GeneDx Q4 2024 Earnings Report

GeneDx EPS Results

• Actual EPS: $0.70
• Consensus EPS: $0.04
• Beat/Miss: Beat by +$0.66
• One Year Ago EPS: N/A

GeneDx Revenue Results

• Actual Revenue: $95.64 million
• Expected Revenue: $82.24 million
• Beat/Miss: Beat by +$13.40 million
• YoY Revenue Growth: N/A

GeneDx Announcement Details

• Quarter: Q4 2024
• Date: 2/18/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, February 18, 2025
• Conference Call Time: 8:30AM ET

GeneDx (NASDAQ:WGS), through its subsidiaries, provides genomics-related diagnostic and information services. The company offers Centrellis, an AI-driven health intelligence platform that integrates digital tools and artificial intelligence allowing scientists to ingest and synthesize clinical and genomic data to deliver comprehensive health insights. It provides genetic diagnostic tests, screening solutions, and information with a focus on pediatrics, rare diseases for children and adults, and hereditary cancer screening. GeneDx Holdings Corp. was founded in 2017 and is headquartered in Stamford, Connecticut.

GeneDx Q4 2024 Earnings Call Transcript

Key Takeaways

• GeneDx closed Q4 2024 with $95.3 M in revenue (up 31% sequentially) and a 70% gross margin, delivered full‐year results ahead of expectations, and is guiding 2025 revenue of $350–360 M with at least 30% exome/genome growth and sustained adjusted profitability.
• The flagship exome and genome business grew 101% YoY (31% sequentially), totaling over 20,000 tests in Q4 (+32% YoY), and GeneDx launched an Ultra Rapid Whole Genome Sequencing service delivering results in as little as 48 hours for NICU patients.
• Operational enhancements include the Epic Aura integration with bedside JDX ordering and result workflows, cutting new hospital integrations from six months to 2–3 weeks and streamlining the end-to-end customer experience.
• Average reimbursement for exome/genome tests rose to $3,500 (from $2,500 a year ago) driven by reduced denials and expanded state Medicaid coverage (32 states outpatient, 14 covering rapid inpatient).
• To accelerate growth, GeneDx is investing in AI/ML automation, targeting new indications (e.g., cerebral palsy, hearing loss), launching telehealth referral pathways, expanding internationally, and exiting hereditary cancer to focus on a genome-only paradigm.

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the GeneDx Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sabrina Dunbar, Investor Relations.

[Operator]

Please go ahead.

[Sabrina Dunbar, Director of IR & Communications at GeneDx]

Thank you, operator, and thank you, everyone, for joining us today. On the call, we have Catherine Stuhland, President and Chief Executive Officer and Kevin Feeley, Chief Financial Officer. Earlier today, Genevx released financial results for the fourth quarter ended 12/31/2024, and full year 2024. Before we begin, please take note of our cautionary statements. We may make forward looking statements on today's call, including about our business plans, guidance and outlook.

[Sabrina Dunbar, Director of IR & Communications at GeneDx]

Forward looking statements inherently involve risks and uncertainties and only reflect our view as of today, February 18, and we are under no obligation to update. When discussing our results, we refer to non GAAP measures, which exclude certain items from reported results. Please refer to our fourth quarter twenty twenty four and full year twenty twenty four earnings release and slides available @ir.gnds.com for definitions and reconciliations of non GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward looking statements. And with that, I'll turn the call over to Catherine.

[Katherine Stueland, President & CEO at GeneDx]

Thanks, Sabrina. Good morning, everyone, and thank you for joining us today. 2024 was a remarkable year for GeneDx across all metrics. We cemented and extended our position as the market leader in exome and genome testing, expanded patient access, solidified our operating processes across all aspects of the business, and started to generate cash to fuel the next leg of growth. Our fourth quarter results surpassed expectations with revenues exceeding $95,000,000 and gross margins expanding to 70%, While providing early and precise genetic diagnoses remains our purpose, creating a financially strong business drives our progress.

[Katherine Stueland, President & CEO at GeneDx]

We are dedicated to helping as many patients as possible and it's not just about what we do, but how we do it in service of our customers with clinical excellence, urgency and integrity. Our flagship exome and genome business delivered enormous growth in 2024 and we're bringing our focus, operational discipline and commitment to profitable growth with us into 2025. In the coming year, we'll be layering on additional investments into growth, scale, innovation and talent to add velocity to our market development. Fueled by our 2024 and early twenty twenty five momentum, we're setting guidance for 2025 to a range of $350,000,000 to $360,000,000 in revenue with at least 30% growth in exome and genome volume and revenue. What's unique about our technology is that it enables a more efficient model, both for families and for The U.

