Biodesix, Inc.

Good day and thank you for standing by. Welcome to the BioDesix Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chris Brinzey. Please go ahead.

Thank you, operator, and good afternoon, everyone. Today, Biodesix released results from the second quarter of 2026. Leading the call today will be Scott Hutton, Chief Executive Officer. He's joined by Robin Harper Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the investor relations section of the company's website at biodesix.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings. which identify certain factors that may cause the company's actual events, performance and results to differ materially from those contained in the forward-looking statements made on today's webcast. In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott?

Thank you, Chris, and thank you all for joining today. I'm proud to share that the Biodesix team delivered another quarter of strong growth, expanding margins, and improving operating leverage, reflecting the strength of our commercial strategy as we continue to progress towards profitability. In the second quarter, total revenue was $26.9 million, representing 34% growth year over year, accompanied by strong operating discipline and execution. Starting with our diagnostic testing business, revenue grew 42%, driven by accelerating test volume growth and improved ASPs over the second quarter of 2025. Total test volumes grew 38% year-over-year due to increased adoption from both primary care and pulmonology, which grew 133% and 31% over the prior year respectively. We're pleased with the growth from both primary care and pulmonology, not only from new physicians beginning to order the Notify CDT and Notify XL2 test, but from increases in the number of patients tested from existing accounts. As a reminder, since the second quarter of last year, we've been ramping our efforts in the primary care market to address the approximately 50% of nodules that are managed by general practitioners. We've seen strong demand for notified testing in patients with smaller lung nodules. This population carries an inherently low risk of malignancy, but early detection of cancers significantly improves patient outcomes. Demand accelerated through the quarter following publication in March of the largest lung nodule biomarker validation study to date, which demonstrated that notified CDT can detect cancer in nodules as small as four millimeters while maintaining a low false positive rate. This clinical evidence drove a significant increase in notified CDT orders in smaller nodules during the quarter. Importantly, adoption within this patient population is also expanding utilization across the broader lung nodule continuum. Healthcare professionals who begin ordering notified CDT for smaller nodules subsequently increased their use of both Notify CDT and Notify XL2 for patients with larger nodules. We are seeing this pattern consistently across customer segments, including both primary care and pulmonology. In addition to the publication at the end of the first quarter, we continue to present and publish clinical data for our on-market test. In May, at the American Thoracic Society, or ATS, annual meeting, Real-world clinical and economic data was presented, including an independent study showing an increase in stage one lung cancer detection after the implementation of a lung nodule program using notified lung testing systematically to guide clinical decisions. Two others highlighted the role of notified lung testing to overcome limitations with PET scans for nodule evaluation. The presentations at ATS continue to highlight the real-world clinical value and economic advantages of lung nodule management programs that use Notify lung testing for risk stratification. This growing body of clinical evidence is driving deeper account penetration and increasing test utilization. The result is continued commercial expansion of the Notify franchise and further validation of its role in addressing the significant unmet clinical needs. As we are growing our top line, our team's ongoing operational focus continues to yield improvements in gross margin and operational leverage. We delivered our fifth consecutive quarter of gross margins at or above 80%. Our total revenue grew 34%, and operating expenses excluding direct costs only grew 7%, which included the expansion of our commercial team. With that, let me now turn it over to Robin to review our financial performance. Robin?

