UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended 2024
June 30
, TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 001-42130
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices, Zip Code)
(800 ) 976-5448
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation Yes ☒ No ☐
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act. | Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
| Emerging growth company | ||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule ☒
12b-2
of the Exchange Act): Yes ☐ No As of August 6,
2024,
there were shares of Class A common stock and 5,043,789 shares of Class B common stock, each with a par value of $0.0001 per share, outstanding.
| Page | ||||||
| Part I – Condensed Consolidated Financial Statements (unaudited) |
1 | |||||
| Item 1. |
Condensed Consolidated Quarterly Financial Statements (Unaudited) | 1 | ||||
| 2 | ||||||
| Condensed Consolidated Statements of Operations and Comprehensive Loss |
4 | |||||
| 5 | ||||||
| 7 | ||||||
| 9 | ||||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 32 | ||||
| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk | 57 | ||||
| Item 4. |
Controls and Procedures | 58 | ||||
| 59 | ||||||
| Item 1. |
Legal Proceedings | 59 | ||||
| Item 1A. |
Risk Factors | 59 | ||||
| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds | 138 | ||||
| Item 3. |
Defaults Upon Senior Securities | 138 | ||||
| Item 4. |
Mine Safety Disclosures | 138 | ||||
| Item 5. |
Other Information | 138 | ||||
| Item 6. |
Exhibits | 139 | ||||
| 140 | ||||||
Tempus AI, Inc.
Condensed Consolidated Quarterly Financial Statements (Unaudited)
June 30, 2024
Tempus AI, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share amounts)
June 30, 2024 |
December 31, 2023 |
|||||||
| Assets |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ |
$ |
||||||
| Accounts receivable, net of allowances of $ |
||||||||
| Inventory |
||||||||
| Warrant asset |
||||||||
| Prepaid expenses and other current assets |
||||||||
| Marketable equity securities |
||||||||
| Deferred offering costs |
||||||||
| |
|
|
|
|||||
| Total current assets |
$ |
$ |
||||||
| Property and equipment, net |
||||||||
| Goodwill |
||||||||
| Warrant asset, less current portion |
||||||||
| Intangible assets, net |
||||||||
| Investments and other assets |
||||||||
| Warrant contract asset, less current portion |
||||||||
| Operating lease right-of-use assets |
||||||||
| Restricted cash |
||||||||
| |
|
|
|
|||||
| Total Assets |
$ |
$ |
||||||
| |
|
|
|
|||||
| Liabilities, Convertible redeemable preferred stock, and Stockholders’ equity ( deficit) |
||||||||
| Current Liabilities |
||||||||
| Accounts payable |
||||||||
| Accrued expenses |
||||||||
| Deferred revenue |
||||||||
| Other current liabilities |
||||||||
| Operating lease liabilities |
||||||||
| Accrued data licensing fees |
||||||||
| Accrued dividends |
||||||||
| |
|
|
|
|||||
| Total current liabilities |
$ |
$ |
||||||
| Operating lease liabilities, less current portion |
||||||||
| Convertible promissory note |
||||||||
| Warrant liability |
||||||||
| Other long-term liabilities |
||||||||
| Interest payable |
||||||||
| Long-term debt, net |
||||||||
| Deferred revenue, less current portion |
||||||||
| |
|
|
|
|||||
| Total Liabilities |
$ |
$ |
||||||
| |
|
|
|
|||||
| Commitments and contingencies (Note 7 ) |
||||||||
| Convertible redeemable preferred stock, $ June 30, 2024 and December 31, 2023, respectively; at June 30, 2024 and December 31, 2023, respectively; aggregate liquidation preference of $ $ |
||||||||
The accompanying notes are an integral part of these
condensed
consolidated financial statements. 2
| Stockholders’ equity (deficit) |
||||||||
| Class A Voting Common Stock, $ authorized at June 30, 2024 and December 31, 2023, respectively; |
$ | $ | ||||||
| Class B Voting Common Stock, $ June 30, 2024 and December 31, 2023, respectively; outstanding at June 30, 2024 and December 31, 2023, respectively |
||||||||
| Non-voting Common Stock, $ 2024 and December 31, 2023, respectively; and |
||||||||
| Treasury Stock, |
( |
) | ( |
) | ||||
| Additional Paid-In Capital |
||||||||
| Accumulated Other Comprehensive (Loss) Income |
( |
) | ||||||
| Accumulated deficit |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Total Stockholders’ equity (deficit) |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Total Liabilities, Convertible redeemable preferred stock, and Stockholders’ equity (deficit) |
$ | $ | ||||||
| |
|
|
|
The accompanying notes are an integral part of these
condensed
consolidated financial statements. 3
Tempus AI, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENS
IVE
LOSS
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2024 |
2023 |
2024 |
2023 |
|||||||||||||
Net revenue |
||||||||||||||||
Genomics |
$ | $ | $ | $ | ||||||||||||
Data and services |
||||||||||||||||
Total net revenue |
$ | $ | $ | $ | ||||||||||||
Cost and operating expenses |
||||||||||||||||
Cost of revenues, genomics |
||||||||||||||||
Cost of revenues, data and services |
||||||||||||||||
Technology research and development |
||||||||||||||||
Research and development |
||||||||||||||||
Selling, general and administrative |
||||||||||||||||
Total cost and operating expenses |
||||||||||||||||
Loss from operations |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Interest income |
||||||||||||||||
Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other (expense) income, net |
( |
) | ( |
) | ( |
) | ||||||||||
Loss before provision for income taxes |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Provision for income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Losses from equity method investments |
