Q1 2025 Overview
Our goal in writing these quarterly letters is to provide you a summary of our financial and
operating results, along with some context as to how we view those results.
We had a record quarter - our revenues in Q1 2025 were $255.7 million versus $145.8 million
in Q1 2024, an increase of 75.4% on a year-over-year basis. Our Genomics business delivered
$193.8 million of revenue in Q1 2025 versus $102.6 million in Q1 2024, an increase of 88.9%
year-over-year. Our Data and services business delivered $61.9 million of revenue in Q1 2025
versus $43.3 million in Q1 2024, an increase of 43.2% year-over-year, with our data licensing
business (Insights) growing at 58.0%.
We delivered gross profit of $155.2 million, or gross margin of 60.7%, in Q1 2025 versus $77.7
million, or 53.3% in Q1 2024, an increase of 99.8% year-over-year. Our Genomics business
had 56.3% gross margin and our Data and services had 74.6% gross margin in Q1 2025. In the
aggregate our gross margin was 740 basis points higher than the same quarter last year.
Our Non-GAAP Operating Expenses were $182.7 million in Q1 2025 versus $131.0 million in
Q1 2024, an increase of $51.7 million year-over year, largely driven by increased investments
in our core business commensurate with our growth and the acquisition of Ambry.
Our Adjusted EBITDA was ($16.2) million in Q1 2025 versus ($43.9) million in Q1 2024, an
improvement of $27.8 million year-over-year. We remain on track to generate positive
Adjusted EBITDA for the full year 2025.
In summary, Q1 2025 revenues and gross profit were above expectation, and our expenses
were largely in line with our plan, resulting in Adjusted EBITDA that was ahead of expectation.
The business is performing well with revenues growing, margins improving, and our costs
remaining in check, allowing us to demonstrate significant year-over-year operating leverage.
As we approach our 10th anniversary, we are right where we want to be.
Genomics
Following the acquisition of Ambry, and the fact that both legacy Ambry and the legacy Tempus
sequencing business live within our Genomics offering, we’re going to delineate between the
two by referring to Tempus Genomics as “Oncology” testing (which includes solid tumor, liquid
biopsies, germline, and MRD testing - basically everything ordered by an Oncologist) and
Ambry Genomics as “Hereditary” testing (which includes inherited cancer risk, whole exome
and genome profiling for rare conditions, including pediatrics, cardiology, neurology, and all
other inherited screening - basically everything ordered by a genetic counselor).
In Oncology, we ran ~75,000 NGS tests in Q1 2025 versus ~62,700 in Q1 2024. Our Clinical
Oncology revenue growth was 31.0%, as a result of improvements in average selling price
(ASP), with year-over-year unit growth at 20%. In Hereditary, we ran ~78,000 tests in the last
two months of Q1 2025 versus ~63,500 tests in the last two months of Q1 2024 (recall that we
acquired Ambry on February 3, 2025). Our overall Hereditary revenue and unit year-over-year
growth was ~23% for the same period.
All of our main assays performed well in the quarter with consistent growth across our entire
portfolio.
A few notable highlights.
Our Oncology ASP’s increased by ~$60, from $1,530 in Q4 2024 to $1,590 in Q1 2025, largely
related to the first phase of the national launch of our xT-CDx assay in January. As a reminder,
Medicare’s reimbursement rate for xT-CDx (our FDA approved assay) is $4,500 compared to
$2,923 for the LDT version of the assay. As we migrate more and more volume to xT-CDx , we
expect continued reimbursement tailwinds throughout 2025.
Our MRD portfolio is off to a great start. In January, we submitted our tumor naive assay, xM,
to MolDx for reimbursement in CRC. Our partnership with Personalis, where we distribute their
tumor-informed portfolio in lung cancer, breast cancer, and patients treated with
immunotherapy, also continues to gain traction in the market. While reception has been
positive for both offerings, we will continue to limit volume until reimbursement is achieved -
which we would anticipate starting in the back half of 2025.
With the completion of the Ambry transaction and our growing MRD offerings, we believe we
have a complete “molecular menu” that allows us to meet the needs of our ordering
physicians. However, performing Genomic tests is just one piece of the puzzle in ushering in
precision medicine. We have long believed that technology and data would play an important
role in bringing personalized care to the clinic and helping doctors make data driven decisions.
As such, we have made significant investments in our connected platform that allows us to
structure large amounts of multi-modal data to provide insights to physicians in near real-time,
which in turn has allowed us to become deeply integrated with providers, fueling our Genomics
business.
