GeneDx - Earnings Call - Q2 2025

Executive Summary

• GeneDx delivered revenue of $102.7M, its first quarter above $100M, with adjusted gross margin at 71% and adjusted net income of $15.0M; management raised FY25 revenue guidance to $400–$415M and Exome/Genome revenue growth to 48%–52%.
• Core Exome/Genome revenue rose 69% YoY to $85.9M on 28% volume growth and a higher average reimbursement; CFO emphasized the ASP uplift was driven by durable denial reduction and expanding Medicaid coverage, not one-time items.
• Guidance raises and AAP’s first-tier testing recommendation for pediatric DD/ID are catalysts that expand the serviceable market and support margin trajectory into H2 and beyond.
• Management reaffirmed profitability each quarter on an adjusted basis; cash, cash equivalents, marketable securities and restricted cash were $135.5M at quarter-end, despite $33.2M paid to acquire Fabric Genomics.
• Sell-side consensus via S&P Global was unavailable for quarterly comparisons; investors should anchor on company-raised guidance and volume/mix trajectory for estimate resets (see Estimates Context).

What Went Well and What Went Wrong

What Went Well

• Strong Exome/Genome execution: revenue up 69% YoY to $85.9M; volumes up 28% to 23,102; mix climbed to 41% of tests.
• Margin expansion and profitability: adjusted GM reached 71% (vs. 62% in Q2’24); fourth consecutive quarter of adjusted net income ($15.0M) and positive operating cash flow.
• Strategic tailwinds: “Crossing the $100 million revenue mark and delivering our fourth consecutive profitable quarter is a major milestone… Our strong second quarter performance was driven by our core business” — CEO Katherine Stueland; AAP guidance and Medicaid coverage broaden addressable market.

What Went Wrong

• Other panels and hereditary cancer continue to decline sequentially from prior highs; hereditary cancer revenue fell to $1.8M from $2.2M in Q1’25 and $3.8M in Q2’24, reflecting deprioritization and mix shift to Exome/Genome.
• Denial rates remain a headwind even as pay rate improved to the mid‑50s; guide embeds conservatism for higher initial denials in new indications and call points (NICU, immunology, pediatrics).
• General pediatrics impact is minimal in 2025 as the company prioritizes core specialist growth; management expects broader pediatric volumes to materialize in 2026+ despite AAP’s guideline change.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the GeneDx Kevin Feeley second quarter 2025 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'll need to press *11 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 turn the conference over to Sabrina Dunbar, Investor Relations. Please go ahead.

Sabrina Dunbar (Investor Relations)

Thank you, operator, and thank you to everyone for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx released financial results for the second quarter ended June 30, 2025. 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 2025 guidance, and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 29, 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 2025 earnings release and slides available at ir.genedx.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. With that, I'll turn the call over to Katherine.

Katherine Stueland (CEO)

Thanks, Sabrina, and good morning, everyone. Today, I'm incredibly proud to share that our team's work not only met but exceeded expectations, achieving a major milestone of delivering over $100 million in revenue in a single quarter for the first time. Our strong second quarter performance was driven by our core business, underscoring its strength and resilience. These results, coupled with the ever-expanding opportunities ahead, demonstrate that we're just beginning to deliver on the promise of how our genomic technology can fundamentally transform healthcare. Our vision is for a world where genetic information is delivered as early as possible to prevent unnecessary suffering and lead to healthier lives for all. Today, we're waiting for symptoms to develop and for disease to progress, not only over the course of months, but over the course of years.

We've never been more resolute about our commitment to radically change this, shifting from sick care to healthcare, driving better health outcomes, better economic value, and a better healthcare system for us all. At a recent all-company meeting, a patient advocate reminded us why we do this. His diagnostic odyssey lasted nearly two decades before he received answers. His story highlights a systemic issue: care often starts too late, with children waiting an average of five years for a genetic diagnosis. This is totally unacceptable given the solutions we have in hand today at GeneDx. Thanks to our investment in innovation and scale, genomic testing, once considered slow and costly, now delivers answers not in weeks or even days, but sometimes hours, and at costs lower than ever before. Our technology is shifting healthcare from reactive to proactive, benefiting both patients and the healthcare system.

GeneDx is uniquely positioned to bring genomic information into mainstream medicine. We diagnose more rare diseases than anyone in the world and are the number one genetic testing brand amongst pediatric healthcare providers, with 80% market share amongst geneticists. Our unmatched expertise and proprietary dataset, enriched for rare disease, inclusive of asymptomatic individuals, supported by clinical data, and representative of the U.S. population, has enabled us to identify over 500 gene-disease relationships to date, ensuring more patients receive answers with greater accuracy. This is what sets GeneDx apart and why we're the clear leader in ushering in the next era of genomics-informed healthcare. Our competitive advantage grows with every patient we test. With over 850,000 Exomes and Genomes and over 7 million phenotypic data points, we've built one of the world's most comprehensive genomic datasets, and we are putting it to work for patients.

