MDxHealth SA Price & Performance (MDXH)

And thank you all for joining us for our fourth quarter and full year twenty twenty four earnings conference call for MDX Health. With me today is Ron Kalfas, Chief Financial Officer. 2024 was a transformational year for MDxHealth. Each of our achievements individually and all of them collectively are rooted in and reflect our unwavering focus on operating discipline and commercial execution.

As we look at our progress, I would point to a number of defining milestones. That reflect the talent, Commitment and success of the team across our organization. We achieved Q4 and full year revenue growth of 28%. And importantly, our revenue growth has been achieved without the expansion of our commercial sales organization demonstrating increased rep productivity, and pathway adoption by our customers. Of course, none of these achievements can be realized without all of our operating group's dedication to our vision of being the most consistent growth company in the urology diagnostic space.

True excellence is measured by performance over time. And we believe our consistent and strong performance quarter after quarter reflects that commitment to excellence. Before I hand it over to Ron for a review of our financial and operating results, A few comments on the focus and execution of our best in class commercial team. Q4 total billable representing total test unit growth of 26%.

Test volumes for our tissue based tests and GPS came in at almost 12,000 for the quarter. An increase of 50% over the prior year period and tissue based tests grew 31% for the full year. For our liquid based tests, which includes SelectMDX, ResolveMDX and Germline test volumes exceeded 12,000 an increase of 10% over the prior year period and liquid based tests grew 28% for the full year. The growth acceleration in our tissue based tests reflects our unique positioning in the urology market.

MDx Health is the only company that is able to provide a clinically actionable result after initial biopsy whether positive or negative, Upon a negative initial biopsy, our confirmed test can determine the patient's cancer risk with an optimal negative predictive value.

Guiding the decision for a repeat biopsy or the potential to monitor with annual screening. Of equal importance and clinical significance, it bears noting that our confirmed test independently analyzes each core of the biopsy to address the estimated thirty percent false negative rate of initial biopsy. Upon positive initial biopsy, our genomic prostate score or GPS test which is supported by twenty year follow-up data for both adverse pathology and prostate specific mortality provides a critical risk assessment that informs whether the patient should be considered for intervention, or an active surveillance protocol. Importantly, the GPS test requires materially less tissue than competing tests. Offering compelling value to our pathology partners who work closely with our urology customers. To preserve biopsy tissue.

This powerful and compelling combination is driving MDxHealth test adoption. Which we believe is leading to significant improvements in how prostate cancer is diagnosed and ultimately managed. Based on our unique positioning in the market, we remain confident that our growth will continue to [indiscernible] in a sustainable way and that our goal of delivering 20% revenue growth is quite achievable. Our focus on execution is the key to our continued the quality and strength of our commercial team, which is comprised of highly experienced molecular diagnostic sales reps, and strategic account managers with support from our medical science liaisons is providing greater access to our tests and increased adoption among key opinion leaders and large urology group practices. To be clear, It remains challenging for patients to navigate the pathway of diagnosis, and potential intervention and or surveillance. MDx Health addresses this challenge. By providing patients with the most expansive menu of clinically actionable diagnostics in the urology space.

We are also confident that our urology and pathology customer base is increasingly recognizing the unique clinical value of our test.

Which bring clarity to what can often be a confounding diagnostic journey for patients. The diagnostic value of our test brings the potential to avoid unnecessary interventions while also accelerating treatment [indiscernible] To summarize, I believe no other company is better positioned to help improve the patient journey through prostate cancer diagnosis and treatment. And our results continue to reflect our success in bringing value to this patient population. Based on these dynamics, we are confirming our previously announced revenue guidance of $108,000,000 to $110,000,000 for 2025.

Meeting or exceeding our 20% revenue growth goal, while also crossing the adjusted EBITDA threshold in the first half of this year.

I will follow-up with closing comments and view forward But first, let me turn the call over to Ron for a review of our financial and operating results for Q4. Ron? Thank you, Mike. To follow on Mike's remarks, we are very pleased to report strong performance in the fourth quarter and full year of 2024.

Revenues for the fourth quarter ended 12/31/2024 increased by 28% to $24,700,000 versus $19,400,000 for the fourth quarter of twenty twenty three. Like the prior quarter, all of this growth was organic and delivered without expansion of our sales organization, which reflects the leverage we continue to generate from our sales channel and the greater market penetration over a full line of tests.

