Bill Bonello

Bill Bonello asked for more color on the rationale behind the accelerated volume expectations, clinical revenue, gross margin, and cash flow guidance, particularly the shift from a more capital-light strategy.

Answer

Aaron Tachibana, Chief Financial and Chief Operating Officer, explained that the change is driven by securing Medicare coverage for breast and lung cancer with favorable pricing, a healthy balance sheet with $240 million in cash, and the strategic opportunity to aggressively gain market share in a rapidly expanding $20+ billion market with limited ultrasensitive competition. Chris Hall, Chief Executive Officer and President, added that they see strong market demand and are balancing aggressive investment with prudent cash management, noting significant R&D investment in studies and evidence development. Bill Bonello also inquired if Tempus has been given more freedom in sales. Chris Hall responded that they are focused on driving deeper within existing accounts and building demand for the ultra-sensitive approach. Bill Bonello then asked about the cash burn for the year. Aaron Tachibana confirmed $74 million was used in 2025, with an expectation of approximately $100 million in 2026.

Bill Bonello asked what prompted the decision to accelerate volume expectations, clinical revenue, gross margin, and cash flow guidance, moving away from a previously discussed capital-light strategy. He also inquired if Tempus has been given more freedom to accelerate sales and sought confirmation on the cash burn for the year.

Answer

Aaron Tachibana, CFO and COO, explained that having Medicare coverage for breast and lung cancer with favorable pricing, combined with a stronger balance sheet ($240 million cash), provides the confidence to 'step on the gas' and gain market share in a rapidly expanding market. Chris Hall, CEO and President, added that strong demand from physicians and careful management of the increased investment (from $74M to $100M cash burn) are also factors. Hall confirmed that they are focused on driving deeper within accounts and expanding their own sales reps. Tachibana confirmed the cash usage for 2025 was approximately $74 million.

Bill Bonello inquired about the quarter-over-quarter decrease in tissue ASP, asking if it reflected a continued mix shift towards Confirm mdx or changes in denial rates. He also questioned the lower-than-expected EBITDA and increased cash flow use, seeking clarification on the underlying causes, future cash burn expectations, and potential financing needs, especially in light of the 10% EBITDA margin target by year-end.

Answer

CEO Michael McGarrity confirmed that the ASP fluctuation was primarily due to the mix shift between GPS and Confirm mdx. He attributed the Q4 EBITDA and cash flow performance to the absorption of the ExoDx acquisition, expecting similar impacts in Q1. McGarrity expressed confidence in achieving the 10% EBITDA margin target by year-end 2026, citing a 30-point EBITDA margin swing over the past 24-36 months and relief from the Exact Sciences earn-out amendment.

Bill Bonello inquired about the quarter-over-quarter decline in tissue ASP, specifically asking if it was due to a mix shift towards Confirm mdx or changes in denial rates. He also questioned the lower-than-expected EBITDA and higher cash flow use, seeking clarification on the drivers and the company's outlook on cash burn and financing needs, especially in light of the 10% EBITDA margin target for year-end 2026.

Answer

CEO Michael McGarrity confirmed that the tissue ASP decline was primarily due to a mix shift towards Confirm mdx, noting the different Medicare rates for Confirm mdx ($2,000) and GPS ($3,850). Regarding EBITDA and cash flow, Mr. McGarrity attributed the Q4 performance to the integration of the ExoDx acquisition, which caused some operational 'chop.' He expressed confidence in the business's ability to absorb the acquisition, highlighting a 30-point EBITDA margin swing over the past 24-36 months and the positive impact of the amended Exact Sciences earn-out.

Bill Bonello questioned the sufficiency of the estimated $10 million to $15 million incremental investment for launching two new products, particularly concerning the need for a new breast cancer sales force, and how this spend ensures competitiveness. He also inquired about Veracyte's capital allocation strategy, given its substantial cash reserves and strong cash flow generation.