Our proprietary interpretation platform grows stronger with each new patient we test, building upon our data advantage and leveraging AI to drive greater accuracy, speed, and scalability. Our lead will only continue to expand as we integrate Fabric Genomics and its proprietary algorithms into the core platform, further strengthening our competitive edge and positioning us for unprecedented scale. As we grow the business and reach new clinicians, we will continue to stand out on quality, accuracy, scale, and experience. Put another way, there's no one who can check all the boxes of being better, faster, and cheaper than GeneDx. We have everything we need to remain the leader, even as competition emerges. We've established a strong foothold with geneticists who choose us eight times out of ten, demonstrating the trust we've built in our core market.

These geneticists are key influencers, and their continued support is helping us win over other specialists as we grow. That's what's happening today as our reach has broadened and deepened. In the second quarter, pediatric neurologists made up a majority of new Exome and Genome ordering providers, and we've now captured nearly a third of our target clinicians in this segment. Most of our Q2 volume growth came from patients within our core indication, but we're also seeing early signs of increased adoption as we introduce new indications like cerebral palsy. This expansion has helped us reach 14% of our target patients, which is growth from last quarter as it represents the same share as a larger patient pool. In Q2, we also began engaging pediatric immunologists, an entirely new audience, focusing on children with inborn errors of immunity.

Based on our experience with pediatric neurologists, we expect to see momentum build in these new indications and call points as our relationships deepen. Another growth driver for the second half is the NICU, which represents a billion-dollar opportunity. Fewer than 5% of babies in the NICU currently receive a genetic test, so this is an important market for us to develop. Each year, 235,000 infants are treated at approximately 800 level 3 or level 4 NICUs that could benefit from rapid genomic testing, 20% of which are already GeneDx clients. Importantly, 42 out of 50 top NICUs have already ordered testing from us this year, and we're continuing to take a top-down and bottom-up approach to scale volume. We recognize the need for three things to succeed in the NICU: data, product, and scale, and we now have all three.

Our enterprise sales team is equipped with seek-first data, demonstrating up to 60% of infants in high-acuity NICUs would benefit from rapid Genome sequencing and a CFO calculator that demonstrates the financial benefits of testing to each hospital. Our ultra-rapid test delivers results in as early as 48 hours, and Epic Aura EMR integrations are supporting a seamless delivery of our testing to patients. We have three health systems live on Epic Aura EMR, and we expect to have a dozen hospitals on board and a few thousand tests performed by year-end. As protocols evolve and whole system engagement increases, we're well positioned to scale NICU testing significantly. While the NICU represents a significant and growing frontier for us, an even larger transformative opportunity is the general pediatrics market.

This shift is largely driven by recent guidance from the American Academy of Pediatrics, recommending pediatricians use Exome and Genome sequencing as a first-tier test for children with global developmental delay or intellectual disability. This is a sea change in pediatric healthcare. Previously, pediatricians preferred these children to specialists, beginning a long, painful odyssey for families. Now, with new guidance, that can all change. The general pediatrician market remains untapped. Of the 60,000 general pediatricians in the U.S., about 25,000 diagnose children with developmental or intellectual delays, representing 600,000 children who could benefit from our testing. To accelerate adoption of the new guidelines, we will have a presence at the annual AAP meeting in September, where we'll engage directly with clinicians. We're also investing in continuing medical education to ensure pediatricians understand the new guidance and how to integrate Exome and Genome testing into their practice.

By collaborating with local AAP chapters and leveraging our marketing engine, we're building awareness and trust in GeneDx, making it easier for pediatricians to navigate this shift and confidently order our tests. Concurrently, we're improving our customer experience to make it more accessible to a non-specialist. We're taking a targeted commercial approach in Q3, starting with the fewer than 5% of pediatricians already ordering genetic tests for a high number of DDID patients, allowing us to learn and refine our strategy before scaling up. With a $2.5 billion market opportunity ahead, we expect the broader adoption to take 18 to 24 months. While pediatricians represent a significant long-term opportunity, for the remainder of the year, we expect growth to be driven by our core customer base of specialists diagnosing patients with epilepsy, autism, and DDID, supplemented by new indications and the NICU.

Our work to date has shown the value of testing symptomatic patients, but we know the next step forward is to provide a diagnosis before symptoms begin with genomic newborn screening. The Guardian study has shown that whole Genome sequencing can identify serious, treatable genetic conditions in over 3% of newborns, 92% of which would have been missed by standard screening. Legislative progress, such as Florida Sunshine Genetics Act, is paving the way for broader adoption. With experience screening over 17,000 newborns, our robust underlying data, and our ability to deliver at scale, we are uniquely positioned to play a key role as this initiative evolves. All the while, our team is forging partnerships with pharmaceutical companies of every size because while only 5% of rare diseases have an approved therapy, we know that our unparalleled genomic data can help accelerate the development of new treatments.

