On Wednesday, MDxHealth (NASDAQ:MDXH) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
MDxHealth reported Q1 2026 revenue of $27.4 million, with core prostate cancer operations revenue at $23.9 million, marking an 11% year-over-year increase.
The company announced a strategic shift, discontinuing its Resolve UTI offering and ceasing operations at its Plano, Texas laboratory due to reimbursement uncertainties.
Management remains confident in the clinical validity of their services and is appealing a $10.4 million recoupment request from Novitas.
MDxHealth is focusing on prostate cancer diagnostics and leveraging AI to enhance operational efficiencies and customer offerings.
The company provided 2026 revenue guidance for the core cancer business, excluding Resolve, at $110 to $115 million, representing a 20-26% growth rate.
Full Transcript
John Fraunces (Moderator)
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 and A session. These forward looking statements are subject to inherent risks and uncertainties and 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'll now turn the call over to Michael McGarrity, Chief Executive Officer.
Michael McGarrity (Chief Executive Officer)
Thanks John and thank you all for joining us for our first quarter 2026 earnings conference call. With me today is Ron Kelfus, Interim Chief Financial Officer. Since I joined MDX Health, we have been very consistent in our message and our mission. We are driven by three core operating principles, focus, execution and growth. And while our commitment to those principles remains absolute, we also carry a great responsibility to our patients, our customers and our stakeholders to make strategic decisions that are rooted in transparency and operating discipline. Our Q1 results, our recent developments and the disclosures we issued today reflect a number of decisions driven by that exact responsibility. Over the past few years. Our aggressive growth strategy and commercial execution have positioned MDX Health as the leader in precision diagnostics focused specifically in urology. This strategy transformed our company from 11 million dollars million in revenue in 2019 to 108 million in 2025. We took gross margins from the 20s to the mid-60s and we reached adjusted EBITDA profitability last year prior to our acquisition of the ExoDx business. However, as we prioritize the ongoing integration of ExoDx and the growth of our core prostate cancer business, we have made the strategic decision to discontinue our Resolve UTI offering and to cease operations at our laboratory facility in Plano, Texas. This was a carefully considered decision. The Resolve test was uniquely designed for our Urology customer base to aid in the rapid diagnosis and treatment of patients presenting with serious, complex, multi-organism infections. Despite the urgent clinical need and the undeniable medical necessity of this test to the urologists who order it, the increasingly uncertain reimbursement landscape has made the continued operation of this business line unsustainable. Specifically, an unexplained recent policy reversal by our Texas Laboratory's Medicare Administrator Novitas has created a level of payer uncertainty that we are simply no longer willing to accept. In connection with this, we recently received a communication from Novitas seeking up to $10.4 million in recoupment of historical Resolve testing claims. We believe this action by Novitas is without merit and we are vigorously defending our position through the formal Medicare appeals process. We remain fully confident in our appellate strategy and in the clinical validity of our testing services. While stepping away from Resolve is unfortunate for the thousands of patients who have benefited from the test, we view this proactive exit as a powerful catalyst for our company. First and foremost, it allows us to focus our capital and operational excellence entirely on our prostate cancer precision diagnostics where we drive the most scalable value. By stepping away from the reimbursement volatility of Resolve, our entire sales organization is now able to focus 100% on our core prostate cancer menu Confirm, GPS, and ExoDx. It is important to highlight that we have already completed the Exo-driven strategic mapping and cross training of our expanded sales force in Q1. Furthermore, we successfully met our internal goal of transitioning our select MDX customers to exo, resulting in accelerating operating efficiencies as we no longer process select samples. With our sales force fully armed and aligned, we are cementing our position as the growth leader in urology, offering an unmatched suite of precision diagnostics addressing every single point in the prostate cancer pathway. An additional value driver of this refocus is our ability to catalyze our commitment to leveraging artificial intelligence. Earlier this year, we initiated an AI dedicated strategic initiative to build out an AI data platform across the company. With the hundreds of thousands of unique biopsy tissue specimens we receive. Our goal is to leverage AI to advance operating efficiency, maximize clinical value and optimize our customer experience. In fact, we are seeing evidence of this with our landmark PROTECT trial in collaboration with the University of Oxford, where the study protocol now includes AI enhanced endpoints targeted to improve the prognostic value of our GPS test. Furthermore, we have initiated a collaboration with a customer facing digital innovation company to develop AI enhanced offerings that build on the evidence-based excellence of our tissue tests. We are incredibly proud of our team's commitment to not only the financials, but to what really matters, the patient and family on the other side of every sample we receive. I will follow up with some closing comments and our updated view forward, but first let me turn the call over to Ron to walk through our first quarter financial results.
