Good morning, ladies and gentlemen, and welcome to the MDxHealth First Quarter 2024 Earnings Call. This call is being recorded on Wednesday, May 1, 2024. Before we begin, I would like to remind everyone that the company will make forward-looking statements during today's call. Whether in prepared remarks or during the Q&A session, these forward-looking statements are subject to inherent risks and uncertainties. These risks and uncertainties are detailed in the Risk Factors section of the company's filings with the Securities and Exchange Commission, specifically in the company's annual report on Form 20-F. I would now like to turn the conference over to Michael McGarrity, Chief Executive Officer. Please go ahead.

Thanks, and thank you all for joining us for our First Quarter 2024 Earnings Conference Call for MDxHealth. With me today is Ron Kalfus, Chief Financial Officer. I am pleased to report that our business continued to generate strong top-line performance in the first quarter of 2024 with revenue growth of 35% compared to the first quarter of 2023. Our results reflect our continued focus on commercial execution and operating discipline, which we believe will drive sustainable growth through 2024 and beyond. On our last call, I noted our strategy of creating multiple sources of growth. That proved to be the case for the first quarter of 2024. In a moment, I'll provide greater detail on some of the key factors that helped drive our strong performance. But first, I would like to comment on the steps we have taken to further strengthen our balance sheet and support the execution of our growth strategy. Today, we announced a $100 million financing agreement with OrbiMed, of which $55 million has been drawn, and which enables us to refinance our former debt facility and significantly extends our cash run rate well through our projected turn to adjusted EBITDA profitability in the first half of 2025. We are obviously quite pleased to have the financial support and considerable commitment from OrbiMed, a leading healthcare-dedicated fund, which we believe reflects the significant growth opportunity for our company and the underlying positive dynamics in our target markets. Ron will provide details of this financing later in the call. Now a few brief highlights from our results that support our view that our growth trajectory is sustainable. We reported first quarter revenue of $19.8 million, an increase of 35% over the prior year period. Of note, we have two levers of revenue growth with our sales team driving unit adoption from our urology customer base; and our market access managed care team driving coverage, which shows up in our average sale price. In Q1, we clearly delivered on both levers with billed prostate volumes rising to over 12,000 billed tests, which represents unit growth of 16% year-over-year, with pricing and Resolve growth covering the rest. We believe this is an uncommon mix of strength and execution from our commercial team and are confident it is quite sustainable. These two important metrics clearly underscore the growth opportunity ahead for us as we continue to expand our offering and build our market-leading position in precision urology diagnostics. We recently communicated our menu addition of our hereditary germline test that will augment our comprehensive menu of diagnostics in the pathway of prostate cancer. We received our first clinical samples at the end of Q1 ahead of our expectations, and now expect revenue contributions from the test in Q2 versus our previous view of the second half of 2024. This offering supports clinically actionable decisions for both the patient and clinician at multiple points in the often-confounding diagnostic journey for patients. Hereditary germline testing, as with all of our prostate cancer diagnostics, is both covered by Medicare and included in the NCCN guidelines. As with any growth opportunities we consider, we undertake a rigorous and disciplined diligence process to ensure that new products will fit seamlessly into our commercial focus and bring value to our customer base. These developments, both individually and collectively, serve as the basis for increasing our 2024 revenue guidance to $83 million to $85 million from the previous $79 million to $81 million, which represents 20% year-over-year top-line growth, which we view as a long-term sustainable goal. These dynamics underscore our confidence in turning adjusted EBITDA positive in the first half of 2025. We have clear visibility to our use of cash declining over the coming quarters, coupled with our revenue growth and operating discipline. In a moment, I'll provide some closing comments on the considerable progress we have made as well as our view of the future. But first, let me turn the call over to Ron for a brief review of our financial and operating results for Q1.