We are positioned as a partner of choice, ready to support biopharma in harnessing genetic insights to inform and transform therapeutic pipelines. Our commitment is simple: get families the answer they need sooner, helping patients get on the right path to better health while reducing unnecessary costs across the healthcare system. Not only are we leaders in genomic testing, but we're extending that lead and continually raising the bar by investing in our strategy, our technology, and our people. While our mission is bigger than profitability, we're proud that we've built a business that is both purposeful and profitable. That success is thanks to our dedicated team, our partners, and a shared belief in what's possible when innovation meets conviction. With that, I'll hand things over to Kevin.

Kevin Feeley (CFO)

Thanks, Katherine, and thank you all for joining us today. We reported second quarter 2025 revenues of $102.7 million, a 49% increase year over year. That total includes a record high of $85.9 million in revenue from Exome and Genome, up 69% from the same quarter last year. The average reimbursement rate for Exome and Genome was over $3,700 a test in the quarter. That's up from approximately $3,400 last quarter, and there's nothing I would call out in the second quarter results as unique or one-time. We're driving sustainable reimbursement rate improvements across both commercial and Medicaid payers by demonstrating the value necessary to expand policies. Our use of technology and process design are helping to avoid unnecessary non-medical documentation and procedural denials. As I've often said, revenue cycle improvements aren't always linear. Some periods outperform others.

Q2 was one of those pain-out quarters, though, reinforcing our durable long-term improvement trend. As we sit here today, business fundamentals have never been stronger, and our serviceable market continues to expand. We remain on track to deliver our full-year guide of at least 30% year-over-year volume growth. We reported 23,102 Exome and Genome tests in the second quarter of 2025, up 28% compared to the second quarter of last year. The first half of the year has continued to play out as anticipated, providing conviction in the back half and with several catalysts to come. This quarter, the majority of growth came from existing docs, and we are seeing strong early signals that new indications like cerebral palsy are driving increased same-store sales. Importantly, our expansion into new indications makes GeneDx even more attractive to new account targets.

In the back half of this year and beyond, we'll begin to layer on new growth curves from the NICU and from pediatric immunologists and other specialists, from the pediatricians backed by AAP, from newborn screening, and from international contribution. Of course, all of that is supplemented by the long-term potential to establish a meaningful, diversified revenue stream by putting the unparalleled nature of the GeneDx data to work for healthcare partners to accelerate drug discovery and development. Over the last 10 years, we've moved from pioneering Exome and Genome to gaining the hard-earned trust of the expert community, to developing the best-in-class product, to becoming the largest provider of rare disease diagnosis. All of this has established unique credibility for GeneDx to lead in all of these new markets.

Now, turning to gross margin, we again expanded total company-adjusted gross margin to a record high of 71%, driven by all three: a favorable mix shift, improved reimbursement, and lower COGS. There is room to run in terms of reducing COGS in the future by combining the best of capabilities between GeneDx and Fabric Genomics as we lean into the best possible algorithms to optimize dry lab processes. Adjusted operating expenses were $58 million. That is up in terms of aggregate dollars, representing investments in future growth and the addition of Fabric Genomics. However, we're driving increased leverage. Total OpEx was 56% of revenue in the second quarter of 2025 compared to 65% in the second quarter of 2024. Our team has the experience necessary to properly balance innovation and growth with the skill to relentlessly look for efficiency, and we'll do just that moving forward.

Where we see clear opportunities to invest to accelerate growth, to open new markets, and to take share, we will do so, all within an envelope of staying profitable. On the bottom line, we generated $15 million in adjusted net income in the second quarter of 2025. That's our fourth consecutive quarter of profitability on that basis, having now cemented the business sustainably in the black. Our business has the bones for durable high growth, all with the ability to drive EPS depletion over time. On the balance sheet, cash, cash equivalents, and marketable securities totaled $135.5 million as of June 30, 2025. As a reminder, the second quarter of 2025 included a payment of $33.2 million at closing to acquire Fabric Genomics. Now on to guidance. We're raising our top-line total revenue guidance to between $400 and $415 million for full year 2025.

We're raising Exome and Genome revenue guidance to deliver between 48% and 52% growth for the full year 2025. The math on that is Exome and Genome revenue of $345 to $355 million. We reaffirm our expectation to deliver at least 30% Exome and Genome volume growth for full year 2025. We're raising our expectation for full year adjusted gross margin to between 68% and 71%, and we once again reaffirm our expectation to remain profitable each quarter for the full year of 2025 on an adjusted net income basis. That'll turn it back to Katherine.

Katherine Stueland (CEO)

Thank you, Kevin, and thank you to our entire team for their continued dedication to the patients and families we serve. We believe the future of healthcare is about proactive, personalized care. That means understanding as early as possible whether a person has a genetic condition so that care can be tailored, risks can be managed, and outcomes improved. This is the future of medicine. This is the Genome era, and we're proud to be leading the way. With that, we welcome your question.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, please press *11 on your telephone. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question for the day will be coming from David Westenberg of Piper Sandler. Your line is open.

David Westenberg (Senior Research Analyst, and Managing Director)

Oh, thank you for taking the question. Congrats on such a great quarter. My first one here is for Kevin. ASP's trounced, you know, estimates by a lot. You kind of mentioned there's no one-time thing in the quarter, but it was a pretty big move. Can you maybe go back a couple of quarters, assuming this is ebbs and flows? Are there a couple of discrete drivers to think about over the last four quarters, maybe like a few states that won that all covered all at the same time or anything to think about, your benefits that maybe manifested this quarter that we could think about comping or any other thing in the go-forward basis?

