Quarterly revenue increased by 75.4% year-over-year to $255.7 million, showcasing strong financial performance.
Genomics revenue saw an impressive 89% year-over-year growth, contributing significantly to overall revenue.
The company announced a 3-year $200 million data and modeling license agreement with AstraZeneca and Pathos, enhancing its strategic partnerships.
Adjusted EBITDA improved significantly, reducing the loss from $43.9 million in Q1 2024 to $16.2 million in Q1 2025.
Tempus AI Inc (NASDAQ:TEM) raised its full-year 2025 revenue guidance to $1.25 billion, indicating confidence in continued growth.
Negative Points
Despite revenue growth, the company reported a negative adjusted EBITDA of $16.2 million, indicating ongoing financial challenges.
The cost of compute for the new data model is significant, although partially covered by partners.
The MRD (Minimal Residual Disease) tests are not yet reimbursed by MolDx, leading to metered volumes and potential revenue limitations.
There is a risk of over-reliance on large pharma contracts, which could be impacted by broader economic conditions.
The hereditary testing business, while performing well, is still subject to market perceptions of commoditization and long-term growth uncertainty.
Q & A Highlights
Q: Eric, can you share some insights on follow-up conversations with other pharma companies about similar foundational model development deals in oncology, like the one with AstraZeneca and Pathos? A: Eric Lefkofsky, CEO: After announcing the deal, there was significant interest from other companies. We work with 19 of the 20 largest pharmaceutical companies in oncology, and many are keen on similar collaborations. The excitement has exceeded expectations, but these are substantial deals, and we need to convert interest into tangible agreements. The Pathos approach, combined with our data, made it a compelling three-way partnership with AstraZeneca.
Q: Can you explain the revenue recognition structure of the $200 million deal with Pathos and AstraZeneca? A: Jim Rogers, CFO: The $200 million data license to Pathos is for building foundational models and will be recognized roughly ratably over the three-year term. The upfront payment from Pathos doesn't trigger immediate revenue recognition; it's part of a three-year subscription similar to other large deals. We expect future payments to be in cash.
Q: Could you discuss the hereditary business's performance, which grew at a faster rate than expected? A: Eric Lefkofsky, CEO: The hereditary business, originally expected to grow in the mid- to high-teens, started the year at a 23% growth rate. We believe hereditary screening has significant long-term potential, with a broader target audience than those currently diagnosed with diseases. While we're cautious about projecting continued high growth, the business is performing strongly.
Q: What capabilities does the Deep 6 acquisition bring to Tempus? A: Eric Lefkofsky, CEO: Deep 6 enhances our data connectivity, allowing providers to interrogate their own data sets and advance analytics. This acquisition strengthens our ability to build rich data sets by connecting clinical and molecular data, which is crucial for understanding patient outcomes and responses.
Q: How do you see the MRD space evolving, and what are the key factors for success in the next year? A: Eric Lefkofsky, CEO: Our MRD portfolio includes both tumor-naive and tumor-informed assays. While we are managing volumes due to lack of reimbursement, demand is strong. Tumor-informed assays are currently more conventional, but we see potential for both types. Success will depend on continued assay improvement and securing reimbursement.
Q: How are you assessing the risk of TCV cancellations given the macro environment? A: Jim Rogers, CFO: Our data business primarily involves large pharma companies with multiyear subscriptions, so we haven't seen significant impact from macroeconomic factors. While biotech funding has been challenging, it represents a smaller portion of our business. Our data helps clients be more efficient, which can be advantageous when budgets are tight.
Q: What are the assumptions behind the new revenue guidance of $1.25 billion for the year? A: Eric Lefkofsky, CEO: The guidance includes some contribution from the Pathos and AstraZeneca deal. We have high visibility into our revenue, especially data revenues, and feel confident about our position. While there could be upside in areas like Ambry's growth, we're being appropriately conservative in our projections.
Q: Can you discuss the potential impact of MolDx xM reimbursement on gross margins and ASP improvements? A: Jim Rogers, CFO: We saw a $60 increase in oncology ASPs in Q1 due to migrating volume to the FDA-approved version of our assay. We plan to continue this migration throughout the year. We haven't included potential xM reimbursement in our ASP projections, as we don't anticipate it until later in the year.
