0001193125-25-264652
SEC filingTempus AI's MD&A reveals 85% YoY revenue growth driven by the Ambry Genetics acquisition and Genomics volume, with adjusted EBITDA turning positive at $1.5 million.
For the three months ended September 30, 2025, Tempus AI reported total net revenue of $334.2 million, an 85% increase compared to $180.9 million in the prior-year period. This substantial growth was primarily attributable to the acquisition of Ambry Genetics in February 2025, which contributed $102.6 million in Hereditary testing revenue within the Genomics segment. Net loss widened slightly to $80.0 million from $75.8 million, as revenue growth was offset by increased operating expenses, including a $12.0 million loss on debt extinguishment. However, the company achieved a significant milestone by reporting positive adjusted EBITDA of $1.5 million, a $23.3 million improvement from the -$21.8 million reported in Q3 2024, indicating improving operational leverage.
Total cost and operating expenses rose 68% to $395.2 million. Key drivers included a $49.2 million increase in cost of revenues, a $17.6 million rise in research and development, and an $86.5 million surge in selling, general and administrative expenses, largely tied to the Ambry integration. Interest expense increased to $15.4 million due to new debt from the Ambry acquisition and convertible notes. Other income swung to a $2.6 million gain from an $11.5 million loss, primarily due to a $43.3 million favorable change in the fair value of warrant liabilities, partially offset by losses on marketable securities.
The Genomics segment was the standout performer, with revenue more than doubling to $252.9 million (+117% YoY). This was driven by a combination of organic and inorganic growth. Organic Oncology test volume increased 27% to approximately 87,500 tests, and average revenue per test improved to $1,600 from $1,530, driven by higher Medicare reimbursement rates. The Ambry acquisition added 129,500 Hereditary tests, contributing $102.6 million in revenue. Cost of revenues for Genomics rose 64% to $98.6 million, reflecting the added material and personnel costs from Ambry.
The Data and Services segment grew 26% YoY to $81.3 million, fueled by an $18.9 million increase in demand for Insights products. This growth was attributed to expansion within the existing customer base, notably the Pathos Foundation Model agreement, and new customer adoption. Cost of revenues for this segment increased 71% to $25.6 million, driven by higher cloud and personnel costs to support delivery.
Management expects to maintain high levels of investment in research and development and technology to support new assay development, algorithm creation, and platform expansion into new disease areas. The company anticipates that selling, general and administrative expenses will continue to increase in absolute dollars but decrease modestly as a percentage of revenue over the long term. The integration of recent acquisitions, including Ambry Genetics and Paige.AI, is a strategic priority to build network effects and expand the company's data and AI capabilities. The company believes its current cash, equivalents, and anticipated cash flows are sufficient to meet requirements for more than twelve months. The MD&A highlights that a significant portion of Data revenue is typically back-weighted to the second half of the year based on customer budgeting cycles.
Cash and cash equivalents reached $655.9M at September 30, 2025, supported by $887.7M net financing inflows including $726.5M from convertible senior notes and $195.5M from ATM equity sales. Total debt stood at approximately $1.45B after repayment of $276.9M prior term loans. Shareholders' equity increased to $507.8M.
Notes disclose $194.6M in non-cancelable purchase obligations for data licenses and cloud services, with $50.7M due within one year. The company also assumed $39.5M of remaining Azure commitments from the Paige acquisition, recorded in other long-term liabilities.
No share repurchase program or dividends were active. Capital actions included issuance of $750M 0.75% convertible senior notes due 2030, purchase of $41.8M capped calls, and $195.5M net proceeds from at-the-market common stock sales. Debt modifications and extinguishments resulted in a $12.0M loss.
The Company operates as one operating and reportable segment. The CODM reviews consolidated net loss and significant segment expenses within SG&A (payroll $203.2M and cloud/software $93.8M for nine months). Revenue is predominantly North America with limited multi-year contract disclosures.
Operating cash flow (CFO) was $(181.3M) for the nine months ended September 30, 2025, compared to $(149.8M) in the prior year, reflecting increased cash burn. The company does not disclose net income in this excerpt, so CFO vs net income cannot be assessed. Capital expenditures (purchases of property and equipment plus capitalized software) totaled $20.9M, up from $14.2M, indicating higher investment intensity. Free cash flow is not explicitly stated and cannot be reliably computed due to lack of CFO detail. Financing activities provided $887.7M, primarily from convertible senior notes ($726.5M), long-term debt ($196M), and at-the-market equity issuance ($195.5M), offset by debt repayments and capped call purchases. No dividends were paid in the current period. Working capital swings are not detailed, but related party accounts receivable and deferred revenue adjustments are noted in the footnotes. Overall, the company relies heavily on external financing to fund operations and investments.