Answer

CEO Marc Stapley stated that the company is confident in its planned investment and has room to increase spending if opportunities arise to accelerate growth. He explained that Prosigna requires about 12 new sales representatives, while TruMRD leverages the existing urology channel, and that the bulk of new product launch costs are for clinical evidence, which is already part of the ongoing run rate. CFO Rebecca Chambers clarified that the actual year-over-year spend increase will be significantly higher than $10 million due to expected gross margin expansion. Regarding capital allocation, Marc Stapley confirmed no change in philosophy, citing the acquisition of C2i for the MRD platform, ongoing market opportunity evaluations, and investments in organic discovery and infrastructure like software development.

Bill Bonello questioned Veracyte's 2026 adjusted EBITDA margin target of 25%, given the 27.6% achieved in 2025, asking about the push and pulls and potential OpEx increases. He also inquired about the company's capital allocation strategy, considering its significant cash balance and strong cash flow generation.

Answer

CEO Marc Stapley explained the 25% margin target provides flexibility for faster investment in new product launches (TruMRD, Prosigna) and clinical evidence. CFO Rebecca Chambers clarified the 2025 margin included $10 million in prior period collections not in 2026 guidance, and highlighted significant high-ROI investments in new product introductions, software, and commercial resources. Marc Stapley reiterated no change in capital allocation philosophy, focusing on M&A (like C2i), organic discovery, and infrastructure.

Bill Bonello sought clarification on the $7.5 million LCD impact, specifically if it assumes AlloMap Heart is no longer reimbursed as part of HeartCare, and asked about the EBITDA guidance's inclusion of one-time cash bonuses.

Answer

President and CEO John Hanna confirmed the $7.5 million is a half-year impact based on the draft LCD, which contemplates a 12-time point bundle for heart transplant paying for one test per date of service. He stated that the 2026 EBITDA guide does not include any one-time cash bonuses, as the 2025 bonus was a one-time event, and they are targeting a sub-4% burn rate for 2026. COO Keith Kennedy added that the timing of the LCD finalization is now expected mid-year.

Bill Bonello sought clarification on the hereditary cancer ASP decline in Q4, asking if it was primarily due to payer mix differences or if contracted rates for MyRisk were decreasing. He also inquired if the change in Myriad Genetics' reporting structure (cancer care continuum, prenatal health, mental health) reflected any underlying changes in the go-to-market strategy, specifically for MyRisk in the unaffected market and the sales team's product portfolios.

Answer

Ben Wheeler, CFO, confirmed that contracted rates are not decreasing; the ASP decline is due to payer mix shifts (volumes from different payers, patient portion), with Q3/Q4 ASP reflecting a new baseline and Q1 typically seeing deductible-related pressure. Sam Raha, President and CEO, confirmed changes in the go-to-market strategy, stating that focused sales organizations mean the new prenatal team (Prequel, Foresight, FirstGene) will not carry MyRisk for the unaffected population. This is an intentional move for efficiency and growth, supported by marketing initiatives.

Bill Bonello circled back to the hereditary cancer ASP, noting a decline in both affected and unaffected groups, and asked if this was solely due to payer mix differences or if contracted rates for MyRisk were decreasing. He also inquired if the change in Myriad Genetics' reporting numbers reflects any underlying shifts in its go-to-market strategy, specifically regarding who sells MyRisk into the unaffected market and if current salespeople will retain their existing product portfolios.

Answer

Ben Wheeler, CFO, clarified that Myriad is not experiencing a decrease in contracted rates for hereditary cancer tests, attributing the ASP dynamics to payer mix shifts, with Q3 and Q4 2025 serving as a baseline for 2026, and noted typical Q1 ASP pressure due to deductible resets. Sam Raha, President and CEO, confirmed that Myriad is making intentional changes to its go-to-market strategy, moving to focused sales organizations. He explained that the new prenatal health team, launching next quarter, will sell only prenatal products (Prequel, Foresight, FirstGene) and will not carry MyRisk for the unaffected population, indicating a strategic shift to drive efficiency and growth through specialized teams.