[Katherine Stueland, President & CEO at GeneDx]

S. Healthcare system. Broad genetic testing, like our differentiated exome and genome services, are massively underutilized, causing the overutilization of other diagnostic tests that don't accurately diagnose disease. The economic burden of rare diseases is estimated to be around a trillion dollars annually with delayed diagnosis contributing heavily to this cost. On average, a child with a rare disease will undergo around 16 ineffective tests and three misdiagnoses.

[Katherine Stueland, President & CEO at GeneDx]

The most recent literature tells us that on average, a child with a rare disease will go on a five year diagnostic odyssey. That's down from six years previously, which implies that we're succeeding in our mission. By enabling early earlier diagnosis with our product, GeneDx alleviates unnecessary suffering for patients and families and offers a readily available solution to reduce inefficient healthcare spending. There's a reason healthcare spend is top of mind for this administration, policymakers, insurers and hospital systems, and GeneDx is in a unique position to help them solve this costly problem. GeneDx is proud to be helping American families have healthier kids and healthier lives, and by doing so, reducing healthcare costs.

[Katherine Stueland, President & CEO at GeneDx]

With a large market opportunity in hand, it's important to understand that not all exome and genome tests are created equal. There's a reason eight out of 10 clinicians who order exome testing choose GeneDx. Fueled by more than 750,000 exomes and genomes, our rapidly growing data asset and clinical expertise differentiate our products from competitors by enabling us to identify novel gene disease connections that are not widely available and ensuring we can offer the clinical utility, accuracy, and easy to understand reports that clinicians need. As we set our sights on offering these services to pediatricians, neurologists, cardiologists, and more specialists in the future. We've recruited some of the best product talent to deliver the smoothest end to end customer experience.

[Katherine Stueland, President & CEO at GeneDx]

Throughout 2025, we'll be releasing a steady stream of new features designed to further simplify our customer experience to make it the easiest to use for all. We already made great progress in the first few months of the year, and our Epic Aura integration is just one example of this. We've launched JDX ordering and resulting workflows at patients' bedsides and in clinician exam rooms. While we have the first mover advantage, there's a large unmet need ahead, and we're running as fast as we can to help as many families as quickly as possible. Our position becomes more formidable and our competitive advantage strengthens with the compounding force of each additional patient that we sequence, creating a flywheel effect that makes our underlying interpretation platform smarter, faster and more scalable.

[Katherine Stueland, President & CEO at GeneDx]

We're seizing our advantage to accelerate market development by scaling utilization of rapid genome testing in the NICU and expanding our dominance in the outpatient setting. Last week, we announced our Ultra Rapid Whole Genome Sequencing product, which delivers results in as soon as forty eight hours. Our ability to offer an Ultra Rapid Genome demonstrates how our lab operations continue to innovate. Throughout 2025 and beyond, we're prepared to capitalize on coupling our clinically enriched data set with AI, machine learning and automation to drive costs and turnaround times down in service of patients, providers and partners. In preparation for our full launch into the NICU in 2025, we recently expanded our enterprise sales team, launched multiple genome product enhancements and EpicAura and are bringing our Ultra Rapid product to market.

[Katherine Stueland, President & CEO at GeneDx]

In the outpatient setting, pediatric neurology proved successful driving most of the growth in 2024. We've only scratched the surface of the outpatient segment's potential with a focus on patients with epilepsy, autism, and intellectual and developmental delay. There are countless applications still to come in 2025. We'll be leaning into new patient populations. Cerebral palsy and hearing loss are just two such examples we'll target as we expand our footprint.

[Katherine Stueland, President & CEO at GeneDx]

Additionally, we're developing new patient access channels like our new telehealth pathway, which accelerates access to testing for parents and caregivers via a streamlined referral process. Ultimately, the first line of defense for families lies within their general pediatrician. When the American Academy of Pediatrics guidelines are updated and reimbursement pathways are clear, we are ready to deploy a commercial strategy and meaningfully expanded sales force against this new call point. Longer term, we will extend our market leadership to the genomic newborn screening market. In total, pediatric testing is a $25,000,000,000 market.

[Katherine Stueland, President & CEO at GeneDx]

And while we've made progress, this opportunity remains largely untapped with multiple levers for growth ahead. While rare diseases affect one in ten Americans, they also affect over three hundred million people worldwide. We will strategically target opportunities outside The U. S. To meet the incredible need for testing on a broader scale.