Thanks, Scott, and good afternoon, everyone. Total revenue for the second quarter was $26.9 million, representing a 34% increase over the prior year period. Diagnostic testing revenue was $25.4 million, an increase of 42% year over year. The increase in diagnostic testing revenue was driven by growth in test volumes and higher average revenue per test. Test volumes were approximately 20,900, an increase of 38% year over year, supported by an average of 104 sales representatives in the field in the quarter. And we plan to continue our commercial expansion and end the year with approximately 120 sales representatives in the field. Salesforce productivity continues to improve across the entire sales organization, with newer representatives advancing along expected productivity curves, while more tenured reps continue to expand their contribution. Improvements in average revenue per test over the prior year were primarily driven by additional payer coverage and improvements to revenue cycle management, continuing the trend that began in the third quarter of 2025 rather than any one-time item. The difference in average revenue per test versus the first quarter of 2026 was driven by the mix in test volumes between Notify CDT and Notify XL2, with average revenue per test for both Notify XL2 and Notify CDT improving over the prior quarter. Development Services revenue for the second quarter was $1.5 million as compared to $2.1 million in the prior year period, reflecting timing of project completion and revenue recognition. We currently have approximately $8.5 million in contracted business, and the demand for our services remains strong. As we have discussed previously, the timing of Development Services project execution and revenue recognition can shift between quarters. Gross margin for the second quarter was 82%, a 200 basis point improvement over the second quarter of 2025. Margin improvement and strength was driven by growth in lung diagnostic testing, improvements in average revenue per test versus the prior year, and decrease in average cost per test. Operating expenses, excluding direct costs and expenses, were $27.4 million, an increase of 7% year over year, supporting the 34% revenue growth delivered during the quarter. The increase in operating expenses was driven by an 8% increase in sales, marketing, and general administrative expenses due to our planned commercial organization expansion, partially offset by a 4% decrease in research and development costs in the quarter. The company expects continued operating leverage as our expanded sales team advances along the productivity curve and converts growing experience into sustained performance, combined with our focus on operational leverage and efficiency. Net loss for the quarter was $7.3 million, a 37% improvement compared to the prior year period. Adjusted EBITDA, which excludes non-cash and other one-time items, was a loss of $3.2 million, representing a 56% improvement over the second quarter of 2025. We ended the quarter with $30 million in unrestricted cash and cash equivalents, a 17% increase compared to the first quarter, which included $6.5 million of at-the-market net proceeds raised during the quarter. Excluding the ATM proceeds, net cash used in the quarter was $2.1 million versus cash use of $6.9 million in the second quarter of 2025, a 70% improvement over last year. We believe current cash, expected growth in revenue, and ongoing operational leverage provide sufficient liquidity to execute our growth strategy.

Looking ahead to the remainder of 2026,

In addition to our planned headcount expansion, we expect sales productivity to continue to improve as our sales team gain experience and tenure and our team continues their cross-discipline operational focus. As a result, we expect continued progress towards sustained adjusted EBITDA profitability and we remain confident maintaining our previously raised full-year revenue outlook of $108 million to $114 million. With that, I'll turn it back to Scott for some closing thoughts before we begin the Q&A.

Thank you, Robin. Each year, August 1st marks World Lung Cancer Day. It is a day of importance for the biodesix team to help raise awareness of the world's deadliest cancer and to expand society's understanding of the prevention, early detection, and treatment of this terrible disease that kills almost as many people annually as breast, colon, and prostate cancers combined. With the broadest portfolio of tests targeting lung disease, and the largest lung-focused commercial team, it is our mission to transform patient care and improve outcomes through personalized diagnostics. We see significant opportunities to impact many more patients as clinical adoption expands, as our additional clinical and economic evidence reinforces the value of biodesix tests, and as our commercial organization continues to mature. We remain focused on executing with discipline, improving capital efficiency, and delivering meaningful value to patients, providers, partners and shareholders. In closing, I want to thank the entire Biodesix team for their continued focus, discipline and commitment to our mission and culture. Let's now move to questions. Operator, you may start the Q&A session.

Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question today is from Kyle Mikeson with Canaccord Genuity. Your line is open.

Hi, this is Alex DeCasen. I'm live for Kyle Mixon. Thank you for taking our questions and congratulations again on the quarter. So it was great to see continued strength in diagnostics. You noted a few different things here. So you benefited from that recent publication supporting the utility of modified testing with small nodules and also healthcare professionals ordering modified CDT for small nodules, subsequently increasing their ordering of modified CDT and XL2 for larger nodules as well. My question here is do you believe this could remain a relatively meaningful test volume growth driver in the near term and potentially medium term? Thanks.

Hi, Alex. Great question. Yes, we do. We think post-publication what we've seen here is kind of the new trend and trajectory. You know, the one thing that we know is that early detection and diagnosis matters. That was where that interest in the smaller nodules really originated. and we've seen great traction both for new customers and existing customers and adopting both.

Thank you. And one more for me. So we're seeing some signs of recovery in biopharma and biotech. Has this translated to additional contracted revenue and new deal flow coming in for you? Thanks.

Yeah, great question, Alex. You know, ASCO is really the largest meeting where you have an opportunity to sit with the major pharmaceutical companies. We noted that we had a strong ASCO this year, and we've continued to see great interest. As the team continues to formalize those agreements and sign those agreements, we'll give updates, but we feel confident that that pipeline will continue to be robust for quite some time.

Got it, thank you. And one last one from me. So you know there was cost improvement during the quarter. Could you just elaborate on that a bit? Are these efforts largely ongoing and we could see continued meaningful improvement, or has the lion's share of the benefits already kind of been realized there? Thanks.

Yeah, great question. Thank you. We are constantly working on operational improvements, trying to increase our efficiency and efficacy. But with gross margins, already above 80%. It's hard to drive it too much higher, but we are continuously working to strengthen our already best-in-class margins. So I don't expect huge increases, which is why we were reiterating margin guide right around 80 or just above 80.