Moving below the revenue line, our gross profit for the fourth quarter of twenty twenty four was $15,500,000 an increase of 22% as compared to $12,700,000 for the fourth quarter of twenty twenty three. Gross margins were 62.7% for Q4 twenty twenty four as compared to 65.3%, for Q4 'twenty three, the decline in gross margins of 2.6 percentage points primarily attributed Our operating loss for the fourth quarter declined 27% to $4,600,000 compared to $6,300,000 for the fourth quarter of twenty twenty three. Primarily driven by a growth in sales and gross profit partially offset by growth of 6% and operating expenses which were primarily related an increase in clinical studies. Our net loss decreased 36% to $6,800,000 compared to $10,700,000 for the prior year period driven by our $2,800,000 increase in gross profit as well as a decrease of $2,200,000 in net financial expenses. Finally, our fourth quarter adjusted EBITDA was negative $1,400,000 a 68% improvement over fourth quarter twenty twenty three adjusted EBITDA of negative $4,400,000 We believe that we are on track achieving our goal of positive adjusted EBITDA in the first half of this year. Note that a reconciliation of IFRS to non IFRS financial measures has been provided in the tables included in this press release.

Cash and cash equivalents as of December thirty one, twenty twenty four were $46,800,000 and with the pending draw of the second tranche under our Orbimed debt facility, our balance sheet will be significantly strengthened to meet our 2025 earn out obligation to Exact Sciences, as well as support the execution our 2025 business plan.

This concludes my overview of the results. And I will now turn the call back to Mike.

Thanks, Ran. I would like to take a step back and reference the goals we set as a company when I joined MDx Health in 2019. And that was to build the highest quality growth vertical urology diagnostics.

Along the way, we have taken advantage of growth opportunities through our acquisition of the Oncotype GPS test from Exact Sciences, the launch of our Resolve test, and the introduction of our hereditary germline testing all conceived of and fueled by rigor in our diligence process, the strength of our channel and relationships, as well as the access and trust we have garnered That trust is only earned through a combination of not only the highest quality sales representatives, but also the world class customer support across our organization all believing quality first, customers always.

I would suggest that the evidence for our review is supported by the fact that our five year revenue compound annual growth rate or CAGR has exceeded 50%. Whether in the sales force, laboratory operations, revenue cycle management, client services, patient advocacy, quality and regulatory Our entire MDx MDxHealth team operates under the mission that there is a patient and family on the other side of every sample we receive. That is what drives our customer base to trust MDx Health as their laboratory partner. For these critical diagnostic tests, that inform patient pathways.

Additionally, as we came into 2024, we set the goal of exiting the year on a $100,000,000 new run rate with clear visibility to operating profitability. And we were confident we would achieve this goal without adding additional sales representatives.

Moreover, we met or exceeded these goals while controlling our operating expense which increased at a fraction of our revenue growth rate. We have delivered on our 2024 goals and are confident that our long term mission set in 2019 has taken shape and put us in a position to become the clear leading growth company focused solely into our target urology market.

As a final comment, this urology vertical market that I referenced is expected to grow at an annual rate of 5% to 10% over the coming years based on multiple factors, including the increasing rate of prostate cancer, the aging population, and the lingering effects of the pandemic where prostate cancer screenings were estimated to be down fifty percent over a two to three year period. I believe it is also fair to say that prostate cancer is where breast cancer was twenty five years ago.

And that the awareness of men's health and screening of men beginning at an earlier age has made the face of prostate cancer more public is the leading cancer risk for men. From the start, we have emphasized two key elements of our operating approach.

Focus and execution.

We are certain that we have built a culture where focus and execution are creating a unique and trusted brand Our reputation is built upon providing exceptional level of [indiscernible] and the quality and mission of our people has cemented a foundation of trust that we strive to earn every day in the urology community. And as always, we carry a great deal of responsibility to provide value for all of our stakeholders. Including patients, customers, payers, and shareholders. Thank you for your interest in and support of MDx Health.