Ron
Ron thank you Mike. Before I dive into the financial results, I want to briefly frame our Q1 presentation. Because our Board's strategic decision to exit the Resolve MDX business occurred in April, the financial results of the Plano Laboratory and Resolve business remain embedded within our reported continuing operations for the first quarter. However, to provide investors with a clear and transparent view of our core business trajectory moving forward, we have provided pro forma as adjusted tables in our earnings release. These tables entirely back out the revenue and direct operating expenses of the Resolve business to help you model the ongoing business. I will provide a statutory result today and compare them directly to these pro forma metrics of our continuing prostate cancer operations. Our as reported revenue for the first quarter ended March 31, 2026 was $27.4 million. However, on a pro forma basis excluding the Resolve business entirely, revenues for our core prostate cancer operations increased by 11% to $23.9 million, demonstrating the continued commercial execution of our integrated sales team. Moving below the revenue line, our statutory as reported gross profit was $16.6 million. When we back out the Resolve business, our pro forma gross profit for the quarter was $15 million, yielding a pro forma gross margin of 62.9% compared to 68% for Q1 2025, with a difference primarily related to tissue versus liquid mix. Our as reported operating expenses for the quarter were $23.9 million, resulting in an as reported operating loss of $7.3 million. On a pro forma basis. Excluding the direct operating expenses of Resolve, our pro forma operating expenses were $22.9 million, resulting in a pro forma operating loss of $7.9 million compared to a pro forma operating loss of 4.7 million dollars for the prior year. Primarily related to the addition of the ExoDx business, our statutory as reported net loss was $8.9 million. Excluding Resolve, our pro forma net loss was $9.4 million compared to a pro forma net loss of $9.3 million for Q1 of last year. Once again, I'd like to direct investors to the tables at the back of today's press release where we have provided a detailed columnar reconciliation of our statutory IFRS results to the pro forma adjustments. Finally, our balance sheet remained solid for the quarter with cash and cash equivalents as of March 31, 2026 totaling $43.2 million. In addition, on April 15th we made the 2025 earn out payment to Exact Sciences in the amount of $15 million. After taking into account this earn out payment, our pro forma cash as of March 31, 2026 would have been $28.2 million. This concludes my overview of the financial results and I will now turn the call back to Mike.
Michael McGarrity (Chief Executive Officer)
Thanks Ron. As we look forward, we believe that the near term impact of our strategic exit from Resolve will ultimately augment our ability to drive sustainable, highly profitable growth across our core prostate cancer menu. By streamlining our operations and removing the reimbursement noise associated with the UTI business, we are effectively resetting our growth trajectory. Today we are establishing updated 2026 revenue guidance for our core cancer business. Excluding Resolve, of 110 to 115 million dollars. This represents a robust 20 to 26% year over year growth rate for our core cancer business. Our culture of quality first and customer always will ensure our growing reputation for excellence in the urology market. We will continue to strive to deliver on our commitments of growth and value, positioning MDxHealth as the leading precision diagnostics company focused solely on the high growth urology space. As always, we carry a great deal of responsibility to provide value to all of our stakeholders including our patients, our clinicians, our payers and our shareholders. Thank you for your continued interest in and support of MDX Health. Now I'll turn the call back to the operator for questions.
OPERATOR
Thank you Mr. McGarrity. Ladies and gentlemen, at this time if you do have any questions please press Star one. And as a reminder, you can remove yourself from the queue by pressing Star two.. Once again, that's Star one for Questions will go first this afternoon to Dan Brennan with TD Cowan.
Dan Brennan (Equity Analyst at TD Cowan)
Great guys, thanks. Thanks for the questions. Maybe just starting on the Novitas issue, I guess you guys cite the 10.4 million related to retrospective review of certain historical Resolve MDX claims and I know you're going to vigorously defend it but can you any other color you can provide on what the issue is there? And given the cash balance, how do we think about the 10.4 million and just the cushion you guys think you have on that and you know, anything on timing, how this will play out?
