Q3 2024 Tempus AI Inc Earnings Call
Initial results conference call.
Speaker Change: At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session.
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Speaker Change: I will now turn the conference over to Liz creature Hello. Please go ahead.
Liz: Thank you Breanna good afternoon, and welcome to temperatures third quarter 'twenty 'twenty four conference call. This afternoon and this released results for the quarter ending September 30th 2020 for joining me today from Tempus, our Eric Lepkowski, founder and CEO and Jim Rogers C F.
Liz: Before we begin I would like to remind you that during this call management may make forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially for a discussion of these risks. Please visit our 10-Q for the quarter ended September 30th 'twenty 'twenty four filed on.
Liz: November four 2024, as well as any future reports that we filed with the SEC.
During the call, we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles definitions of these non-GAAP financial measures along with reconciliations to the most directly comparable GAAP financial measures are included in our third quarter earnings release, which has been furnished.
Liz: The SEC and is available on our website at investors thought Tempest Dot com I would now like to turn the call over to Eric.
Eric Lepkowski: Hi, all.
Eric: Before we start the Q&A session and I thought I would just briefly run through some of the highlights for the quarter.
Eric: Q3 was.
Eric: Solid quarter for Tempus, we delivered.
Eric: Our revenue growth of 33% hitting $180 9 million.
Eric: We had genomics unit growth that accelerated from last quarter to 23, 9%.
Which was meaningful acceleration in terms of unit growth.
Eric: The overall business was about 20% growth based upon some.
Liz: ASP true ups from last year, but we were excited to see the unit growth pickup or.
Liz: Our data and services revenue accelerated to 64, 4% year over year growth, notably led by our insights for data licensing business, which came in at 86, 6%, which was a meaning.
Eric: A meaningful acceleration from last year.
Liz: I mean last quarter.
We also delivered adjusted EBITDA of negative $21 8 million, which was a $14 4 million year over year improvement and also a significant improvement quarter over quarter. So we're well on track.
Liz: Improving our EBITDA for the quarter as we march toward cash flow breakeven.
Liz: On top of that the Big news, obviously for the quarters, we announced the acquisition of that.
Liz: I've decided agreement to acquire Ambry genetics, who is a leader in hereditary screening and whose business we've come to know well over the past few years or actually are our largest reference lab for run through screening we do.
Liz: And we spent significant time with the team and understanding the business not just super excited.
Liz: To have them.
Liz: Join our world. It's the business is synergistic across all of our products from sequencing to we've over time, our data business and our AI applications business.
Liz: They also accelerate our path to cash flow and adjusted EBITDA breakeven.
Liz: Breakeven given that the business today is growing at north of 25%.
Liz: Which is meaningful growth, but even more fantastic is that they generate significant EBITDA.
Liz: So they've achieved one of the rare things in our space, where you actually have the genomics business and has significant growth in our proprietary business model, but is also making money.
Liz: And we're excited that the combination of the two of US on an annualized basis will also be now.
Liz: The EBITDA and cash flow positive.
Liz: We're paying $600 million for the business $375 million in cash and 225 million in equity $120 million, which will vest at closing we should occur in early Q1.
Liz: And the other 100 million, which.
Liz: Is locked up for a year.
Liz: And in terms of the multiples we're paying it's about one nine times current revenue and roughly 15 times EBITDA. So we feel like we are buying the business and attractive price.
Liz: And we're able to finance the business largely with additional debt from areas and so the transaction is.
Liz: Not materially dilutive at all.
Liz: Our equity.
Liz: So overall fantastic quarter and on that note, we're happy to take any questions folks out.
Speaker Change: Thank you.
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Liz: We kindly ask that you please limit yourself to one question and one follow up.
Speaker Change: Our first question comes from the line of Tejas Savant with Morgan Stanley. Please go ahead.
Tejas Savant: Hey, guys good evening and thanks for taking the questions here.