[Katherine Stueland, President & CEO at GeneDx]

All of this is underpinned by our ability to provide valuable products and services to biopharma, leveraging our unique data assets to enable faster, cheaper and more effective therapeutic development, all in service of expediting therapies to market for patients. We're in a privileged position to be in a market leader with the product, quality, scale, talent and commercial strategy to transform the standard of care and win in an ever expanding market. The opportunity ahead is ours for the taking and we're moving quickly and decisively to claim it. With that, I'll turn it over to Kevin.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Thanks, Katherine, and thanks everyone for joining us. Fourth quarter twenty twenty four revenues from continuing operations reached $95,300,000 Exome and Genome revenues grew 101% year over year and 31% sequentially contributing $78,800,000 this quarter. Both volume and reimbursement contributed to the growth. Exome and genome tests accounted for 38% of all tests in the fourth quarter, up from 27% a year ago and 33% in the previous quarter. Our team delivered over 20,000 of these flagship tests, which is up 32% year over year and 7% sequentially.

[Kevin Feeley, Chief Financial Officer at GeneDx]

We are driving a long term replacement cycle of the industry's individual gene tests and panels into Exome and Genome and twenty twenty five trends to date are encouraging. In addition to growing off this base, we'll be layering on a new growth curve in the NICU and new indications in the outpatient setting in 2025. Both of these initiatives are starting at near zero today and we anticipate these growth curves to ramp in the second half of twenty twenty five. Demand is strong and we balance that demand with discipline, targeting only volume with a high propensity to get paid fairly. So speaking of getting paid, average reimbursement rate have come entirely from reduced denials.

[Kevin Feeley, Chief Financial Officer at GeneDx]

In the fourth quarter, the underlying average reimbursement rate for ExoMagino after all denials was approximately $3,500 excluding the discrete benefit from our large appeal win in the quarter. That's up from $3,100 last quarter and up from approximately $2,500 in the same quarter of last year. Our work to refine insurance specific workflow to minimize administrative and procedural denials and the activation of additional state Medicaid policies to cover exome and genome testing more broadly are both contributing. 32 states now cover exome and or genome outpatient and 14 cover rapid genome inpatient. We'll continuously focus on improving processes, producing clinical and health economic data, supporting patient advocates and leaning into policy work both at the state and federal level.

[Kevin Feeley, Chief Financial Officer at GeneDx]

We've built the operational strength and tools to now open the aperture of volume that we'll target to drive growth to higher levels. Adjusted gross profit from continuing operations in the fourth quarter was $66,900,000 which is up 106% compared to the prior year and up 36% sequentially from the previous quarter. That translates to an adjusted gross margin of 70% in the fourth quarter, up from 56% a year ago and 64% last quarter. Our team has exceeded expectations on COGS throughout 2024 and Q4 was no exception. And while we're pleased with how far we've come to reduce cost per test, there's still work to do.

[Kevin Feeley, Chief Financial Officer at GeneDx]

I'm excited to partner with our recently onboarded Chief Operating Officer, Brian DeCaro. He's begun to retool resources and our approach to extract the next leg of scalability and product enhancement. Beyond that, Brian is leading a new charge with respect to innovation and enabling a next generation customer experience to make ours the most attractive in the space. Down to the bottom line, total company adjusted net income for the fourth quarter of twenty twenty four was $16,800,000 our second consecutive quarter of profitability. Full year and fourth quarter twenty twenty four revenues, adjusted gross margin and adjusted net income includes $6,800,000 of discrete benefit in connection with a multiyear appeal win from a single payer.

[Kevin Feeley, Chief Financial Officer at GeneDx]

$5,800,000 of that benefit went to Exome and Genome. This recovery to overturn past denials is a prime example of the quality and professionalism of the revenue cycle team we've assembled here at GDX. And on the balance sheet, cash, cash equivalents, marketable securities and restricted cash totaled $142,200,000 as of 12/31/2024. Cash flow for the fourth quarter twenty twenty four included $12,400,000 in cash generated from ordinary operations, including receipts of $6,800,000 in connection with the appeal recovery and $31,900,000 of proceeds net of fees from the issuance of 406,726 shares of common stock in connection with sales pursuant to our ATM program. Those inflows were partially offset by $19,600,000 in scheduled payments to service previously reported liabilities of legacy SemaCore.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Now turning to guidance. We expect to deliver at least 30% growth in exome genome volume and revenues and expect total revenues between $350,000,000 to $360,000,000 for full year 2025. We expect full year 2025 adjusted gross margin between 6567%. And for comparison, full year 2024 was 65%. We expect to maintain profitability each quarter and for the full year 2025 on an adjusted net income basis.

[Kevin Feeley, Chief Financial Officer at GeneDx]

You can generally define adjusted as EBITDA less share based compensation. And in our business, adjusted net income should conform fairly closely to operating cash flow over time. As we previously shared, we will continue to optimize the test menu towards the genome only paradigm. To that end, and in order to focus all investment and investment into accelerating exome and genome growth, hereditary cancer is a non core fit within our business we are exiting in 2025. So I'll wrap with this.