Thank you, Mike. As Mike mentioned, today, MDxHealth closed and funded $55 million under a new loan and security agreement with OrbiMed Advisors, which replaces the company's existing $35 million outstanding under our current debt facility. Furthermore, at our option, an additional $45 million can be drawn from OrbiMed, consisting of a $25 million Tranche B and the $20 million Tranche C. The B and C tranches can be drawn in 2025 and in 2026, respectively, at our discretion, subject to certain conditions. On to our first quarter results. We are pleased to report strong top-line growth in the first quarter of 2024. Revenues for the first quarter ended March 31, 2024, increased by 35% to $19.8 million versus $14.7 million for the first quarter of 2023. All of this growth is organic and reflects greater market penetration of our full line of tests into the large addressable market through the outstanding execution of our sales and marketing team. Revenue from our prostate cancer tests made up approximately 85% of our Q1 2024 revenue. Moving below the revenue line, our gross profit for the first quarter of 2024 was $12.1 million, an increase of 38% as compared to $8.7 million for the first quarter of 2023. Gross margins were 60.8% for Q1 2024 as compared to 59.3% for Q1 '23. Operating loss for the first quarter was $6.6 million compared to $8.7 million for the first quarter of 2023, representing a reduction of 24%, driven by top-line growth, improved gross margins, and continued operating discipline. Also of note is that we were able to drive a 35% growth in revenue with only a 7% growth in operating expenses, which was largely driven by sales commissions on that growth. This is a testament to the operating leverage we are now generating and believe is sustainable. Cash and cash equivalents as of March 31, 2024, were $14.5 million. This concludes my brief overview of the results, and I will now turn the call back to Mike.

Thanks, Ron. Over the past few years, MDxHealth has evolved to become a premier growth story in precision diagnostics. Quarter after quarter, we are driving revenue growth and operating metrics toward profitability that far exceeds the secular growth rate within the clinical diagnostics sector. This progress is rooted in both the positive underlying demand we are seeing in our end markets and our team's solid execution. This process has been catalyzed by expansion of our menu, from just a single test generating revenue at the beginning of 2022 to now 4 prostate cancer diagnostics, all of which are covered by Medicare and included in the NCCN guidelines. This menu expansion, carefully conceived with our marketing and KOL partners, coupled with the strength of our sales channel, provides access to a nearly $5 billion U.S. addressable market. It is important to note that our adoption and penetration has validated this TAM as accessible and viable, serving to drive considerable growth in the near and long term. Our view of growth is also supported by empirical evidence in the market. The increasing diagnosis of prostate cancer, particularly at an earlier stage of disease; coupled with greater appreciation by clinicians and patients of the clinical value of our advanced precision diagnostics at each point of the pathway, all drive acceptance by both patients and clinicians to guide optimal diagnostic and treatment options. In fact, it's reasonable to say that men's health in the urology segment, and prostate cancer in particular, is where women's health and breast cancer were maybe 25 years ago from both a public and clinical perspective. The earlier diagnosis of prostate cancer, along with the use of more precise diagnostics, are two trends that will only accelerate over time. MDxHealth is exceptionally well positioned to benefit from these market dynamics. Finally, I would also like to note our relationships continue to improve and expand within the medical community. Our partnership with urology customers has always been best-in-class. However, over the past couple of years, we have also recognized and embraced pathology as a key partner in driving further adoption of our menu. This evolution is actively supported by our sales and marketing teams who have cemented a KOL network in pathology that complements the positioning of our menu and our overall growth strategy. In summary, our company is positioned in the right end markets and leveraging best-in-class technology and customer service to position MDxHealth as one of the most widely recognized high-growth companies in precision diagnostics. And with the capital now in place to support our long-term growth, I believe our future is brighter now than at any point in our company's history. As always, we carry a great deal of responsibility to provide value to all of our stakeholders, including patients, customers, payers, and shareholders. Thank you for your interest in and support of MDxHealth, and now I'll turn the call back over to Constantine for questions.

Your first question comes from the line of Andrew Brackmann from William Blair.

All the color on this update. Maybe just to start here on the increased guidance for the year. Obviously, I think a lot is going well for you guys on sort of the underlying basis. But can you maybe just sort of parse out for us the drivers of that increase? How much of that relates to the hereditary kind of testing launch and versus just sort of the overall better trends that you're seeing in the quarter here?

