GeneDx Q2 2026 Earnings Report

GeneDx EPS Results

• Actual EPS: $0.01
• Consensus EPS: -$0.19
• Beat/Miss: Beat by +$0.20
• One Year Ago EPS: $0.36

GeneDx Revenue Results

• Actual Revenue: $114.44 million
• Expected Revenue: $111.01 million
• Beat/Miss: Beat by +$3.43 million
• YoY Revenue Growth: N/A

GeneDx Announcement Details

• Quarter: Q2 2026
• Date: 8/3/2026
• Time: After Market Closes
• Conference Call Date: Monday, August 3, 2026
• Conference Call Time: 4:30PM ET

GeneDx (NASDAQ:WGS) is a clinical diagnostics company specializing in comprehensive genetic and genomic testing for rare and inherited disorders. The company offers a broad portfolio of assays, including targeted gene panels, whole exome sequencing, whole genome sequencing and chromosomal microarray analysis. GeneDx’s laboratory services support the diagnosis of a wide range of conditions—from rare pediatric diseases and hereditary cancer syndromes to neuromuscular and metabolic disorders—by providing clinicians with detailed variant interpretation and reporting.

Founded in 2000 and based in Gaithersburg, Maryland, GeneDx was established with the aim of accelerating the translation of genomic discoveries into clinical care. In 2015, the company became a subsidiary of OPKO Health, leveraging OPKO’s global infrastructure to expand its testing capabilities and research collaborations. GeneDx holds College of American Pathologists (CAP) accreditation and is CLIA-certified, ensuring adherence to stringent quality and regulatory standards.

GeneDx serves a diverse client base that includes hospitals, academic medical centers, reference laboratories and pharmaceutical partners, as well as patients participating in research studies. While its primary market is the United States, the company also accommodates international referrals through its global network, enabling access to advanced genetic diagnostics for clinicians and patients worldwide. With a dedicated team of geneticists, laboratory scientists and genetic counselors, GeneDx continues to advance precision medicine by translating complex genomic data into actionable clinical insights.

GeneDx Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record testing volume and return to profitability: GeneDx processed 30,785 exome and genome tests in Q2, up 32% year over year, generated $114.4 million in revenue, and posted $0.4 million in adjusted net income. The company reaffirmed full-year revenue guidance of $475 million–$490 million and expects to remain profitable for 2026.
• Positive Sentiment: Coverage expansion creates a potential reimbursement tailwind: Commercial genome coverage increased from 47% to 87% of covered lives, driven largely by Carelon, while 39 states now cover exome or genome testing through Medicaid. Management expects the revenue impact to begin emerging in Q4 2026 and become more significant in 2027 as coverage translates into claims payments.
• Neutral Sentiment: Revenue cycle management is the primary growth opportunity but remains early: The outpatient genome collection rate was approximately 32%, with exome rates described as comparable, versus management’s long-term target of roughly 70%. Payer-specific workflows, improved prior authorization and denial management, and technology investments are being implemented, but collection rates are expected to remain roughly flat in Q3.
• Positive Sentiment: Demand is broadening beyond GeneDx’s core markets: The company maintained about 80% share among geneticists and reached roughly 50% among pediatric neurologists, while General Pediatrics and prenatal testing showed early growth. New sales representatives, corporate pediatric accounts, and the planned “one-minute” ordering tool are expected to support further adoption.
• Positive Sentiment: Liquidity and operating efficiency improved: GeneDx completed its planned $25 million in annual cost reductions, expanded its debt facility by $50 million, and received a strategic equity investment from Blackstone Life Sciences, bringing pro forma liquidity to approximately $188 million. Management also cited gross-margin improvement to 70%, additional AI-driven productivity opportunities, and a return to cash-flow generation expected in Q4.

Presentation

[Operator]

Good day. Thank you for standing by. Welcome to the GeneDx second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sabrina Dunbar of Investor Relations. Please go ahead.

[Sabrina Dunbar, Director of Investor Relations and Communications at GeneDx]

Thank you, operator. Thank you everyone for joining us today. On the call, we have Katherine Stueland, Chief Executive Officer, Kevin Feeley, Chief Financial Officer, and Mark Gardner, President. Earlier today, GeneDx released financial results for the second quarter ended June 30th, 2026. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, updated 2026 guidance and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, August 3rd, 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 second quarter 2026 earnings release and slides available at ir.genedx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results.

[Sabrina Dunbar, Director of Investor Relations and Communications at GeneDx]

Additionally, please refer to our most recent annual and quarterly filings with the SEC for a discussion of factors that could cause actual results to materially differ from forward-looking statements. With that, I will turn the call over to Katherine.

[Katherine Stueland, CEO at GeneDx]

Thank you, Sabrina. Good afternoon, everyone. Our team demonstrated incredible focus and agility to deliver a solid second quarter. We hit a new record, resulting more than 30,000 exome and genome tests in a quarter, which represents 32% year-over-year growth. We reported $114.4 million of total revenue, exceeding our guide, and returned it to profitability one quarter earlier than we had previously expected. Based on our second quarter performance and our continued momentum into Q3, we are reaffirming our full year 2026 guidance. Demand for our services has never been higher, and as we continue to drive adoption of our exome and genome, we must be relentless in our efforts to improve the rate at which we get paid for our services. It's the single biggest opportunity for us, and as we shared on the last call, we've organized the business around three key imperatives.

