Tempus AI, Inc. (TEM) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance, particularly in data licensing, with a 44% growth and major partnerships with Merck and Gilead. Despite some uncertainties in FDA submissions, the company anticipates significant revenue growth driven by oncology and AI solutions. Positive cash flow projections and strategic collaborations further enhance sentiment. The market's positive response to strategic partnerships and robust financial metrics outweighs any minor uncertainties, indicating a likely positive stock movement in the short term.
Key Financial Performance
Revenue $348.1 million, up a little over 36% year-over-year. Growth driven by strong performance in Oncology business, including unit growth of about 28%, and solid tumor and liquid biopsies performing well. MRD volume also performed better, while hereditary slowed down due to lapping extreme growth rates from a year ago.
Diagnostic Revenue $261.1 million, representing almost 35% growth year-over-year. Growth driven by strength in Oncology business and strong performance in solid tumor and liquid biopsies.
Data and Applications Revenue $87 million, representing 40.5% year-over-year growth. Growth driven by strength in data licensing and modeling business insights, which grew over 44%.
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Operating Highlights
Oncology Diagnostics: Strong performance with 28% unit growth, driven by solid tumor and liquid biopsies. MRD volume performed even better, while hereditary diagnostics slowed but is expected to recover to mid-teens growth in the second half of the year.
Data and Applications Business: Generated $87 million in revenue, a 40.5% year-over-year growth. Data licensing and modeling business insights grew over 44%. Bookings exceeded $100 million for the third straight quarter, with improved visibility and TCV.
Revenue Growth: Achieved $348.1 million in revenue, a 36% year-over-year increase. Diagnostic revenue contributed $261.1 million, growing by 35%.
Revenue Guidance: Increased guidance to $1.59 billion to $1.6 billion for the year, with adjusted EBITDA of $65 million.
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Risk or Challenges
Hereditary Business Slowdown: The hereditary segment experienced a slowdown, attributed to lapping extreme growth rates from the previous year. This could impact revenue growth in the short term.
Revenue Dependency on Oncology: While the oncology business showed strong growth, heavy reliance on this segment could pose risks if market conditions or competitive pressures change.
Forward-Looking Statements Risks: Management acknowledged that forward-looking statements are subject to risks and uncertainties, which could lead to material differences in actual results.
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Guidance & Outlook
Revenue Guidance: The company increased its revenue guidance for the year to a range of $1.59 billion to $1.6 billion.
Adjusted EBITDA: Projected adjusted EBITDA for the year is approximately $65 million.
Diagnostic Revenue Growth: The company expects the hereditary diagnostics business to return to mid-teens growth in the second half of the year.
Data and Applications Business: The data and applications business is experiencing strong growth, with visibility and bookings in a strong position, indicating continued positive performance.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How have discussions with Large Pharma customers been trending this year, particularly regarding interest in AI and de-identified data?
A:Eric Lefkofsky stated that core big data relationships are strong, with a history of renewing agreements at or above historical levels. The company has added new significant collaborations, including Merck and Gilead, and is in late stages with others. The data business has grown to a scale where multiple large agreements ($100 million+) have been signed, and the trend is expected to continue as more companies build proprietary models using their data.
Q:What is notable about the recent Gilead and Merck deals?
A:The Merck deal is a large strategic data and modeling collaboration, similar in magnitude to collaborations with AstraZeneca, GSK, and BMS. The Gilead deal, while smaller than Merck, represents a significant step-up from their historic levels. Both deals contribute to the company's strong pipeline and visibility into future revenue.
Q:Are there updates on the xF FDA submission and ADLT pricing?
A:James Rogers confirmed that the xF submission was made earlier this year, and no updates are available yet. The company does not expect this to impact pricing or ASPs in 2026. An amendment was submitted for tumor-only cases to accelerate migration to the ADLT version of the assay, with a decision expected imminently.
Q:What percentage of data licensing comes from Oncology, and what is the potential for other areas?
A:The vast majority of data licensing comes from Oncology, primarily from therapy selection. There is growing interest in other areas, such as Neurology, with a recent multi-million dollar project in Alzheimer's disease. The company sees significant long-term growth potential in expanding to other disease areas.
Q:How is cash flow expected to progress throughout the year?
A:James Rogers explained that cash flow was elevated in Q1 due to timing of payables and bonuses. Significant improvement is expected in Q2 as payables normalize and large contracts transition to quarterly payments. The company anticipates continued improvement as adjusted EBITDA grows.
Q:What is the impact of FDA approval on xT, xR, and xF assays?
A:Eric Lefkofsky stated that over time, all main assays are expected to be FDA-approved. Current ASPs are around $1,740, with an expected $500 incremental lift over the next 1-2 years due to FDA approvals. FDA approval is not expected to impact how tests are ordered or billed.
Q:What is the outlook for Oncology genomic trends and therapy selection adoption?
A:Eric Lefkofsky noted that CDx has had no impact on physician ordering in the U.S. The company expects significant unit volume growth in therapy selection over the next 3-5 years, driven by their comprehensive technology platform. The space is considered healthy, with growth expected in Solid-Tumor Profiling, Liquid Biopsy, and MRD.
Q:How important is RARE for the hereditary testing business, and what is the growth profile of xG?
A:RARE is meaningful in revenue but small in volume. The hereditary business is expected to return to mid-teens growth in the back half of the year. xG grew 50% year-over-year in Q1, but percentages can be misleading due to the small base. The company expects better performance in the second half as RARE gains traction.
Q:What is driving the 40% attach rate for algorithms on Solid Tumor assays in Oncology?
A:Eric Lefkofsky highlighted various algorithms, such as Homologous Recombination Deficiency and Tumor Origin, which help physicians make better decisions. These tools are increasingly ordered and contribute to the company's growth by providing comprehensive solutions for physicians.
Q:What is the expected progression of adjusted EBITDA and MRD volumes?
A:Adjusted EBITDA is expected to grow throughout the year, with significant improvement in Q2 and stronger performance in the back half due to data revenue. MRD volumes are growing robustly but are currently limited by reimbursement constraints. The company plans to scale MRD more aggressively as reimbursement improves.
Q:What is the expected top-line growth over the next three years, and how does ASP impact this?
A:The company expects 25% top-line growth over the next three years, driven by both volume and ASP increases. ASPs are expected to rise by 30% due to reimbursement improvements, but the growth projection is not solely dependent on ASP increases.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific timeline or detailed updates on the xF FDA submission and ADLT pricing, stating only that a decision is expected imminently. Additionally, while they discussed the potential for ASP increases and reimbursement improvements, they did not provide precise details on when these changes would occur.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Conference
AI Financial
CEO President
CFO statement
Co Founder
Competitive Intelligence
Conference afternoon
Definitions measure
Financial Results
Founder CEO
IR page
IR website
Instructions conference
Intelligence afternoon
Ladies gentleman
Lefkofsky Founder
President Chairman
Relations Competitive
Results Conference
SEC measure
accordance accounting
accounting principle
afternoon AI
conference discussion
filing SEC
gentleman AI
measure Vice
measure release
page Co
principle Definitions
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risk filing
today Lefkofsky
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Frequently Asked Questions
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