Yes, Andrew. We see, we have seen, and we expect to continue to see balanced growth across our menu. So while we're very encouraged by the germline initial acceptance, the basis for taking the guidance up is the fundamental menu and adoption of our pathway to the points that I commented on. And we think we'll continue to see that through the quarter. I mean, our Q1 revenue growth was 35%, very balanced across our menu without germline. We expect that growth to continue. And at the midpoint of our new guidance, we're at 20% growth. So we view that as reflecting our key and core prostate cancer menu.

Regarding the financing, it seems that it leads you to positive cash flow. Could you discuss the flexibility it offers concerning the contingent payments to Exact Sciences? Additionally, please update us on your current thoughts regarding those obligations and the options you have available.

Yes, Andrew, we're very confident and appreciate the support and perspective from OrbiMed regarding our business fundamentals. Regarding our earnout with Exact, I have mentioned before that it is truly a partnership, and there is an aspect of the earnout where we can choose to provide cash or equity to Exact Sciences amounting to up to 7.5% of the company. We'll be strategic as we move forward, and we have substantial flexibility to operate and enhance our growth. We believe that everything is in place to advance the company, and we are eager to keep delivering results. That is the focus of our operational team.

Perfect. Maybe if I could just sneak in one more here just on LDT regulation. Obviously, I think that read positive for you all when that came out a couple of days ago. But I'm just thinking about future test launches or product modifications. Can you maybe just sort of talk about how that final rule might change things from a regulatory or cost dynamic for you guys moving forward?

Yes, Andrew, we are truly encouraged by the recent developments, which align with our expectations based on the evidence we have regarding our menu's data, clinical, and scientific advantages, Medicare coverage, and NCCN guidelines. I've often stated that New York State approval represents perhaps the highest standard, and they certainly take that into account as well. We believe that all the requirements we established have been satisfied, providing us some relief as we move forward. Regarding the second part of your question, we see two positive outcomes. First, it establishes a significant barrier to entry for competitors in our target markets and our expanded menu offerings. Secondly, we consistently evaluate coverage, guidelines, and approvals based on our company's past experiences and challenges, ensuring these factors have been mitigated as we consider future opportunities. This does not alter our execution strategy or growth outlook, and we believe it safeguards us from competition in the market for the foreseeable future.

Your next question comes from the line of Jason Bednar from Piper Sandler.

Congrats on all the updates here. Want to pick up on maybe some of the same topics Andrew was referencing. I want to focus on the EBITDA profitability timeline. That first half '25 profitability seems even more likely now. But I also would think maybe there's a chance to come sooner than what you previously thought in light of the revenue strength that you're seeing here. And also, as Ron, you referenced the operating expense structure just continues to grow at a modest rate. So maybe help us out, why not adjust that target alongside the bump in revenue guidance this year? Or are there just other investment decisions that you're not contemplating in light of that revenue strength?

Yes, Jason, I think our view has always been, if we put something out there, our expectation is that it will be met or exceeded. I think that's the way we view our turn to EBITDA profitability in Q1 or Q2 of 2025, is what we've communicated. We're very confident in that. I think I would leave it there right now. But our inside expectations are, as you know, higher than maybe what's on the street. And so we just focus on the execution. But this clearly cements our view that our business is a few quarters from really looking, I think, uncommon in our sector. At the revenue rate, at the growth rate, and at our ability to hold our OpEx and be profitable from a P&L perspective, we like where we're going. And we think we'll look very strong as we look at the market opportunity.

I completely agree, Mike. Andrew also inquired about germline. It seems you prefer not to break down the components of the $4 million increase in the midpoint revenue guidance this year. However, I would like to rephrase the question regarding germline. How should we perceive the exit revenue rate for that test as we conclude 2024? This is important as we begin to factor in this contribution for 2025.

