Good day and thank you for standing by. Welcome to the GeneDx' First Quarter 2023 Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker, Tricia Truehart, Head of Investor Relations. Please go ahead.

Thank you, and thank you to everyone who is joining us today on this call. I'm Tricia Truehart, Head of Investor Relations at GeneDx. On the call today, we have Katherine Stueland, President and Chief Executive Officer; Kevin Feeley, Chief Financial Officer and Jennifer Brendel, Chief Commercial Officer. Earlier today, GeneDx released financial results for the first quarter of 2023 ended March 31st 2023. A copy of the press release and our first quarter earnings slide deck are available on the company's website. Before we begin, I'd like to remind you that management will make forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements, due to a variety of factors. Additionally, these forward-looking statements, particularly our 2023 financial guidance, our expectations for revenue growth, gross margin and profitability over the next several years and our expected cost savings and reduction in cash burn involve a number of risks, uncertainties and assumptions. For a list and description of the risks and uncertainties associated with GeneDx' business, please refer to the Risk Factors section of our latest Form 10-K filed with the Securities and Exchange Commission and the other documents filed by us from time-to-time with the SEC. We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. During the call, we may discuss certain non-GAAP financial measures. For reconciliations of the non-GAAP measures to GAAP financial measures as well as other information regarding these measures, please refer to our earnings release and other materials in the Investor Relations section of our website. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 9th, 2023. GeneDx disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I will turn the call over to Katherine.

Thank you, Tricia. I'm excited share our progress so far in 2023. But to begin, I'd like to take a step back and remind you why we're here at GeneDx. Over the past decade, we've seen a massive conversion from single-gene testing to multi-gene panels. GeneDx has played an instrumental role in ushering in this new era, while also pioneering an even more comprehensive set of services with whole exome and whole genome testing. With more data supporting the clinical necessity of exome sequencing versus multi-gene panels, GeneDx is now poised to lead this conversion to deliver more comprehensive, more definitive answers to more patients. Today, we're focused on rare disease testing and the pediatric setting. With the current standard of care is generally a lack of testing, usually resulting in a multiyear diagnostic odyssey for children and for their parents. In fact on average, it takes eight years to diagnose a rare disease. We know that exome and genome testing, dramatically shortens that timeframe from years to weeks. And we also know that these pediatric-rare diseases are not at all rare when taken as a whole. Think of how cancer is actually a constellation of hundreds of diseases. Similarly, there are 7,000 rare diseases that together are nearly as common as cancer. Consider that one in eight women will be diagnosed with breast cancer. Of one in 10 people have a rare disease half of, whom are children. In fact, we estimate that each year over one million infants and children in the U.S. alone would benefit from whole exome or genome testing. And fortunately, we're not alone in our mission to expand care. Medical societies, such as ACMG, NSGC and the American Epilepsy Society are calling for exome and genome sequencing as a first-line test and major national…

Thank you, Katherine. With another quarter past since our 2022 restructuring, we're seeing meaningful financial improvements across all aspects of our business. I would like to first take you through revenues and gross margins from continuing operations and then address spend and cash burn on a total company basis. I'll wrap up with 2023 guidance, which we are reaffirming. During the first quarter of 2023, pro forma revenue from continuing operations was $40.7 million compared to $38 million in the first quarter of 2022. The increase was driven by 22% growth in whole exome sequencing revenue. Total test volumes are up 8% sequentially and 29% year-over-year. The first quarter revenues are reflective of a few transitory effects to be aware of. First, the annual reset of insurance deductibles and co-pays. The first quarter typically brings a reset to patient insurance plans and that creates a seasonal decline in average reimbursement rates that then ramp up as the year progresses. Second, we adjusted some direct billing rates for certain long-standing clients. We made that change to match current pricing in line with our plan and in order to accelerate growth while also maintaining a favorable gross margin profile. Third, test mix, our sales team intentionally built up volumes on certain non-exome tests that are often the precursors to a client ordering whole exome sequencing. These carry lower average reimbursement rates and lower gross margins compared to exome sequencing tests. But as Katherine mentioned, we think of them as stepping stones to our higher-value exome. Pro forma adjusted gross margin from continuing operations in the quarter was 34%. Adjusted gross margin for whole exome sequencing was approximately 60% and whole exome sequencing represents 17% of total volume in the first quarter. As the March and April volume mix, that Katherine highlighted, makes…