Tejas Savant: Eric maybe I'll start with the Ami news first of all congrats on the announcement can you just walk us through the rationale of expanding into her added pre cancer testing.
Tejas Savant: One of the questions, which I'm sure. We get is the sustainability of that 25% growth you cited for the Ambry asset in light of some of the.
Tejas Savant: Uneven growth trends that some of the peers have faced in that market and then second can you comment on just.
Tejas Savant: The organizational readiness, if you will to continue making progress on the thematic side of the portfolio, including your Mardi push while also expanding into these new verticals and integrating the transaction or is the plan here that you'll essentially operated arm's length. It was a well run asset you talked about the EBITDA agenda.
Liz: <unk>, there and essentially sort of.
Liz: Think about integrating it further down the road.
Speaker Change: Yes, so I'm happy to jump in so first of all we know.
Liz: Ambry fits squarely within our current strategic.
Liz: Our platform for genomics in that we currently offer hereditary testing today, we have an assay called <unk>, It's one of our main.
Liz: Product categories, and it's critical to us because we want to capture we want to capture patients early we want to be there for them. When they are being treated we want to be their monitoring their disease over time, and we believe in what's been central to our thesis, which we've talked about historically.
Liz: Is that we believe is going to be very much. If you kind of look at the analogy of Amazon and ecommerce more.
Liz: More and more physicians and care teams and oncologists are going to want to work with those labs that can.
Liz: Help them treat their patients from beginning to end and not work with five different labs, they're going to want to work with one lab lab can offer comprehensive.
Liz: Profiling and so we have always felt it's important to be in hereditary screening it's important to be in somatic and liquid testing for therapy selection, it's important to be in MRV and monitoring. So this fits kind of squarely within our strategic.
Liz: Our plans and current activities.
Liz: And that the.
Speaker Change: The business has actually been accelerating their growth rate and if you look at the landscape.
Speaker Change: We believe the hereditary market is quite stable.
Speaker Change: More and more insights are relevant to inherited cancer risk understanding and so there are certainly the growth in that space and <unk> in particular seems to be taking market share from others. We don't see any signs that that's going to slow down and even though the law of big numbers does tend to bring down growth rates, which is for us.
Speaker Change: Will be true for them.
Liz: We think it'll be a meaningful growth for some period of time and there's nothing that we saw in the past year, where we really dug into the business deeply that led us to think.
Liz: There was some kind of systemic slowdown so we think the business will perform well it will grow it will make more money and it's and it fits squarely within our.
Liz: Our footprint in terms of the other end of the spectrum, which is okay. Instead of catching patients earlier before they developed cancer right when they do.
Liz: Thinking about monitoring them post therapy.
Liz: For minimal residual disease detection as well as monitoring.
Liz: We have as we've talked about historically, we have kind of.
Liz: Two different platforms. There one is our tumor naive assay.
Liz: We're in colorectal cancer, where doing our own <unk>.
Liz: We'd assay and the other is a tumor informed product that is in partnership with personality in lung and breast and Io Io response.
Liz: And we believe that our portfolio in MRV is expensive, we think it's the right portfolio to capture share of the demand for our products have been.
Liz: I've been quite strong we're obviously gated.
Liz: By reimbursements and until both we and personnel also achieve reimbursement, it's hard to really unshackle those products and so I would suspect it'll be a much more meaningful story in the coming years, as we get reimbursement and as we really start to ramp that portfolio.
Liz: Yeah.
Speaker Change: Got it that's helpful.
Speaker Change: And then maybe switching gears to the data side of things you guys. I think you've talked about the <unk> contract renewal you got intra quarter you got the expansion of the Takeda collaboration.
Liz: Of the one with <unk> as well can you just clarify whether the PCB.
Liz: <unk> grew a little bit sequentially I know you kind of reiterated it was north of $900 million again, but it would be helpful to just reassure investors that its moving in the right direction and then.