[Katherine Stueland, CEO at GeneDx]

First, optimizing unit economics. Second, growing utilization of exome and genome. Third, delivering leading products at unmatched scale, all while managing our capital responsibly. Optimizing unit economics is our first priority because we're under-earning on our potential, and we see significant room for improvement off this Q2 baseline. Our long-term vision remains unchanged. We believe the genome will increasingly become the standard for diagnosing all heritable disease, and we're continuing to optimize our commercial and operational strategies to bridge this transition. Our strategies took hold in the second quarter as mix moderated with steady month-over-month mix gains back into our exome products, including Reflex. In tandem, we saw coverage begin to catch up with the clinical demand, with Carelon announcing a new coverage policy that expanded commercial genome coverage from 47% to 87% in just one quarter.

[Katherine Stueland, CEO at GeneDx]

Our team plays a pivotal role in these coverage expansions through advocacy and evidence generation and will continue to pursue coverage expansion opportunities for both exome and genome. This is our market development strategy in action. By surveying the market ahead of coverage, we demonstrate demand and medical necessity. That unpaid volume is primed for us to accrete revenue in new markets as coverage expands. Our greatest focus is translating coverage into payment. We'll spend the majority of our time today discussing how we'll get paid far more for our tests, and in doing so, see in the fullness of time, revenue growth rates converge with or exceed volume growth in the future. We're committed to serving families during their moments of greatest need. They are at the center of everything we do.

[Katherine Stueland, CEO at GeneDx]

To reach them, we're making strong progress against those foundational and expansion markets. Demand continues to be a source of strength and optionality. We've proven we can maintain our leadership position through this genome transition. Our competitive positioning is directly translatable. Clinicians choose GeneDx and return to GeneDx because of the quality and reliability of our results, our leading turnaround times, our deep data and expertise, and the customer support infrastructure we have built specifically for the complexity of rare disease. As genomic testing moves into the mainstream, our ability to transform a genome's worth of information into a single actionable answer will only increase in importance. In summary, demand is strong, and we're now leading into a large multi-year opportunity to improve ARR, which will serve as a significant revenue tailwind.

[Katherine Stueland, CEO at GeneDx]

We are confident we can drive collections to the industry standard of 70%. We're building on the strengths of our team to realize this massive revenue opportunity ahead. With that, I'm happy to pass the call over to the newest addition to our executive team, Mark Gardner. I was elated to welcome Mark to the team back in June. He has brought his experience from across the industry and passion for what we do to ensure our capabilities keep pace with the growing demand for our services. I'm excited for you to hear directly from him. Mark, please take it away.

[Mark Gardner, President at GeneDx]

Thank you, Katherine. Good afternoon, everyone. I'm excited to be here and really grateful for the opportunity to serve patients and customers in this critical segment of the advanced diagnostics industry. I joined GeneDx because I saw a company with proven clinical leadership, a strong market position, and a tremendous opportunity ahead. Six weeks in, that conviction has only grown. The quality of our products, our variant classification interpretation capabilities, our Infinity database, and our scale are just some of the things that set us apart as the leader in rare disease testing. I've also observed that while we've grown quickly, we need to strengthen specific elements of our operations to unlock the next phase of growth. Today, I'll walk you through what I believe to be the two most impactful areas for improvement, Revenue Cycle Management and commercial operations.

[Mark Gardner, President at GeneDx]

We bring significant value to the healthcare system, and we should be paid fairly for our services. I agree with Katherine that we are under-earning today on both exome and genome testing. This is a significant opportunity that the whole of our company has rallied around. To be specific, we are focused on four operational levers to improve the blended average reimbursement rate of the company. First, mix management. By managing our exome versus genome mix in the near term, we have more time to build the internal processes needed to maximize payment on whole genome volume in the long term. Mix improved during the second quarter and continued to improve throughout July. Second, expand payer coverage. Payer coverage is moving in the right direction as a direct result of GeneDx's evidence and advocacy. It still lags clinical demand and includes too much red tape. Third, implement payer-specific workflows.

[Mark Gardner, President at GeneDx]

Medical necessity criteria, documentation requirements, and prior authorization processes vary across payers. We need to build workflows to ensure that we meet every administrative requirement to collect payment. When done well, this approach improves prior authorization approval rates, reduces avoidable denials, and increases the percentage of tests for which we are ultimately paid. While we're focused in the near term on improving our RCM processes for genome, I would note that our exome business will also continue to see improvements in collection rate. Fourth, we have to invest in technology. We're applying artificial intelligence and other systems and processes around or across our entire Revenue Cycle operations to build a more intelligent and scalable function. This includes internal controls and customer experience features to collect and submit billing information that enables consistent and reliable payment. This is a longer-term capability and under development.

[Mark Gardner, President at GeneDx]

We've already made progress on all four of these actions. We expect they'll begin to influence rates in the quarters to come. I'm confident based on the data we've seen during Q2 and our ability to drive ARR improvements off this Q2 baseline. Next on commercial. Our core market of geneticists and Pediatric Neurology continued to perform well. We maintained our approximately 80% market share among geneticists while expanding our Pediatric Neurology market share grew up to 50%. While geneticists may have moved from exome to genome over the past year, they did not leave GeneDx. At the same time, it could still take years to reach a geneticist, thus diversifying call points will enable us to unlock our total addressable market and bring the power of genomic testing to patients with a much shorter diagnostic journey. This strategy is driving our investment approach.