( |
) | ( |
) | ||||||||||||
Net Loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Dividends on Series A, B, B-1, B-2, C, D, E, F, G, G-3, and G-4 preferred shares |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Cumulative Undeclared Dividends on Series C preferred shares |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net loss attributable to common shareholders, basic and diluted |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net loss per share attributable to common shareholders, basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
$ | ( |
) | ||||
Weighted-average shares outstanding used to compute net loss per share, basic and diluted |
||||||||||||||||
Comprehensive Loss, net of tax |
||||||||||||||||
Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
Foreign currency translation adjustment |
( |
) | ( |
) | ||||||||||||
Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The accompanying notes are an integral part of these
condensed
consolidated financial statements. 4
Tempus AI, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands, except share and per share amounts)
Six Months Ended June 30, |
||||||||
2024 |
2023 |
|||||||
| Operating activities |
||||||||
| Net loss |
$ | ( |
) |
$ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities |
||||||||
| Change in fair value of warrant liability |
$ | ( |
) | $ | ( |
) | ||
| Stock-based compensation |
||||||||
| Gain on warrant exercise |
( |
) | ||||||
| Gain on marketable equity securities |
( |
) | ||||||
| Amortization of original issue discount |
||||||||
| Amortization of deferred financing fees |
||||||||
| Change in fair value of contingent consideration |
||||||||
| Amortization of warrant contract asset |
||||||||
| Depreciation and amortization |
||||||||
| Provision for bad debt expense |
||||||||
| Change in fair value of warrant asset |
||||||||
| Loss from equity-method investments |
||||||||
| Amortization of finance right-of-use lease assets |
||||||||
| Non-cash operating lease costs |
||||||||
| Minimum accretion expense |
||||||||
| Impairment of intangible assets |
||||||||
| PIK interest added to principal |
||||||||
| Change in assets and liabilities |
||||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventory |
( |
) | ( |
) | ||||
| Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
| Investments and other assets |
( |
) | ||||||
| Accounts payable |
( |
) | ( |
) | ||||
| Deferred revenue |
( |
) | ( |
) | ||||
| Accrued data licensing fees |
( |
) | ( |
) | ||||
| Accrued expenses & other |
( |
) | ||||||
| Interest payable |
||||||||
| Operating lease liabilities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash used in operating activities |
$ | ( |
) | $ | ( |
) | ||
| |
|
|
|
|||||
| Investing activities |
||||||||
| Purchases of property and equipment |
$ | ( |
) | $ | ( |
) | ||
| Proceeds from sale of marketable equity securities |
||||||||
| Business combinations, net of cash acquired (Note 4 ) |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash provided by (used in) investing activities |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Financing activities |
||||||||
| Proceeds from issuance of common stock in connection with initial public offering, net of underwriting discounts and commissions |
$ | $ | ||||||
| Tax withholding related to net share settlement of restricted stock units |
( |
) | ||||||
| Issuance of Series G-5 Preferred Stock |
||||||||
| Principal payments on finance lease liabilities |
( |
) | ||||||
| Purchase of treasury stock |
( |
) | ||||||
| Payment of deferred offering costs |
( |
) | ( |
) | ||||
| Dividends paid |
( |
) | ( |
) | ||||
| Proceeds from long-term debt, net of original issue discount |
||||||||
| Payment of indemnity holdback related to acquisition |
( |
) | ||||||
| |
|
|
|
|||||
| Net cash provided by financing activities |
$ | $ | ||||||
| |
|
|
|
|||||
| Effect of foreign exchange rates on cash |
$ | ( |
) | $ | ||||
| |
|
|
|
|||||
The accompanying notes are an integral part of these
condensed
consolidated financial statements.5
| Net increase (decrease) in Cash, Cash Equivalents and Restricted Cash |
$ |
$ |
( |
) | ||||
| Cash, cash equivalents and restricted cash, beginning of period |
||||||||
| |
|
|
|
|||||
| Cash, cash equivalents and restricted cash, end of period |
$ |
$ |
||||||
| |
|
|
|
|||||
| Cash, Cash Equivalents and Restricted Cash are Comprised of: |
||||||||
| Cash and cash equivalents |
$ | $ | ||||||
| Restricted cash and cash equivalents |
||||||||
| |
|
|
|
|||||
| Total cash, cash equivalents and restricted cash |
$ | $ | ||||||
| |
|
|
|
|||||
| Supplemental disclosure of cash flow information |
||||||||
| Cash paid during the year for interest |
$ | $ | ||||||
| |
|
|
|
|||||
| Cash paid for income taxes |
$ | $ | ||||||
| |
|
|
|
|||||
| Supplemental disclosure of noncash investing and financing activities |
||||||||
| Dividends payable |
$ | $ | ||||||
| |
|
|
|
|||||
| Purchases of property and equipment, accrued but not paid |
$ | $ | ||||||
| |
|
|
|
|||||
| Deferred offering costs, accrued but not yet paid |
$ | $ | ||||||
| |
|
|
|
|||||
| Redemption of convertible promissory note |
$ | $ | ||||||
| |
|
|
|
|||||
| Non-voting common stock issued in connection with business combinations |
$ | $ | ||||||
| |
|
|
|
|||||
| Operating lease liabilities arising from obtaining right-of-use assets |
$ | $ | ||||||
| |
|
|
|
|||||
| Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering |
$ | $ | ||||||
| |
|
|
|
|||||
| Taxes related to net share settlement of restricted stock units not yet paid |