Liz: Jim one for you in terms of the near term dynamics here one of the questions. We get is that the <unk>.
Liz: 25 million sort of quarter over quarter step up that's embedded in street models into the fourth quarter for the data and services business. So just your visibility there in light of some of the mixed commentary we've gotten from the <unk> and some of the other players in Biopharma funding weakness would be helpful.
Speaker Change: I'll start with the overall business and then Jim can talk a little bit about the financial metrics.
Speaker Change: The data business continues to be to be strong.
Speaker Change: <unk>.
Speaker Change: We were fortunate that a lot of the pressure that other people have been experiencing.
Speaker Change: We're not immune to it certainly.
Speaker Change: There was historically some additional tailwind when biotechs were going public and R&D budgets were larger.
Speaker Change: And so we certainly have seen some of that tailwind subside, but the overall business remains really strong and in fact the growth rate when you look at our data licensing business.
Tejas Savant: Most 87%.
Tejas Savant: We don't expect to sustain that so we expect the growth rates to come down and so we have long we've got some good cushion in terms of.
Tejas Savant: Building a durable meaningful.
Tejas Savant: Fast growing large data business, given where we sit.
Tejas Savant: And so overall I would say everything's moving right direction, one thing really quickly on on Merck. It was really nice when a large client that has a big three year data license and it comes up for renewal and then you.
Speaker Change: Re sign up you expand these relationships is really.
Speaker Change: That's a testament to the data is adding value our products are adding value and what most people don't understand when they look at our data businesses. Its not just that we have lots of data, which we obviously do but we've built a whole series of tools and data products.
Speaker Change: That makes that data usable by biotech and pharmaceutical companies and that's really the main differentiation.
Speaker Change: And in terms of the overall metric and 900 million I'll, let Jim.
Speaker Change: Yes, so as it is.
Speaker Change: As we noted at the end of Q2 was north of $900 million still north of $900 million at the end of Q3, we obviously recognize a lot of revenue in Q3.
Speaker Change: From the number that was there in Q2. So again, we continue to refill the bucket and we think that at that level or north of $900 million. Obviously gives us very good forward looking visibility.
Speaker Change: Into the next several years of data licenses.
Speaker Change: In terms of the step up in Q4 Q4 is historically our largest quarter.
Tejas Savant: Quarter from a data perspective, oftentimes, we have projects I've got a follow pharma cycling budgets.
Tejas Savant: And so our budgeting cycles and so.
Tejas Savant: This is not atypical for us to have a step up in Q4 on the data.
Tejas Savant: Yeah.
Speaker Change: Got it that's helpful. I appreciate the time guys.
Speaker Change: Our next question comes from the line of Rachel VAT and stall with J P. Morgan. Please go ahead.
Rachel VAT: Hey, good afternoon. Thanks for taking the question. So first off on our core genomics business. Eric I believe you mentioned that unit growth accelerated this quarter. So can you breakdown craft what did volumes grow sequentially and then can you break that down even further which task and did you see faster uptake how does the portfolio there.
Speaker Change: Yes. The total total volume was about 66500 in Q2, just about 69000 tests in Q3, we should note that both of those numbers exclude any are already testing so the.
Speaker Change: Growth that we're seeing quarter over quarter are coming from our core assays. So ex Gx Rx up and then X gene growing more quickly, but that's as far base. So most of it coming from <unk> XR in excess.
Speaker Change: Yeah, and I think we had we had kind of foreshadowed.
Speaker Change: Last quarter that we did expect to see some additional.
Speaker Change:
Speaker Change: Unit lift in the quarter and you saw what we expected.
Speaker Change: It was nice to see.
Speaker Change: Great and then just for my follow up.
Speaker Change: Last quarter, you guys mentioned just around hiring some of the sales force I believe you added roughly 50, new sales reps in the quarter.