[Kevin Feeley, Chief Financial Officer at GeneDx]

GeneDx has spent two decades investing in the accumulation and expert curation of data, know how and tools necessary to interpret a genome's worth of information most definitively and at previously unimaginable scale. And under Catherine's leadership over the past three plus years, it's now coupled that long history of clinical expertise with a strategy, commercial effectiveness and operating discipline to finally scale the promise of GenoX. Stepping forward, we intend to address a large unmet medical need and do so while saving an overly complex, bloated and expensive healthcare system massive dollars. In an era where cost efficiency for healthcare in The United States is top of mind for hospital executives, insurance partners, policymakers, politicians and taxpayers alike, the GeneDx, Exome and Genome are a large part of the solution. And with that, we welcome any questions passed.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Operator?

[Operator]

Our first question comes from Dan Brennan with TD Cowen. Your line is open.

[Daniel Brennan, Managing Director at TD Cowen]

Great. Thank you. Thanks for the questions. Congrats on the quarter. Maybe to start off, Kevin, could you just give some color on the implied price assumption for 25%?

[Daniel Brennan, Managing Director at TD Cowen]

Obviously, you're saying 30% plus rev and volume. So I guess the implication is maybe pricing can be flat or so. Obviously, great progress in the quarter on price, but we understand it's still decently below the institutional and Medicaid rates and the commercial list price. So just wondering how we're thinking about pricing in 2025?

[Kevin Feeley, Chief Financial Officer at GeneDx]

Yes. The way I look at it, Dan, is the $3,500 in the fourth quarter was very much improved and outpaced expectations. And I would say at this point, we consider rates to be stable and have room to go much higher. We're still at a point where nearly half of all tests are being denied and the team continually is refining processes to avoid those denials. We're certainly optimistic that we can get that rate higher than what we just posted in the fourth quarter.

[Kevin Feeley, Chief Financial Officer at GeneDx]

And our guidance philosophy tends to be very much data dependent and we look forward to updating you as we move throughout the year.

[Daniel Brennan, Managing Director at TD Cowen]

Got it. Okay. And then can you speak a little bit to like what's implied? You talked about being adjusted net income positive and adjusted EBITDA positive in 2025, which is I think consensus has you guys to that level at a low level. But can you just speak to how we should think about OpEx leverage and kind of what the magnitude of kind of EBITDA and cash flow could be

[Daniel Brennan, Managing Director at TD Cowen]

in 2025?

[Kevin Feeley, Chief Financial Officer at GeneDx]

Yes. So there'll be a step up in OpEx as we look to ways look for ways to accelerate growth and reduce costs. I think Epic is a prime example of that. That will be about $5,000,000 annual to add to the current OpEx base. And so we certainly see areas to invest.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Catherine spoke about some across the commercial teams and ways to drive further automation. I think we built the discipline within the company at large to look at the multitude of bets that we can place and ensure a high level of probability of success. The way we think about it is you've got the revenue and gross margin guide, OpEx will step up and but only in a way in which we're committed to keep profitability positive each quarter and for the full year.

[Daniel Brennan, Managing Director at TD Cowen]

Okay. And maybe just a final one. You talked about new opportunities you're kind of baking into the guide in the second half. I think you mentioned the NICU, but you've already launched there. So I'm just wondering, can you speak to kind of what these new opportunities are?

[Daniel Brennan, Managing Director at TD Cowen]

And can you frame like relatively how meaningful they are in the '25 guide? Thank you.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Yes. So the NICU is one, we did deliver the Epicor integration ahead of schedule, still expect a second half of year ramp in the NICU, maybe pulling that forward a couple of months into the second quarter. What's also built in that we're excited about is turning on new indications and use cases for exome and genome. The growth to date or at least over the last year plus has been on that focus of epilepsy, autism, intellectual delay, developmental delay across the pneuro call point. Maybe just a couple examples and they're just a couple.

[Kevin Feeley, Chief Financial Officer at GeneDx]

So stepping into use cases like cerebral palsy is an example, hearing loss maybe another one. So use cases to drive further same store sales within call points we've already launched into will be a focus of the second half of the year.

[Operator]

Thank you. One moment for our next question. Next question comes from William Bonello with Craig Hallum Capital Group. Your line is open.

[William Bonello, Senior Research Analyst at Craig-Hallum]

Hey, thanks a lot guys. Just wanted to follow-up a little bit more on the comments on the earnings guidance and profitability and the incremental investment. Maybe two things in particular. One, you mentioned expanding the sales team. I'm wondering if you can give us any sense of magnitude of that expansion and maybe the corresponding cost?

[William Bonello, Senior Research Analyst at Craig-Hallum]

And then I'll ask the next one.