[Mark Gardner, President at GeneDx]

For example, based on changes in the AAP guidelines, we invested in building out our commercial team to serve General Pediatrics in early 2026. In Q2, we saw our highest growth ever in this channel. We're seeing the early signals that typically precede larger scale adoption, including increased engagement with our field reps and medical science liaisons, new account creation, and first orders from new clinicians. Across all markets, we'll continually adjust coverage models as necessary to ensure that each dollar we invest in the sales force has an appropriate return on investment in the longer term. In summary, by driving process excellence in Revenue Cycle Management and prudently investing in call point diversification, we will drive sustainable long-term growth for the company. I'll now pass it to Kevin to walk through our financials and the leading indicators we will use to track progress over time.

[Kevin Feeley, CFO at GeneDx]

Thanks, Mark, and good afternoon, everyone. Total revenues were $114.4 million, up 11% year-over-year. Exome and genome revenues were $100.3 million, up 17%, with exome and genome result volume of 30,785 tests, up 32%. Unit growth was broad-based across geneticists, Pediatric Neurology, and the NICU, with early contributions from General Pediatrics and prenatal. Total company gross margin was 70%, up sequentially from 69% in the first quarter. We returned to profitability with adjusted net income of $0.4 million, an $8.6 million improvement from the first quarter. The blended average reimbursement rate in the second quarter was $3,258 per test, roughly flat quarter-over-quarter and in line with expectations. The primary driver of the larger ARR variability against 2025 is the product mix shift into genome.

[Kevin Feeley, CFO at GeneDx]

There have been no meaningful changes to our contracted pricing. We view this Q2 blended ARR as the new baseline for the remainder of the year and are working against three key levers to improve it: product mix, payer coverage, and underlying collection rates. First on mix. In the second quarter of 2026, genome represented 32% of all insurance-based outpatient volume mix. Down from close to 40% in the first quarter, demonstrating steady mix share gains back into exome and Reflex each month of Q2, continuing through July. That second quarter genome mix is up from only 15% in 2025, is what drives the divergence between our volume and revenue growth rates year-over-year. Although genome contracted rates are lower than exome by comparison, I'll underscore that genome gross margins are healthy. Second, on payer coverage.

[Kevin Feeley, CFO at GeneDx]

While payer coverage is moving in the right direction, coverage varies significantly between exome and genome, and understanding that gap is important context for the forward-looking ARR outlook. On the commercial side, approximately 98% of commercial lives have some level of exome coverage, up from approximately 90% in the first quarter. Genome is earlier in that journey. Approximately 87% of commercial lives now have some level of genome coverage, up significantly from 47% last quarter, representing a structural shift in reimbursement outlook for genomes. The primary driver of that increase was Carelon. On the Medicaid side, 39 states now cover exome or genome testing, with Mississippi coming online July 1st. The full impact of coverage expansion takes time to flow through our blended ARR and revenue based on collections and accrual lags. It's important to acknowledge that across both commercial and Medicaid plans, not all coverage policies are created equal.

[Kevin Feeley, CFO at GeneDx]

Even with written policy, genomic testing remains out of reach for too many children, as claims are denied by overly restricted eligibility criteria and administrative barriers. In the second quarter, approximately 67% of our outpatient genome volume was submitted to payers with an active positive coverage policy. Looking at the evolution here, that rate is up from 38% in the second quarter of last year and up from 46% just last quarter. The uptrend has continued in July, giving the rolling advancements of policy coverage. Third, outpatient genome collection rates, which are affected by both coverage and our own operational effectiveness. Our operational underlying outpatient genome collection rate, which is the percentage of claims paid, today stands at approximately 32%, flat with the first quarter, and down from 43% in the second quarter of 2025.

[Kevin Feeley, CFO at GeneDx]

That decline in collections from last year reflects an investment we made into developing the market by accepting volume ahead of coverage. Importantly, it reflects a tremendous opportunity for us when, in the fullness of time, we get paid more often for these volumes with greater coverage and with better RCM. As Katherine rightly pointed out, we are under-earning versus our full potential. As an illustration of the opportunity, if we were to double that 32% collection rate, what are zeros in our blended ARR today become paid units, driving revenue uplift that falls directly to the bottom line. I focus on genome here because of the large year-over-year mix shift and its larger place in the future of the business, and also the fact that exome already operates at a gross margin above the total company average.

[Kevin Feeley, CFO at GeneDx]

However, outpatient exome collection rates are comparable to genome, which means there's a ton of room to improve. Most denials are addressable, and the work we'll put into RCM aims to benefit the entire portfolio. We do not expect improvements to be perfectly linear, but in terms of pacing, Q3 collection rates should remain roughly flat as our payer-specific workflows are still being built out and incrementally implemented. As a reminder, our revenue recognition reflects collection experience over a trailing period, and thus it takes a couple of quarters to fully capture improvements in coverage and the impact of operational actions. We expect to see meaningful improvements in Q4 2026, with the most significant uplift coming in 2027 as both expanded coverage and stronger operational execution compound together.

[Kevin Feeley, CFO at GeneDx]

Beyond operational effectiveness, that collection rate, and thus ARR, could always have some underlying variability from the single payer's administrative behaviors, tightening coverage policy, or contracting change. However, we serve a diversified payer base, so the impact of any single payer action is usually moderated. Moving down the income statement, beyond ARR uplift, genome gross margins have room to expand from lower COGS over time. Today, whole genome cost us nearly twice as much to produce than exome. The difference there is almost entirely higher reagent costs, which we expect will come down as utilization for genome grows and manufacturers advance their technology. We expect cost per test to stay relatively flat for the second half of 2026, with step improvements in 2027. Operating expenses were approximately $80 million, which was slightly better than expected.