$ | $ | ||||||
| |
|
|
|
|||||
| Reclassificiation of deferred offering costs to additional paid-in capital upon initial public offering |
$ | $ | ||||||
| |
|
|
|
|||||
| Issuance of Series G-3 Preferred Stock |
$ | $ | ||||||
| |
|
|
|
|||||
| Issuance of Series G-4 Preferred Stock |
$ | $ | ||||||
| |
|
|
|
The accompanying notes are an integral part of these
condensed
consolidated financial statements. 6
Tempus AI, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK, COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(in thousands, except share and per share amounts)
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive (Loss) Income |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||||||||||||||||||||||
Class A |
Class B |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
|||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 |
$ | $ | — | $ | — | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Issuance of Series G-3 Preferred Stock |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series G-4 Preferred Stock |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series G-5 Preferred Stock |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued in connection with business combinations |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Dividends |
— | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with initial public offering, net of offering costs, underwriting discounts and c om missions |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering |
( |
) | ( |
) | — | — | — | — | ( |
) | — | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of non-voting common stock to Class A common stock |
— | — | — | — | ( |
) | — | — | ( |
) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock units, net |
— | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon settlement of warrant |
— | — | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Balance at June 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive (Loss) Income |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||||||||||||||||||||||
Class A |
Class B |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
|||||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 |
$ | $ | — | $ | — | $ | $ | — | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||||
| Issuance of Series G-3 Preferred Stock |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends |
— | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||
| Repurchase of Non-voting Common Stock |
— | — | — | — | — | — | — | — | ( |
) | ( |
) | — | — | — | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Common stock issued in connection with business combination |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Balance at June 30, 2023 |
$ | $ | — | $ | — | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
The accompanying notes are an integral part of these
condensed
consolidated financial statements. 7
Tempus AI, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK, COMMON STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(in thousands, except share and per share amounts)
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive (Loss) Income |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||||||||||||||||||||||
Class A |
Class B |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
|||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||||
| Issuance of Series G-5 Preferred Stock |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends |
— | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with initial public offering, net of offering costs, underwriting discounts and commissions |
— | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering |
( |
) | ( |
) | — | — | — | — | ( |
) | — | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of non-voting common stock to Class A common stock |
— | — | — | — | ( |
) | — | — | ( |
) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon settlement of restricted stock units, net |
— | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon settlement of warrant |
— | — | — | — | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Balance at June 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock |
Voting Common Stock |
Non-Voting Common Stock |
Treasury Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive (Loss) Income |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||||||||||||||||||||||
Class A |
Class B |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
Units |
Amount |
|||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Dividends |
— | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Balance at June 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
The accompanying notes are an integral part of these
condensed
consolidated financial statements. 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. |
DESCRIPTION OF BUSINESS |
Company Information
Tempus AI, Inc., together with the subsidiaries through which it conducts business (the “Company”), is a healthcare technology company focused on bringing artificial intelligence and machine learning to healthcare in order to improve the care of patients across multiple diseases. The Company combines the results of laboratory tests with other multimodal datasets to improve patient care by supporting all parties in the healthcare ecosystem, including physicians, researchers, payers, and pharmaceutical companies. The Company primarily derives revenue from selling comprehensive genetic testing to physicians and large academic research institutions, licensing data to third parties, matching patients to clinical trials, and related services.