Kevin Feeley (CFO)

Thanks, Dave. I'd say if you were to roll back the clock and go back towards the end of 2023, we made major overhauls to the team and processes across the revenue cycle to identify ways to more closely adhere to documentation requirements on a payer-by-payer basis. That's paid off handsomely. As it relates to reducing denials across commercial payers, it's more so our continued ability to improve payment rates by reducing what I'll call unnecessary documentation or procedural denials. That work has been ongoing for a year, and we continue to invest in finding ways to adhere to necessary requirements to get paid fairly for the work that we perform. Of course, on the Medicaid population, a large portion of our business does run through Medicaid, state Medicaid programs. There's been a steady flow of new states picking up Medicaid coverage over the last year to two years.

We're now up to 35 states that cover Exome and Genome on an outpatient basis, which includes just two new ones this quarter that picked up coverage, and 17 that cover rapid Genome on the inpatient side. There's no doubt that we're benefiting from more and more state Medicaid coverage. That's volume that we've been serving well ahead of coverage, so it was always there in terms of volume, but not necessarily paid volume, and happy to see that pulling through. My comment on the second quarter is more so to say there's nothing I would call out that's leading to that higher rate in the second quarter as anything outside of us just continuing to collect better by reducing denials. No major appeal wins to call out, just the good hard work to ensure that we're boosting collection rate by avoiding unnecessary denials.

David Westenberg (Senior Research Analyst, and Managing Director)

Got it. Thank you very much. This is probably more for Katherine. As you're thinking about going after the pediatric market in 2026, can you talk about balancing an economically sound approach with going after this really big opportunity, and how we should think about the ramp in investment there? Maybe that's a little bit of Kevin, too. Anyway, thank you.

Katherine Stueland (CEO)

That's great. The general pediatric opportunity is, of course, a massive one, and it's one that we have to build. I think your question about how do we balance particularly the core of our business and growth in ped neuro, where we've been continuing to see great success versus building a market, is really important. The runway on the ped neuro side of things continues to be a really critical opportunity for us. We're going to continue to put the vast majority of our focus, of course, there for the remainder of this year and into 2026 and 2027 as we start to build this broader general pediatrician market. The first step for us, beyond the guidelines being published, really comes down to a number of things.

One, our sales team will continue to focus on ped neuros, but we've got a very targeted approach to the pediatricians who are ordering testing from us today. We feel like we've got the right balance, keeping our eye on the ball for the near-term opportunity. I would say second, we'll be at AAP, which is in September. We'll start to educate the general pediatricians at that meeting and through local chapters and through medical education. Our market access team is bringing the guidelines to all of the payers to ensure that the medical policy really gets updated to be in line with AAP guidelines. We will continue to extend our marketing investment that we kicked off in June of this year to raise awareness.

We think that we're taking a really prudent approach to the investment in the current market expansion in ped neuros and other specialists while we take on the future market on general pediatricians. I'd say the other piece that we have an eye on is how do we continue to make it easier for a non-expert to order our testing. We've begun to invest earlier this year, in fact, already embedded in our plans for 2025, in simplifying the ordering experience, making it easier for a non-expert to understand the results and the clinical action plans, the next steps. Our product and technology team has, I would say, a really important roadmap that we need to realize to fully be able to take over that general pediatrician opportunity.

David Westenberg (Senior Research Analyst, and Managing Director)

Thank you so much, and congrats again.

Operator (participant)

Thank you. One moment for the next question. Our next question will be coming from the line of Dan Brennan of TD Cowen, and your line is open.

Daniel Brennan (Senior Equity Research Analyst)

Great. Thank you. Congrats, obviously, on a really strong quarter. Maybe could you speak a little to, and Katherine and Kevin, you both touched on it during the prepared remarks, just as we think about volumes, which were, you know, good in the quarter, you talked about the bridge to the second half. Just give us a little color on how the NICU is going, kind of how do we think about the impact in the back half of the year from the EMR integrations and as well from some of these newer indications. Just wondering how the early progress has been and kind of what we assume to kind of bridge to the 30% volume growth.

Katherine Stueland (CEO)

Awesome. Starting with the outpatient opportunity, as we said, most of the volume that we saw in the second quarter came from our core, meaning pediatric neurologists who had been ordering from us. About 25% of the volume growth came from new clinicians. I think what we saw in Q2 was continued great growth in terms of the existing indications, starting to be amplified by new indications as well. We kicked off cerebral palsy in March. We started calling on pediatric immunologists in April. We expect that those are going to continue to really pick up. We saw some early indications that it amplified Q2, but we think Q3 and Q4 are going to be when we start to see the additional benefits from new indications.