We have taken a similar holistic approach to our R&D initiatives. Unlike some of our
competitors who run very large studies with seminal readouts, we are more focused on smaller
studies, with continuous readouts. Our approach has allowed us to publish more than 2,000
papers & posters to date, which demonstrates the power and effectiveness of our
comprehensive suite of assays. We believe our strategy allows us to innovate quickly and
manage risk more effectively than alternate strategies.
All in, our Genomics business was a bright spot in Q1 and we expect that to continue
throughout the year, with healthy unit growth and rising ASPs and margins.
Data
Our Data and services business had continued strong growth in the quarter, delivering $61.9
million in revenue in Q1 2025 versus $43.3 million in Q1 2024, up 43.2% year-over-year,
largely driven by our Insights business (data licensing), which grew 58.0% in the quarter.
Overall Data and services gross margins were 74.6%. It’s easier for small things to grow
quickly; much harder when they get to scale. It’s nice to see our Data business maintain
healthy growth rates even at this size.
A few notable highlights.
Let’s start with the biggest. In April we signed a 3 year, $200 million data licensing and
modeling agreement with AstraZeneca and Pathos, in conjunction with a significant investment
from AstraZeneca, to build the largest foundation model that’s ever been built in oncology.
The model will have access to over 300 petabytes of data, which includes rich molecular data
connected to outcomes. In addition to the significant data license, they are also covering a
significant amount of the compute costs necessary to train the model. When complete, each
party gets a copy of the model - AZ and Pathos to advance their drug discovery efforts and
Tempus to advance our diagnostic and data products. This is a non-exclusive agreement, so
Tempus is free to license its data and build other models with other biopharma companies,
which we expect to do in the future. As such, this represents an entirely new, and significant,
use case for the proprietary multi-modal data set we have amassed.
I told our team this is probably the most important deal I have ever personally worked on. Not
just as it relates to its impact on Tempus and our business, but also for its impact on patients.
Foundation models, and generative AI more broadly, have the potential to make precision
medicine a reality. We are closer than ever to understanding at a molecular level why patients
do and don’t respond to cancer treatments. As AI brings this picture into clearer focus, I can
see a day when our diagnostics are so smart they ensure that every patient is on the optimal
therapeutic path and that every drug company is efficiently designing trials that have a much
higher likelihood of success.
In addition to the AZ/Pathos deal, we also completed the first phase of a large project for BMS
leveraging the combined capabilities of our data set and organoid lab, to validate novel
degrader targets. When we started Tempus, we collected phenotypic, morphological, and
molecular data as the building blocks for AI models. At the time, we could see that a number of
questions would arise for which existing data would be insufficient, so we began building out
our patient derived biological modeling capabilities centered around organoids, as a means of
adding orthogonal data. Over the past 9 years, we have collected ~4,000 tissue samples
across all major epithelial subtypes and have successfully grown and cryopreserved a
significant percentage of those samples. The samples are typically sequenced and connected
to clinical data, which makes them ideal for drug discovery and development given the FDA’s
recent adoption of organoids as a proxy for animal models. We call this product “Loop”.
Apps
As a reminder, our Apps product line primarily consists of applications that we build and deploy
through our connected network of ~4,000 sites (yes, the number is up from our last quoted
number of ~3,000 sites). Our connectivity efforts took a big leap forward with our acquisition of
Deep6, which had spent years building software to help some of the nation’s top providers find
patients for their studies, build cohorts of interest, and advance their own analytics. Adding
Deep6’s product to our own allows us to offer an even broader set of features to providers,
giving them yet another reason to integrate with our AI-enabled platform.
While we made progress across all of our main products (Next - closing care gaps in real-time,
TIME - matching patients to trials in real-time, and Algos - deploying purely algorithmic
diagnostics in real-time), I will hit a few highlights.
Next: As part of our Next product, we launched a suite of care gap algorithms in lung cancer,
such as EGFR testing, across six health systems. Next uses AI to comb through multimodal
patient records in real-time and identifies patients who are not receiving guideline directed
care. While early, the program is demonstrating that surfacing care gaps to physicians at the
right time, changes behavior, which is not easy to do. Across our network, we have seen a 10%
improvement in compliance to testing guidelines, highlighting the success of the program.
We’re excited to see how these algorithms perform as we roughly triple the number of
healthcare systems in the program this year.
Algos: We have numerous efforts in oncology, cardiology, radiology, and pathology to build
purely algorithmic diagnostics, including two digital pathology algorithms that we developed this
quarter to predict biomarkers from H&E slides in NSCLC and endometrial cancer. Each of these
algorithms addresses a significant clinical need, similar to those we have already launched
including algorithms to predict homologous recombination deficiency status (HRD), site of
tumor origin (TO), likelihood to respond to immunotherapy (IPS), etc.
