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EI

EXAGEN INC. (XGN)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3 revenue of $17.244M, up 38% YoY (26% ex one-time 2024 adjustments) and modestly above consensus; gross margin 58.4% and adjusted EBITDA loss improved to -$1.895M . Revenue beat vs S&P Global consensus $16.900M*, while EPS of -$0.31 missed consensus -$0.159*.
  • Management reiterated FY 2025 revenue guidance at $65–$70M and expects positive adjusted EBITDA in Q4 2025 at the high end of the range . CFO indicated the low end assumes little/no ASP expansion in Q4 .
  • Volume trends resilient: AVISE CTD test volume grew 16% YoY, TTM ASP reached $441 (+$37 YoY), and Exagen launched PAD4 markers (seronegative RA) late in Q3 (revenue contribution expected to ramp gradually) .
  • Near-term headwinds: loss of a large high-ASP direct-bill account (blended ASP headwind ~$20 in-quarter) and slower-than-expected reimbursement ramp for new biomarkers; management remains confident in the appeals/revenue-cycle path and longer-term ASP targets .

What Went Well and What Went Wrong

What Went Well

  • “Q3 was the strongest quarter in Exagen’s history,” driven by robust volume growth and execution across teams; AVISE CTD volume growth +15% YoY and nearly +2% sequentially noted on the call .
  • Trailing-12-month ASP expanded to $441 (+9% YoY), supported by new biomarkers; gross margin held near ~58% and remains on a path to mid-60s over time with ASP gains and COGS optimization .
  • Pharma services revenue accelerated to ~$0.78M in Q3 (YTD $1.2M) with backlog ~$3.5M; management sees expanding, margin-accretive opportunities, albeit lumpy timing .

What Went Wrong

  • Slower-than-expected ASP acceleration due to higher initial denials on new markers and conversion of a high-ASP client bill account to third-party insurance (regional payer mix normalization) .
  • EPS loss widened YoY to -$0.31, with ~$3M non-cash expense impact from new debt/warrant fair value adjustments; EBITDA miss vs consensus reflects these items and ASP headwinds .
  • Management flagged potential delay of “sustained cash flow positivity” to 2026 despite reiterated FY revenue guidance and Q4 adjusted EBITDA positivity at high-end scenario .

Financial Results

YoY comparison (Q3 2024 → Q3 2025)

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$12.507 $17.244
Gross Margin %55.8% 58.4%
Operating Expenses ($USD Millions)$11.644 $13.175
Operating Loss ($USD Millions)-$4.663 -$3.100
Net Loss ($USD Millions)-$5.028 -$7.087
Adjusted EBITDA ($USD Millions)-$4.024 -$1.895
Diluted EPS ($USD)-$0.28 -$0.31
Cash and Equivalents ($USD Millions)$22.035 $35.652

Sequential comparison (Q2 2025 → Q3 2025)

MetricQ2 2025Q3 2025
Revenue ($USD Millions)$17.202 $17.244
Gross Margin %60.4% 58.4%
Operating Expenses ($USD Millions)$13.025 $13.175
Operating Loss ($USD Millions)-$2.630 -$3.100
Net Loss ($USD Millions)-$4.439 -$7.087
Adjusted EBITDA ($USD Millions)-$1.721 -$1.895
Diluted EPS ($USD)-$0.21 -$0.31
Cash and Equivalents ($USD Millions)$30.033 $35.652

Consensus vs Actual (Q3 2025)

MetricConsensus EstimateActualSurprise
Revenue ($USD Millions)$16.900*$17.244 +$0.344
Primary EPS ($USD)-$0.159*-$0.31 -$0.151
EBITDA ($USD Millions)-$1.580*-$2.489*-$0.909

Values retrieved from S&P Global.*

KPIs and Operating Metrics

MetricQ2 2025Q3 2025
AVISE CTD TTM ASP ($)$428 $441
AVISE CTD Volume Growth YoY (%)—16%
Gross Margin %60.4% 58.4%
Pharma Services Revenue ($USD Millions)—$0.780
Sales Territories (period-end / current)42 42 (period-end) / 45 current