Speaker Change: Initially and just led to lower productivity during the ramp up period in some of the territory adjustments. So can you provide an update in terms of current productivity levels of your sales force at this point and how should we see that trending in terms of the ramp in <unk> and then into next year as well.
Speaker Change: Yes, I can start so I mean, the the sales force is getting certainly more productive every month as they get trained to get up to speed. We have seen historically that it can take six to nine months to get reps.
Speaker Change: <unk> in our world really up to speed, we've got a broad testing compendium. So it takes a little time.
Speaker Change: And we suspect they will continue to get more efficient at it isn't meaningful for us in the way it might be meaningful for others in that.
Speaker Change: We're metering our investments now if you look at the business, let's say three quarters ago, we were generating negative 40 plus million of EBITDA.
Speaker Change: Last quarter negative 30 plus million now it's just over <unk>.
Speaker Change: Low $21 million or maybe EBITDA. So we're on a consistent monthly trend on our own of getting to adjusted EBITDA positive in the next short period here, let alone the accelerant from Ambry that obviously.
Speaker Change: Just pulled that forward a bit, but we're not making such large investments in our sales force that their lack of productivity is is kind of causing any financial payoffs not at all it just might mean that any given quarter, we might sell 1000, less reqs than we thought or 2000, and so the growth rate might go from 23.
Speaker Change: 3% to $25 22 to 24, so we can explain some of the fluctuations relative to what we had forecast by looking at that productivity, but.
Speaker Change: It doesn't really meaningful because this isn't a massive investment for us thats like we've got to get through to be financially healthy already.
Speaker Change: On a good path.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Michael Ruskin with Bank of America. Please go ahead.
Michael Ruskin: Great. Thanks for taking the question guys.
Speaker Change: I appreciate it.
Speaker Change: Color on Ambry earlier on and congrats on that deal. It seems like the financials are a pretty compelling I won't expand a little bit on your existing relationship with <unk>.
Speaker Change: You've touched on in the past.
Speaker Change: Got a relationship with them there with your primary reference lab.
Speaker Change: Do you have a sense of that $300 million in revenue generated they generated and what.
Speaker Change: Do you expect to generate this year.
Speaker Change: How much is sort of going to be incremental right I mean, what I'm trying to get at is how much of their current business as their relationship with you versus how much is external I'm just.
Speaker Change: Just how should we think about the setback to the model next year.
Speaker Change: Yes, so I mean, obviously the vast majority is not overlapping.
Speaker Change: That you know that said, we don't we haven't provided exact numbers of the breakdown between our test week.
Speaker Change: In large part I mean wouldn't it wouldn't be that exciting so but it would just create more questions every.
Speaker Change: So these things move around a bit and so we've got a pretty broad testing portfolio. So we don't we don't want to be in the habit of every single quarter discussing every single nuance of every single assay.
Speaker Change: That said R. R.
Speaker Change: Heritage cancer risk of hereditary screening it was a newer offering for us as Jim mentioned, a second ago, it's still relatively small in terms of its overall.
Speaker Change: Piece of our of our larger genomics business.
Speaker Change: And the vast majority of Enbridge business is not all of them.
Speaker Change: I would also add that their primary primary call point is doing a colors, where art testing volume is coming through on colleges. So it's very complementary of what we're what we're doing.
Speaker Change: Okay alright. Thanks.
Speaker Change: Then on just go into the genomics business 69000 tests, you've called out <unk> ASP.
Speaker Change: Some nice sequential improvement over <unk> and <unk>.
Speaker Change: Particular trends to call out in the on the reimbursement side of things any particular payer that came on board or was just some broad uplift and how to think about that line item going forward.
Speaker Change: The pace of pace of improvement we should continue expect.
Speaker Change: Yes, so from a reimbursement standpoint, we made some progress with commercial payers over the last couple of months Blue Cross Blue Shield of Illinois, Blue Shield of California, Avalon at all in network contracts covering all of our therapy selection and inherited cancer panel <unk> X Gene X plus.