Yes, Jason, I want to clarify that our updated guidance wasn't solely influenced by our germline offerings. We were very encouraged to receive our initial clinical samples. I believe this validates the effort we put into exploring these opportunities, primarily based on our customer feedback. Our decisions are made in consultation with our customers and key opinion leaders, which makes us feel optimistic. The foundation for our guidance is our core menu and sales execution. Looking ahead, I can’t specify a particular product, but we are confident in our ability to achieve sustainable adoption within our customer base. Although I won't forecast in the same way as we did with Resolve, we are following a similar operational process, dedicating time and effort to validate our key priorities as we move forward. Once we introduce something into our sales channel, we are sure it will contribute to revenue growth. Importantly, this aligns with our diagnostic pathway at various stages. From a patient experiencing elevated PSA to high-grade interventions and active surveillance, our menu serves as a clinically actionable resource at every point in this journey. The germline aspect enhances our understanding of patient risk, making it a sensible addition to our offerings.

Excellent. And just one more for me. Ron, as you were running through some of the overview on the debt terms. I think you mentioned those two additional tranches, they have maybe some conditions or terms. I don't know if you're willing to go into any of those today or if they're even relevant. But just are those revenue- or EBITDA-dependent? Or any other financial or operational bars that you need to clear in order to tap those additional term loans?

Yes, please continue, Ron.

There are certain conditions, Jason. And if you look at our filings with the SEC, we've the agreement has been disclosed. So if you look there, you'll see, to the extent that we could disclose, the conditions are there.

Your next question comes from the line of Mark Massaro from BTIG.

Congrats on a strong quarter. I guess I wanted to ask, it's great to see the 35% growth in the quarter. And the raise to the guidance, it sounds like the rate of the guidance is not on the germline. So is it safe to say that you're feeling good about the breadth of the portfolio throughout the course of the year? And then are you willing to provide any qualitative comments on some of the product lines, whether it's Confirm or Select? Just give us a sense for how the overall portfolio did in Q1.

Yes, Mark. I understand your question. We are feeling positive. The change in guidance is not related to germline, so your assumption is correct. If you look back to the quarters when we made the GPS acquisition, we clearly stated our focus was on two areas: the integration and transformation of our sales organization, which turned out to be more complex than I initially thought. I expected it would take one or two quarters, but it likely took two to three. By mid-last year, we felt we had everything in place with the right team and were strongly focused on the important aspect of the initial biopsy, since we are the only company able to confirm whether that initial biopsy is negative or positive. Those tissue-based tests offer the highest reimbursement and average sale price. It was essential to solidify that part of our business and our position in the urology market. We believe those efforts are paying off, and we are seeing positive results. Thus, we are very confident in the trends within our GPS and Confirm business. We had shifted some attention to Select during this process, but we have now returned to our complete diagnostic pathway offering. My comment about pathology is significant because we have an effective approach for promoting the sustainable adoption of our pathway in these practices. It is crucial to have both urology and pathology on board. This is a key development in our focus and strategy. We expect germline to be integrated into that. Our Resolve opportunity has been validated during the diligence process and shows the strength of our channel. We are not actively seeking new customers for Resolve or germline; instead, we introduce it within our existing customer base.

Yes. And then probably not everyone on the call has gone through the terms of the OrbiMed deal. This is 5 years interest only, and this is debt. Are there any other terms you can call out in terms of the financing over time? And why you chose that over other alternative forms of financing?

Well, a couple of things there. Number one, we don't think there's a higher-quality partner in our space than OrbiMed. Their diligence was quite rigorous on our business and our view forward. We think this structure gives us flexibility and optionality as we go forward, and also the time with that interest-only period. We think it's the ideal structure for where we are today, and still allows us all the flexibility to operate and execute with the business. So I think there were a number of criteria from our side. We value the commitment, and we think that all of the different aspects of our business give us that flexibility and really clear the path for our business all the way through.

Excellent. Last one for me. As we're updating our models later today, is it reasonable to think that revenue could grow? It looks like revenue was up a little bit sequentially. But is there any reason to believe that, as we think about any seasonality to the business, typically Q1 is lighter, Q2 is typically higher? Is it reasonable for us to put in a slight increase sequentially in revenue throughout the course of the year?

I think that is a reasonable assumption.

Your next question comes from the line of Daniel Brennan from TD Cowen.

Maybe the first one, I know you mentioned adjusted EBITDA profitability in the first half of '25. Can you remind us if that aligns with free cash flow positivity?

