Tempus Reports Second Quarter 2024 Results

Tempus AI, Inc. (NASDAQ:TEM), a technology company leading the adoption of AI to advance precision medicine and patient care, today reported financial results for the quarter that ended June 30, 2024, and provided recent business highlights.

• Revenue increased 25% year-over-year to $166.0 million in the second quarter of 2024
• Data licensing revenue growth accelerated to 40% year-over-year
• Expanded into the minimal residual disease (MRD) market with the launch of both tumor-naïve and tumor-informed assays
• Established a joint venture with Softbank to enter the Japanese market
• Raised $410.7 million of gross proceeds in initial public offering
• Net Loss of ($552.2 million), largely driven by $493.1 million of stock compensation expense and related employer payroll taxes tied to initial public offering
• Adjusted EBITDA improved $12.7 million quarter-over-quarter to ($31.2 million)
• Expect full year 2024 revenue of ~$700 million, which represents ~32% annual growth
• For additional information on the quarter, including a letter from our CEO, please visit our investor relations site

"We continue to make great progress in deploying technology within healthcare as providers and life science companies are increasingly seeking AI solutions," said Eric Lefkofsky, Founder and CEO of Tempus. "Given our expansive multimodal dataset, and our broad reach across thousands of connected healthcare providers, we are uniquely positioned to advance AI in diagnostics and accelerate the pace of algorithmic insights."

Second Quarter 2024 Financial Results

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• Genomics revenue of $112.3 million in the second quarter of 2024, an increase of $20.4 million or 22.2% over the second quarter of 2023.
• Data and services revenue of $53.6 million in the second quarter of 2024, an increase of $13.2 million or 32.5% over the second quarter of 2023, including 40% growth in our Insights (data licensing) business.
• Non-GAAP Genomics gross margin was 49.4% in the second quarter of 2024, compared to 48.9% in the second quarter of 2023.
• Non-GAAP Data and services gross margin was 72.4% in the second quarter of 2024, compared to 65.9% in the second quarter of 2023.
• Net Loss of ($552.2 million), largely driven by $493.1 million of stock compensation and related employer payroll taxes tied to initial public offering.
• Adjusted EBITDA ($31.2 million) in the second quarter of 2024, compared to ($43.9 million) in the first quarter of 2024.

Recent Operating Highlights

• Announced the clinical launch of our MRD portfolio including Tempus' xM tumor-naïve test and xM tumor-informed (NeXT Personal® Dx) test.
• Received 510(k) clearance from the U.S. Food and Drug Administration (FDA) for the Tempus ECG-AF device that uses AI to help identify patients who may be at increased risk of atrial fibrillation/flutter (AF).
• Completed a Joint Venture Agreement with SoftBank, titled "SB Tempus," to bring Tempus' AI-enabled precision medicine solutions to Japan.
• Received Advanced Diagnostic Laboratory Test (ADLT) status from the Centers for Medicare & Medicaid Services (CMS) for Tempus' next-generation sequencing assay, xT CDx.
• Sold 11,100,000 shares of Class A common stock at $37 per share in initial public offering, raising $410.7 million of gross proceeds.

Financial Outlook and Guidance

Tempus expects full year 2024 revenue of approximately $700 million, which represents approximately 32% year-over-year growth. The Company expects approximately ($105 million) in adjusted EBITDA, an improvement of approximately $50 million over 2023.

Webcast and Conference Call Information

A conference call and webcast will begin today, August 6, 2024 after market close at 4:30 p.m. Eastern Time. Interested parties may access details at:

Conference ID: 6326328

Domestic Dial-in Number: (800) 715-9871

International Dial-in Number: (646) 307-1963

Live Webcast: https://edge.media-server.com/mmc/p/75k462fh

The webcast may be accessed on the company's investor relations website at investors.tempus.com. For those unable to listen to the live webcast, a recording will be made available on the company's website after the event and will be accessible for one year. Visit the investor relations website to find the company's latest deck, and commentary on the quarter by Eric Lefkofsky, Founder and CEO and Jim Rogers, CFO, which will be discussed on the conference call and webcast.

