GeneDx Holdings Corp. (WGS) Earnings

Management highlights

### Reimbursement and Coverage Progress - 98% of commercial lives now have some level of exome coverage, up from 90% in Q1 2026. 87% of commercial lives now have some level of whole genome coverage, up sharply from 47% in the prior quarter, driven primarily by the new Carolon coverage policy that expands access to ~56 million lives. - 39 U.S. states now cover exome or genome testing under Medicaid, with Mississippi adding coverage starting July 1, 2026. California Medi-Cal published a genome reimbursement rate that took effect July 1, 2026. - 67% of Q2 outpatient genome volume was submitted to payers with an active positive coverage policy, up from 38% in Q2 2025 and 46% in Q1 2026, with continued upward trends in July 2026. ### Collection Rate and Revenue Cycle Performance - The underlying outpatient genome collection rate (percentage of claims paid) stands at 32%, flat from Q1 2026 and down from 43% in Q2 2025. This decline comes from the company's deliberate strategy to accept volume ahead of full coverage to develop the market, creating significant future upside. - Outpatient exome collection rates are comparable to outpatient genome rates, leaving room for material improvement across the entire testing portfolio. NICU testing has a 100% collection rate that brings the company-wide total collection rate up to ~50%. - Management has added experienced new revenue cycle management (RCM) talent to build payer-specific workflows and improve collection rates, and expects improvements to drive direct bottom-line uplift as coverage expands. ### Strategic Positioning and Operational Update - GeneDx is currently under-earning relative to its full potential; doubling the 32% collection rate would convert unpaid test volumes to paid tests, driving incremental revenue that falls straight to the bottom line. - The company completed all $25 million in annual cost reduction commitments announced on the prior call, and recalibrated investment pace while protecting core investments in growth channels and operational infrastructure. - Subsequent to quarter-end, GeneDx expanded its existing debt facility by $50 million and secured a concurrent equity investment from strategic partner Blackstone Life Sciences, bringing pro forma total liquidity to ~$188 million as of June 30, 2026, providing full capitalization through sustained positive cash flow and flexibility for strategic growth investments. - Management reaffirms that the long-term strategic shift to whole genome testing will continue, with genome expected to eventually become the standard for inherited disease diagnosis, while the company currently offering a reflex pathway (exome first, followed by genome if needed) that optimizes economics and diagnostic yield.

Guidance

- Management reaffirms the full-year 2026 revenue guidance range of $475 to $490 million, maintaining prior guidance for at least 30% exome and genome volume growth, at least 20% exome and genome revenue growth, a full-year gross margin of approximately 70%, and full-year profitability. - Q3 2026 is expected to deliver total revenues between $122 to $124 million, exome and genome revenue between $110 to $112 million on approximately 33,200 total tests, with a blended ARR of approximately $3,300 per test, a gross margin of approximately 70%, and adjusted net income of approximately $2 million. - Q3 2026 collection rates are expected to remain roughly flat, as new payer-specific RCM workflows are still being rolled out incrementally. Meaningful collection rate improvements are expected in Q4 2026, with the most significant revenue and gross margin uplift coming in 2027, as expanded coverage and improved operational execution compound. - Genome cost per test is expected to stay relatively flat in the second half of 2026, with step cost improvements coming in 2027 as utilization grows and reagent technology advances. Cash flow generation is expected to return in Q4 2026, with strong sustained cash generation expected by 2027.

Segment performance

The transcript does not split the company into formal product segments with discrete reported financial performance figures for revenue, profit, or revenue contribution percentage. It only distinguishes between two core test products: exome testing, which currently operates at a gross margin above the company-wide average, and whole genome testing, which currently has a gross margin with significant room for expansion. Whole genome testing currently costs nearly twice as much as exome testing to produce, due almost entirely to higher reagent costs. Operating expenses for the entire company were approximately $80 million, which was slightly lower than management expectations.

Risks & headwinds

- Even with positive written coverage policies, many patients still cannot access genomic testing due to overly restricted eligibility criteria and administrative barriers that lead to claim denials. - Collection rates and blended ARR can have underlying variability from single payer administrative changes, coverage policy tightening, or contracting changes, though management notes the impact is moderated by the company's diversified payer base. - The full impact of new coverage expansions takes multiple quarters to flow through to reported revenue, due to lags in collections, accrual accounting, and payer operationalization of new policies. - Revenue cycle improvements are not expected to be perfectly linear, and the company is still building out new workflows that will not deliver full improvements.

Analyst Q&A

• Q: Can you explain why collection and upside from new coverage expansions won't hit in Q3/Q4 2026 rather than immediately, and what upside is expected for 2027? /

  A: There is a natural lag between implementing operational RCM improvements and those improvements flowing through to accrual-based revenue recognition. Coverage gains do not immediately translate to higher collected revenue, so collection rates will stay flat in Q3, with meaningful improvement starting in Q4 2026. The full upside from expanded coverage (including the large Carolon policy and new Medi-Cal coverage will mostly flow through in 2027. The company prioritizes disciplined guidance that accounts for this natural timing lag.

• Q: Why did blended ARR dip slightly in Q2 despite a better-than-expected shift to more lower-collection-reflex exome testing, and is there real downside beyond 2026? /

  A: The small $50 (less than 1% change in ARR came from minor payer mix variation, and blended ARR has now stabilized at a new base for future improvement. The 32% outpatient collection rate cited is only for insurance-based outpatient volume, and the 100% collection rate on NICU volume pulls the total company collection rate up to ~50% overall. The low 32% outpatient rate reflects current coverage maturity, not a permanent weakness, so the upside for 2027 and beyond is substantial.

• Q: What is GeneDx's current position on the competitive landscape, and what advantages does the company hold? /

  A: GeneDx remains the market leader, with 80% market share among geneticists and 50% share among pediatric specialists. Competition helps expand the overall market faster and speed up payer policy development. The company's core competitive advantage is its unique Infinity Database, which delivers higher diagnostic yield by more accurate variant matching, driving strong customer loyalty.

• Q: What is different about the new RCM improvement approach, and how is new sales rep productivity tracking? /

  A: Historically, GeneDx did not invest enough in payer-specific RCM processes and systems. New industry-experienced leadership has brought a clear, detail-oriented playbook focused on complying exactly with payer requirements to secure payment, which is already delivering meaningful improvement. New sales reps hired earlier in 2026 are already delivering positive ROI, and will continue to ramp productivity through the second half of the year, with new tools like simplified one-minute ordering supporting faster adoption in new markets like general pediatrics.