GeneDx Holdings Corp.

Good day and thank you for standing by. Welcome to the GNDX third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, it will be a question and answer session. To ask a question during a session, you will need to press star 101 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 101 again. Please be advised that today's conference is being recorded I would like to hand the conference over to your speaker today, Sabrina Dunbar at GNDX. Please go ahead.

Thank you, Operator, and thank you to everyone for joining us today. On the call, we have Catherine Stuland, President and Chief Executive Officer, and Kevin Feely, Chief Financial Officer. Earlier today, GNDX released financial results for the third quarter ended September 30, 2023. Before we begin, please take note of our cautionary statements. We may make forward-looking statements on today's call, including about our business plans, guidance, and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, October 30th, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our third quarter 2023 earnings release in slides available at ir.gndx.com for definitions and reconciliations of non-GAAP measures, and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. And with that, I'll turn the call over to Catherine. Thanks, Sabrina.

We have a lot of news to cover on our call today, so I'm going to jump right in. Our third quarter results were strong, with $53 million in revenue, gross margins of nearly 50%, and a 52% year-over-year reduction in cash burns. We also saw the highest mix of exomes as a percentage of total volume coming in at nearly 30% in September. Our industry-leading exome and genome drove almost two-thirds of our revenue this quarter, and we continue to grow the market and offer clinical insights to more and more patients. And at the same time, we are materially reducing our cost structure in effective and scalable ways. The fundamentals of our business have never been stronger. We have organized our entire team around three major efforts. One, increasing exome and genome volumes. Two, reducing claim denial rates to increase revenue per test. And three, driving down our cash burn. Our exome-focused strategy is taking hold. Our goal is to transform the market from single gene tests, multi-gene panels, and microarrays to exomes and genome. And with exome representing 63% of our revenue in September, we're well on our way. This quarter, we saw a 12% increase in the number of clinicians ordering exomes in the outpatient setting, with the fastest growing clinician count coming from neurology, representing 18% quarter over quarter growth. Pediatric neurologists continue to make up the largest portion of our new ordering clinicians. But building markets takes time. This year, we had our sights on an aggressive growth trajectory in the second half of the year, centered around a faster conversion of single and multi-gene tests to our exome business. With $50 million in core revenue in Q3, we expect continued growth in Q4 and full year revenue now in the range of $187 million to $192 million. We have just moved through the final stages of shutting down the former Semaphore business. That took longer than we anticipated, but is officially complete. Excluding those final shutdown costs and one-time severance costs, our cash burn in Q3 from continuing operations was approximately $25 million. That is today's steady state burn rate from which we plan to improve moving forward. Today, we announced that we've effectuated a cost reduction plan of approximately $40 million from the Q3 base. which includes vendor spend as well as a reduction in force. We are prioritizing efforts that support exome and genome growth and increases in paid claims. We'll continue to invest in the teams responsible for these efforts, as we're seeing that they are making tangible progress, thanks to the addition of some key leaders across commercial, operations, finance, and products and technology. Some of the efforts that have been de-prioritized include R&D and other longer-term strategies that will earn our right to invest in once we get closer to profitability. Today, we also announced that we have entered into a debt facility of $75 million with perceptive advisors, and we're grateful to them for believing in our team and the strength of our business in the near and long term. This fortifies our balance sheet, and with the reduction of burn that we have just effectuated, provides balance sheet flexibility in 2025. Balancing our investment and growth while removing cash burn from the business is no easy task. But with the plan we've assembled, I'm confident we are making the right choices to ensure we grow our leadership position in the most cost-effective way possible. I know we're not alone in navigating these waters. Other companies are facing similar challenges but I'm proud of how our team has come together in close partnership with our board on a clear-eyed view of the market we're living in, a meticulously focused strategy that prioritizes growth of our exome and genome offerings, and course correcting as we move forward. You have our commitment that we'll continue to do so in order to drive shareholder value. I want to extend an immense thank you to our teammates and leaders past and present who have invested their time and passion to get us to where we are today. And a thank you to the incredible team who continued to stay committed in our mission despite the winding path we've been navigating. No path to profitability is easy nor straightforward, particularly when introducing a new technology to improve healthcare. But with the generous support and patience of our shareholders, we're all grateful for the opportunity to make a meaningful impact on patients and are committed to delivering value for those shareholders that continue to entrust us to realize that vision. Kevin?