[Kevin Feeley, CFO at GeneDx]

We completed the full $25 million of annual cost actions committed to on our last call, and we've recalibrated our investment pace while continuing to protect core investments in our proven growth channels and operational infrastructure. Onto the balance sheet. Subsequent to the close of the quarter, we further fortified our financial position through a $50 million expansion of our existing debt facility and a concurrent equity investment from a valued strategic partner, Blackstone Life Sciences. This brings our pro forma liquidity to approximately $188 million as of June 30th, 2026. This opportunistic capital expansion ensures that GeneDx is fully capitalized well beyond sustained positive cash flow, while maintaining the flexibility to invest in high growth strategic opportunities. Turning to guidance. We're reaffirming our full-year guidance range of $475 million-$490 million in revenues.

[Kevin Feeley, CFO at GeneDx]

We continue to expect exome and genome volume growth of at least 30%, exome and genome revenue growth of at least 20%, gross margin of approximately 70%, and to be profitable for the full year. For the third quarter, we expect revenues between $122 million-$124 million, exome and genome revenue of $110 million-$112 million on volume of approximately 33,200 tests. The blended ARR there is approximately $3,300 a test. Expect gross margins of approximately 70% and approximately $2 million in adjusted net income. With that, I'll turn you back to Katherine prior to Q&A.

[Katherine Stueland, CEO at GeneDx]

Thank you, Kevin. GeneDx is positioned for long-term, sustainable profitable growth. For 25 years, clinicians have relied on GeneDx to resolve their most challenging cases because our accuracy is proven. Deep clinical loyalty has enabled us to shepherd the market through major shifts before, beginning 15 years ago with the transition from single-gene tests and multi-gene panels to exome, and beginning now from exome to genome. Innovation accelerates, and we're leading the way. We have the strategy, the team, and the operating plan to capture the significant opportunity ahead. I want to say thank you to our dedicated employees for all of their extraordinary work and to our shareholders for their continued support. Without you, our work and service of the ever-growing number of families needing answers would not be possible. With that, operator, please let's open up the lines for questions.

[Operator]

Thank you. As a reminder to ask a question, please press star one one your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, we ask that you please limit yourself to two questions. Please stand by while we compile the Q&A roster. Our first question comes from Dan Brennan of TD Cowen. Your line is open.

[Dan Brennan, Analyst at TD Cowen]

Great. Thank you. Thanks for the questions. You gave a lot of, obviously, a ton of detail on the focus on getting better payment rates. I was hoping maybe you could just there's a lot of numbers in there. I was hoping maybe you can just elaborate a little bit on the pacing in 3Q, 4Q. Kevin, I heard you say that it seems like 4Q could see a meaningful uplift just given the timing it takes. Maybe can you just review? I got the numbers in 3Q. Maybe, A, why is the pace a little slower? Then, B, what's the kind of upside case you're exiting 4Q, and what could that mean for next year?

[Kevin Feeley, CFO at GeneDx]

Thanks, Dan. Look, there's a natural lag between operational improvements and those improvements blending through our accrual rates. We'd expect the collection rate to remain roughly flat with Q3, with meaningful improvements beginning in Q4. In 2027, the upside is real. It just takes time to flow through. We're placing a premium on getting paid and guiding with that discipline.

[Dan Brennan, Analyst at TD Cowen]

Okay. Maybe just on the mix, you have the Reflex, you're getting the whole genomes down. I know on the last call, you talked about, obviously, you want to provide the best service to customers, so you don't want to dissuade them from getting what they want. Maybe just speak to a little bit of how you're managing that mix. You've got it down, kind of what you're baking in for the back half of the year. From a competitive standpoint, if the competitors are pushing whole genome, does that put you at a disadvantage at all that you're trying to favor the exome against that? Thank you.

[Katherine Stueland, CEO at GeneDx]

Certainly. Well, first, we continue to see, as I said in my prepared remarks, the future is indeed genome. We expect that all inherited disease will be diagnosed off of a genome. In the meantime, we have several services that we're able to provide to give our clinicians, regardless of what channel they're in, the right technology to get the diagnostic yield that they need to get the right answer to their patient. Remember, 80% of the time, patients with genetic disease can be diagnosed with an exome. We see really good uptake with that product. If they need more information, then we can quickly reflex them beyond that exome to a genome. Because we've been able to drive down our turnaround times, we can do all of that faster than other labs can run a genome. We've been successful in really managing this transition.

[Katherine Stueland, CEO at GeneDx]

We saw it in Q2, and we continue to drive, I would say, a really meticulous approach to the sales force to ensure that we are giving customers what they want, utilizing the various tools that we have.

[Dan Brennan, Analyst at TD Cowen]

If I'm still live, maybe this last one to sneak in. We had modeled realized price are kind of flattish after 2026 because you were just getting to this level, and I think The Street and us probably had similar, maybe low single-digit pricing. I know, Kevin, in the past, you've talked about how you'd be willing to go in contract with payers to secure higher payment rates, even if it meant, like you give away some of the upside. The tone sounds different now with Mark. Sounds like you feel there's all this upside on getting realized price. Any way for us to think about what this could mean beyond 2026 in terms of what the capture could look like? Thanks.

[Kevin Feeley, CFO at GeneDx]

In terms of 2027, I think to keep flat in 2027 and beyond misses a core central opportunity for us. Today at 32%, genome collection rates reflect where we are in the coverage maturity, not where we think we're going. We've brought in that volume to deliberately build the clinical evidence to expand payer policies. That's worked, as represented by that, frankly, massive jump in commercial coverage from 47% to 87% in just one quarter. All collection rates for exome and genome are well below where we think a mature diagnostic test should typically live, at or around 70%. That would be doubling today's collection rate, and we think that represents a meaningful structural opportunity for us as we progress. As we said, it won't be linear, but in 2027 and beyond, we expect this work to pay off handsomely in that regard.