Michael McGarrity (Chief Executive Officer)
Yeah, Dan, we anticipate this will not be resolved or adjudicated for a significant period of time unless it's immediately in our favor. And we feel like that that's a high likelihood. We, you know, this is a very recent development that we're communicating so we, you know, we have no sense of our multiple initial replies. So it's difficult to bracket the timeline, but likely well beyond, you know, the period of time that we're focused on here between now and the end of the year. And I would say that although we don't anticipate any liability or recoupment, if there were any minimal, it would be amortized over a five year period. But you know, I only share that based on our understanding. We don't anticipate. We anticipate a quick positive resolution or a longer term adjudication in our favor.
Dan Brennan (Equity Analyst at TD Cowan)
Got it. And Mike, is there any, just maybe one more quick one there. Is there any issues or any feedback you've had throughout the process of billing there where there were calling into question, you know, clinical utility of the test or is there any issues on that front or just anything else you could share on that?
Michael McGarrity (Chief Executive Officer)
As you can imagine, we don't have any further comment on our any communication back and forth other than to present full transparency on everything we know as of today. We, I will say we have absolute certainty and would find impossible to argue the medical necessity and clinical validity of our test for the patients that are treated. It's important to note that a lot of this focus on fraud and abuse with infectious disease testing which UTI has been noted in what is not policy based but communications coming out of novitas. It is not the type of test that we are offering to the customer base. We are right. We market our tests specifically to urology customers for a very specific patient population and it is patients that are referred to urology. Right. When you have a uti, you don't call a urologist. This is not your run of the mill immediate care. Get put on Cipro and you're brand new. These are patients that present in men with enlarged prostate or BPH are prone to these women are referred to urology for these. We've had patients and clinicians present at our national sales meeting and the clinical value is impossible to argue and remarkably compelling. So the broad panel of organisms and susceptibility markers. In addition, a little bit more detail. Our test is in the twenties of organisms and susceptibility markers. Each run is a specific reaction for each analyte or target organism. So we have exhausted when we entered the market are following the AMA guidelines. I'll leave it there. But it leads to our confidence and for sure the medical necessity and our ultimate process.
Dan Brennan (Equity Analyst at TD Cowan)
Got it. No thanks for that Mike. And maybe for the follow up just on the, just on the quarter maybe versus your expectations. Obviously really strong growth in liquid tissue is up against a really tough comp there. Just. Yeah, I mean how did the quarter play out versus your expectations? And as you kind of, you know have the. Have the updated guide like kind of what are you incorporating or like how are you thinking about the rest of the year across your two businesses? Thank you.
Michael McGarrity (Chief Executive Officer)
Thanks Dan. Yeah, I think we would appreciate your comments because it's what we expected and I communicated as far as Q4 and Q1 with the integration there will be some focus on the transition of our Resolve customers. It's important to note also that every one of our Resolve customers is urology customers. So our reps will be navigating that with our customers. We're confident that we'll navigate through that. And then our guidance adjustment really reflects while we don't break it out and haven't broken it out historically made the assumption that it's really stripping out our expectation of what Resolve would contribute. That's essentially the calculus of our new guide.
Dan Brennan (Equity Analyst at TD Cowan)
And any color just on you know, the strength in liquid obviously tissue up against a really tough comp. But you know, on a comp adjusted basis, nice growth. Just. Yeah. Anything to point out across the two segments, you know, as you look out, as we look for the rest of the year.
Michael McGarrity (Chief Executive Officer)
No, I think there might be some embedded strength there because we're There were some additional adjustment to our Q1 revenue based on the fact that we're conservatively not accruing going forward here, cash only. So I don't have any additional comment other than our guidance clearly reflects confidence in our core cancer business, both tissue and exo. And you know, I'll just add that, you know, at the risk of being clever here, you know, we view this as we believe we'll look back on this as a blessing in disguise from a focus benefit of our sales organization because one rep selling four tests. Resolve is a great test that has been broadly adopted but it requires focus and time with our customers and obviously our organizational support of that.
Dan Brennan (Equity Analyst at TD Cowan)
Okay, great. Thanks.
Michael McGarrity (Chief Executive Officer)
Thank you Dan.
OPERATOR
Thank you. We go next now to Bill Bonello with Craig Hallam.