Thank you very much. Thank you.

Our next question is from Thomas Flatton with Lake Street Capital Markets. Your line is open.

Good afternoon, guys. Congrats on that great quarter. Just on the sales team dynamics, you guys added maybe a couple of heads fewer than I was expecting, but it seems like you're going to ramp hiring in the second half of the year. Can you just walk us through some of those dynamics, including how you're splitting it between pulmonology and PCP?

Yeah, great question, Thomas. You're spot on. We're approximately too short of maybe what you would have modeled. Most of that is just timing. As you know, when we share total rep count, it really is based upon them being hired, completing their training, and being actively in the field and positively contributing. So we're continuously recruiting and bringing on the best team members that we possibly can. We haven't given great clarity on the split between primary care and pulmonology-focused sales reps to date because we're going to hire opportunistically. And again, some of that is based upon the progress we make in pulmonology and then those pulmonologists subsequently introducing notified testing into their referral network and those primary care physicians. So as that scales, then opportunistically we'll bring in somebody to support the primary care call point. To date this year, the majority of those new hires have been primary care focused.

Got it. And then looking ahead to the balance of the year, anything we should be expecting relative to more publications and then importantly, any news from the development pipeline?

Yeah, great question. We're always focused on data development. We think that's critically important as we continue to build this market. We have a number of papers that we have submitted. And so until they're actually accepted and published, we can't really share much on that. So we'll be giving news there. The CHEST meeting, which is the annual American College of CHEST Physicians Society meeting occurs every year at the end of October, beginning of November. We usually target that for posters, presentations, and publications also. So more to come as we receive notice on those publications and presentations. But you definitely should be expecting more. We're very excited about our clinical efforts. Last year, we really highlighted the progress we'd made with Clarify. A couple of things have been submitted out of Clarify, so we're eager to start sharing that data. But more to come there. On the R&D side, you may recall last year around the AMP meeting, We did a development partner and R&D update. We plan on doing another one of those this year, so in the November timeframe. And we're eager to share some of the progress we've made. We think that we've made meaningful progress that will positively impact that pipeline and future revenue streams in years to come.

And if you could just help me, Scott or Robin, with some quick math. I know you said that PCP volumes grew 133%, but approximately what percent of your total testing volume now comes from PCP? I think it was 15% last quarter.

Yeah, it's very consistent with last quarter. Right around that 15%.

Excellent. Appreciate that. Thanks, guys. Thanks, Thomas. Thank you.

Our next question is from William Bonello with Craig Holland Capital Group. Your line is open.

Hey guys, thanks for taking my call here. So it's been your strategy, you know, which seemed really prudent to us and the market seems to be appreciating to grow at sort of a responsible pace, I think is probably how you'd describe it, Scott, and being sure that you're able to drive leverage from your top-line growth, not getting out too far over your skis. I'm just wondering if your opinion on that changes at all in light of You know, a couple of things. One, the really positive response that you are seeing from the paper that was published in the spring, and two, the response that you're seeing from your PCP efforts.

Yeah, Bill, it's a great question. We continually assess what it may look like to opportunistically expand the sales force more rapidly, but you nailed it. We're very cost-conscious. We're mindful of where we are on that path to profitability. We think that's critically important and have noted that there's not an abundance of diagnostic companies that have gotten to profitability and then stayed there. We think that's important not only for investors and shareholders, but also our team. So yeah, we're going to continue to be mindful about when and where we spend money. We want to ensure that we've got great line of sight to an immediate return on that investment. And so we'll maintain that six to eight hiring cadence per quarter and currently estimating that we'll end the year right around 120 sales professionals. Okay, that's really helpful.

And then you're probably tired of getting this question every year, but, you know, as long as around the corner, any updated thoughts on activity around guidelines?

Yeah, Bill, it's a really good question. We never get tired of that question because we think it's important that we talk about it. For those that may not understand what Bill was referencing, the ACCP, or the American College of Chest Physicians, have not updated their relevant guidelines in over 12 years. And so, as we all know, there have been significant advances in almost all avenues of healthcare and medicine. So there is not currently any reference to blood-based biomarkers. And so we feel that we've built a really strong data package. We think it's compelling. And so we'll continue to publish, present that data in hopes that when they update, that we have a favorable response. CHEST went on record two years ago. They acknowledged they were behind. They stated that they had assigned a team to update those. The last CHEST meeting passed. and they said that they had moved their target to updating those guidelines this year, being 2026. So to your point, Bill, as we head into October and we all fly to Phoenix this year for that meeting, we'll be eager to see what updates they provide.