[Dan Brennan, Analyst at TD Cowen]

Great. Thank you.

[Operator]

Thank you. Our next question comes from Mark Massaro of BTIG. Your line is open.

[Mark Massaro, Analyst at BTIG]

Hey, guys. Thank you for taking the questions. I was hoping that maybe you could double-click on the Carelon opportunity, recognizing that that is a very significant lift that you talked about. I was just wondering if you could maybe frame what needs to happen next. Is this just getting in front of commercial payers? I think I heard you say this is a big lift in 2027, but can you just walk me through why it wouldn't be a lift in Q3 and Q4 and any potential for that?

[Katherine Stueland, CEO at GeneDx]

Mark, thank you for that. It is indeed in a single quarter, just a massive opening up of possible patients and revenue for us moving forward. It's a really positive development. As Kevin had shared in his comments, coverage leads and payment lags. There's just a massive opportunity ahead to raise our collection rates and revenue based on Carelon, and extended coverage to about 56 million lives. Payers don't always operationalize everything immediately, it takes some time. Kevin, anything you want to add?

[Kevin Feeley, CFO at GeneDx]

I would just add that, certainly we're not counting on anything in that regard for the third quarter here. Some contribution beginning in the fourth quarter of 2026, more fully in 2027 to account for that natural lag.

[Mark Massaro, Analyst at BTIG]

Perfect. If you don't mind, I want to ask the same question on Medi-Cal. Obviously, these are different payers, can you just walk us through the same thought process as to when you expect a benefit if there could be anything in Q3 versus Q4?

[Kevin Feeley, CFO at GeneDx]

Monitoring it closely. California pricing for their genome, within Medi-Cal fee for service, they published a rate a couple of months ago, that became effective just July 1st. It's pretty early, monitoring adjudication experience closely to see that they're paying often and at that price. I think some of the larger work to do is to make sure that MCOs in the state of California are following Medi-Cal policies and guidelines which they're required to do under regulatory frameworks. We want to see some data further accumulate that the MCOs, which is the largest proportion of volume, are going to follow policy. We have counted on some uplift based on recent trends that we can see, continue to view it as a massive long-term win that Medi-Cal has put out policy, still monitoring it closely and expect greater uplift in 2027.

[Mark Massaro, Analyst at BTIG]

Fantastic. Last one from me. It was encouraging to hear the progress with rising engagement with the General Pediatrics market, with orders coming in. Is there any way to quantify what those orders are? When do you think it might be material enough to quantify them? Are there any lessons learned? I know it's early, but perhaps, can you talk about ways that maybe you've optimized the early launch and how you can attack that in a bigger way in 2027?

[Katherine Stueland, CEO at GeneDx]

Certainly. Well, as a reminder, it's been just over a year since the guidelines published. We're still in the early stages of commercial activity post-guidelines. We're pleased that we are investing in this channel. We're seeing clinicians in the Gen Peds channel ordering exome testing predominantly, and we're seeing some good interest there. It's a different call point, though. I'll let Mark comment a little bit more on this.

[Mark Gardner, President at GeneDx]

Yeah, obviously, this is one where, depending on the specifics of each of the practices, some of those practices are more attractive than others. There's obviously a greater emphasis amongst developmental and behavioral specialists to order more exomes than you might see amongst the rest of the Gen Peds call point. We're definitely seeing that there are differences even within the overall General Pediatrics channel. The other thing I would note is that we think that this is an area where, as more and more general practitioners are becoming corporatized or a part of larger groups, that that's actually an opportunity to aggregate demand and to set policy for the larger corporate entity. We think that by being really focused on higher productivity physicians and by concentrating on how we win corporate accounts, we think that that's a way to expand the market.

[Mark Gardner, President at GeneDx]

So far, the evidence is that it has a very high return on investment.

[Mark Massaro, Analyst at BTIG]

Great. Thank you.

[Operator]

Thank you. Our next question comes from William Bonello of Craig-Hallum. Your line is open.

[William Bonello, Analyst at Craig-Hallum]

Hey, guys. Thanks a lot. I'll ask my two questions. One, I'm trying to understand, it sounded like you said a pretty significant improvement in mix actually in Q2 versus Q1. We actually saw the ASP or ARR go down, not a ton, but slightly, and with the improvement in mix, we might have thought it would move the other direction. Is something else getting worse? Are you seeing an uptick in the rate of denials? Are you seeing pricing pressure? I mean, why wouldn't it flow through to higher ARR rather than lower ARR?

[Kevin Feeley, CFO at GeneDx]

Yeah, it's a great question, Bill, and hi. Look, the mix improvement is real, moving from 40% to 32%, with the differential there flowing back into the Reflex product, an important bridge that allows us more time to mature collection processes for genome. The reality is exome collection rates roughly flat underlying from quarter to quarter. There was some slight variation in payer mix that led to about that $50 variation that's within 1% of Q1. I think the way we would read that is the blended ARR has stabilized, it's flat, it now represents a new base for us to work off of. The building blocks that we described in terms of operational improvements is being deployed now. That will take some time. We're not happy with the 32% collection rate on genome, and exome collection rates are comparable to that.

[Kevin Feeley, CFO at GeneDx]

We have work to do, frankly, we think that represents the largest opportunity the company has to meaningfully increase our earnings power over time.

