Tempus AI (NasdaqGS:TEM) 2025 Conference Transcript

Summary of Tempus AI Conference Call Company Overview - Company: Tempus AI - Industry: Life Sciences and Diagnostics Key Points AI Integration in Diagnostics and Biopharma - Tempus AI leverages AI across its operations, focusing on enhancing patient care through data and technology [4][5][6] - The company has developed platforms like Hub and Lens to facilitate interaction with diagnostic tests and build patient cohorts, respectively [4][5] - A partnership with AstraZeneca and Pathos aims to create a foundation model to extract insights from large datasets [6] Financial Performance - The third quarter reported a 28% organic growth, with specific segments showing: - Genomics: High 20s growth - Ambry: 33% growth - Data Licensing: 37% growth [10][12] - Adjusted EBITDA turned positive, marking a significant milestone for the company [13] Oncology and Hereditary Testing - Oncology volumes grew by 27%, while Ambry benefited from market disruptions in hereditary screening [12][42] - The hereditary testing market is expected to moderate as share gains stabilize [12] Data Licensing and Contracts - Total remaining contract value exceeded $1 billion, with a net revenue retention rate of 140% [48] - New contracts included a $66 million deal with a biotech customer and expansions with existing clients [48] - The company anticipates strong engagement from both big pharma and biotech sectors [48] Market Position and Competition - Tempus AI has established connections with over 5,000 institutions, enhancing its data collection and diagnostic capabilities [19] - The company emphasizes ease of use and connectivity as key differentiators against competitors [20] Reimbursement Trends - Average Selling Prices (ASPs) have increased to approximately $1,600, with expectations for 40% of xT volumes to transition to ADLT pricing by year-end [22][23] - The company aims for 85% of xT volumes to shift to ADLT pricing by the end of 2026 [23] Clinical Trials and CRO Business - The CRO segment has faced headwinds, but the acquisition of a small CRO aims to enhance clinical trial matching capabilities [61] - The company does not prioritize aggressive growth in the CRO sector but sees potential stabilization as funding for CROs improves [61] Investment and Growth Strategy - Tempus AI plans to reinvest about two-thirds of incremental gross profit back into the business over the next three years to support growth [64] - The company aims for long-term growth rates of 25-30%, focusing on sustainable growth rather than maximizing quarterly revenue [58][64] Gross Margins and Future Outlook - Genomics business margins are expected to stabilize around low 60%, while data operations may achieve mid 70% margins [66] - AI applications, though currently a small revenue source, are anticipated to positively impact margins as they scale [68] Upcoming Developments - Data from a new ultra-high sensitivity assay for MRD is expected in 2026, with further developments in breast cancer and immuno-oncology to follow in 2027 [38][39] Additional Insights - The company is cautious about the competitive landscape in MRD testing, focusing on leveraging existing data connections and insights to gain market share [34][35] - Tempus AI's strategy emphasizes long-term relationships with clients to ensure sustained growth and value delivery [58][59]