Bill Bonello (Equity Analyst at Craig Hallam)
Hey guys, thanks for taking the Question. I want to focus a little bit on the cash situation here. So when you think about the, you know, restructuring expenses that you're going to incur, do you have any sense of the magnitude of the cash outlay that may go along with that?
Michael McGarrity (Chief Executive Officer)
Yeah, Bill, I think we're, we're confident that our expectation would be the operation would cease by the end of June. Obviously, the majority of the Plano operation is carried in cogs, but we expect to derive any additional expense associated with that will be absorbed by additional efficiencies across our operation that has adjacent or I guess, you know, blended support of our Resolve business in our operation across RCM client services and shared services with operation and product support. So I guess that hopefully that answered
Bill Bonello (Equity Analyst at Craig Hallam)
your question, if I understood your question. I mean, somewhat, I mean, it just, you know, you've got, you've got, I just want to make sure I understand that. I mean, there's going to be some, some severance payments you're going to be making, there's charges on the lease that you mentioned, etc. Those are all cash. And so you're thinking you can offset that cash outlay that, you know, may come over the next couple of quarters. You can completely offset that with enhancements to the rest of the business.
Michael McGarrity (Chief Executive Officer)
We're confident that there'll be a considerable offset there, Bill. Okay. And then when I think about the only term I use differently was that completely, I mean, whether it's completely materially offset. Yep. Just for transparency.
Bill Bonello (Equity Analyst at Craig Hallam)
Yep. Okay. And then just when I look at the, at the, at the pro formas and I think, you know, there's maybe 700 and something thousand dollars of expense that you. Put with Resolve. Can you give us some sense of what, what those expenses are just, and, and what I'm trying to get at here is, you know, how easy will it actually be to eliminate operating expense? What's truly attached to Resolve? And, and what was, you know, just, you know, covering fixed costs,
Michael McGarrity (Chief Executive Officer)
mainly incentive comp, Bill, through our sales organization for the Resolve test, if I'm under that question correctly. And again, as we, you know, we're not in a position right now to fully reconcile. But to your two part question, we expect the majority of the offset of the closing of the operation, the associated cost with that to be offset by efficiencies across the organization. And from an OPEX perspective, while I noted that the majority of opex, that OPEX will not change materially because the majority of the Plano carry was in cogs, we would expect some benefit IC is a good example. Right. To our sales program.
Bill Bonello (Equity Analyst at Craig Hallam)
Okay, that's really helpful. And then just I guess if I can and I'll get out of the way and let other people ask questions, but just on the tissue volume, just trying to get a better understanding of what's going on there. It's been sort of moving steadily downward. And I know you've been doing a big integration and Salesforce was distracted by that. But it's sort of hard to believe at these trends that there's nothing else at all happening. So I guess I'm just trying to get what can you tell us about whether you're actually been losing some customers on the GPS side or maybe people are not continuing to use confirm or why are we seeing volume actually going down? Yeah, so I think I understand the question. I think I would say there's a multifactorial impact there. Right. We have made significant progress as I've noted, and based on our trending consistent growth profile is sticky adoption. There are aspects of our tissue based test that require focus and continued work with our customer base with both confirm and gps. You commented on the integration, which I fully anticipated and we expect clearly reflected in our guidance to see sequential acceleration on the tissue side, even with the focus required on this new development related to resolve on the tissue side in Q3, Q4, Q2, Q3 and Q4 as we go forward. And that's part of the calculus that we understand with our mapping of our customer base, our utilization rates, the implied churn or whatever that we would have. And we've made so much progress on that over the last couple years that we're confident that sticks. And as we look at the comp quarter that Dan noted, we would attribute it to those multiple factors. And our guidance requires that that comes back online on the tissue side as we anticipated at the beginning of the year. Knowing that Q1 would be choppy. Sure. Okay, thank you.
OPERATOR
Thank you, Bill.
Mark Massaro (Equity Analyst at BTIG)
Thank you. And just a quick reminder, everyone, Star one for questions today. We'll go next now to Mark Massaro with btig.