Speaker Change: So that led to a little bit of incremental kind of quarter over quarter improvement I would say no significant step up.
Speaker Change: In Q4.
Speaker Change: <unk> status that pricing pricing process still underway just as a reminder, we're targeting $4500 a ton.
Speaker Change: Just there for the X T C. D X will start migrating volume to that version of the assay in Q1 of 25, so that would be kind of in the next kind of a meaningful accelerant from a reimbursement standpoint, as we move to that person.
Speaker Change: Okay.
Speaker Change: Alright, thanks, so much.
Speaker Change: Our next question comes from the line of Daniel Brennan with TD Cowen. Please go ahead.
Daniel Brennan: Great. Thanks, Ron Thanks for the questions maybe just on Ambry.
Daniel Brennan: Presumably given your partnership deal was not competitive just wanted to clarify that or just kind of learn about that in terms of the deal process and then anything you can say about what kind of topline growth.
Speaker Change: You guys are plugging it or we can think about coming forward and are there any synergies associated with this deal.
Speaker Change: Yes so.
Speaker Change: I'll cover the first couple of so in terms of a competitive process and we did run a competitive process.
Speaker Change: They.
Speaker Change: Let's see higher.
Speaker Change: Banks and looked at there it looks at their options you'd have to kind of dig in there a public company. So you can kind of dig into some of their historic comments, but.
Speaker Change: I'm not an expert on Konica Minolta, but I know at one point they had ambry plus another business that were bolted together I think for a period of time they were looking to sell both and then decided to split it out so it was a.
Speaker Change: He was a process, but it was a process with twists and turns we were fortunate that we knew the business well we were watching it closely we were interacting with them.
Speaker Change: As a partner and we were able to kind of watch their performance over over a long horizon is a time to really get comfortable that this business was durable that the economics, we're going to work.
Speaker Change: We're improving and that we thought this was going to be.
Speaker Change: Really synergistic assets acquired under the right terms and in a way that it accelerates our business both in terms of products, we take to market and.
Speaker Change: Our journey to get to EBITDA cash flow positive, which we now are.
Speaker Change: In terms of top line growth, we've got some slides in the investor deck, you can take a look at the.
Speaker Change: The combined business. If if we were one company today would be about $1 billion in revenue.
Speaker Change: We give a little bit of color, even though we haven't fully built our models for.
Speaker Change: For 2025, yet.
Speaker Change: We expect the combined business to grow in the kind of 20% to 25% range.
Speaker Change: And obviously, the combined business will be adjusted EBITDA and cash flow positive. So.
Speaker Change: So we're in a good healthy spot.
Speaker Change: Bill.
Bill: Our size and growing and continuing on our mission to bring AI to diagnostics in terms of synergies.
Speaker Change: The synergies.
Speaker Change: It's a well run business, we plan on having that operate independently.
Speaker Change: Independently.
Speaker Change: The near term, but there certainly are some synergies for example.
Speaker Change: Have a large data business, we have a large data business that we've been having corporate.
Speaker Change: Additionally, there are largely an in network provider so about 95% of their volume is in networks, they've got very good relationships with payers that hopefully we're able to leverage its episodic so.
Speaker Change: While not kind of immediate synergies.
Speaker Change: And so what were anticipating overtime, we think that Theres a very synergetic.
Speaker Change: Got it. Thank you and then maybe just as a follow up just on the kind of outlook for the remainder of the year I think in the press release or maybe in the prepared remarks, you decided to.
Speaker Change: Genomics business, you expect to kind of stay in that 25% to 30% range and you kind of reiterated the $700 million guide for the year. So as a conclusion that we should be thinking about 25% to 30 on genomics and <unk> and then we can just solve for what the remaining data business should be growing at or are you guys thinking about that.
Speaker Change: Something differently by segment for <unk>.
Speaker Change: That's it.
Speaker Change: Probably.
Speaker Change: <unk> for <unk> to take up after this call.