[William Bonello, Analyst at Craig-Hallum]

Hey, if you'll indulge me and let me sneak in a third. You don't have to, just, I want to follow up on that. When you're saying exome collection is roughly the same, I thought in the past we had gotten all the way up to, like, 55% collection rates or something on exome. So if we're down at sort of 32-ish or something, maybe I'm just not understanding what you're saying.

[Kevin Feeley, CFO at GeneDx]

No, you're tracking well, Bill, the nuance there is those collection rates we cited are for the outpatient insurance-based volume only. So what I mean by that is excluding the NICU. The NICU is collected at 100%, what buoys that rate back up towards the 50% range in total. What we'll be tracking and culling out specifically so you can all track along with us is the improvements in the underlying outpatient insurance-based rate, which is where we see the largest opportunity at.

[William Bonello, Analyst at Craig-Hallum]

Okay. That makes a ton of sense. If I can ask what was going to be my second question, I'm just trying to wrap my head around the guidance, I may be remembering commentary a little bit wrong from last quarter. I thought we were kind of expecting some steady improvement in ARR over the course of the year, I appreciate all the reasons not to necessarily expect that seems really prudent. You held your volume growth rate flat and your revenue guidance flat, your volume guidance and your revenue guidance flat. I'm just sort of wondering how we reconcile maybe ARR not improving at the same rate, revenue and volume being still where you expected.

[Kevin Feeley, CFO at GeneDx]

Yeah, look, the guide reflects July trends that we had the benefit of seeing, which showed mix continuing to move in the right direction, and core channel demand really healthy at this point, and Reflex volume for the first time on a single-month basis since we've launched that product. Reflex volume's exceeding genome in the month of July. We took stock of the totality of what we see as really positive trends that played out throughout the second quarter and into July and incorporated all that into the new guide that we just provided here.

[William Bonello, Analyst at Craig-Hallum]

Perfect. I really appreciate that. Thanks a lot.

[Operator]

Thank you. Our next question comes from David Westenberg of Piper Sandler. Your line is open.

[David Westenberg, Analyst at Piper Sandler]

Okay. I'm going to truly ask just one and one follow-up here. I'm going to get into the H2 guidance. How much visibility do you have on collection rates in Q4? Secondly, on kind of like the sales force ramp and their productivity, how much productivity are you seeing right now, and how much of productivity gains are in the Q4 guidance I'm thinking about specifically? Last one follow-up.

[Kevin Feeley, CFO at GeneDx]

Yeah. Look, in terms of visibility, it was a commitment of ours to improve that following the first quarter call, we think we've done that. I've had the benefit of adding a number of folks to my financial leadership team. We brought in some exciting Revenue Cycle leaders with experience doing this at very large scale at companies you all know very well in addition to Mark. Beyond Mark joining, a whole host of new talent really with the goal of upping experience levels, operating at much larger scale than we have. We've accumulated data trends, like I said, through July, those data points throughout the second quarter and into July inform what we see as the outlook that we provided.

[David Westenberg, Analyst at Piper Sandler]

On the sales productivity-

[Mark Gardner, President at GeneDx]

With regard to the sales force, I would just say that what we've seen is that while our traditional call points continue to deliver at a very high rate per rep, if you actually look at the incremental number of new physicians, the incremental number of new orders, we think that these emerging markets actually represent a significant amount of our future growth. They, by now, actually represent a meaningful and impactful amount of our overall volume growth for the quarter. Frankly, a lot of these folks we just hired in the first part of this year, traditionally, they would have a learning curve, and they would get more productive as the year goes on. We see that accelerating in the back half of the year.

[David Westenberg, Analyst at Piper Sandler]

Thank you so much. Kevin, just going to stick with the question on you, congrats on the return to profitability in Q2. The operating cash flow was one of the high points we've seen in quite a while. Now I think investors are also kind of seeing the Blackstone facility and that happening in the quarter. We just want to think about how you're thinking about cash flow expenses from here out for the rest of the quarter and what GeneDx needs to do to become a sustainably cash flow positive company over the next couple of years. Thank you.

[Katherine Stueland, CEO at GeneDx]

Sure. Dave, thanks for the question. I'll kick it off and then hand it over to Kevin. Just to say, as we committed on the last call, we have succeeded in that $25 million OpEx cut. We've organized the company around the three biggest levers, which is improving unit economics, driving utilization of exome and genome, and delivering best-in-class products. We have organized everyone around all of our capital deployment around those three efforts. Anything that doesn't fall into that is opportunity to continue to make sure that we've got the right capital management strategy. We feel like we've got the right focus in place.

[Kevin Feeley, CFO at GeneDx]

Yeah. As you pointed out, Dave, Q2 certainly will be the high point of the year. Q2 reflecting the lag from the first quarter operating loss, which in large part was driven by the heavy commercial investment into expanding the sales team as well as some other investments. The second quarter was a heavier CapEx cycle than what we might expect moving forward, as we've significantly increased the sequencing fleet to keep pace with the increase in genome volume that we've seen over the past year. We think that has now reached a point of leveling out. Q2 did have some certain one-time payments, as well as the lag between the fact that earning a $1 today takes some more time to collect it in cash. Three things going to improve that picture moving forward.

[Kevin Feeley, CFO at GeneDx]

First, as I mentioned, we've completed the execution out a net $25 million in cost from our plan. That work is behind us and in current run rates. Second, the RCM improvements we've talked about will begin to increase our earnings power more so in the fourth quarter as collection rates rise. Third, as volumes continue to grow, we do get some compounding COGS leverage that improves operating margins over time. Would expect about $10 million approximately in the third quarter, but the fourth quarter returning to cash flow generation, and that Blackstone financing gives us ample runway to get there without any sort of compromise. By 2027, we expect all of those factors to converge in strong, sustained cash generation.