As we think about the con scores of Q3 and Q4, we think volume growth will be bolstered by new indications in the second half of the year. On the NICU side of things, that's such an important new market for us. We're really pleased with all of the progress that we've made. We have three health systems that are live with Epic, and we're seeing volumes come through those three health systems. We'll have at least 12 in the second half of the year. The sales team will really be focused, and this is an enterprise sales team, so different from the outpatient team. They're focused now on pulling those volumes through once Epic sites are coming online. We'll see some contribution in Q3, but I think the real boost will be in Q4, in terms of the few thousand tests for the full year.

Daniel Brennan (Senior Equity Research Analyst)

Great. Sorry. I think, I don't know if it's my phone window now, but thank you for that. Maybe if you can hear me, hopefully, you can hear me okay. Just on price. Kevin, obviously, really strong price quarter.

Kevin Feeley (CFO)

Would you be, could you give us a sense of what the prior period collection was in the quarter so we can kind of do our math? It looks like you're kind of guiding for the back half of the year somewhere between, call it $3,450, like low $3,600s in order to get to your Exome Genome revenue growth. Obviously, it's a bit of a step down, but still super solid. Just wondering if you can help us think through what's baked in and kind of the prior period impact this quarter.

If you look at pricing for the remainder of the year, you take the $3,718 we just posted in the second quarter, I think that's a good number, Dan. The reason I didn't call out anything kind of unique or one-off is that number, I think, is reflective of our cash collection experience in the second quarter and today and should be relied upon. Now, from a guide perspective, the guide does absorb the ability as we enter into new indications or new call points to see a higher denial rate on the new stuff, if you will. Therefore, if you do the math on the guide anchored in achieving the 30% for the full year, which we remain convicted in, the guide allows for that rate to step down some in the back half of the year.

We have no particular reason to believe that that rate would step down other than the inherent nature of submitting things for the first time to payers on the new indications and new call points. The level of out-of-period adjustments has been fairly consistent over the past two years. The numbers disclosed in the quarter, it ranges anywhere from like $3 million to $6 million. I think it's important to properly characterize the Q2 performance as really representative of the collection rate and, frankly, a function of the fact that we continue to reduce denials and improve collection.

Daniel Brennan (Senior Equity Research Analyst)

I'm going to sneak one more in. Katherine, you said in the prepared remarks, I think you said less than 5% of pediatricians already order, for GP and IDD. If you do the quick math, that's like over 2,000 pediatricians. That's where maybe your target early. Do you think you can begin to see some volume impact this year from those pediatricians? Just trying to solve for what that early opportunity might look like. Thank you.

Katherine Stueland (CEO)

We are going to be talking to pediatricians who are ordering from us today, but we don't want to distract our team from ensuring that they are really focused on the ped neuro and other specialists that are embedded into our plan. I would say contribution to this year from general pediatricians is going to be very minimal. I think we'll start to see some more volumes in 2026, without a doubt. I would say minimal for this year, because we do want to make sure that the team continues to focus on the important growth opportunity that we have from the core.

Daniel Brennan (Senior Equity Research Analyst)

Great. Okay. Thank you.

Operator (participant)

Thank you. One moment for the next question. Our next question is coming from the line of Subbu Nambi of Guggenheim. Your line is open.

Subbu Nambi (Senior Analyst)

Hey, guys. Thank you for taking my question and an amazing quarter. A follow-up to Dave's question, you are targeting 60,000 or so pediatricians. First, how do you go about identifying pediatricians who have ordered genetic tests at some point? I know you're going to use a targeted commercial approach where you're going to learn before scaling up. What are the signs you're looking for? What would make you expand quicker or slower?

Katherine Stueland (CEO)

Wonderful. Just to zoom out, the general pediatrician opportunity, really, if you think about it, there's 60,000 pediatricians in the U.S. About 25,000 of them see about 600,000 patients who have DDID. As we think about that target group of pediatricians that we'll first focus on as we start to enter the GenPEDS market, it would be the 25,000 who today are diagnosing patients with DDID. Of course, we want to see a day where all pediatricians are ordering the testing, but we think that from a segmentation standpoint, that 25,000 is the right area for us to focus on. As we think about the sales force and planning to expand it as we enter into 2026, the 25,000 will be the area that we really stay focused on in the beginning.

Subbu Nambi (Senior Analyst)

Got it. Thank you for that, Katherine. This is just one thought, Kevin. The other panels were pretty strong compared to our estimate. What drove that strength? I thought you were deprioritizing targeted panel. Along those lines, how should we think about it in Q3 and Q4?

Kevin Feeley (CFO)

You're thinking about it correctly. The sales team is not out there targeting, and not incentivized, frankly, for the past two years to bring in anything other than Exome and Genome. That said, as we activate new accounts, there are some non-Exome, non-Genome orders that come along for the ride with new doctors, which then tells us there's an opportunity to educate physicians around the clinical benefits for Exome and Genome to continue our efforts to really move the industry away from individual gene tests and multi-gene panels onto Exome and Genome. The growth there, I would say, is nothing more than some success on activating new accounts, and gives us an opportunity to further educate those physicians now that they're active owners of GeneDx.