Speaker Change: I don't think we have a.
Speaker Change: By segment, the quick snapshot of how I would break down, but certainly we do expect genomics to be in that 25% to 30% range. So you can kind of back your window, yes, we wouldn't anticipate any significant shifts in Q4 of kind of where the businesses have been growing independently.
Speaker Change: Although I will I will say and we said this I think in the in our in our in our letter you Shouldnt expect the data business to be growing at 87% right right I mean, if the business performing super well, but again, we are far more focused on long term growth in that 25% range as opposed to short term excel.
Speaker Change: <unk> that when we lap.
Speaker Change: You can make the business is highly volatile.
Speaker Change: We want long term growth given how big the spaces and given the unique position we hold in the space.
Speaker Change: Really one of the leading companies, bringing out of health care and bring particular diagnostic.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from the line of Ryan Macdonald with Needham. Please go ahead.
Ryan Macdonald: Hi, Congrats on a great quarter and thanks for taking my questions, maybe just to start on the the data purchasing environment right. Now obviously some nice notable deals in the quarter, but can you just talk about sort of if youre seeing any changes in sort of how let's call. It new newer customers on the data side might be purchasing.
Speaker Change: Our making that initial purchase and if youre seeing maybe are made.
Speaker Change: Maybe growth or larger initial lands relative to maybe the last six to 12 months, which had been a bit of a harder data buying environment.
Speaker Change: Yes, no I mean, I don't think we're certainly seeing continued.
Speaker Change: Continued strong interest in our data products, we've had really.
Speaker Change: Big wins this year.
Speaker Change: Lots of good momentum added lots of big clients to the portfolio, we talked about some in the last few.
Speaker Change: A few quarters, but certainly like bio and techs are great new wins things like that are great new wins for us.
Speaker Change: But as I mentioned there is no question that the overall marketplace.
Speaker Change: No. It doesn't have the same tailwind that it had a few years ago when capital was flowing more freely.
Speaker Change: A few years ago, there were just a plethora of biotechs.
Speaker Change: That were flushed with capital, having just gone public or race or recently around that we're looking to buy data.
Speaker Change: And when you talk to biotechs, they are looking to preserve capital because the market's just different.
Speaker Change: So the fact that we're still growing and have this really big backlog I think just bodes.
Speaker Change: Well for the value that our data products.
Speaker Change: Offer the market and I would suspect as.
Speaker Change: The landscape shifts a bit we will get some of that tailwind in maybe 25 or 26.
Speaker Change: Capital becomes a bit more free.
Speaker Change: But we haven't seen any fundamental shift in batteries people still in our world.
Speaker Change: To buy a little bit of data.
Speaker Change: More and then an even bigger deal and then our goal of eventually is to get them into some kind of strategic relationship.
Speaker Change: Really helpful color, Thanks, and maybe as a follow up on a recognized its a small portion of the business today, but within the apps arena.
Speaker Change: <unk> recently announced a collaboration with northwestern medicine like <unk>.
Speaker Change: Cardiology, and I think they're utilizing the ECG E. F. L ago can you just talk about a little bit more about that collaboration and then is this starting to form a pathway of how you think sort of the App segment can start to sort of build the monetization pathway here overtime.
Speaker Change: Yeah, that's exactly right I think.
Speaker Change: More and more large.
Speaker Change: Medical systems are trying to figure out how.
Speaker Change: How to take advantage of.
Speaker Change: This new onslaught of generative AI and large language model capabilities. They recognize that these tools are.
Speaker Change: Catalytic for their ability to treat patients to generate better outcomes and so theyre trying to figure out how to bring that into their practice and there's very few companies at our scale with our size that have products in that arena.
Speaker Change: And so.
Speaker Change: We are fortunate to have really deep relationships some of the best medical centers in the world with Western being one and we're all trying to figure out the best way to get these model supported with what's what's interesting and I think I've said this now two quarters in a row.