About Tempus

Tempus is a technology company advancing precision medicine through the practical application of artificial intelligence in healthcare. With one of the world's largest libraries of multimodal data, and an operating system to make that data accessible and useful, Tempus provides AI-enabled precision medicine solutions to physicians to deliver personalized patient care and in parallel facilitates discovery, development and delivery of optimal therapeutics. The goal is for each patient to benefit from the treatment of others who came before by providing physicians with tools that learn as the company gathers more data. For more information, visit tempus.com.

Non-GAAP Financial Measures

In addition to the financial information presented in this release in accordance with accounting principles generally accepted in the United States of America (GAAP), Tempus also presents adjusted non-GAAP financial measures.

Non-GAAP gross profit is defined as GAAP gross profit, excluding stock-based compensation expense and employer payroll tax related to stock-based compensation (collectively, the "stock-based compensation adjustments"). Non-GAAP gross margin is defined as gross profit, excluding the stock-based compensation adjustments, as a percentage of revenue. Non-GAAP operating expenses are calculated as the sum of technology research and development expense, research and development expense, and selling, general and administrative expense, excluding the stock-based compensation adjustments. Non-GAAP net income (loss) is defined as net income (loss), adjusted to exclude (i) losses on equity method investments, (ii) changes in fair value of our warrant liability, warrant asset, marketable equity securities, contingent consideration liabilities and indemnity-related holdback liabilities, and (iv) the payment of $2.3 million of our Series G-4 convertible preferred stock in connection with the initial public offering (the "G-4 Special Payment"). Non-GAAP net income (loss) per share is defined as adjusted net income (loss) divided by weighted average common shares outstanding, basic and diluted.

Adjusted EBITDA is defined as net income (loss), adjusted to exclude (i) interest income, (ii) interest expense, (iii) depreciation and amortization, (iv) provision for (benefit from) income taxes, (v) losses on equity method investments, (vi) changes in fair value of our warrant liability, warrant asset, marketable equity securities, contingent consideration liabilities and indemnity-related holdback liabilities, (vii) the stock-based compensation adjustments, and (Viii) the G-4 Special Payment. Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue.

Tempus believes these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by institutional investors and the analyst community to help them analyze the health of Tempus' business. In particular, Adjusted EBITDA is a key measurement used by Tempus management to make operating decisions, including those related to analyzing operating expenses, evaluating performance, and performing strategic planning and annual budgeting. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

Tempus does not provide guidance for net loss, the most directly comparable GAAP measure to Adjusted EBITDA, and similarly cannot provide a reconciliation between its forecasted Adjusted EBITDA and net loss without unreasonable effort due to the unavailability of reliable estimates for certain components of net income and the respective reconciliations. These forecasted items are not within Tempus' control, may vary greatly between periods and could significantly impact future financial results.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, about Tempus and Tempus' industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this press release are forward-looking statements, including, but not limited to, Tempus' expected financial results for full year 2024; the contributions of Tempus' research and findings to the larger scientific community and the use of Tempus' products and services to advance clinical care for patients. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "going to," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," or "would" or the negative of these words or other similar terms or expressions. Tempus cautions you that the foregoing may not include all of the forward-looking statements made in this press release.

You should not rely on forward-looking statements as predictions of future events. Tempus has based the forward-looking statements contained in this press release primarily on its current expectations and projections about future events and trends that it believes may affect Tempus' business, financial condition, results of operations and prospects. These forward-looking statements are subject to risks and uncertainties related to: the intended use of Tempus' products and services; Tempus' financial performance; the ability to attract and retain customers and partners; managing Tempus' growth and future expenses; competition and new market entrants; compliance with new laws, regulations and executive actions, including any evolving regulations in the artificial intelligence space; the ability to maintain, protect and enhance Tempus' intellectual property; the ability to attract and retain qualified team members and key personnel; the ability to repay or refinance outstanding debt, or to access additional financing; future acquisitions, divestitures or investments; the potential adverse impact of climate change, natural disasters, health epidemics, macroeconomic conditions, and war or other armed conflict, as well as risks, uncertainties, and other factors described in the section titled "Risk Factors" in Tempus' Final Prospectus filed with the Securities and Exchange Commission ("SEC") on June 17, 2024, pursuant to Rule 424(b)(4) under the Securities Act, as well as in other filings Tempus may make with the SEC in the future, including its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. In addition, any forward-looking statements contained in this press release are based on assumptions that Tempus believes to be reasonable as of this date. Tempus undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

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