Tempus AI, Inc. (TEM) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates strong financial performance with 38% growth and a positive adjusted EBITDA for the first time in 10 years, suggesting effective cost management. The Q&A session highlights strong bookings and a strategic plan for sustained growth, particularly in oncology. Despite some unclear responses, the overall sentiment remains positive due to increased revenue guidance and strategic investments. The convertible notes issuance for cash savings also supports a positive outlook.
Key Financial Performance
Genomics volume 33% overall growth with Oncology growing at 27% and Hereditary growing at 37%. Growth attributed to strong performance across all assays and expectations of additional tailwinds from MRD reimbursement and planned regulatory filings.
Data licensing (Insights) business 38% growth in the quarter with an additional $150 million in total contract value. Growth driven by strong bookings across multiple contracts and a significant foundation model deal earlier in the year.
Adjusted EBITDA Positive for the first time in 10 years, inclusive of several million dollars of additional expense from the Paige acquisition. Without Paige, adjusted EBITDA would have been close to $4 million. This milestone reflects rapid growth and cost management.
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Operating Highlights
Genomics volume: 33% overall growth with Oncology growing at 27% and Hereditary growing at 37%. Planned regulatory filing of liquid biopsy xF later this year.
Data licensing/Insights business: Grew 38% in the quarter with an additional $150 million in total contract value. Highlighted multiple contracts and a multi-hundred million dollar foundation model deal earlier this year.
Adjusted EBITDA: Generated positive adjusted EBITDA for the first time in 10 years. Inclusive of several million dollars of additional expense from Paige acquisition. Without Paige, adjusted EBITDA would have been close to $4 million.
Acquisition of Paige: Acquired mid-quarter, contributing several million dollars of additional expense but aligned with long-term goals.
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Risk or Challenges
Hereditary Growth Moderation: The company expects hereditary growth to moderate to low to mid-20% range, down from previous guidance of mid- to high teens. This indicates a potential slowdown in growth, which could impact revenue projections.
MRD Reimbursement and Regulatory Filing: While MRD reimbursement and liquid biopsy xF regulatory filing are on track, any delays or issues in these processes could pose risks to expected tailwinds in the business.
Acquisition of Paige: The acquisition of Paige added several million dollars of additional expenses mid-quarter, creating a drag on adjusted EBITDA. This could pose financial strain if the integration does not yield expected synergies.
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Guidance & Outlook
Hereditary growth expectations: Growth is expected to moderate to the low to mid-20% range, revised from the previous guidance of mid- to high teens.
MRD reimbursement and liquid biopsy xF: Planned regulatory filing of liquid biopsy xF later this year is expected to provide additional tailwind for the business in terms of units and revenue.
Data licensing business growth: The data licensing business grew 38% in the quarter, with $150 million in total contract value and strong bookings. This growth is expected to continue, supported by a multi-hundred million dollar foundation model deal struck earlier this year.
Adjusted EBITDA expectations: The company expects to achieve slightly positive adjusted EBITDA for the year, even with additional expenses from the Paige acquisition.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is driving the strength in volume growth in the Genomics business, particularly in Oncology?
A:The strength in volume growth is attributed to the increased efficiency of the sales force, which underwent significant changes with the introduction of the MRD portfolio. Additionally, the tightly integrated technology delivering comprehensive results to physicians is gaining traction. Broader market trends, such as healthy testing volumes due to more biomarkers being identified, also contribute, but Tempus' growth is not reliant on one-time benefits from solid or liquid assays.
Q:How is Tempus planning to go to market with MRD testing, and what is the expected growth trajectory?
A:Tempus plans to gradually scale up MRD testing as reimbursement becomes available, leveraging its large and well-trained sales force. The company aims for sustained long-term growth of 25% annually over the next three years, supported by a robust portfolio of naive and informed MRD products and ongoing investments in the space.
Q:Why did Tempus disclose $150 million in new bookings this quarter, and what is the outlook for the backlog?
A:Tempus disclosed the $150 million in bookings to highlight significant deals that bundled together in a noteworthy way. These bookings are multiyear deals and do not immediately translate into revenue. The total contract value is in a strong position, with more than $350 million disclosed in two data points, and the company will provide an annual update on the backlog.
Q:Is there a market shift towards liquid biopsy in therapy selection, and what is Tempus' position?
A:Tempus has not observed a significant market shift from solid to liquid biopsy but has seen strong growth in both areas. The company is well-positioned across the continuum of Hereditary profiling, therapy selection, and MRD, and expects liquid biopsy to benefit from serial testing in the future.
Q:What is the growth outlook for Ambry and its position in the Hereditary cancer market?
A:Ambry's growth is driven by a mix of share gains and organic expansion, with growth expected to moderate to the low to mid-20% range in Q4. The Hereditary cancer market is growing in the low double digits, and Ambry is outperforming the market with its gold standard assays. ASPs have been stable, with potential upside from the rare business.
Q:How does Tempus plan to integrate Paige AI into its diagnostics business?
A:Paige AI's digital pathology capabilities will enhance Tempus' diagnostics by providing predictive insights when sequencing fails or when rapid results are needed. The integration will support a multimodal approach to delivering high-quality, data-driven insights across various data modalities.
Q:What is the progress on the foundation model with AstraZeneca and Pathos, and how does Paige AI contribute?
A:The foundation model is completing its pretraining phase and entering large compute, with the first versions expected in Q1. Paige AI's digital pathology expertise complements this work, and the teams are collaborating to integrate data and insights, enhancing the overall foundation model efforts.
Q:What is Tempus' view on reimbursement for data interpretation and analysis, and how does it impact the business?
A:Tempus believes that reimbursement for data interpretation and analysis is essential for addressing inefficiencies in the healthcare system. The company is well-positioned with a portfolio of FDA-approved algorithms across various specialties, which could scale rapidly if reimbursement becomes available.
Q:What are the updates on MRD studies and expected data releases?
A:Tempus is running studies on its tumor-naive assay in CRC and non-small cell lung cancer, with data expected next year. The company is achieving strong metrics and plans to expand into other disease areas by early 2026. Personalis is also investing heavily in tumor-informed studies.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the reimbursement levels for xF and xR tests, stating that the process is long and reimbursement typically provides upside. They also did not disclose assay-level details for Ambry or specific growth rates for competitors. Additionally, while discussing the foundation model and Paige AI integration, management provided general progress updates but avoided specific milestones or timelines for measurable outcomes.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Financial
CEO CFO
CEO President
CFO measure
Co Founder
Competitive Intelligence
Conference Instructions
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Definitions Vice
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IR page
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Instructions conference
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Ladies gentleman
Lefkofsky Founder
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accordance accounting
accounting principle
afternoon Conference
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gentleman AI
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today Lefkofsky
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