The Company, based in Chicago, Illinois, was founded by Eric P. Lefkofsky, the Company’s CEO and Executive Chairman, and evolved from a business Mr. Lefkofsky founded called Bioin. Bioin originally was established as a limited liability company. Effective September 21, 2015, Bioin converted its legal form to a corporation organized and existing under the General Corporation Law of the State of Delaware. Bioin subsequently changed its legal name to Tempus Health, Inc. in September 2015, to Tempus Labs, Inc. in October 2016 and to Tempus AI, Inc. in December 2023.
Initial Public Offering
On June 13, 2024, the Company’s11,100,000 shares of Class A common stock, at a public offering price of $37.00 per share. The Company received net proceeds of $382.0 million after deducting underwriting discounts and of $28.7 million.
registration statement relating to its
initial public offering (the “IPO”) was declared effective and its Class A common stock began trading on the Nasdaq Global Select Market on June 14, 2024. On June 17, 2024, the Company completed its IPO in which it issued and sold commissions
In connection with the closing of the IPO, all shares of the Company’s then-outstanding redeemable convertible preferred stock, other than the Company’s Series B redeemable convertible preferred stock, converted into an aggregate of
shares of Class A common stock. The Company’s Series B redeemable convertible preferred stock converted on a one-for-one basis into an aggregate of
shares of Class B common stock. Subsequently,
shares of Class B common stock were automatically converted into shares of Class A common stock, such that there are
shares of Class B common stock outstanding immediately following the IPO. The Company issued an additional
shares of Class A common stock pursuant to a separate agreement with an investor in the Series G-3 convertible preferred stock.
As of June 16, 2024, the Company’s redeemable convertible preferred stock had accrued $188.2 million of unpaid dividends, which were paid in 5,098,799 shares of Class A common stock at the closing of the IPO.
Outstanding shares of non-voting common stock were converted on a one-for-one basis into 5,069,477 shares of Class A common stock.
The restricted stock units (“RSUs”) granted to employees pursuant to the Company’s 2015 Plan are subject to two vesting conditions. The first is a time-based component. The second vesting condition is the occurrence of a liquidity event. The liquidity event condition related to these awards was satisfied upon the IPO and, as a result, the Company recognized $488.3 million of stock-based compensation expense 4,568,291 fully vested RSUs (the “IPO Settled RSUs”). To meet the related tax withholding requirements, the Company withheld 1,911,316 shares from the 4,563,164 shares of Class A common stock issuable upon settlement of the IPO Settled RSUs. Based on the public offering price of $37.00 per share, the tax withholding obligation was $70.8 million.
for the six months ended June 30, 2024
. In connection with the IPO, the Company settled an aggregate of The Company issued 109,459
shares of Class A common stock upon the automatic net exercise of a warrant issued to Allen & Company LLC (“Allen”), as further described in Note 8.
In connection with the IPO, the Company amended and restated its certificate of incorporation (the “Restated Certificate”), under which authorized capital stock consists of
shares of Class A common stock,
shares of Class B common stock, and
shares of preferred stock.
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Principles of Consolidation and Basis of Presentation
The condensed consolidated financial statements include the accounts of Tempus AI, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial information and include the assets, liabilities, revenue and expenses of all wholly owned subsidiaries. Investments in unconsolidated entities in which the Company does not have a controlling financial interest, but has the ability to exercise significant influence, are accounted for under the equity method of accounting. Investments in unconsolidated entities in which the Company is not able to exercise significant influence are accounted for under the cost method of accounting. Certain information and disclosures normally included in the annual consolidated financial statements prepared in
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
accordance with GAAP have been omitted. Accordingly, the unaudited interim
condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s final prospectus, dated June 13, 2024, filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”), on June 17, 2024 (the “Prospectus”) in connection with the IPO. The unaudited interim conde
consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and reflect, in management’s opinion, all the adjustments of a normal, recurring nature that are necessary for the fair statement of the Company’s financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results expected for the full year or any other period. nsed
In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2024 and its results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The condensed consolidated balance sheet at December 31, 2023, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.