And I'll turn the call back over to the operator for questions. We will now begin the question and answer session. Our first question comes from Thomas Flatten with Lake Street. Please go ahead.

Hey, good afternoon. Thanks Mike and Ron for taking the questions. Just curious if you could give us some qualified or is it some qualitative ideally or quantitative thoughts on how you would expect germline to contribute to the 2025 growth rate that you've laid out?

Regards It's We're confident that our germline offering will begin to contribute in 2025 as we've noted.

I would say two things.

As we've discussed, we're very conservative with initial introductions, revenue recognition, payer experience, Same way we took resolve to market is the path we're following with [indiscernible] We do expect it to contribute in 2025 and we'll expect to update that quarter by quarter. I would just say that our guidance is not contingent on Significant contributions from our germline but we're very confident same diligence, and rigor I noted that we applied any growth opportunities was applied here and we're confident that it [indiscernible] very, very well with our prostate cancer menu.

And the way my comment about breast cancer, the way the market is is paying attention to not only the diagnostics, but the hereditary risks.

Thank you. And then one more, I'll hop back in the queue. Ron, how should we be thinking about gross margins moving forward, particularly in light of Mike's comments that germline might not be a significant contributor this year. Well, we don't guidance on gross margin specifically, but I think we've said in the past that we expect gross margins to be in the to start with the six and be somewhere around in the mid-60s for for the next few quarters.

Got it. Appreciate taking the questions. Thank you.

And the next question comes from Andrew Brackmann with William Blair, Please go ahead.

Hi guys. Good afternoon. Thanks for taking the questions. Maybe to pick up Ori just left off on the outlook for adjusted EBITDA. You maybe just sort of remind us how we should be thinking about OpEx here over the next handful of quarters? Then I guess bigger picture as you cross the CASM to adjusted EBITDA positivity does that change any of your sort of views on how you sort of think about investments or sort of maybe being more aggressive on the spend after you cross that milestone? Yes, I'll take that, Andrew.

So I think the important point on The gross margin is that it's where we expected it to be and it's where it our target was to flip EBITDA positive. So we're very confident that the P and L and you're seeing what we anticipated, right? The decline in adjusted EBITDA, we then we reported it for Q4 to give a basis for A, the progress we've made and the path that we have to flip here far as the second part of your question, will that catalyze additional investments? Think that our growth strategy remains the same as it has over the last number of years, right? We [indiscernible] becoming more obvious as a potential partner for growth opportunities in the space based on strength of our channel and our access and influence over our urology and pathologist group customer base, but we're going to be very I'll go back to the term rigorous in evaluating these and I think we have a really good model for how we look at opportunities and how we execute on them. I think unlikely to be transformative M and A, but if you look at the way we've put together our menu, We have visibility to opportunities look at them as we go.

But no material change to our strategy. I think the business begins to fund itself as we cross operating profitability and that really ensures that we we're very confident in our ability to operate, execute, deliver results and be funded as a company to to drive that growth [indiscernible] meet all of our obligations. Great. That's perfect color.

And then Mike, as my follow-up here, there's been a lot of chatter around for the NCCN guidelines that were published in December for GPS. Maybe just big picture how has this impacted the business, if at all, over the last few months since that came out? And then separately, how should we be sort of thinking about the potential for you to generate level one evidence there?

Yes, I'll take the back part first. So So we communicated publicly that we have a plan based on our partnership with Oxford to drive our data and access Level one coverage. It's important to note that I think with regard to the NCCN guidelines, I think you noted appropriately that I think it created more confusion than directed behavior. I think our our results with our tissue based tests reflect that. I think as we look at Q4, our growth is actually accelerating. Through that period. And I'll be careful here, but I think a lot of positions candidly have been overplayed with regard to that [indiscernible] and the immediate response we're very, very confident in is our channel checks our relationships with the way clinicians, our customer base, well as our target customer base absorb that information and makes clinical decisions about which test to use for which patient population. I think speaks to our AER results And so we're very confident that [indiscernible] We are very confident in our position with regard to the guidelines And I think maybe more importantly, our understanding of the way that are adopted. And if you look at GPS in particular, we would put our data and positioning in the patient population that we serve most is not only compelling, but best in class.