It is not. It's adjusted EBITDA.

And in terms of free cash flow positivity? Ron or Mike, excuse me, like when would you guys consider that?

We'll be generating operating cash at that point. It depends on how you define it. I guess from a P&L perspective, we would still have, below the EBITDA line, our debt service and earnout to Exact, which we believe this facility solves for. That's why we think, in combination, our operating leverage, coupled with the facility that we have in place now, gives us that coupled with the Exact equity earn-out option, sets us up very well for free cash flow.

Perfect. Okay. And then on the guide, I know you didn't provide explicit guidance for Q1 previously, but I think you talked about revenues would decline quarter-to-quarter seasonally. And obviously, they didn't; they grew 2%. So did Q1 come in better than you anticipated? And if so, what came in better?

No, I would say that our inside expectations and model are coming along very much in line with our expectations. We believe that, from a market and transparency perspective, we see upside to the original guidance we gave. A lot of that is just based on seeing quarter-after-quarter continued execution. When we look deeper into that execution and look customer by customer, the sustainability, the adoption and the commitment to our pathway will continue to inform our view of our revenue growth. So we're very confident in the $83 million to $85 million. We'll just continue to update on a quarterly basis.

Got it. And I know there's been a bunch of questions trying to tease out some of the contributions in the quarter, but any help on Resolve in the quarter? Since that's a little different than your prostate portfolio. Just wondering, how is Resolve doing? Is that still being a material contributor?

It's still a significant contributor. The growth rate is being maintained, and we are witnessing ongoing adoption from our urology customers for that test. We look at our entire menu, and both individually and collectively, we are seeing strength across it. The Resolve fit within our customer base has been confirmed. While we won't see 100% growth from quarter to quarter as this business develops, we do anticipate sustainable growth with that offering.

Got it. And then like consensus was at $18 million; you obviously came in around $2 million above that. The guidance raise at the midpoint is $4 million. So I'm just wondering, have you raised what you guys expected Q2 to Q4 to be versus your prior view, or are you just kind of booking the Q1 upside that you saw?

I'm not going to share our modeling exercise internally, but I would say that we as a team and our Board has a view of expectations that is probably higher than what's in the market. We believe that our guidance reflects the confidence in our business and our clear visibility into our growth being sustainable. That’s why I point to 3% growth in Q1. I lean on the 20% growth. If you have the right team and the right menu, the right focus, and the right execution, the 20% top-line growth should be our goal forever. At least that's our goal for the next few quarters.

And then maybe last one, I know there's been several questions on the germline test. Did you give a price point on that test? Is it reimbursed today? And just anything on sizing the addressable opportunity for that new germline test.

Yes, Dan. The addressable opportunity is that the data would suggest that 10% to 20% of patients have hereditary risk. We view it as a real tool. It's driven by the patient or once they present with the importance of the diagnostic availability for prostate cancer; it's starting to look more like that. We think the germline, whether it's driven by the patient or once they present, is really meaningful information. It can be prior to elevated PSA, post elevated PSA, or post initial biopsy, so we like the fit there. And as far as the pricing, the Medicare rate for that test is $1,800.

Our next question is from the line of Thomas Vranken from KBC.

Congrats on another quarter with solid progress, as well as the upgrade of the guidance. Two questions from my side. The first one is on the germline testing. I understood, based on the news, that could start contributing to revenues as of Q2. Could you give an indication as to when you would expect the test to be accretive to margins as well? Is this going to be immediately? Or will this take some time?

Yes, Thomas. We don't break out margin by product, but part of our process before we introduce something is that we believe that it's accretive to our business from an operating and gross margin perspective, day one, dollar one. There's always a little bit of a ramp there, but it fits well into our P&L profile.

Okay. And as a second question, I also wanted to zoom in a little on the OrbiMed financing agreement. Could you give any sentiment whatsoever as to how we should think about the interest rates perhaps as compared to the prior loan that was in place with Innovatus?

Yes, Thomas, I think to Ron's point, we would just refer you to all of our filings for the detail on the facility. But we think it is strong, both from a commitment and a market perspective.

There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.