Bill Bonello questioned the timing of the CEO transition and asked for a characterization of the Q1 outlook, noting that the commentary suggested a potentially slower start to the year than investors might have hoped for.

Answer

CEO Paul Diaz clarified that the transition timing was driven by a personal career opportunity and expressed his full confidence in the remaining team and strategy. Regarding Q1, CFO Scott Leffler highlighted a difficult year-over-year comparison due to a significant favorable prior-period adjustment in Q1 2024. COO Samraat Raha added that their view of the full year and typical Q1 seasonality (impacted by deductibles) remains unchanged.

Bill Bonello from Craig-Hallum pressed for more clarity on the expected sequential decline in Q1 2026 test volumes and ASPs, comparing it to prior year trends and considering Q4's strong performance and Q1's weather impacts. He also sought clarification on the 'nearly tripling' of GeneDx's commercial footprint, asking for the baseline number of sales representatives.

Answer

Kevin Feeley, CFO, indicated that a sequential decline of 300-400 tests in Q1 2026 from Q4 2025 would be consistent with the 33% baseline expectation, attributing it to weather, deductible resets, and fewer operating days. He clarified that the 33% refers to volume growth. Feeley explained that the commercial footprint is expanding from a 2025 base of approximately 60 sales reps (50 for outpatient, 10 for NICU) by adding about 100 new reps, including 50 for general pediatricians and 10 for prenatal in January, with a ramp-up period expected.

Bill Bonello pressed for more detail on the sequential decline from Q4 to Q1, specifically asking if a more significant drop in cases and ASPs should be expected compared to the previous year, given the strong Q4 and weather impacts. He also sought clarification on the base number of sales representatives when GeneDx refers to 'nearly tripling the commercial footprint'.

Answer

Kevin Feeley (CFO) indicated that a 33% baseline expectation for Q1 volume would imply a sequential decline of 300-400 tests from Q4, attributing it to fewer operating days, seasonal deductible impacts, and weather. He clarified that the base for the commercial footprint expansion was approximately 60 sales reps (50 for outpatient markets and 10 for the NICU) for most of 2025, with about 100 new reps being added on top of that, factoring in a natural ramp-up period.

Bill Bonello inquired about GeneDx's EBITDA margin outlook, asking if the company aims to maintain current levels or if margins might temporarily decrease due to incremental investments before improving significantly in the future. He also sought more detail on the steps required for a meaningful ramp in the general pediatrician market, beyond sales force recruitment and training, specifically regarding the ordering and results delivery platforms and other foundational work. Lastly, Bonello asked if GeneDx would consider partnering with larger lab companies to expand into the primary care physician market.

Answer

Kevin Feeley, CFO, stated that GeneDx is in an investment cycle, and while the commitment is to remain profitable on an adjusted basis, EBITDA margins may temporarily decrease in some quarters as investments ramp up before maturing into top-line contributions. Katherine Stueland, CEO and President, outlined key steps for pediatrician market ramp: extensive education to dispel myths and highlight benefits, workflow improvements for one-minute ordering, market access efforts aligned with guidelines, and direct sales rep engagement. Bryan Dechairo, COO, added that GeneDx's strong brand recognition among pediatricians supports their current direct-to-market strategy. Stueland acknowledged that while open to partnerships that drive the business forward, past experiences suggest partners may not prioritize GeneDx's offerings.

Bill Bonello of Craig-Hallum Capital Group asked about the expected trajectory of EBITDA margins given increased investments, the detailed steps required for a meaningful ramp in the general pediatrician market, and GeneDx's openness to partnering with larger lab companies for market expansion.

Answer

Kevin Feeley, CFO, indicated that while GeneDx aims for profitability, EBITDA margins might temporarily decrease during the investment cycle before contributing to future growth. Katherine Stueland, CEO and President, outlined key steps for pediatrician market penetration, including extensive education, workflow improvements, market access alignment, and direct sales engagement. She also noted that while open to new channels, past experience with partnerships hasn't been ideal, and Bryan Dechairo, COO, emphasized GeneDx's strong brand recognition among pediatric providers.