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brandon Couillard from Jefferies. Brandon, your line is now open. Q – Brandon Couillard: Hi, thanks. Good afternoon. Catherine and Ken, I think you spoke to some of this in your prepared remarks. But if we just look at the single and multi-gene tests in the quarter, just help us reconcile the volumes being up, with the revenues down, so realized ASP trend behind that. Do you expect that realized ASP to improve or normalize as we move through the year? And strategically, what's kind of I guess the rationale of using the sales team as you described that driving those non-test as a stepping stone? That seems to be I guess a newer aspect of the commercial strategy. Thanks.

Absolutely. So pleased that the overall volume was up across the board. But indeed the sales team is incentivized to be able to really sell exome. And one of the key strategies to getting clinicians there does include moving from CMA FMR1 and autism testing. So as we're spending a lot of time educating them on some of the data that came out last fall, at ASC at AAN on why exome is a superior test and why CMA and guidelines calling for CMA may be outdated. We are continuing to see the momentum is building in April and expect that the exome growth momentum will continue beyond April into Q2 and the rest of the year. I think as we look at the percentage of revenue the exome drives, it's a huge aspect of our strategy here. But we're also ensuring that we can really meet clinicians where they're at, give them the data. It's one of the reasons why the MSL team that we've invested in to really spend time educating them on relatively new data as it pertains to exome, why they should be taking the step forward to get there sooner. And we also see that clinicians start with exome and they want to see that it's working. They want to see that the message that we're delivering that four out of five patients have zero out of pocket for exome with us. They want to see that that's the case. So we expect this momentum to build in the second half of the year and that ASPs will include on the trajectory that we've set out to be able to achieve. Q – Brandon Couillard: Okay. That's helpful. And then Kevin, Mark color you'd be willing to share with us in terms of the pace and magnitude of gross margins as we move through the year? And what should we think about as the top one or two drivers of that, whether it's mix, better reimbursement, lab efficiencies, how would you just back rank those?

Yes. So consistent with our reiteration of the full-year guidance, we'd expect the full year to average out above where we ended 2022. We exited the fourth quarter at 41% adjusted gross margin. I think, the way we see that playing out is sequential growth through each quarter of the year towards something towards the mid-40s. The main drivers of that really is a continuation of COGS improvement efforts that we have underway. I gave a few examples of those in my prepared remarks. We do expect to see seasonal sequential improvements in ASPs as the year progresses and then the overall effect of mix shift towards the higher-margin test. So it really does take the combination of all of those, but see us getting back towards fourth-quarter gross margin profile in the second quarter and then beyond that to be able to reaffirm our guide that the full year will be above where we exited 2022.

Okay. And then how much of the cash burn in the first quarter was tied to restructuring and expect those outlays to be fully behind you by the end of 2Q?

Yeah. A substantial amount was included in the first quarter. We still have some remaining payments to go although our shutdown activities of the Semafo diagnostic business are now complete. There is some further pay downs of accounts payable and some facility leases that will remain with us into the future. But I think the way we look at the burn was very much pleased with where we ended the first quarter. It was in line with our plans. Overall operating expenses improved substantially. If you look at the bottom line on an adjusted basis really just taking out non-cash items of depreciation and stock-based compensation a 33% sequential improvement on the bottom line versus the fourth quarter. More impactful items to further reduce our burn include finishing up some integration activities that were left over following the acquisition of GDX, and getting them off of its previous ownership in IT systems and merged with Semaphore. We'll see those activities really wind down in the second quarter and then continued focus on taking down G&A. But overall, pleased with the leverage we're driving in OpEx and expect to see sequential improvements with the fourth quarter coming in -- in the neighborhood of $20 million of burn for the fourth quarter of 2023.

Okay. Thank you.

Thank you very much. I would like to turn the call back to Katherine Stueland for closing remarks.

I want to just thank the customers and patients who trust us. I want to say, thank you to our teammates who we rely on to serve our customers and most definitely to the shareholders, who are putting their trust in our ability to continue to grow this business that plays a meaningful role in the lives of so many patients. So thank you very much and we look forward to talking with you all soon.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.