Okay, thanks. And then just one last one that's sort of a two-parter, but the PCP test growth is obviously really strong. Just Curious, you know, sort of what you're seeing on the PCP front, how that growth is kind of breaking out between adding new providers and providers ordering more tests. And then along with that, I know you've been doing some of these kind of special seminars around, you know, nodule clinics and management programs and whatnot. And I'm just wondering if those are continuing to happen and how they're going.

Yeah, Bill, we see strong momentum and growth kind of in new ordering physicians in primary care. And then those that began ordering a few months ago, we see them continue to increase and improve. So it's a nice balanced approach across both. And you highlighted it. We've got first mover status We take that both as a privilege and an honor that we're out there educating, training, and building this market. We highlighted the lack of updates to the guidelines. We also have noted that pulmonologists don't have a long track record with biomarkers. And so what you're referencing is educational events that we may sponsor or host. Our whole goal there is to put physicians in front of physicians so that there's peer-to-peer experience sharing, knowledge sharing, and we think that that's a responsible way to help build this market, and we'll continue to do so. When we do those programs, we definitely see a number of physicians leave that, having a better understanding of how nodule management tools like Notify Lung can help positively impact early detection and diagnosis, hopefully increasing the likelihood of an earlier diagnosis which we know leads to a higher likelihood of a positive outcome.

Excellent. Thanks a lot.

Thanks, Bill.

Thank you very much. Our next question is from Max Masucci with Ross Capital Partners. Your line is open.

Hi. Good afternoon. Nice quarter. Great to see the momentum in the core business. So, you know, first half 38% year-over-year growth in revenue. If you look at the full year range, it implies second half growth, like around 16% at the midpoint, 22% at the high end. So I know you're comping up against a much stronger second half, but it would be great to understand just about the approach you're taking with guidance, just as you really try to balance What appears to be a nice multi-year growth acceleration with continuing to set achievable targets. More simply, what has to go right to land above the implied range in the second half?

Thanks, Max. Our outlook is based on continued growth of our commercial team and improved sales rep productivity, especially those hired in the second half of 2025 as they gain tenure and experience in the field. We want to demonstrate continued ASP stability from payers, and we fully expect that, and the anticipated volume growth across both pulmonology and primary care. We've already referenced that there will be new evidence generation. We'll continue to share that. We think these factors are in our control. They're repeatable and sustainable in 2026, and we're excited to go out and demonstrate that. The one thing that we have seen over time is is that that biopharma services, those partnerships, that there can be a seasonality and a lumpiness to those. And we want to be mindful of setting ourselves up for success.

And, Max, you're exactly right. The comps, there's a pretty strong step up in the second half of 2025, so the comps get a little bit closer, decreasing that year-over-year estimated growth. And just as a reminder, we did have about a million dollars estimated from back pay collections in that time period as well. So if you extract that, then the year over year growth looks a little closer to the first half.

Yeah, that absolutely makes sense. So second one, I mean, fourth straight quarter of accelerating test volume growth. Also, you have very strong sequential growth off of Q1. A bit above the normal Q2 step up that we see. So just curious how much of the growth acceleration can be attributed to the expanded PCP targeting versus other factors like rising productivity across the broader sales force. And then final one, just any catch up in Q2 from the weather disruption last quarter?

Yeah, you know, great question. Maybe I'll take that in reverse order. We highlighted last quarter that we did not see a significant or material weather impact. We saw minor impacts, but over time, you know, for us, with our really rapid turnaround times, you know, we track the traceability of those orders coming in, and we haven't seen an impact So we had a strong quarter last quarter on that front, and we hope to continue to do so. Robin, anything you would add on that?

Yeah, I think the timing of the weather in the first quarter was middle of the quarter, such that we had time to catch up inter-quarter. So that was good. We didn't have anything roll into the next one.

Got it.

That's it for me. Thanks. Thanks, Max.

Thank you. Our next question comes from Yi Chen with HC Wainwright and Company. Your line is open.

Thank you for taking my questions. So with operating expenses increasing just 7%, how are you balancing the accelerated commercial investment and also the pipeline development against the objective of sustained profitability? And what level of expense growth is embedded in the second half of this year?

Thank you for your question. We're very pleased with the leverage we're gaining. We've built a strong infrastructure and team internally here that can help support that accelerating revenue growth without having to grow our expenses at the same level. Our number one priority is growing top line revenue. Our number two priority is getting to profitability as you mentioned. So we are very, very focused on maintaining expenses and growing the internal infrastructure only as needed. We anticipate that we'll see pretty steady operating expense from where we are now across the rest of the year with moderate step-ups due to the increase in the commercial team. Thank you. Thank you, Lee. Thank you.

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