• Revenue: $76.6 million in Q3 2024, a 52% increase year-over-year and 11% sequentially.
• Exome and Genome Revenue: $60 million, a 77% year-over-year increase and 18% sequentially.
• Gross Margin: 64%, up from 48% a year ago and 62% last quarter.
• Adjusted Gross Profit: $49.3 million, up 103% year-over-year and 16% sequentially.
• Exome and Genome Test Volume: Over 19,000 tests, up 46% year-over-year and 7% sequentially.
• Average Reimbursement Rate: Approximately $3,100, up from $2,800 last quarter and $2,600 a year ago.
• Adjusted Operating Expense: $46.6 million for Q3 2024.
• Adjusted Net Income: $1.2 million, marking the first positive quarter since inception.
• Net Cash Burn: $5 million, an 88% improvement year-over-year and 17% sequentially.
• Cash and Equivalents: $117.4 million as of September 30, 2024.
• Full Year Revenue Guidance: Raised to between $284 million and $290 million.
• Full Year Gross Margin Guidance: Raised to 62%.
• Full Year Net Cash Burn Guidance: Improved to $60 million to $65 million.

• Warning! GuruFocus has detected 5 Warning Signs with WGS.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• GeneDx Holdings Corp (NASDAQ:WGS) achieved profitability in the third quarter of 2024, marking a significant milestone for the company.
• The company reported a 52% increase in revenues from continuing operations compared to Q3 2023, reaching $76.6 million.
• Exome and genome revenues grew 77% year over year, contributing $60 million this quarter.
• GeneDx has expanded its gross margins to 64%, up from 48% a year ago, benefiting from better average reimbursement rates and lower cost per test.
• The company has sequenced over 700,000 clinical exomes and genomes, with over 100,000 completed in the last six months, demonstrating strong growth in testing volume.

Negative Points

• Despite strong growth, GeneDx remains only 12% penetrated among pediatric neurologists, indicating a significant untapped market.
• The company faces challenges in expanding coverage for exome and genome testing, with state-by-state Medicaid policy changes being slow and inconsistent.
• GeneDx's guidance for the fourth quarter is cautious due to potential impacts from weather events and possible strategic decisions regarding non-exome and non-genome tests.
• The company is still in the early stages of penetrating the outpatient specialist market, indicating that significant growth efforts are still required.
• There is a long-term challenge in achieving broader adoption of genomic newborn screening, with a five-plus year timeframe anticipated for meaningful uptake.

Q & A Highlights

Q: Can you provide insights on the raised revenue guidance for the fourth quarter and how it compares to normal seasonality? A: Kevin Feeley, CFO: The fourth quarter is typically the strongest seasonally. However, early Q4 was impacted by weather events in the southeast, so we left some room in the guidance. We also considered potential decisions regarding the non-exome and non-genome portfolio, like hereditary cancer tests. We expect Q4 to be seasonally stronger but have left some flexibility in the guidance.

Q: What initiatives are in place to increase penetration with pediatric neurologists, and where do you see penetration going over time? A: Katherine Stueland, CEO: Utilization in pediatric neurology is driven by our efforts, guidelines from the American Epilepsy Society, and biopharma education. We aim for every pediatric neurologist to use genetic testing for children with seizures. Currently, we're at about 12% penetration, and we see a $2 billion market opportunity in the outpatient setting.

Q: Can you elaborate on the CMS guidance for State Medicaid plans and its potential impact? A: Kevin Feeley, CFO: The CMS guidance reinforces existing obligations for state Medicaid programs to cover medically necessary services for children, including diagnostic tools like exome and genome sequencing. However, there's no enforcement mechanism, so it's more about reinforcing guidance rather than mandating coverage.

Q: Regarding the JAMA study and the Guardian readout, when do you expect to commercially launch your exome product for newborns, and what is the payer strategy? A: Katherine Stueland, CEO: The GUARDIAN study is proof of principle, showing a 4% positivity rate in genomic newborn screening. Commercial launch and payer strategy will take several years to develop. We aim to work with policymakers and biopharma companies to solve business problems and expand coverage.

Q: How should we think about the impact of prior period collections on profitability, and what trends should we expect moving forward? A: Kevin Feeley, CFO: Prior period collections were about $6 million, reflecting outperforming past estimates. We expect to continue seeing positive adjustments in future quarters. The $3,100 average reimbursement rate is a new floor, and we aim to further reduce denials and improve payment rates.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.