MDxHealth S.A. Q3 FY2025 earnings call

Core Principles

• MDxHealth S.A. is driven by three core operating principles: focus, execution, and growth.
• The company recently acquired the Exosome Diagnostics business, enhancing its comprehensive menu of precision diagnostics in urology.

Execution Highlights

• Sales organization has achieved a 45% compound annual growth rate over the last four years while reducing sales and marketing expenses as a percentage of revenue.
• Laboratory operations have kept pace with business scale and improved gross margin through optimization of efficiency.
• Emphasis on customer experience, aiming to reset the industry gold standard for sample-to-result turnaround time.

Integration Efforts

• Integration of the ExoDx acquisition is a top priority in Q4, including expanding the commercial operation with sales reps cross-training, converting select customers to ExoDx by year-end, and integrating laboratory operations for efficiency.
• Set aside entry into the germline market for 2025 but will revisit and reevaluate it in 2026.
• Will evaluate strategic opportunities from ExoDx's IP and clinical data within urology and through partnerships.

MDxHealth S.A. reported Q3 revenue of $27.4 million, representing an 18% growth compared to 2024. Tissue-based tests, including ConfirmMDx and GPS, saw an approximately 18% volume increase and accounted for 76% of Q3 revenue. Liquid-based tests, such as ResolveMDx, Germline, and the newly acquired ExoDx, experienced a roughly 65% volume increase. The gross profit for the quarter was $17.9 million, a 25% increase from 2024. Gross margins were 65.2% in Q3, up 4 percentage points from Q3 2024, primarily driven by test mix and operational efficiencies.

Revenue Guidance

• 2025 revenue guidance was $108 million to $110 million, but material germline revenue contribution was set aside for the year.
• Expect the Exo business to contribute $20 million or more in 2026 and accelerate revenue growth from the prior 20% to close to 30%.

Q: Dan Brennan asked about the contribution of Exo in the quarter and conservatism in revenue guidance.

A: Michael McGarrity responded that there was no material contribution from Exo in Q3 due to the acquisition closing at the end of Q3, but the company is confident in meeting or exceeding revenue guidance by adjusting focus from germline.

Q: Andrew Brackmann inquired about integrating client service and RCM initiatives.

A: Michael McGarrity stated that integrating these initiatives aims to ensure world-class service standards, focusing on laboratory operation efficiencies, information system advancements, and client service and revenue cycle management integration.

Q: Bill Bonello asked about tissue side ASP fluctuations.

A: Michael McGarrity said ASP variability is normal and not notable, with no material change in view.

Q: Mark Massaro asked about the germline test being set aside.

A: Michael McGarrity explained that the germline market was not materially differentiated, and the company chose not to focus sales reps on it initially due to experience with other products.

Q: Thomas Flaten asked about territory adjustments with new reps.

A: Michael McGarrity said there were territory adjustments to strengthen customer bases and put strength on strength when expanding the sales organization from 50 to 60 reps.