Tempus AI, Inc. (TEM)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 revenue rose 33.0% year-over-year to $180.9M, driven by 64.4% growth in Data & Services and 20.3% Genomics revenue growth; adjusted EBITDA improved to $(21.8)M from $(36.2)M YoY and $(31.2)M QoQ .
• Management announced the agreement to acquire Ambry Genetics for $600M (≈$375M cash + $225M stock), citing ~1.9x 2024 revenue and ~15x EBITDA multiples; Ambry is expected to exceed $300M 2024 revenue and >$40M EBITDA, with closing targeted for early Q1 and financing partly via a $300M debt increase from Ares .
• Guidance maintained: 2024 revenue ≈$700M (+32% YoY) and adjusted EBITDA ≈$(105)M; management highlighted typical Q4 step-up in data licensing and backlog “north of $900M” providing forward visibility .
• Operational KPIs improved: Genomics test volumes increased to ~69,000 (ex-MRD) from ~66,500 in Q2; ASP reached ~$1,530, supported by new commercial payer in-network wins (BCBS IL/CA, Avalon) .

What Went Well and What Went Wrong

What Went Well

• Data licensing (Insights) growth accelerated to 86.6% YoY, lifting Data & Services non-GAAP gross margin to 78.3% versus 60.5% a year ago; CEO: “meaningful acceleration” led by Insights .
• Genomics unit growth accelerated to 23.9% YoY with rising average revenue per clinical test; overall revenue grew 33.0% YoY to $180.9M .
• Strategic expansion: multi-year collaboration with BioNTech, 3-year extension with Merck EMD, and new OneOncology partnership; beta launch of Olivia, a patient-facing AI health app .

What Went Wrong

• Genomics GAAP gross margin compressed to 48.4% (vs. 51.9% last year), with non-GAAP margin at 49.3% (down 260 bps) due in part to one-time cash payments in 2023 .
• Net loss remained significant at $(75.8)M, though improved QoQ from IPO-related charges; GAAP operating expenses increased YoY and QoQ, reflecting stock-based compensation .
• MRD ramp constrained by reimbursement gating; management is metering volumes and expects more meaningful impact post-reimbursement submissions (MolDx) in typical timelines .

Financial Results

Consolidated Metrics (GAAP and Non-GAAP)

Segment Revenue and Margins

KPIs

Non-GAAP adjustments: Tempus excludes stock-based compensation, employer payroll taxes on stock comp, certain fair-value changes, losses on equity method investments, G-4 special payment, and deferred other income amortization when reporting non-GAAP metrics and adjusted EBITDA .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Q3 was a solid quarter… We delivered revenue growth of 33%, hitting $180.9 million… data licensing business… came in at 86.6%…” .
• “We’re… excited to announce the pending acquisition of Ambry Genetics… growing at north of 25% a year and… generates meaningful EBITDA and cash flow.” .
• “In terms of the multiples… about 1.9x current revenue and roughly 15x EBITDA… able to finance… with additional debt from Ares… not materially dilutive to our equity.” .
• “Remaining contract value… still north of $900 million… Q4 is historically our largest quarter from a data perspective.” .
• “We’ve got efforts in place… to submit [RNA and liquid biopsy assays] to the FDA… these things are all kind of imminently coming.” .

Q&A Highlights

• Ambry rationale and integration: Highly complementary to hereditary screening; majority of Ambry’s volume is non-overlapping; near-term operation independently with future synergies in data and payer relationships .
• Data backlog and Q4 step-up: Remaining contract value >$900M; Q4 typically largest due to pharma budgeting cycles; do not expect sustaining 86.6% Insights growth rate indefinitely .
• Genomics growth drivers: Sequential volume rise (~66.5k → 69k); ASP uplift ($1,530) aided by BCBS IL/CA and Avalon in-network coverage .
• MRD commercialization: Strong demand; metered volumes pending reimbursement; submissions underway; broader story post-reimbursement .
• Apps and AI reimbursement: Early-stage adoption with strong interest; multi-year journey to reimbursement for algorithmic diagnostics (e.g., ECG-AF device, PurIST) .

Estimates Context

• S&P Global Wall Street consensus estimates for Q3 2024 revenue and EPS were unavailable at the time of analysis due to data access limits. As a result, beat/miss versus consensus cannot be assessed in this report. Values retrieved from S&P Global were unavailable due to request limits.
• Street commentary referenced an expected $20–$25M QoQ step-up embedded in some Q4 Data & Services models; management affirmed typical Q4 seasonality but did not provide specific Q4 segment guidance .

Key Takeaways for Investors

• Data & Services strength and margin expansion are the near-term earnings drivers; backlog north of $900M plus typical Q4 seasonality support revenue visibility into 2025 .
• Genomics KPIs are trending positively (volumes, ASP), with additional payer in-network wins providing incremental reimbursement lift; ADLT pricing migration in early 2025 is a potential ASP catalyst .
• The Ambry acquisition is strategically aligned and financially accretive on an adjusted EBITDA and cash flow basis, with attractive multiples and limited equity dilution; closing targeted early Q1 .
• MRD portfolio offers medium-term optionality; reimbursement progress (MolDx and commercial payers) is the gating factor for meaningful revenue contribution .
• Near-term trading implications: headline catalysts include Ambry close, Q4 Data & Services step-up, payer coverage expansions; watch for FDA and reimbursement updates across assays .
• Medium-term thesis: diversified revenue streams (Genomics, Data, Apps) underpinned by multimodal datasets and AI tools, with pathway to adjusted EBITDA and cash flow positivity strengthened by Ambry .
• Risk factors: reimbursement timing (MRD, AI algorithms), macro pressure on biopharma budgets, ongoing legal backdrop in genomics; monitor operating expense discipline and stock-based compensation impacts .