Bill Bonello asked about the anticipated physician appetite for concurrently ordering Guardant's tissue and blood tests post-FDA approval, and potential reimbursement challenges.

Answer

CFO Mike Bell explained that FDA approval for Guardant360 would remove the headwind for concurrent ordering of tissue and blood tests, especially in lung and breast cancer, and expressed confidence in its potential as an important catalyst for the tissue business.

Bill Bonello asked about the potential for FDA approval of Guardant360 to enable concurrent ordering of tissue and blood tests, the anticipated physician appetite for using both upfront, and any expected reimbursement challenges.

Answer

Helmy Eltoukhy, Co-CEO, noted that guidelines increasingly recommend concurrent testing upfront, especially in lung and breast cancer. He explained that FDA approval for Guardant360 would remove the headwind of LDT reimbursement limitations for concurrent orders, becoming a tailwind and an important catalyst for the tissue business, confident in its clinical utility for treatment selection.

Bill Bonello of Craig-Hallum Capital Group LLC asked for a big-picture perspective on whether the paradigm shift from tissue-first to liquid-first seen with Guardant360 could be extrapolated to the MRD space, shifting perceptions of Reveal's tumor-naive approach versus tumor-informed tests.

Answer

Chairman & Co-CEO Helmy Eltoukhy agreed with the analogy, suggesting it's an underappreciated aspect of the Infinity platform. He explained that features from Guardant360 will migrate to Reveal, creating a differentiated product that analyzes active tumor biology, not just passenger mutations. He believes this will lead to two distinct MRD markets—tumor-informed and a 'massive' tissue-free market—similar to the dynamic in therapy selection, where liquid biopsy is becoming dominant.

Bill Bonello inquired about quantifying the impact of exiting low-value business on clinical volume and whether more such exits are planned for future quarters, to understand volume growth trends.

Answer

Tony Zook (CEO, NeoGenomics) explained a strategic shift towards higher AUPs (upper single-digit growth) and lower volume growth (lower- to mid-single-digit growth) due to exiting a high-volume, low-value contract with AUPs in the low $200s. Abhishek Jain (EVP of Finance and Incoming CFO, NeoGenomics) added that Q1 and Q2 2026 would reflect this, with Q2 volumes expected to be flattish year-over-year, before returning to normal growth trends in Q3 and Q4.

Bill Bonello (Craig-Hallum) asked for quantification of the impact from exiting low-value business on clinical volume and whether further exits are planned, seeking clarity on how to project volume growth throughout the year.

Answer

CEO Tony Zook explained a strategic shift towards higher AUPs and margins, noting that the exited contract had low AUPs (around $200). He indicated that AUPs are now expected in the upper single-digit range, with volume in the lower- to mid-single-digit range, while still growing high-value modalities like NGS. EVP of Finance and Incoming CFO Abhishek Jain added that sequential volume growth was slightly down in Q4 and is anticipated to be down in Q1, with year-over-year flattish volumes in Q2 before growth resumes in Q3 and Q4.

Bill Bonello of Craig-Hallum Capital Group asked for clarity on the cash flow guide and outlook beyond 2026, specifically whether additional one-time cash investments are expected or if $200 million is the right starting point for 2027 free cash flow. He also sought to reconcile previous comments on gross margin, where 'more instrument revenue' was cited as a factor impacting gross margin, with the statement that 'instrument was flat year-over-year' in Q4.

Answer

Joe Busky, Chief Financial Officer, stated that one-time cash uses are expected to be around $40 million-$50 million in 2027, primarily for the Raritan, New Jersey facility shutdown and direct procurement initiatives, but beyond that, he has no visibility to other one-time cash. He outlined a path to 50% free cash flow conversion through expanding EBITDA margin, working capital improvements (inventory), limiting one-time cash, potential debt refinancing (Term Loan B), limiting reagent rental cash, and limiting CapEx. He clarified that for Q4, the gross margin decline was mostly due to product mix and tariffs, not instrument revenue.