So we continue to be confident that the results that we're presenting today reflect that position. And obviously inform our view forward for 2025 for sure. And our ability to continue to drive and deliver Great. And the next question comes from Thomas Abrantin with KBC Securities. Thanks for taking my questions.

Maybe to start off, I want to build on a previous question Mike, how do you currently think about the breadth of test menu at this point in time? Should we potentially anticipate any new test additions for 2025?

Well, [indiscernible] I'll hit it again. Thomas, maybe referring to the way I addressed the first time. I think it's important to note that our current menu in the market opportunity associated with that would allow us to meet our growth objectives for the foreseeable future. I think our growth rates are speaking to fact that we are driving growth through both market conversion and market share. Particularly when you look at our tissue based test, our growth rate has accelerated through Q4 And I think that can only happen when those two factors are working. But the most important point is absent any additional growth opportunities that we would take advantage of, Our view on our growth being very sustainable is So we would look at it the same way I've commented before that we'll be opportunistic I'll refer back to my comment that in my view over the last five years, we had to do two things with our business. We had to derisk the business and we had to become more obvious. I think that we have done the former I think the latter is is taking shape. We're confident that I'll reserve any comments on the current market valuation other than to say we are very confident that we focus and execute and deliver results quarter after quarter the business begins to fund itself We like our balance sheet position.

Going forward. That that will all solve for itself and that's what everybody here on the team is we would update on additional growth opportunities as they present themselves to us and we execute on them. But we are our guidance does not contemplate any additional growth opportunities through 2020.

Okay. Thanks. And I also wanted to quickly check-in with regards to Select It's been a couple of quarters now since Medicare reimbursement has been put in place. Do you see any impact or any consequences on that on on the commercial coverage side as well? Do you see that picking up? Or what's the sentiment there? Or what are the trends there?

Yes, I think across our menu, if you look at our unit revenue growth as they complement each other, we've clearly seen the unit growth across our menu for the year in both liquid and tissue.

And our pricing is holding or accelerating across our menu. We don't obviously report that test by test. But our Market Access Managed Care team has done a really nice job of continuing to drive expansion of coverage across our menu with commercial and private payers. And we expect that to continue. So our revenue growth, as you can see, unit growth drives the day, but we are seeing really solid footing on the pricing side. We would expect that to continue. Again, no heroics on the pricing side to drive our 2025 revenue view? But we're confident that we'll operate and execute on both those fronts.

Okay. That's clear. Thank you very much. Thank you, Thomas.

And the next question comes from Jason Bednar with Piper Sandler. Hey, good afternoon, guys. Pull on some threads that have already been talked about here.

But as we think about the phasing of the performance throughout the year, within the 20% to 22% revenue growth. I think it sounds like the phase of the year is probably similar to how we've seen past years play out, no unique timing factors or anything. Maybe Germline helps a bit more in the second half versus first half. But I guess is there anything you'd call out sequentially as we think throughout the year and model revenue, again 1Q through 4Q, Again, any just anything you would call out to make sure our models are in the right spot here getting going in '25?

Yes, Jason, I think I don't think I would call out anything specific as we go through the year and history would inform Q1 and Q3 can always be a little bit of wildcards with regard to [indiscernible] and seasonality, but I would say that we feel really good about where we are in the uptake in the sustainable adoption. I think that's one of the the main the product think quarter by quarter was a little bit more getting solidified with our customer base. I think what we're seeing today and hopefully our results reflect it as well as our view forward is that I don't want to refer to it as compliance to our pathway, but we really the programs we've put in place with our customer base allow for really sticky sustainable adoption of our menu and think about our Urology Group practices are the reason I think we've been able to drive the growth without expanding our sales organization that only happens if the adoption is sustainable within a practice and some of these larger larger group practices that have five, ten, fifteen, twenty, 25 urologists in the practice that begins to really drive growth as a function of driving adoption within that practice.

So I don't think there's anything we don't measure, metric or analyze our sales organization and our adoption profiles of our customer. Customer base, I should So we like that the way that looks is twenty twenty five unfolds and we will look forward to reporting our Q1 results along that way. I think your assumption on germline is Fair one. I mean that's That's the point I made. Our guidance isn't counting on significant contribution there, but we do expect it I think back half of the year is a reasonable Okay. All right. Perfect. And just as a follow-up, maybe combine a couple here, but Since we're basically on the cusp of seeing you guys turn EBITDA profitable or adjusted EBITDA profitable. What's the next KPI or mile marker you want to invest community to focus on, Mike?