For the back half of the year, we tend to expect, since we're not incentivizing the commercial team to grow that other panel line, flat or some slight attrition in that other panel line with pickup in Exome and Genome. At the same time, I'd say as we move further down the road to pediatricians, we'll have to learn some of the initial experience to see if we see an increase in CMA, chromosomal microarray orders, as we first start to approach pediatricians. None of that is expected to impact volumes in the second half of the year in a meaningful way.

Subbu Nambi (Senior Analyst)

Kevin, just to be clear, you're doing all of this passively, not incentivizing, but you're taking in orders when it comes.

Kevin Feeley (CFO)

Correct.

Subbu Nambi (Senior Analyst)

Got it. Last one from you guys. During the last quarter, you mentioned that there's a waiting room of clients for Epic Aura EMR. Did you make meaningful steps to onboard all those clients? Is there still a backlog, so to speak, of systems waiting to integrate?

Katherine Stueland (CEO)

We absolutely have made progress. As I said, we have three that are live, and we're continuing to bring more Epic Aura sites on, and we continue to build a pipeline there. We're really pleased with how that business is continuing to shape up. As I said, we're contemplating that the fourth quarter will see the impact of those Epic Aura implementations in a more meaningful way than in Q3. We're pleased to see volumes coming through when we're bringing on Epic Aura sites.

Operator (participant)

Perfect. Thank you so much, guys.

Thank you. One moment for the next question. Our next question will be coming from the line of William Bonello of Craig-Hallum. Your line is open.

William Bonello (Senior Research Analyst)

Hey, guys. Thanks for taking the questions. A couple of things. Kevin, I know you don't give quarterly guidance, but given the commentary about a lot of the impact, at least on the NICU side, really being more Q4 than Q3, and in the hopes to avoid a repeat of Q1, can you give us any kind of sense of how you think volume growth might shake out between the third and the fourth quarter?

Kevin Feeley (CFO)

Hey, Bill. Look, the guide is anchored on our conviction today to deliver that 30% or more volume growth for the full year. If you take last year's test count, at 30% or more, that gets you to about 96,900 tests. If you were to back out what we just resulted in the first half of the year, that leaves roughly 53,200 in the back half of the year. There is a seasonal dynamic that I'll remind everybody about, with Q4 invariably being the strongest of any quarter throughout the year. Q1 is the lightest of any quarter during the year, and Q3 does have some summer calendar effects to it. We sit here today reaffirming that 30% full year, year-over-year guide because of our conviction in it.

You might expect the second half of tests to kind of fall out with about 54% of that back half number in the fourth quarter.

Okay. That's really helpful. And then just on that number, I know you addressed this a little bit in response to Dan's question, but it still is a really big ramp that's implied in the back half of the year. I guess, if it's based on Katherine's comments about maybe a few thousand NICU tests, that doesn't really quite get you there. Maybe just give us a little reason, a little bit more color on your level of confidence and why you feel so confident that either the new indications are really going to be kicking in or you're seeing an acceleration in the growth from the pediatric neurologists, or allow us to believe that that ramp's going to happen.

The majority of the second half ramp coming from outpatient, although that's not to understate the long-term importance of the NICU or our competence to win that market. If you look at the second half of the year, some of that competence comes in the acceleration of growth we've now had in the second quarter, right? The first quarter was 24% year-over-year, second quarter 28%. In order to get to the full-year guide of 30% or more, the 30% mark would infer about 33% in the second half of the year. It has available to it a lot of levers that the first half didn't, which includes some more time for new indications like cerebral palsy and others that we'll be launching into to mature in terms of ramp from existing docs and new account activation.

The first half didn't have available to it any impact from pediatric immunologists that will begin to see an inflection in the second half of the year. We continue to see a growing increase in same-store sales, as I called out. A nice signal we saw in the second quarter was some of the talking points around new indications and a broader focus on education for physicians, we think, is making us more attractive to new accounts, but also just giving us a great reason to get back into the doctor's office to re-educate them on the benefits of Exome and Genome first. With a broader set of indications to talk about, we're seeing signs that that's going to help increase same-store sales.

William Bonello (Senior Research Analyst)

That's really helpful. Thanks a lot. That's all I had.

Operator (participant)

Thank you. One moment for the next question. Our next question will be coming from the line of Mark Massaro of BTIG. Your line is open.

Mark Massaro (Managing Director)

Hey, guys. Congratulations for a very nice quarter. I know in Q4 of 2024, I believe your payment or denial rates were somewhere in the 50% range. I think in Q1, you made some improvements. Your denial rate, I think, was somewhere around the high 40% or so. Kevin, you talked about improvements in revenue cycle management. I would just be curious where you're at today with the denial rate or the pay rate percentage.

Kevin Feeley (CFO)

The paid rate's now, and you're tracking correctly, Mark, so thanks. The paid rate is now mid-50s, so a nice step up of a couple hundred basis points this quarter over last. I think we remain convicted that there's still a lot of room to run to reduce denials over time. Like I said, the guide assumes that on the portion of volume coming from new indications and new call points, there's just an inherent nature, and therefore, we've left some conservative room in the guide. As we sit here today, the team is more well armed to have that back-and-forth boxing match with payers than we've ever been. I think you're tracking correctly and appreciate it.