[Katherine Stueland, President & CEO at GeneDx]

Certainly. So, and thanks Bill. A couple of things on Salesforce. So, we have expanded our enterprise team from about five to 10, and that's something that we have our eye on as we get Epic off the ground, as we start really getting more experience. We're going to keep an eye on that and we're prepared to continue to add reps as we make progress on the plan on the NICU side of things.

[Katherine Stueland, President & CEO at GeneDx]

We also have hired inside sales reps for the team that's been focusing on the outpatient opportunity. I think we've talked about the fact that that sales force has been they've been out there focused on new accounts on same store sales, but they're also doing a lot of administrative work. So, we've hired a team of about 25 people to focus on inside sales that are really helping to offload the administrative burden and ensure that our sales reps can be focused on bringing in new accounts and looking for additional opportunities within existing accounts. I would say our sales force is by far an order of magnitude three times larger than the next sales force in our space. So our focus is on continuing to get greater productivity out of that team.

[Katherine Stueland, President & CEO at GeneDx]

The customer experience that we're investing in is also intended to create a really intuitive experience that will also offload some of the more manual work. And so we think that the investments that we're making on customer experience are going to pay off in terms of stickiness and same store sales as well in the future.

[William Bonello, Senior Research Analyst at Craig-Hallum]

Sure. And in terms of cost, I mean, that sounds like maybe $1,000,000 to $2,000,000 or something like that?

[Kevin Feeley, Chief Financial Officer at GeneDx]

Yes. It's certainly I don't know if I'd give you the exact number, but say it's order of magnitude is not that large with I'd say the EPIC investment that I cited being the single largest investment year over year. And the way I think about cadence on the bottom line is Q1 being near breakeven slightly positive and then ramping in the latter three quarters.

[William Bonello, Senior Research Analyst at Craig-Hallum]

Okay. And then that was the follow-up on profitability. So is your goal to just ensure that you stay profitable or I mean you were meaningfully profitable in the fourth quarter. How are you thinking about growing profits in addition to revenue this year and maybe next year?

[Kevin Feeley, Chief Financial Officer at GeneDx]

Yes, I think so we've stated it is a commitment of ours to keep the company profitable from this point forward. That said, we're excited about a way to accelerate growth. As we enter into new call points and new indications, we want to see what it takes to really dominate and win those markets and have some latitude to tackle accordingly.

[William Bonello, Senior Research Analyst at Craig-Hallum]

Okay. That's very helpful. Thanks a lot.

[Operator]

One moment for our next question. Our next question comes from Tycho Peterson with Jefferies. Your line is open.

[Matt Stanton, Analyst at Jefferies]

Thanks. This is Matt on for Tycho. Maybe first one going back to some of the new products innovation on the ultra rapid whole genome sequencing product you recently launched. Could you just remind us the immediate opportunity that opens up for you like what size of the market or kind of TAM does this so let you address now? And then what are your kind of expectations for penetration of that opportunity?

[Matt Stanton, Analyst at Jefferies]

It sounds like it's more maybe back half of the year and beyond, but just trying to get a better understanding of the potential impact from this launch on volumes as we move through 2025 and beyond? Thank you.

[Katherine Stueland, President & CEO at GeneDx]

Yes. So one, I would say, ultimately down the road, we want to be delivering the best, fastest and most cost effective genome across the board. So we ultimately want to move to just being able to run highly accurate, fast, clinically actionable genome for everyone. But in the meantime, that product is indeed focused in the NICU setting. So we think being able to have the five day turnaround time and now the ultra rapid for patients who may be in most need really unlocks what is roughly considered to be about a billion dollar market opportunity in that NICU inpatient setting.

[Katherine Stueland, President & CEO at GeneDx]

Fewer than five percent of babies in the NICU get a genetic test today. And so we think there's just a it's massively underutilized in that setting. So this gives us the ability to provide either that five day turnaround time or for super dire cases the ultra rapid as well.

[Matt Stanton, Analyst at Jefferies]

Thanks. And maybe one on capital allocation. I think you talked about in the prepared remarks kind of fueling the next leg of growth. Just talk about what your priorities are today, how that might differ between organic and inorganic? And if there are items on the inorganic side, can you just remind us kind of types of assets you might consider looking at either on size or kind of where it fits relative to your existing portfolio today?

[Matt Stanton, Analyst at Jefferies]

Thank you.

[Katherine Stueland, President & CEO at GeneDx]

So in terms of priorities of investment, continuing to invest in growth is obviously critically important. So product, having best in class products, having the best in class customer experience, We think this is a prime opportunity to really be able to deploy AI machine learning and other automation technologies to help smooth out that overall customer experience. As I mentioned, we've hired, in particular, one of the leading industry customer experience product designers who has tremendous experience in terms of making it a really sticky experience for everyone. Continuing to automate as much of the lab as possible, the interpretation platform, those are the major areas as we think about prioritization of investments. All of that, of course, to fuel a fast growing market.