Bill Bonello of Craig-Hallum Capital Group asked for clarity on the free cash flow guide beyond 2026, specifically whether additional one-time cash investments are expected and if the $200M recurring cash flow is a suitable starting point for 2027. He also sought to reconcile previous comments on instrument revenue impacting gross margin with the statement that instrument revenue was flat year-over-year, not contributing to Labs growth.

Answer

CFO Joe Busky projected one-time cash uses for 2027 to be similar to 2026 ($40M-$50M), primarily for the Raritan, New Jersey facility shutdown and direct procurement initiatives, with less visibility beyond that. He outlined a path to 50% free cash flow conversion by expanding EBITDA margins, optimizing working capital (inventory), reducing interest expense (e.g., through refinancing Term Loan B), limiting reagent rental cash by flipping customers to cash instrument sales, and limiting CapEx. He clarified that for Q4 2025, the gross margin impact was primarily due to product mix and tariffs, not instrument revenue, which was flat.

Bill Bonello commented on the Immune Medicine business's strategic shift towards a data and informatics model rather than therapy development, asking about the monetization strategies for its leading database and how the business might scale over time. He also inquired about necessary investments to enhance data accessibility for pharma clients and the potential timing for this business to inflect.

Answer

Sharon Benzeno, Chief Commercial Officer of Immune Medicine, Adaptive Biotechnologies, expressed excitement about the two distinct Pfizer data licensing deals and the potential to replicate similar partnerships, leveraging the massive differentiated dataset for various immunology applications. Chad Robins, CEO and Co-Founder, Adaptive Biotechnologies, further clarified that the Pfizer deals represent both data licensing for AI modeling and target discovery work. He stated that all necessary investments for generating a robust dataset are captured within the projected $15-$20 million net burn for the year, indicating that future investment plans would be shared if a business case for higher risk-adjusted returns emerges.

Bill Bonello asked about the Immune Medicine (IM) business, noting its shift towards a data and informatics model rather than therapy development, and sought insights into monetizing its leading database and scaling the business over time. He also inquired about investments needed to make data more accessible to pharma clients and the timing of the business's inflection.

Answer

Sharon Benzeno, Chief Commercial Officer of Immune Medicine, expressed excitement about the two Pfizer data licensing deals and the potential to replicate similar or differentiated deals, leveraging the massive, differentiated dataset for various immunology applications. Chad Robins, CEO and Co-Founder, added that the Pfizer deals represent both data licensing for AI modeling and target discovery work, highlighting multiple monetization opportunities. Regarding investments, Mr. Robins stated that current investments are captured within the projected $15-$20 million net burn for the year, with future investments to be evaluated based on risk-adjusted returns.

Bill Bonello of Craig-Hallum Capital Group LLC asked for a breakdown of the path to adjusted EBITDA positivity in Q4, questioning the mix of revenue leverage and cost-cutting. He also sought clarity on whether second-half revenue growth would be driven by volume or ASP, and inquired about the outlook for Development Services revenue.

Answer

Robin Harper Cowie, CFO, clarified that the path to Q4 adjusted EBITDA positivity is primarily driven by revenue growth, fueled by the planned sales team expansion to 93-97 reps. She stated there are no major cost-cutting measures planned. Cowie confirmed that the expected revenue acceleration is rep and volume-driven, with stable ASPs, and noted that Development Services revenue typically sees a seasonal uptick in the fourth quarter.

Bill Bonello of Craig-Hallum Capital Group LLC sought details on the AstraZeneca contract structure, asking if it was milestone-based, if milestones were within Sophia's control, and if it could generate ongoing revenue. He also attempted to clarify the deal's potential size and asked about the terms of the Perceptive financing.

Answer

President Ross Muken confirmed the AstraZeneca deal has a mix of base payments and milestone 'bullets' tied to deliverables, not clinical risk, and that it's too early to discuss potential ongoing products. He declined to size the deal but affirmed its materiality. EVP & CFO George Cardoza detailed the Perceptive financing terms as SOFR plus 6%, along with the issuance of warrants.