Mark Massaro (Managing Director)

Awesome. I know, I think you guys have touched on this, but there were some inbounds this morning about the rationale to increase the Exome and Genome revenue guide, but to hold the Exome and Genome volume guide. I'm pretty sure it has a lot to do with the success with the higher ASPs on Exome and Genome. Can you maybe just fill that rationale out a little bit further just for folks?

Kevin Feeley (CFO)

I think it reflects our best estimate of how the year is going to play out. Obviously, we're very pleased with the performance in reimbursement rates. We think those rates are durable and we'll expect to see them rise, and so felt it's important to reflect our confidence in the overall reimbursement dynamic, to raise the revenue number. At the same time, our outlook for the year has been and remains today even more confident in that 30% or higher volume mark, which is why we reaffirmed that.

Mark Massaro (Managing Director)

Awesome. If I can sneak one more in, I'd be curious if you guys could expand a little bit more about how the Fabric Genomics is tracking relative to your expectations. I know that there were some customers that Fabric had that you guys may not have had. I'd just be curious how that's going and to what extent can that expand some of your opportunities.

Katherine Stueland (CEO)

Fabric, we're really happy that we acquired it. Just out of the gates, it's a fantastic team. Our team has begun really mapping out what integration looks like from porting our data into Fabric, in order to ensure that we can really drive better diagnoses in a decentralized way, putting our data to work for more patients, as well as how do we think about the best of Fabric, the best of GeneDx, and our ability to really put the strongest AI features into our interpretation capability. We're excited about it. They're on track with our plan this year in terms of their revenues, their gross margins. The teams have had a fantastic time collaborating and really starting to work together. We're excited about it.

As we think about the potential for where Fabric can really help us drive the business, we've begun hiring sales reps for the international opportunity. We're excited about the potential to start driving utilization of Fabric via GeneDx in international markets. It's also a really important asset as we think about how to solve newborn screening and ensure that patients have standardized results, whether a baby is born in London or in Los Angeles. We're really excited about the future potential within the capabilities of GeneDx. It's off to a great start.

Mark Massaro (Managing Director)

It's great to hear. Thanks, guys.

Operator (participant)

Thank you. One moment for the next question. The next question will be coming from the line of Brandon Couillard Wells Fargo. Your line is open.

Brandon Collier (Analyst)

Hey, guys. Thanks. Good morning. Kevin, do you think the second quarter volume growth benefited from any catch-up benefit from the, you know, after the weather-related disruptions you encountered in the first quarter at all?

Kevin Feeley (CFO)

I think in the first quarter, we said weather might have impacted Q1, one to two days. Let's call that 4,500 tests. We also said at that time, missed appointments due to weather events in our space are not typically lost, but just deferred and sometimes deferred for weeks or even months. We saw that play out as expected. It was equal to the one or two days we called out as weather in Q1 and carried over to Q2. We saw a nice, good growth on top of that.

Brandon Collier (Analyst)

Okay. How much of the sequential OpEx growth came from the Fabric Genomics deal as opposed to organic investments? How are you thinking about OpEx in the second half?

Kevin Feeley (CFO)

Fabric was about $1 million of OpEx in the quarter. That's a partial quarter where we've owned the asset for two months in the second quarter. As I said in my prepared remarks, certainly where we see opportunities to invest to seize a leadership position in all these new markets, we will make those investments. I think at the same time, we want to signal that we think we have ample room for the business to drive leverage such that we can make substantial investments to dominate these markets while still driving a profitable business. We think that's important to do in the long run for shareholders, and we thought it important to call that out.

Brandon Collier (Analyst)

Great. Last one, Katherine. The data business picked up a little bit in terms of revenue. Anything to watch out for on the pharma partnership fronts? Any milestones to look forward to later this year? Thank you.

Katherine Stueland (CEO)

Certainly. I think that business is healthy, and we're really happy to see same-store sales there, both in terms of patient matching and in terms of people interested in GeneDx Discover, which is our data visualization product. We're bringing on new customers, continuing to sign more contracts within existing customers, and I expect we'll continue to rinse and repeat that throughout the course of this year. We remain really optimistic about the future, ability for us to put data to work in a much more meaningful way. We're starting to turn our attention to what that can look like in the future in terms of much broader collaborations with pharma companies. Today, we're happy with the way that business continues to perform, and we remain really optimistic about the potential for it in the future.

Brandon Collier (Analyst)

Great. Thanks.

Operator (participant)

Thank you. Our next question will be coming from the line of Tycho Peterson of Jefferies. Your line is open.

Tycho Peterson (Analyst)

Hey, thanks. I appreciate all the color you guys have given on the AAP guidelines. Just one question we've gotten is just on the reliance on geneticists, you know, readiness to interpret reports, pediatricians are spread thin, workload, etc. Maybe just talk a little bit about the role you think they might play and to what degree that could be a rate-limiting factor for adoption.