[Katherine Stueland, President & CEO at GeneDx]

We want to make sure, as I said, that we've got the best, fastest and most competitive in terms of pricing. We've invested a lot in scale. So I think we're really pleased about our ability to have the highest level of clinical excellence, but also be able to do it more cost effectively than anyone else in the space.

[Matt Stanton, Analyst at Jefferies]

Thanks. And maybe just one more I could sneak in for Kevin. On the hereditary cancer exit in 2025, can you just spike at what's in or out of the guide for that? And then any more color on timing when we could expect or the type of exit we could expect in 2025 for that hereditary business? Thank you.

[Kevin Feeley, Chief Financial Officer at GeneDx]

It assumes in 2025 losing the vast majority, nearly all of the hereditary cancer contribution that we saw in 2024.

[Matt Stanton, Analyst at Jefferies]

Thank you.

[Operator]

One moment for our next question. Our next question comes from Matt Sykes with Goldman Sachs. Your line is open.

[Matt Sykes, Analyst at Goldman Sachs]

Hi. Thanks for taking my question this morning. Kevin, maybe just two quick ones for you and then I have a follow-up, Catherine, for you, a more bigger picture. But just, Kevin, can you talk a little bit about what your expectations are for true ups within that guide for 2025? I know that Q4 was more of a one off appeal, but how should we think about true ups as we move through this year as a portion of that revenue?

[Matt Sykes, Analyst at Goldman Sachs]

And then secondly, just given the exit rate of gross margins in Q4 and then your guide for $65,000,000 to $67,000,000, how should we think about phasing for gross margin improvement over the course of this year on a quarterly basis?

[Kevin Feeley, Chief Financial Officer at GeneDx]

Yes, thanks. So on the true ups, I think fair to say that the order of magnitude of subsequent quarter true ups may come down some naturally as we're getting to a more mature spot. Although I will say we're still a far way off from what we think is a theoretical max on payment rate, which is probably likely around 80%. And so still a lot of room to go. But would expect that every quarter, we're on the positive side of those trucks.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Frankly, it's an estimate that is meant to align to expected cash collection and there's always some slippage up or down on that and it's our hope that we're being appropriately conservative and coming back with positive true ups in that regard. And then on gross margin, we're certainly excited about the ability to unlock further efficiency and cost savings in the dry side of the lab. I would think most of the impact to come in the second half of the year, but not really in a large step down function, more so pretty smooth. Frankly, there's a lot of manual steps we think right for automation. And so we'll have a bit of a rolling launch of automation throughout those steps rather than one big bang really.

[Matt Sykes, Analyst at Goldman Sachs]

Got it. And then Katherine, just when you think about sort of the moat you're trying to build around this business, you've mentioned a few things in this call, product development and design, investment in commercial sales force, turnaround time, etcetera. How do you think about protecting sort of the market share you've got while also expanding the business, keeping in mind some of the competitors might not have the resources you have, but others might get into this business over the course of the next few years. How do you think about building that moat and protecting that? And what types of investments will you make to do that?

[Katherine Stueland, President & CEO at GeneDx]

Certainly. I mean, a couple of things come to mind. As the first mover, we have an advantage so long as we run fast. And I think we have proven over the past several years, we're running fast. And if there's a message we want to make sure everyone understands coming out of this call, we're going to continue to run fast and hard this year too.

[Katherine Stueland, President & CEO at GeneDx]

I think continuing to diversify our customer base and really cementing the JNDX brand in settings like the NICU and continuing to cement our brand with health systems, we think is critically important. As I said on the call, there's a reason eight out of 10 genetics experts use us. And, we intend to ensure that we can continue to leverage that as we introduce our services to new call points as well. We think that's going to pay dividends once we move into the general pediatric segment. The endorsement by the genetic experts is going to go a long way for us.

[Katherine Stueland, President & CEO at GeneDx]

But at the end of the day, the reason why we have prevailed, not just over one year or two years, but over a decade where competitors have entered our space and have failed to catch up to us is because our data asset is indeed truly valuable. It sets apart our interpretation platform. It ensures that, clinicians can trust the answers that we're providing them. We deliver fewer variants of unknown significance. Our diagnostic yield is higher.

[Katherine Stueland, President & CEO at GeneDx]

It's a better product and that's the reason that we have the stickiness with the most discerning genetics experts out there. So, we're going to continue to build that data moat rapidly. We're going to build, as I said, a customer experience that we think will be an amazing complement to that data moat, just making it super intuitive and easy to order, easy to understand. And I think the rate at which we're onboarding new customers and continuing to see same store sales is exactly the reason that we'll continue to win in this space.