And then For the OpEx spend, I heard the comment on not needing any sales or any additional sales investments to hit the targets last year. I didn't were you willing to make the same comment for '25 if you did? Sorry if I missed it. Just kind of trying to figure out where what functional areas are consuming incremental OpEx spend here this year? Thanks. Yes, Jason. I think your assumption is correct. We feel like our sales channel will actually all be together here next week. It's probably my favorite few days of the year, but we feel very good about sales organization individually and collectively and they will be a group to take us through 25. So we're very confident deliver that As far as broadly on the P and L, OpEx investment, we haven't cut our way here. And we don't anticipate putting our way going forward. But what I would say is that when you look at our business, based on what we've put in place in the productivity across our organization, but particularly with the sales channel, it really begins to provide [indiscernible] [indiscernible] expansion is largely scale through our laboratory [indiscernible] RCM Group.

So we would expect our P and L just to continue to improve for the business to begin to fund itself. And yet we'll be very prudent with growth opportunities. But again, current market opportunity, we're very confident that we can build continue to build a high growth vertical under the Sure. Anything on the KPIs you want to stab in mind Mike or you want to to hold off on on that until you get past this to keep it at profitability? I think I will look to follow-up you over the coming quarters. I think the only thing I would say is what we feel get the question often is there some something coming, some value creating milestone that we can look to we view positively that we don't have a binary event coming We're counting on to drive our view of our ability to to continue to accelerate from a growth perspective and build value as an asset for the company.

I think that's that's the way we view it. It. All right. Perfect. Thank you. Jason, thank you.

And the next question comes from Mark Massaro with BT PIG, please go ahead. Hey guys. This is Vivien on for Mark. Thanks for taking the questions.

So just one on GPS, that's test seems to be posting pretty healthy growth From my understanding, it's a bit more of a mature test. Just how should we think about current levels of penetration there Any potential decel looking at 2025 or do you think the those growth levels should be sustained? [indiscernible] Well, I think when we look at the market opportunity for GPS, when I made a comment that we're seeing growth two ways. Market conversion and market share. And when I speak to market conversion, you look at the market GPS type testing the diagnostic pathway of prostate cancer, it's Probably plus or minus 40% [indiscernible] And so when I speak to the two levers of growth, it's Mark penetration and market share. The market penetration is driving that market penetration up for those tests which we're seeing, particularly with GPS and low very low, low intermediate risk patient population that we serve and but also I think our growth rate would suggest that we're also driving growth On the On the share side. We actually view significant continued opportunity for growth in GPS and do not view it as mature or decelerating as we go forward.

I don't think we could provide a view of 20% or greater growth not only for this year, but our goal is to have that be very without [indiscernible] opportunities in front of us to drive a market Conversion? Share.

Perfect. That's super helpful color. And then just one on the adjusted EBITDA positivity. Any reason we shouldn't think about that being pulled into Q1 twenty five rather than Q2? And can you just remind us about any other assumptions that are embedded into that? Target? Thanks.

Yes. There's nothing between us and flipping adjusted EBITDA positive here in the first half, clearly Q1 or Q2. And we don't need to make any changes to the way we're operating, investing it's continued execution, which hope you're getting the sense We have high confidence Okay, great. Thanks for taking the questions. Thanks, Fabian.

And the next question comes from Dan Brennan with Steedy Cowen. Please go ahead. Hi. Thank you. My first question is, as far as Exact Sciences, what is baked into your expectations this year regarding your earnout to Exact Sciences? And can you provide any update on potential timing of when the first earn out payment comes due this year? So sorry, is this Dan or Kyle? I'm sorry, Dan? Yes, the exact earn out is twenty five, twenty six, 27 that payment will likely fall in Q2 each year So we'll continue to update that, but we're confident that our setup allows for meeting between Our debt facility the business, the operating cash flow of the business, which commences here this year?

As we go forward. So that obligation and earn out is incorporated into our full view forward as a company. For our growth and Thank you. This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. May now disconnect.