Katherine Stueland (CEO)

That is a fantastic question, Tycho. A couple of things. Pediatricians, their time is indeed tight. I think they have on average about 12 minutes per patient. We need to really make it easier for one of those clinicians to have access to testing. When we talk about our customer experience, making it a best-in-class customer experience, it includes simplifying the entire ordering process on the front end, as well as on the back end. How do we simplify the reports to make it easier for them to understand so they're not reliant on a genetic counselor or a genetic expert? How do we simplify the report? How do we make the care plans really easy to understand as well?

Part of our customer experience that our product team is building out really, I would say, streamlines and simplifies that entire experience so they're not needing to be beholden to a genetic counselor or another genetics expert. Part of that includes taking the knowledge base of genetic counselors and ensuring that whether it is through CAT capabilities or otherwise, throughout that entire customer experience, we can really scale the knowledge base that is currently existing within only about 2,000 genetic counselors that are out there. We think the customer experience challenge and opportunity is real, and we're really excited about building that out. Importantly, it is also how do we take some of the workload off of the pediatrician and empower parents?

How much of the parent portal can we build to make it easier and even more informed by a parent who's super motivated to make sure that their child gets an answer? There's really kind of this nice push and pull between how we simplify the ordering and reports and customer service experience for the pediatrician, but also how we engage with parents in a really smart way to offload some of the work from the pediatrician as well. That is really an important part of what our team has started building, and we expect that we'll start to see some of those features in 2026 that we think will help unlock the market.

Tycho Peterson (Analyst)

Okay. That's helpful. Maybe just following up on the pediatric market, just commercial payers, how do you think about the timeline to really get them on board? What's needed to operationalize? Obviously, guidelines put a lot of pressure on them to come on board, but what, you know, how do you think about the timelines?

Kevin Feeley (CFO)

Yeou're right. Guidelines do put a lot of pressure. They don't guarantee, but it certainly is an important tool that we will use to make the case to payers. Look, as we outlined, that 18 to 24 months from the time point between guidelines and inflection in terms of pull-through is to build the product features Katherine just talked about. It's to educate physicians, get them aware of the benefits and the guidelines, frankly. There's a lot of buy-side analysts who probably follow AAP guidelines more closely than pediatricians. There is education for us to do.

While at the same time, that gives us the lead time to build the dossier to approach payers to ensure they're up to date with the latest literature, with the latest clinical and economic data to show that the use of these tests frontline not only alleviates suffering and gives better insights to physicians, but can help avoid unnecessary costs for the health system and for insurers. Rest assured we'll be making that case in earnest and are already getting started on that.

David Westenberg (Senior Research Analyst, and Managing Director)

Okay. Last one. As you know, as you kind of lap some of the biomarker bills that got added over the last 12 months, what should we be watching on the state front for the back half of the year? On Medicaid, have you sized the potential headwinds from the big beautiful bill cuts that were laid out?

Katherine Stueland (CEO)

We were pleased to see additional states come on this past quarter. We're now up to 35 in the outpatient, 17 in the inpatient, and we've expanded our government affairs team on the state side of things. We're full-court press in terms of continuing to drive the statewide. On HR1, I think the reality is, not a material impact directly on our business, but of course, any changes in Medicaid impact every hospital system. What is beneficial for us is the health economic data that we have generated, and that our field continues to generate, that ensures that we're actually making the healthcare system and every dollar that is allocated towards it go further. We're making the healthcare system more efficient.

Going back to that pediatrician opportunity and the NICU opportunity, the five years on average that a child is undiagnosed is costing the healthcare system a lot of money today. Getting an answer as early as possible is going to save the healthcare system dollars. The health economic data that we are putting in front of Medicaid, in front of payers, in front of health systems, in front of policymakers, is part of what is making the GeneDx opportunity one that is beneficial both from a clinical care perspective, but also in terms of the overall healthcare spend in this country. We think that there's only strength ahead in terms of our ability to both impact and affect change for the better for these kids, get an earlier diagnosis, and save everyone money along the way.

Kevin Feeley (CFO)

Okay. Thank you very much. States, Tycho. As Katherine said, look, we picked up two new states with outpatient coverage despite some of the headline noise out there. I think a strong signal. Go back a year, there were 28 states, and we're now up to 35 covering the test outpatient. Significant progress. In terms of what that number will be a year from now, it's hard to tell. A lot of factors outside of our control. From a guide perspective, we don't count on any new states picking up coverage, and we take those as they come. Certainly, the momentum is there.

Tycho Peterson (Analyst)

Okay. Thank you.

Operator (participant)

Thank you. That does conclude today's Q&A session. I would like to go ahead and turn the call back over to Katherine Stueland for closing remarks. Please go ahead.

Katherine Stueland (CEO)

Thank you all for your questions and for joining our call today. As we look ahead, we remain focused on execution, innovation, and expanding access to genomic insights that can truly transform care. Thank you for your continued support and belief in our vision. We look forward to updating you on our continued momentum next quarter.

Operator (participant)

This does conclude today's conference call. You may all disconnect.