We have dozens more in flight, and as we begin to garner insights from our large multimodal
and foundation models, we could see that number grow exponentially. Given our scale and
the breadth of our platform, we can deploy these algorithms to approximately 4,000 sites in
the US, who are connected to us in some way. As more and more of these tests get the
reimbursement they deserve, we believe we’re uniquely positioned to benefit.
Financials
Overall, we are pleased with the financial results of the first quarter - which were ahead of our
expectations. Please note that the Ambry transaction was closed on February 3, 2025, so our
numbers include Ambry from that date. Both the Tempus core business and Ambry performed
well during the quarter, demonstrating healthy year-over-year growth across each of our
product lines. Margins continue to improve year-over-year and we continue our path towards
our goal of being Adjusted EBITDA positive for full year 2025.
We are providing each of gross profit, gross margin, and operating expenses on a Non-GAAP
basis to exclude stock compensation expense and related payroll taxes so they are comparable
with prior periods. See “Non-GAAP Financial Measures” below.
First Quarter 2025 Financial Results
Three months ended March 31,
2025 2024 Change
(in thousands, except percentages)
(unaudited)
GAAP Results
Revenue $ 255,737 $ 145,820 75.4%
Genomics gross margin 56.3% 48.5% 780 bps
Data and services gross margin 74.6% 64.7% 990 bps)
Operating expenses $ 223,892 $ 130,971 NM(1)
Net loss $ (68,037) $ (64,743) NM(1)
Non-GAAP Results
Non-GAAP Genomics gross margin 56.8% 48.5% 830 bps
Non-GAAP Data and services gross
margin 75.6% 64.7% 1100 bps
Non-GAAP Operating expenses $ 182,717 $ 130,971 39.5%
Adjusted EBITDA $ (16,174) $ (43,926) 63.2%
_______________
(1) Not meaningful due to the impact of including stock compensation expense and related employer payroll taxes
Revenue
Our Q1 2025 revenues were $255.7 million, representing 75.4% year-over-year growth.
Excluding legacy Ambry revenues, the core Tempus business grew 31.8%.
Our Q1 2025 Genomics revenues were $193.8 million, representing 88.9% year-over-year
growth. The growth was largely driven by our Oncology business and the addition of Ambry
(which we now refer to as “Hereditary”). Oncology experienced 31.0% year-over-year revenue
growth on ~20% volume growth. Oncology average reimbursement also improved to $1,590 in
the quarter, a result of the migration of volume to the FDA approved version of xT and improved
CMS reimbursement for xF. As expected, xT cDX represented ~20% of xT reports delivered by
the end of Q1. As we continue to migrate xT volume to the cDX version, we should continue to
experience reimbursement tailwinds. Hereditary contributed $63.5 million of revenue on
~78,000 tests delivered and average reimbursement of approximately $770.
Our Q1 2025 Data and services revenues were $61.9 million, representing 43.2%
year-over-year growth, largely driven by strong growth in our Insights (data licensing) business
- which grew 58.0% year-over-year. This growth is largely the result of us delivering on
previously signed agreements, including the large data project we highlighted in our previous
earnings call that was originally scheduled for Q4 2024 but was delayed into Q1 2025. Given
that most of our data licensing revenue comes from long term subscriptions, we have good
visibility into our expected data licensing revenues for 2025.
We also announced our expanded collaboration with AstraZeneca and Pathos AI to build the
first foundation model within oncology leveraging our data. As Eric has described above, this
agreement is exciting because we believe these types of models will have a tremendous
impact on patient care. While not a contributor to Q1 revenues, it does increase our Total
Remaining Contract Value by $200 million, resulting in a Total Remaining Contract Value as of
April 30th in excess of $1 billion. Revenue associated with this agreement will be recognized
over the three year term. Given AstraZeneca is our longest standing data customer and our
first strategic collaboration, we’re very pleased that they have expanded our relationship in
such a significant manner - further validating the value of our data for biopharma. It should
also be noted that this deal does not impact our current licensing arrangement with
AstraZeneca which remains intact and serves a different purpose. The data being licensed here
can only be used to build a foundation model, whereas AstraZeneca’s current data license is
for files they can bring into their environment and use for both discovery and regulatory
purposes.
Gross Profit
We generated $155.2 million of gross profit in the quarter. Non-GAAP gross profit was $156.9
million in Q1 2025, representing an aggregate Non-GAAP gross margin of 61.4%. This was a
810 basis point improvement year-over-year, largely the result of increased margins in our
Genomics business through ASP improvements and the addition of Ambry, along with growth in
our Data and services product line, which operates at a higher margin.
Our Non-GAAP gross margin for our Genomics business was 56.8% in Q1 2025 compared to
48.5% in Q1 2024. The increase is a result of increases in average reimbursement per test and
the addition of Ambry, partially offset by increases in costs associated with our xF+ panel . Our
Non-GAAP gross margin for the Data and services business was 75.6% in Q1 2025, compared
to 64.7% in Q1 2024, again highlighting the year-over-year growth in the Insights business.