[Matt Sykes, Analyst at Goldman Sachs]

Great. Thank you. Very helpful. Appreciate it.

[Operator]

One moment for our next question. Our next question comes from Mark Massaro with BTIG. Your line is open.

[Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG]

Hey guys, thanks for taking the questions and congrats for a strong 2024. Catherine, the first one I wanted to ask of you is the ultra rapid whole genome, which I think you're targeting turnaround time in about forty eight hours. Can you just remind us how that compares to the turnaround time of your legacy exome or genome that you have in the market today? And is there a potential for going back to payers and looking for more payment as a result of potentially higher clinical utility? Or is this more of a feature that you want to ensure that is best in class?

[Katherine Stueland, President & CEO at GeneDx]

Yes, those are all spot on questions. So a couple of things. Just zooming out, it wasn't that long ago that the turnaround times for an exome or genome were six months. So I think that, part of the reason why exome and genome are now and part of the reason why multi gene panels will become obsolete in time is for exactly the point that you're making, Mark. We can now do this, not just in weeks, not just in days, but in hours.

[Katherine Stueland, President & CEO at GeneDx]

And we want to continue to be the driver and the innovator that ensures that we can get turnaround times as quickly as possible. So whereas a few years ago genomes were six months, last year our genome was fourteen days, we were able to get that down to five days. And then the forty eight hour ultra rapid just gives us an additional boost in terms of making sure that we can provide the most rapid results as necessary. We will have a higher price point for that ultra rapid test. That is in the NICU.

[Katherine Stueland, President & CEO at GeneDx]

So again, that is institutional pay, and so it's not contemplated in our contracts with payers. But, we think that it ensures that for the most dire cases where it may be warranted that we can provide that, but there is a higher price on that.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Although I will

[Kevin Feeley, Chief Financial Officer at GeneDx]

add to that,

[Kevin Feeley, Chief Financial Officer at GeneDx]

we're confident, Martha, that higher price point though we will be in a position to be the most competitive priced in the marketplace. And then in terms of that institutional price for hospital systems in the NICU or down the road as we just effectively eradicate the terms rapid and not rapid and make all as possible. It's always our intention to ensure we're bringing to payers the data that shows the value add not just clinically, but from a health economic standpoint of getting these answers into the hands of providers as soon as possible.

[Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG]

Okay, great. This is actually an investor question. Can you walk us through the phasing of the first and second half of revenue? And do you think in Q1, we should expect volumes to grow sequentially off of Q4? Or do you expect any impacts related to lingering holidays or any new product rollouts that might impact Q1 volume?

[Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG]

Yes.

[Kevin Feeley, Chief Financial Officer at GeneDx]

I'd expect Q1 to be slightly above Q4, which does show tremendous underlying growth. There is a seasonal effect in our business and across the industry. Typically, Q1, the seasonally weakest, Q4 the seasonally highest as patients are trying to get into physician offices before co pays and deductibles reset. So there is a fairly habitual Q1 lag, not just for us, but across the industry. We expect to grow beyond that to keep volumes at or above Q4 levels and then ramp up significantly around the same pacing, as you saw in 2024 in terms of cadence for each of the quarters.

[Kevin Feeley, Chief Financial Officer at GeneDx]

But Q1, the lowest in Q4, the strongest data to date through Q1 is very encouraging despite the fact that much of the country had a rough January and February in terms of weather and in terms of the wildfires, but very encouraged and happy with the data that we're seeing to date.

[Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG]

Okay. Last one for

[Kevin Feeley, Chief Financial Officer at GeneDx]

Mark, I would though expect a larger proportional second half of the year solely as a function of us activating the NICU opportunity and those new indications we talked about, both of those hitting at best late in the first half, but really ramping up in the second half of the year.

[Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG]

Okay. I got it. Maybe last one for me. It was great to meet Brian last month. I think in the press release higher, I think he might be overseeing the program management office.

[Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG]

So I'd be curious to better understand some of the programs or initiatives you guys have rolling out in 2025 and 2026. And then specifically, I wanted to ask about the opportunity in adults. You've done a really nice job with pediatrics, but I'm curious what inning you think we're in in adults? And maybe can you touch on some of the clinical areas that you can help address unmet needs for in adults?

[Katherine Stueland, President & CEO at GeneDx]

Absolutely. Yes. So it's been fantastic having Brian on board. He's on week six. It feels like six months in the best way possible, though.

[Katherine Stueland, President & CEO at GeneDx]

He really has immersed, and, he's responsible for operations, medical affairs, product technology and the program management office. So the PMO is really intended to ensure that we accelerate any sort of automation efforts coming out of the product and technology groups and into the lab operation, in addition to any sort of customer experience efforts that we've mentioned that we're investing in. Customer experiences is one of our biggest areas of focus for the year. So the PMO just helps us run more efficiently. We've just recruited a fantastic person to lead that organization.