Michael McGarrity (Chief Executive Officer)
Hey guys, thank you for taking the question. I apologize. I hopped on the call a few minutes late, so I wanted to just ask a clarifying question. You know, I saw from your press release that you received a Medicare recoupment decision from Novitas, but I wanted to ask, did you receive a non coverage determination? So I'm just the clarification is, is the coverage suspended at this time? Mark? My answer to that is we've not. I don't know that Novitas has a coverage policy which you're very experienced in this segment. I mean, I don't. I think I commented, you know, Moldeax or California Mac has a clear policy related to UTI testing. Novitas does not. There have been communications that have come out over time, kind of over the last year or two where they're calling attention to it and focused on fraud and abuse. I think this is government down and I think that Moldyx has probably held up as well, difficult to navigate through Moldy X. We've experienced that, that they have a standard, a policy coverage. We have followed the AMA guidelines and the guidelines associated with how we have billed Novitas and Medicare for the past five years, Mark. And we know, I think, you know, you would probably know this too from landscape perspective. We know we're not alone here.
Mark Massaro (Equity Analyst at BTIG)
In fact, I would add an additional point here that we have urology customers that have brought UTI testing in house
Michael McGarrity (Chief Executive Officer)
through whatever methodology they're using or platform. And they are coming to us saying that they are experiencing reimbursement and are looking to bring reimbursement challenges, inconsistencies. But we don't have a policy to lean on to explain their behavior. And we are very confident. To my opening comment, which you missed, we can follow up that medical necessity is unquestioned and a very ambiguous, seemingly change in their posture on paying tests they paid for over time. Okay, thank you for clarifying that, Mike. We are not willing to try different billing schemes. We're just making what we believe is the prudent near and long term decision for our company and for all of our stakeholders to maintain our transparency and integrity.
Mark Massaro (Equity Analyst at BTIG)
It's unfortunate.
Michael McGarrity (Chief Executive Officer)
It's remarkably unfortunate because the value of
OPERATOR
patients and the way we've responsibly marketed this test.
Dan Brennan (Equity Analyst at TD Cowan)
Okay, so I understand why you made the decision to cease operations in Texas, but did you guys evaluate the option to run the test out of a separate lab in a Medicare jurisdiction that does have coverage?
Michael McGarrity (Chief Executive Officer)
Yeah, Mark, I don't think I'd comment anymore on all of the complex decision making process that we went through. So I don't really have a comment. I mean, our Irvine Laboratories in Moldiac Switch has a non coverage decision for UTI test. Yep. All right, and then last one for me. Are you seeing any, you know, as a follow up to Bill's question on the tissue volume side, are you seeing any changes in the competitive landscape that you can speak of? Nothing material from the two competitors on the GPS side. Okay, thank you for the time. Thank you, Mark. Thank you. We'll take a follow up question now from Dan Brennan at TD Cowan.
Dan Brennan (Equity Analyst at TD Cowan)
Hey guys, maybe just one more since, you know, we'd probably follow up later. Just. Michael, to your point on the tissue volume acceleration, can you just elaborate a little bit in terms of some of the initiatives and efforts that you kind of discussed in terms of seeing that sequential acceleration, any color, qualitative color, you can provide just about the visibility confidence in that acceleration. Thanks.
OPERATOR
Yeah, I mean I think maybe to provide to Mark's last question, you know, the one competitive landscape change I should
H
have noted, Mark is on the AI
G
side and I think there's a lot
H
of discussion, I don't want to say
G
noise, but awareness of and communication about the promise of AI in our space particularly relevant to gps. And what I noted in our strategy
H
here going forward, including the partnership that we've entered into, is that we've been
G
very patient and rigorous in our process as to the best path forward.
H
We have not been asleep at the wheel, but we've also not panicked.
G
I think we've gone through a prudent exercise of our operational value and use
H
of AI which does drive, as I noted, all of our clinical data generation and study protocols.
G
But more importantly the partnership that we've entered into when I know customer facing, you know, my comment would be there
H
is that they, this partner provides relevant
G
urology pathology services to our common customer base.
H
So we are very, very confident that our patient approach there.
G
There's not a company in the space that has been partnered with or available
H
with AI technology that we haven't spoken to, evaluated. And we're very confident that the efforts we're taking internally and the partnership that we have embarked on will drive significant, Significant support for our GPS and confirmed business. But that coupled with our execution focus of the sales organization, I guess those are the couple two or three different
G
basis that we have for being confident that tissue begins to accelerate as we go forward.
F
Got it. Okay, thank you.
B
Thank you. And gentlemen, it appears we have no further questions today. So ladies and gentlemen, that will bring us to the conclusion of today's MDX Health first quarter 2026 earnings conference call. We'd like to thank you all so much for joining us today and wish you all a great rest of your day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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