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$65–$70M $65–$70M Maintained
Adjusted EBITDAQ4 2025Positive at high end of FY range Positive at high end of FY range Maintained
Free Cash Flow PositivityTimeline“At or near free cash flow positive” in H2 2025 “Sustained cash flow positivity may be pushed to 2026” Pushed out
Gross Margin TargetLTPath to mid-60% over time Path to mid-60% over time Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Prior-2)Q2 2025 (Prior-1)Q3 2025 (Current)Trend
ASP trajectory & reimbursementNew SLE/RA biomarkers launched; expected ~$90 per test increment Adjusted accruals to align with collections; still targeting ~$90; TTM ASP $428 TTM ASP $441; slower-than-expected acceleration; PAD4 accrual to begin; appeals ongoing Gradual improvement, timing extended
Salesforce expansionFirst wave of new territories identified Expanded to ~42 territories; adding towards 44–45 Operating 45 territories; expansion territories among top growth Expanding and productive
Gross margin58.9% ~60.4% and improving ~58.4%; up ~260 bps YoY; ex-2024 adjustments, down ~175 bps Near ~60%, variable quarter-to-quarter
Pharma/CRO services—$0.10–$0.20M quarterly; accretive $0.78M; YTD $1.2M; $3.5M backlog Accelerating, lumpy
Regulatory/legal (ALJ appeals)—Highlighted ALJ wins and payer progress Filed for future ALJ hearings; no new public wins Ongoing appeals
R&D execution (biomarkers, LN)Biomarker launches; LN research presentations PAD4 launch plan; LN urine/blood pipelines, NIH cohorts PAD4 markers commercially launched; six abstracts; plenary at ACR Advancing pipeline and launches
Regional/payer mix——Loss of a high-ASP direct bill hospital; converting to payer mix (Northeast) Temporary ASP drag, normalizing

Management Commentary

  • “Q3 was the strongest quarter in Exagen’s history, driven by robust volume growth and continued execution across our commercial, scientific, and operational teams.”
  • “Our trailing 12-month ASP for CTD now at $441… we’re not seeing the full second half of ASP expansion I had anticipated… we lost a large high ASP direct bill account this quarter.”
  • “Gross margin in the third quarter was just over 58%. Up about 260 basis points compared to the third quarter of 2024. Excluding the impact of over $1 million in downside revenue adjustments in [Q3’24], gross margin… was down about 175 basis points from just over 60% in 2024.”
  • “We currently operate with 45 sales territories, up from 42 at the end of Q3… focus remains on profitable growth.”
  • “At the end of Q3, commercially launched seronegative RA markers for anti-PAD4, the latest enhancement to the AVISE CTD panel.”

Q&A Highlights

  • ASP and guidance sensitivity: Low end of FY revenue range assumes little/no ASP expansion in Q4; high end implies continued/accelerated ASP gains .
  • Direct bill account transition: Blended in-quarter ASP headwind “a little north of $20”; volume recovering via logistics and payer conversion; longer-term ASP expected to improve with payer relationships .
  • Path to $500–$600 ASP: Management still views $500 realistic (cash flow positive at current volume), medium-term goal roughly half of Medicare (~$600), longer-term potentially higher .
  • Volume trajectory: Q3 volume up vs Q2 despite seasonality; expect some Q4 step-down due to holidays/ACR timing, but team incentives and execution supportive .
  • Pharma services: $0.78M in Q3, backlog ~$3.5M; business is margin-accretive, lumpy quarter-to-quarter; expanding collaborations .

Estimates Context

  • Q3 revenue beat: $17.244M actual vs $16.900M consensus*; EPS miss: -$0.31 actual vs -$0.159 consensus*; EBITDA miss: -$2.489M actual vs -$1.580M consensus*.
    Values retrieved from S&P Global.*
  • Street models may lift FY revenue (toward high end) on volume resilience and PAD4 launch, but adjust EPS/EBITDA for non-cash expenses (warrant/fair value, debt) and slower-than-expected ASP ramp .

Key Takeaways for Investors

  • Revenue momentum and volume resilience underpin FY guide; near-term stock drivers: ASP trajectory and evidence of payer wins; PAD4 accrual starting in Q4 should modestly assist ASP .
  • Watch the appeals cadence: higher initial denials on new markers are slowing ASP progress, but Exagen’s revenue-cycle playbook (ALJ filings, medical director engagement) is in motion .
  • The direct-bill hospital exit is a transitory drag; volume is returning and payer mix normalization should gradually restore realized price in the region .
  • Pharma services could become a meaningful, accretive contributor with $3.5M backlog and strong partner demand; expect quarter-to-quarter lumpiness .
  • Liquidity improved (cash $35.7M); Q4 adjusted EBITDA positivity at high end of revenue range remains in view, but sustained FCF positivity likely shifts into 2026—avoid extrapolating Q3’s margin to FY run-rate .
  • Longer-term thesis hinges on ASP expansion toward ~$500–$600 via payer coverage and appeals, plus new biomarkers/LN platform; each reimbursement win can drive step-changes in gross margin toward mid-60s .
  • Trading setup: near-term catalysts include Q4 ASP update, PAD4 early accrual, any disclosed ALJ wins or payer policy changes; risks include payer pushback, seasonal volume effects, and debt-linked non-cash EPS volatility .