[Operator]

Thank you. Our next question comes from Kyle Mikson of Canaccord Genuity. Your line is open.

[Kyle Mikson, Analyst at Canaccord Genuity]

Hey, guys, thanks for the question. It's good to see a clean quarter. I want to ask about the Reflex testing. If that volume mix continues to expand at a pretty rapid clip like you saw recently, and the Reflex mix is much higher in 4Q than you would have expected, how does that impact the guidance, especially ARR?

[Kevin Feeley, CFO at GeneDx]

What's in the guidance is our expectation of how those mix would evolve over time. Look, think about Reflex together with exome. It's designed to be reimbursed at the exome rate. There could be some interplaying between exome and Reflex, but ultimately, see that genome mix rate at or slightly lower than where it is today in the back half of the year, and we've incorporated that into the guide.

[Kyle Mikson, Analyst at Canaccord Genuity]

All right, great. If the outpatient genome mix decreased by so much here, what other end markets kind of benefited the most? Was it the emerging, like the NICU and the Gen Peds or the established kind of end markets? Which area did volume increase the most?

[Kevin Feeley, CFO at GeneDx]

Yeah, look, the Reflex product, like I said, is in large part meant to be a bridge offering. Where we're seeing the greatest interest is in the geneticist forum. As Mark said, the secular shift to genome and its interest has not slowed down. What we have seen is many of those genome orders moving to Reflex, taking advantage of the exome to Reflex structure that we've put up. The product is operating better than initial expectations when we first launched it in February.

[Katherine Stueland, CEO at GeneDx]

I would just add, in the Gen Peds sector, we're seeing good utilization of our exome products. It's predominantly exome, there's a healthy mix. Again, as we're in each channel, we learn more about what product works, what services work, and what the sales force needs to do to make sure we've got the right mix.

[Kyle Mikson, Analyst at Canaccord Genuity]

Thanks, guys.

[Operator]

Thank you. Our next question comes from Tycho Peterson of Jefferies. Your line is open.

[Tycho Peterson, Analyst at Jefferies]

Hey, thanks, and welcome, Mark. Curious how you'd characterize the competitive landscape now. I think you've called out at some of the conferences competitive forces as a factor of that whole genome shift. Any comments you'd make on kind of just the shifting competitive landscape?

[Katherine Stueland, CEO at GeneDx]

Sure. I'll kick it off and then would love Mark to share his fresh perspective on it. One, I would say we're still the dominant player. We still have 80% market share amongst geneticists. We're now at 50% for pediatric specialists, so we're continuing to be the market leader. We're evolving and developing new markets in Gen Peds, mainly because of the quality and accuracy of our product, the customer experience, the underlying data that ensures that people have confidence in our answers. Yeah, we keep our eyes on competition. We've made it clear this is a really attractive and it's a very large market that will require more than WGS. Having more voices out there really opens up markets faster. It helps shape payer policy faster, helps shape policy in general faster. We're going to continue to be the leader and we also welcome competition for those reasons. Mark?

[Mark Gardner, President at GeneDx]

Yeah, Tycho, it's great to hear your voice again. I would just say that what really characterizes a lot of our competition right now is who's able to both measure variation and match variation the best. There are a lot of different ways to measure genomic variation, but at the end of the day, the Infinity database is a unique asset for matching that variation to drive discovery. What we find is that our customers are loyal to that because it produces a higher diagnostic yield and it gets better answers for the patient. We feel like we can maintain our leadership through continuing to invest in that data asset and continuing to drive discovery in the market.

[Tycho Peterson, Analyst at Jefferies]

Okay. That's helpful. The one-minute genome, where are you in rolling that out and how critical is that to the ramp in the back half of the year?

[Katherine Stueland, CEO at GeneDx]

Certainly. We've made some really good progress with one-minute ordering, which, in the past, we've talked about as an unlock predominantly for general pediatricians. It was designed by them, for them. We think it has the potential to unlock more volume across all the channels. It will be later this summer with, I would say, a rolling set of features. We're going to continue to put out kind of an MVP and continue to iterate on it. All is on track there.

[Mark Gardner, President at GeneDx]

Kevin, I would just add that, obviously, one of the things about these emerging markets is that the customer service expectations are different. We're obviously learning from that and we're adjusting our approach commensurate with the maturity of those markets. I feel really proud of the work of the team on that, and I think we're really going to be able to accelerate growth with people who are, frankly, not that used to ordering exome and genome testing.

[Tycho Peterson, Analyst at Jefferies]

Great. I'll leave it at that. Thank you.

[Operator]

Thank you. Our next question comes from Subbu Nambi of Guggenheim. Your line is open.

[Subbu Nambi, Analyst at Guggenheim]

Hey, guys. Thank you for taking my question. Kevin, last quarter, you were really helpful in telling us the exome genome mix, and it would be really helpful if you could tell us what your assumptions are for exome genome mix in 3Q and then in 4Q. Where do you see yourself exiting this year? This is all acknowledging that payer coverage is improving at a rapid rate for genome.

[Kevin Feeley, CFO at GeneDx]

Yeah. In terms of mix, we would expect that genome mix that we cited to come down some, hovering at around approximately 30%, maybe slightly lower in the second half of the year. Recent data order flows over the past several weeks helped frame that expectation.

