MDxHealth SA(US:MDXH)2024-11-08 12:13Financial Data and Key Metrics - Q3 2024 revenue increased by 21% YoY to $23.3 million, with an adjusted growth rate of 27% when accounting for Select revenue backlog in Q3 2023 [5][7] - Gross profit for Q3 2024 was $14.3 million, up 14% YoY, with gross margins at 61.2%, down from 64.9% in Q3 2023 due to Select Medicare backlog [25] - Operating loss for Q3 2024 was $6.1 million, compared to $4.6 million in Q3 2023, driven by clinical study expenses, GPS lab transition, and sales incentive compensation [26] - Cash and cash equivalents stood at $49.3 million as of September 30, 2024, with pro-forma cash balance reaching $53.5 million after over-allotment proceeds [10][27] Business Line Performance - Total billable test volume for Q3 2024 was 22,795, representing 30% YoY growth [8] - Tissue-based tests (Confirm mdx and GPS) volume exceeded 10,000 tests, up 36% YoY [8] - Liquid-based tests (Select mdx, Resolve mdx, and Germline) volume exceeded 12,000 tests, up 24% YoY [9] Market Performance - The company raised its 2024 revenue guidance from $85-87 million to $87-89 million, marking the third consecutive quarter of upward revision, reflecting confidence in diagnostic value and increasing healthcare provider utilization [21] - The U.S. addressable market for urology precision diagnostics is estimated at $5 billion, with the company achieving organic growth without expanding its sales organization [23] Strategic Direction and Industry Competition - The company aims to generate at least 20% YoY revenue growth over the next several years, driven by its leadership in urology precision diagnostics [6][29] - The company’s focus on molecular diagnostics in the high-growth urology market is supported by rising prostate cancer incidence, expected to grow at a 5% annual compound rate due to pandemic-related screening declines and an aging population [32][33] - The company’s Confirm test offers a 96% negative predictive value, reducing the need for repeat biopsies and detecting aggressive cancers missed by initial biopsies [16] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in achieving adjusted EBITDA positivity in the first half of 2025, supported by strong revenue growth and operating discipline [11][77] - The company’s commercial team, including molecular diagnostic sales reps and strategic account managers, is driving increased adoption among key opinion leaders and urology group practices [13] - The company’s pathway for precision diagnostics is seen as best for patients, providing clear and actionable information to physicians and patients, avoiding unnecessary interventions while accelerating treatment when appropriate [20] Other Important Information - The company raised $40 million in gross proceeds during Q3 2024, with strong institutional investor demand, bolstering its cash position to $53.5 million [10][27] - The company’s GPS test has 20-year follow-up data for adverse pathology and prostate-specific mortality, requiring five times less tissue than competing tests, which is compelling for pathologists focused on tissue preservation [18] Q&A Session Summary Question: Revenue Guidance and Q4 Expectations - The company raised its 2024 revenue guidance, with Q4 expected to see a slight step down due to seasonality and fewer business days, but management remains confident in meeting or exceeding the updated guidance [39][40] Question: Portfolio Expansion and M&A Strategy - The company has shifted from transformative M&A (e.g., GPS acquisition) to focusing on channel growth opportunities, with a disciplined approach to de-risking and ensuring clinical relevance [41][46] Question: Revenue Growth Levers for 2025 - Growth levers for 2025 include continued adoption of the company’s diagnostic menu in urology, engagement with pathology, and leveraging large urology group practices for increased utilization [49][52] Question: End Market Dynamics and Test Volume Drivers - Test volume growth is driven by market penetration, share gains, and utilization increases, with adoption becoming more sustainable as urologists and pathologists integrate the company’s tests into their practice pathways [53][57] Question: ASP Growth and Commercial Payers - The company is focused on tightening its payer mix distribution, with ongoing efforts to secure medical policies and contracts with commercial payers, leveraging its market access and managed care team [59][62] Question: Germline Test Uptake - The Germline test is expected to contribute modestly in the back half of 2024, with a more significant ramp anticipated in 2025 as payer coverage and adoption increase [63][65] Question: Doctor Utilization and Test Adoption - The company tracks utilization by individual doctors and group practices, noting that adoption has become stickier, with many urologists ordering multiple tests from the company’s menu [68][70] Question: Impact of Storms on Business - The company reported no significant impact from recent storms on its business operations [71] Question: Revenue Growth Composition for 2025 - The company expects balanced growth across its tissue-based (80% of revenue) and liquid-based tests, with Germline contributing more significantly in 2025 [73][74] Question: Gross Margin and EBITDA Positivity - The company’s path to positive EBITDA in H1 2025 is driven by revenue growth and operating discipline, with gross margins expected to trend positively but not being a primary driver of EBITDA improvement [75][78]