Tempus AI, Inc. (TEM)·Q2 2024 Earnings Summary

Executive Summary

• Revenue was $165.969M (+25.3% YoY), with Genomics at $112.324M (+22.2% YoY) and Data & Services at $53.645M (+32.5% YoY); data licensing growth accelerated to 40% YoY .
• Adjusted EBITDA improved by $12.7M QoQ to $(31.186)M, demonstrating operating leverage despite IPO-related stock comp; management reiterated leverage will continue .
• GAAP net loss of $(552.212)M was driven largely by ~$493.1M stock-based compensation and related payroll taxes tied to the IPO, masking underlying non-GAAP margin improvements .
• Guidance: FY2024 revenue ~ $700M (~32% YoY) and adjusted EBITDA ~ $(105)M (≈$50M improvement vs 2023) .
• Stock reaction catalysts: MRD portfolio launch (tumor-naïve and tumor-informed), ADLT status for xT CDx (initial price $4,500) with 2025 ASP tailwinds, SoftBank JV to enter Japan, and multiple large pharma data licensing wins with remaining contract value >$900M .

What Went Well and What Went Wrong

What Went Well

• Strength in Data licensing (Insights): “really strong” quarter; Insights ~75% of Data revenues and growing quickest; multiple large pharma deals signed (Novartis, Takeda, Astellas) with bookings replenishing total remaining contract value (> $900M) .
• Margin mix improvement: Non-GAAP gross margin increased to 56.8% (from 54.1% YoY), with non-GAAP Data & Services margin at 72.4% (+650 bps YoY) and non-GAAP Genomics margin at 49.4% (+50 bps YoY) .
• Strategic progress: MRD platform launched (xM tumor-naïve; tumor-informed via Personalis) with positive reception; FDA 510(k) clearance for ECG-AF AI device; ADLT status for xT CDx .

What Went Wrong

• GAAP profitability heavily affected by IPO-related stock comp: Net loss $(552.212)M; operating expenses $609.005M with $469.757M stock-comp components .
• Salesforce productivity below target due to rapid headcount additions (~60), territory changes, and new assay introduction; management expects normalization by Q3 or shortly after .
• Limited near-term ASP benefit from ADLT xT CDx; pricing process will play out in H2 2024 with meaningful ASP tailwinds expected in early 2025 as volume migrates .

Financial Results

Consolidated Metrics (GAAP and Non-GAAP)

Note: Q1 2024 revenue is computed from six-month reported totals minus Q2 revenue .

Segment Revenue Breakdown

Margins

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Q2 was a strong quarter…our core businesses remain on track…everything is how you want to see it up into the right” — Eric Lefkofsky, CEO .
• “Our average reimbursement in Q2 was about $1,500, an increase about $50 over Q1…ADLT price [xT CDx] was set at $4,500…no meaningful impact to ASPs in 2024; tailwinds as we migrate volume in early 2025” — James Rogers, CFO .
• “We launched…our MRD platform…response has been quite positive…we’re metering out volume…we don’t dial up those units until reimbursement is in sight” — Eric Lefkofsky .
• “Insights represents about 75% of Data & Services revenues…growing most quickly” — James Rogers .
• “Total remaining contract value is still north of $900 million” — James Rogers .

Q&A Highlights

• Genomics ASP/reimbursement: ASP rose to ~$1,500 (+$50 QoQ); ADLT xT CDx initial price $4,500 with 2025 ASP tailwinds; in-network progress with Cigna, Humana, Aetna; commercial negotiations ongoing .
• MRD ramp: Launched both tumor-naïve and tumor-informed assays; metered volumes to manage unreimbursed testing; MoldX submission in process; reimbursement likely H2 2025 .
• Data business strength: Multiple large-pharma agreements; bookings replenished >$900M remaining contract value; renewals/extensions push durations to ~2027–2028 .
• Profitability trajectory: Adjusted EBITDA improved by $12.7M QoQ; management expects further leverage as scale increases .
• Sales force efficiency: Near-term inefficiency from rapid expansion and territory changes; normalization expected by Q3 .

Estimates Context

Wall Street consensus (S&P Global) for Q2 2024 was unavailable at the time of analysis due to data-access limits. Management’s reported actuals are shown; any comparison to consensus cannot be made. S&P Global consensus unavailable (daily request limit exceeded).

*Values retrieved from S&P Global; consensus data unavailable at time of request.

Where estimates may need to adjust: The acceleration in Insights (40% YoY), ASP uplift, and MRD launch may support upward revisions to Data & Services and 2025 ASP expectations; near-term GAAP loss is inflated by one-time IPO-related stock comp and should be normalized in models .

Key Takeaways for Investors

• Underlying growth remains robust: +25% YoY revenue with visible operating leverage (Adjusted EBITDA improved $12.7M QoQ) despite IPO-related GAAP noise .
• Mix shift favorable: Insights (high-margin) leading Data growth, lifting non-GAAP margins despite GAAP distortions; focus remains on higher-margin data licensing .
• Reimbursement catalysts ahead: ADLT xT CDx and commercial in-network progress support ASP expansion; MRD reimbursement likely in H2 2025, implying 2025 volume/ASP tailwinds .
• Strong pharma demand defensively positioned: >$900M remaining contract value and multi-year renewals/extensions, even in a tough macro for biotech spend .
• Near-term execution watch: Sales force productivity normalization through Q3 is key for sustaining Genomics unit growth trajectory .
• International optionality: SoftBank JV unlocks Japan market for AI-enabled precision medicine solutions .
• FY24 setup: Guidance of ~$700M revenue and $(105)M adjusted EBITDA frames continued scale-up; monitor quarterly bookings, ASPs, and MRD ramp pace as key narrative drivers .

Search notes: Q2 2024 earnings call transcript and 8-K press release (including exhibits) were read in full. No prior quarter (Q1 2024, Q4 2023) press releases/transcripts were found in the catalog; trend analysis used YoY comparisons and QoQ data disclosed in Q2 materials .