[Subbu Nambi, Analyst at Guggenheim]

Thank you for that. Then I want to probe a bit on the operational pillars and focus in the prepared remarks. Mark, can you expand a bit on what's different about this approach compared to what was being done before? Just trying to understand how this new approach will materially change things in the near term. Thank you so much.

[Mark Gardner, President at GeneDx]

Yeah. I would say that with regard to developing payer-specific processes. That's something where, historically, we've frankly not invested enough in the systems and process muscle to really execute against that. The team had already brought on a number of key personnel to help lead that, so I'm just sort of shepherding that further along. I think with some of the people that we brought in from the industry who really have sort of been there and done that before, you really have a playbook that's relatively straightforward. It just comes down to complying with exactly what the payers need you to comply with in order to get paid. It's a very attention to detail-oriented process, but it's something where I think that we're seeing dramatic improvement in that.

[Subbu Nambi, Analyst at Guggenheim]

Thank you for that, Mark. Team, you hired a bunch of sales reps. How is the productivity going on with the new reps? Are we seeing returns from that investment already? Should we expect that group to still be ramping to full productivity throughout the end of the year?

[Mark Gardner, President at GeneDx]

I would say that we already see what we would say is a positive return on investment so far. Absolutely, we think that those teams will continue to accelerate in their productivity. Things like one-minute ordering actually just complement that. It's not just about adding reps, it's also about adding processes and market-specific customer service elements to really drive adoption. We feel like that should continue to accelerate with time.

[Subbu Nambi, Analyst at Guggenheim]

Okay. Thank you so much, guys.

[Operator]

Thank you. Our next question comes from Keith Hinton of Freedom Capital Markets. Your line is open.

[Keith Hinton, Analyst at Freedom Capital Markets]

Great. Thank you. I have one on volumes and then a follow-up on gross margin. For volumes in the quarter and the back half of the year, can you just talk a little bit about the contributions from the foundational markets, versus how much of the growth came from the various expansion markets? Sort of any granularity you can give there for the quarter and kind of what's baked into the guide, and then I'll follow up on gross margin.

[Kevin Feeley, CFO at GeneDx]

Look, we've seen broad-based contribution. The majority of growth in terms of units, of course, coming from geneticists, Pediatric Neurology, and the NICU, maybe in that ranked order, just given the much larger base. If you were to double-click into those newer markets of general pediatricians and prenatal, lower unit contribution, but significant year-over-year growth rates or even quarter-over-quarter growth rates, just off of a much smaller base. We would expect through the second half of the year to see contribution from all those channels. I think signals through July continues to show we're in the right markets, and they're growing in a direction that we'd expect them to. I think frankly, if you look at contribution, we still have significant headroom to penetrate and grow in those core foundational markets of geneticists, Pediatric Neurology, and the NICU alike, notwithstanding early contributions received from the new markets.

[Keith Hinton, Analyst at Freedom Capital Markets]

Great. That's helpful. On gross margin, I believe based on the numbers that I'm looking at, that you guys were able to improve gross margin almost 200 basis points quarter-over-quarter, even though the ExGen ASP was slightly down. Can you just talk a little bit about sort of what drove that quarter-over-quarter efficiency gains and how we should think about the sustainability going forward as hopefully ASP starts to come up?

[Kevin Feeley, CFO at GeneDx]

Maybe I'll start and then see if Mark has some additional color to layer in. Thanks for pointing that out. I think the team here continues to focus really on two fronts. How do we continue to improve wet lab efficiency? Certainly see reductions in input costs as utilization for genome grows. Also we are still in the early innings of deploying advanced technology across the dry side stack. Having made significant efficiency gains, there still remains a large opportunity to further expand gross margins. We saw some of that this past quarter. That's helping us get more efficient. We have reached a point of pretty impressive economies of scale, but I think one area we're most excited is to get Mark's fresh perspective on where we can continue to see step change, and realize even greater efficiencies over time.

[Mark Gardner, President at GeneDx]

I think this is one of the more exciting opportunities that we actually have as a company is leveraging the power of machine learning and AI and other tools like that, coupled with our data, coupled with the talented, brilliant scientists that we have on the team to really drive productivity on that. I would say that we had very significant improvements in dry lab productivity in Q2, and we're obviously trying to continue to drive that for several years to come. By now, in a lot of ways, the amount of productivity that comes from the dry lab in some cases actually is larger than that that you would see from the wet lab. Exciting stuff.

[Keith Hinton, Analyst at Freedom Capital Markets]

Great. Thank you.

[Operator]

Thank you. This concludes our question and answer session. I'd like to turn it back to Katherine Stueland for closing remarks.

[Katherine Stueland, CEO at GeneDx]

Excellent. Well, we appreciate everyone's time tonight. We look forward to talking to you soon over the coming days, have a good evening. Thank you.

[Operator]

This concludes today's conference call. Thank you for participating, you may now disconnect.

Participants

Executives

• Sabrina Dunbar, Director of Investor Relations and Communications
• Katherine Stueland, CEO
• Mark Gardner, President
• Kevin Feeley, CFO

Analysts

• Dan Brennan, Analyst at TD Cowen
• Mark Massaro, Analyst at BTIG
• William Bonello, Analyst at Craig-Hallum
• David Westenberg, Analyst at Piper Sandler
• Kyle Mikson, Analyst at Canaccord Genuity
• Tycho Peterson, Analyst at Jefferies
• Subbu Nambi, Analyst at Guggenheim
• Keith Hinton, Analyst at Freedom Capital Markets