Speaker Change: Would suspect that these models will be their first of all in our world. They already are deployed at scale, but I would suspect over the coming years there'll be deployed it really tremendous scale.
Speaker Change: And you'll have an enormous number of people actually bailing selves of these algorithmic diagnostics.
Speaker Change: That said it may not be a lot of revenue.
Speaker Change: You could have millions of people that are benefiting in some way from these things without a generate lots of revenue because we still haven't figured out at.
Speaker Change: At least in the U S. How to appropriately pay for the benefit of these truly are from diagnostics. So.
Speaker Change: One of the things we spent a lot of time thinking about is how do we eventually demonstrate to Medicare.
Speaker Change: Medicare and Medicaid and other commercial payers that these things add value they save money they improve outcomes.
Speaker Change: Improved longevity and they should be reimbursed. So I think the big watershed moment for the business side of our applications is going to be when they do get there.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Our next question comes from the line of Andrew Backman with William Blair. Please go ahead hi.
Andrew Backman: Hi, good afternoon. Thanks for taking the questions maybe just to start on <unk> in the deck, you sort of call out the health system relationships that can further along for you guys. So maybe just at a high level can you just sort of talk about how this acquisition, maybe accelerate or grow some of those partnerships just essentially how does this better help you become sort of a provider.
Speaker Change: The go to provider for those groups.
Speaker Change: Yes, so in terms of the relationship that ever has on the payer side. They obviously.
Speaker Change: Our primarily an in network lab, we're primarily an out of network lab. So built facilitating some of those discussions they've got a lot of history in dealing with the commercial payers and then on the health system side.
Speaker Change: As I mentioned before they are primarily primary primary call point is genetic counselors, where we're primarily dealing with oncologist. So again, just deepening those relationships with across the entire ecosystem on the provider side.
Speaker Change: Believe we'll kind of strengthen our position with <unk>.
Speaker Change: I mean, a good example, I was at two.
Speaker Change: Very large.
Speaker Change: Academic medical centers and say I can't start this morning.
Speaker Change: Hum.
Speaker Change: And.
Speaker Change: Both both centers.
Speaker Change: Were worth they were like precision medicine departments and cancer Center.
Speaker Change: A cancer center and both both groups are responsible for.
Speaker Change: <unk> screening for cancer patients therapy selection conference of genomic profiling those patients and now obviously MRV and monitoring so it's not like they have different groups right, where it's like Oh, you want to do her injury screening it goes over there.
Speaker Change: It's the same group of people that are trying to figure out how to bring precision medicine to their cancer patients that think about.
Speaker Change: You know ambry and to think about Tempest and so we're both highly I think synergistic in that regard and.
Speaker Change: All the folks that we talk to typically are looking for.
Speaker Change: Vendors that can help them in a more comprehensive manner.
Speaker Change: But the general trend.
Speaker Change: Is can I kind of work with fewer people that can help me in a more integrated manner and to and comprehensively as opposed to having lots and lots of lots of very small.
Speaker Change: Sequencing providers and so we think this.
Speaker Change: This just strengthens our overall our overall platform.
Speaker Change: Great and then I want to go back to one of your answers to a question earlier around sort of profitability. So how should we sort of be thinking about you balancing investments with this process. This march towards profitability going forward does this acquisition change any of that philosophy or should we still sort of expect continued March forward.
Speaker Change: So we told when we when we went public which was just five months ago, we told.
Speaker Change: We told folks that we were on a discipline on a disciplined path to get to EBITDA positive.
Speaker Change: We wouldn't that we were that we were we were looking to basically take the.
Speaker Change: The gross profit dollar growth, we were generating and produce some leverage so that our losses were declining instead of what some other folks in our space have done which is either kind of has maintained high loss levels. We're actually go the other way an investment.