[Katherine Stueland, President & CEO at GeneDx]

So that is Brian's focus in addition to a new innovation team, which is looking at, I think, in a more forward looking way, how we continue to make sure that, as new technologies come to bear, whether it's from sequencing companies or otherwise that we can be as forward leaning as possible. So those are the sorts of efforts that will come out of the CMO and out of Brian's organization. On the adult side of things, you know, the way that we the way that we think about it, we're we're in inning inning, like, zero right now on that. We we have, like, a smattering of tests that come in for adults today, and historically, that that's been the case. And so that is a massive and untapped opportunity ahead.

[Katherine Stueland, President & CEO at GeneDx]

The clinical areas that we think are most representative, so think neurodegenerative disease for adults, Parkinson's, Alzheimer's. Think about some of the cardiac conditions, so amyloidosis, hypertrophic cardiomyopathy. So some of those areas where you're seeing biotech companies focus on genetic based medicine. So those are areas that we think are important. And as we continue to build a biopharma pipeline, having conversations in some of those areas as well.

[Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG]

Thanks so much.

[Operator]

One moment for our next question. Our next question comes from Braden Colliadog with Wells Fargo. Your line is open.

[Brandon Couillard, Managing Director at Wells Fargo]

Thanks. Good morning. Kevin, not surprising to see you exit hereditary cancer. Can you just remind us what the gross margin profile of that revenue stream was? I imagine it's slightly accretive exiting hereditary cancer, probably slightly accretive overall this year.

[Brandon Couillard, Managing Director at Wells Fargo]

That'd be helpful.

[Kevin Feeley, Chief Financial Officer at GeneDx]

Yes, it was about forty percent.

[Brandon Couillard, Managing Director at Wells Fargo]

Okay. And then, Catherine, on the Epicora rollout, so you've launched in one site right now at UNC Health. How many sites do you expect to have by the end of the year? And just can you remind us what the process is like from kind of turning it on, kind of educating doctors until you start recognizing revenue from that?

[Katherine Stueland, President & CEO at GeneDx]

Yes, absolutely. I'll kick it off and then let Kevin comment as well. So before we even made the decision to sign the Epic contract, we booked a large pipeline of business that was primed to flip when we had the Epic Aura functionality. So, we did a lot of the pre work and we kept those customers warm over the course of time as we did all of the tooling required to really build the capability. UNC is one that we've been close with and they wanted to be the first.

[Katherine Stueland, President & CEO at GeneDx]

We've got a number of others in the waiting room that are fast followers and then we'll continue to drive our sales effort. As I said, we've got an expanded enterprise sales team that will be focused in this area. But we're starting with UNC, we'll start adding them as we start to build that muscle in terms of how we work quickly with these health systems, not just on their side of the integration, but then starting to pull through the volumes and the revenues. And so that's part of the reason why it will be a slower start in terms of the guide and then start to pick up really in the back half of the year.

[Kevin Feeley, Chief Financial Officer at GeneDx]

And Brandon, it was about six months of picks and shovels from the time we signed the contract to going live or launching last week. That was really to build the infrastructure. So I consider that effort of build one time. At this point though, and moving forward, it radically improves our time to deliver new integrations with willing hospital systems down to a matter of something close to two to three weeks for each additional hospital system. So a massive improvement over building customized bespoke bidirectional interfaces.

[Kevin Feeley, Chief Financial Officer at GeneDx]

So we're really excited to deliver that better experience of integrating with hospital systems. And then to your point, the end user, the real key is putting bedside ordering and results delivery on the screen in the exam room or at the patient's bedside.

[Brandon Couillard, Managing Director at Wells Fargo]

Great. Thank you.

[Operator]

And ladies and gentlemen, this does conclude the Q and A portion of today's call. I'd now like to turn it back to Catherine for any further remarks.

[Katherine Stueland, President & CEO at GeneDx]

Amazing. Well, we look forward to seeing you all very soon at investor conferences. And thanks so much for your ongoing support.

[Operator]

Have a good day. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Participants

Executives

• Sabrina Dunbar, Director of IR & Communications
• Katherine Stueland, President & CEO
• Kevin Feeley, Chief Financial Officer

Analysts

• Daniel Brennan, Managing Director at TD Cowen
• William Bonello, Senior Research Analyst at Craig-Hallum
• Matt Stanton, Analyst at Jefferies
• Matt Sykes, Analyst at Goldman Sachs
• Mark Massaro, Managing Director - Senior Equity Research Analyst at BTIG
• Brandon Couillard, Managing Director at Wells Fargo