Operating Expenses
Operating expenses for the quarter were $223.9 million compared to $131.0 million in Q1
2024. The increase in expenses is a result of the addition of Ambry’s operating expenses,
stock-based compensation and related employer payroll taxes of $26.5 million, amortization of
intangibles from acquisition of $11.2 million and acquisition-related costs of $3.5 million.
Non-GAAP operating expenses were $182.7 million in Q1 2025 compared to $131.0 million in
Q1 2024. The primary difference between GAAP and Non-GAAP relates to stock based
compensation and related payroll taxes, amortization of intangibles associated with the Ambry
transaction, and acquisition costs. The year-over-year increase is mostly attributable to the
addition of Ambry’s operating expenses, along with modest investments in the business
commensurate with our growth, and increased professional services fees in the quarter. Our
expenses are broken down into three categories: Non-GAAP technology expense, was $29.8
million, Non-GAAP research and development expense, was $33.7 million, and Non-GAAP
selling, general and administrative expense was $119.2 million.
Adjusted EBITDA and Net Loss
Adjusted EBITDA for the quarter was ($16.2) million, compared to ($43.9) million in Q1 2024,
an improvement of $27.8 million year-over-year. We plan on continuing to evaluate the level of
investment we make in the business based on increases in gross profit dollars, such that we
anticipate continued improvement in Adjusted EBITDA throughout the year.
Net loss for the quarter was ($68.0) million, including fair value losses of $31.8 million related
to our marketable equity securities and stock compensation and related employer payroll
taxes of $28.2 million. Adjusting for stock compensation, related employer payroll taxes and
other non-operating items, Non-GAAP net loss for the quarter was ($41.6) million compared to
($65.3) million for Q1 2024.
We finished the quarter with ~$220.5 million of cash, cash equivalents, and marketable
securities. Cash outflows were largely driven by our acquisition of Ambry, which called for an
~$100 million payment at closing, net of Ares financing received, along with increased interest
expense related to Ares’ financing, and other timing related factors. In addition, we were
negatively impacted by the performance of Personalis and Recursion stock, which reduced our
marketable equity securities by $31.8 million. The timing related items began to normalize in
April, with April’s ending balance at approximately $250 million of cash, cash equivalents and
marketable securities.
Guidance
We are increasing our guidance and now expect to finish 2025 with approximately $1.25 billion
in revenue, and approximately $5 million in Adjusted EBITDA.
Similar to previous years, we would anticipate revenues to continue to grow during the year,
with the fourth quarter being the largest given the seasonality we typically experience in the
data business. Given the unique nature of our business, it’s difficult to predict these numbers
with complete accuracy; as such, the word approximately implies a modest range.
Thanks for your support and for joining on this journey,
Eric & Jim
Forward Looking Statements
This letter contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, about Tempus AI, Inc. (“Tempus”) and its industry that involve substantial risks
and uncertainties. All statements other than statements of historical facts contained in this
letter are forward-looking statements, including, but not limited to, Tempus’ expected financial
results for full year 2025 expectations concerning the growth of Tempus’ business, including
Hereditary; the impact of pricing and reimbursement actions on Tempus’ financial results; the
expectation that the collaborations with AstraZeneca and Pathos AI will result in the largest
multimodal foundation model in oncology; the potential of generative AI to make precision
medicine a reality; 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 letter.
You should not rely on forward-looking statements as predictions of future events. Tempus has
based the forward-looking statements contained in this letter 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, including our
ability to consummate the acquisition of Ambry Genetics and Deep6 AI on the terms described
herein or at all, and, if consummated, to realize the expected benefits of such acquisition; 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’ Form 10-K for the year
ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC) on
February 24, 2025, as well as in other filings Tempus may make with the SEC in the future, In
addition, any forward-looking statements contained in this letter 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
letter or to reflect new information or the occurrence of unanticipated events, except as
required by law.
Non-GAAP Financial Measures
In addition to the financial information presented in accordance with accounting principles
generally accepted in the United States of America (GAAP), Tempus also presents adjusted
EBITDA, non-GAAP net loss, non-GAAP loss from operations and non-GAAP operating
expenses (collectively, the “non-GAAP financial measures”). For definitions of each of these
non-GAAP financial measures, as well as reconciliation of each non-GAAP financial measure to
its most comparable GAAP financial measure, please see the section titled “Non-GAAP
Financial Measures” in Tempus’ first quarter earnings release and the tables accompanying
such release, which can be found on Tempus’ investor relations website at this link. 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.