Speaker Change: We felt that was prudent given that we're going to turn 10 next year and we just thought given our size and scale being sustainable and not a burning money wasn't important milestone we havent yet determined how we want to harvest profits. So I think what I would what I can safely say is especially with this acquisition we've cross.
Speaker Change: That hurdle, we've kind of check that box we're now.
Speaker Change: On an annualized basis, an EBITDA positive cash flow positive.
Speaker Change: Sustainable business, but we need to think a little bit about how we want to.
Speaker Change: Our harvest.
Speaker Change: The the EBITDA, we're going to generate relative to invest in the future.
Speaker Change: I wouldn't I don't I think we're more focused in the next several years on making sure. We can sustain our growth rate not trying to generate an extra $50 million of EBITDA in a given year. So I think youll I.
Speaker Change: They see us make those trade offs, but we're still discipline and we we want to run a good business and so I think hopefully we'll find the right balance.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of David Westenburg with Piper Sandler. Please go ahead.
Speaker Change: Hi, Thanks for taking the question. This is John on for Dave.
John: First of all I just wanted to ask there's been some.
John: Issues between myriad genetics, and United recently on getting reimbursement for gene site.
Speaker Change: Do you have any thoughts on how the industry you might see reimbursement playing out in the psychiatric conditions and pharmacodynamics going forward.
Speaker Change: Yes, more than more than ever they don't want so our neuro looks like because this is relatively small.
Speaker Change: So any kind of disruption in reimbursement there.
Speaker Change: A very insignificant impact on our overall kind of growth rate as far as kind of where it plays out longer term. Obviously this news came out last week.
Speaker Change: So it remains to be seen how other payers will react to it and all that but very minimal impact on our.
Speaker Change: Yeah.
Speaker Change: Got it thank you.
Speaker Change: Secondly, there's also been a lot of talk about billing for transcript telmex and for genomics. So I just want to ask this question in kind of a different way can you just talk about how your CGP test provides different value relative to competitors.
Speaker Change: Ah.
Speaker Change: Is your billing out of whack with the value that you think that provides.
Speaker Change: Okay first of all nor billing, we don't think our billings out of whack. We don't we don't set the billing rates. The billing rates are set by in the case of in the case of <unk>.
Speaker Change: Medicare Medicaid by CMS and by our local.
Speaker Change: Mac as part of their process and so we've got we avail ourselves of billing rates, both in <unk> and Ngls were actually in two Max So our blended rate of <unk> 30 for all of our tests has some tests paid at X amount and some test paid y amount and at the end of the day, we follow a MMA codes we follow.
Speaker Change: The reimbursement pathways that are set by our Max and then we and then we follow the whatever the payers are locally pay. So for example in the case of Jim mentioned that we just signed like Blue Cross Blue Shield, Northern California, those folks are paying.
Speaker Change: Some slightly discounted rates in Medicare for both our DNA test same thing for our RNA test and same thing for our liquid test.
Speaker Change: Now.
Speaker Change: Many many many times many many many many independent times, we've had independent.
Speaker Change: Independent Max and commercial payers look at our DNA test, our RNA test liquid tests and establish rates and those rates have all kind of coalesced around the same place. So we don't suspect anything will change with that we think that's pretty well established we do expect that.
Speaker Change: Our rates on our DNA test will go up a bit with our ADL status. We don't know what that's going to be and we have long taken the approach of not committing to or forecasting ASP gains until they arrive. So if you look at this year, we kind of said hey.
Speaker Change: We're around $400 and that's what we can see and now we're <unk> 30, but we don't say, we're 15 30, and we can see 1700, we just kind of look at it and say Hey, we were fortunate that we've got a high margin.
Speaker Change: At a profitable business at this juncture and if Theres ESP.
Speaker Change: That's great, but we don't control it and it's it all has to be independently ascertained and and so I think time and time again it has been.
Speaker Change: Got it thank you.
Speaker Change: We have no further questions at this time with that we will conclude today's conference call. Thank you all for your participation you may now disconnect.