The Company believes that its existing cash and cash equivalents and marketable equity securities at June 30, 2024 will be sufficient to allow the Company to fund its current operating plan through at least a period of one year from the date of issuance. As the Company continues to incur losses, its transition to profitability is dependent upon a level of revenues adequate to support the Company’s cost structure. Future capital requirements will depend on many factors, including the timing and extent of spending on research and development activities and growth related expenditures.
Other than described below, there have been no changes to the Company’s significant accounting policies described in the “Notes to the Consolidated Financial Statements” included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2023 included in the Prospectus that have had a material impact on the Company’s consolidated financial statements and accompanying notes.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation.
Emerging Growth Company
The Company is an “emerging growth company” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed
consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expenses, and the related disclosures of contingent assets and liabilities in the condensed consolidated financial statements and accompanying notes. The most significant estimates are related to revenue, accounts receivable, stock-based compensation, operating lease liabilities, and the useful lives of property, equipment and intangible assets. Actual results could differ from those estimates.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Net Loss Per Share Attributable to Common Stockholders
Basic and diluted net loss per share attributable to common stockholders is presented in conformity
with
the two-class
method required for participating securities. The Company considers all series of its redeemable convertible preferred stock to be participating securities. Prior to the IPO, under the two-class
method, the net loss attributable to common stockholders was not allocated to the redeemable convertible preferred stock as the holders of its redeemable convertible preferred stock did not have a contractual obligation to share in the Company’s losses. Upon IPO, the Company’s redeemable convertible preferred stock converted to either Class A or Class B common stock and therefore will be included in allocation of net loss attributable to common stockholders as they will share in the Company’s losses. Net income is attributed to common stockholders and participating securities based on their participation rights. Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options and redeemable convertible preferred stock. As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share. Deferred Offering Costs
Deferred offering costs consist primarily of accounting, legal, and other fees related to the IPO. The Company had
$
million of deferred offering costs as of December 31, 2023. Prior to the IPO, deferred offering costs were capitalized on the consolidated balance sheets. Upon the consummation of the IPO, $
million of deferred offering costs were reclassified into additional
paid-in
capital as an offset against IPO proceeds.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), which provides enhanced disclosures about significant segment expenses. The standard also enhances interim disclosure requirements and provides new segment disclosure requirements for entities with a single reportable segment. The standard is effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Retrospective adoption is required for all prior periods presented. Early adoption is permitted. The Company is currently evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.
In
2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09
is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect that this guidance will have on the consolidated financial statements and related disclosures.11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. |
REVENUE RECOGNITION |
The Company derives revenue from selling lab services (“Genomics”) to physicians, academic research institutions, and other parties. The Company also derives revenue from the commercialization of data generated in the lab (“Data and services”) through the licensing of
de-identified
datasets to third parties and by providing clinical trial support, such as matching patients to clinical trials enrolled in its clinical trial network, and related services. The majority of the Company’s revenue is generated in North America. The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) ASC 606 (“ASC 606”). The Company commences revenue recognition when control of these products is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for such products. This principle is achieved by applying the five-step approach: (i) the Company accounts for a contract when it has approval and commitment from both parties, (ii) the rights of the parties are identified, (iii) payment terms are identified, (iv) the contract has commercial substance and (v) collectability of consideration is probable. Revenues and any contract assets are not recognized until such time that the required conditions are met.
Revenue from Contracts with Customers
Disaggregation of Revenue
The Company provides disaggregation of revenue based on Genomics and Data and services on the condensed consolidated statements of operations and comprehensive loss, as it believes these best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Genomics
The Company generally recognizes revenue for its Genomics product offering when it has met its performance obligation relating to an order. The Company has determined its sole performance obligation to be the delivery of the testing results to the ordering party. The Company receives payments from Medicare, Medicaid, and commercial insurance for clinical orders and directly from research institutions, pharmaceutical companies or other third parties for direct bill orders. The Company recognized Genomics revenue of $112.3 million and $91.9 million for the three months ended June 30, 2024 and 2023, respectively. The Company recognized Genomics revenue of $214.9 million and $174.0 million for the six months ended June 30, 2024 and 2023, respectively.
For clinical orders from Medicare, Medicaid, and commercial insurance, the Company determines transaction price by reducing the standard charge by the estimated effects of any variable consideration, such as contractual allowance and implicit price concessions. The Company estimates the contractual allowances and implicit price concessions based on historical collections in relation to established rates, as well as known current or anticipated reimbursement trends not reflected in the historical data. Estimates are inclusive of the consideration to which the Company will be entitled at an amount for which it is probable that a reversal of cumulative consideration will not occur. The Company monitors the estimated amount to be collected at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Payment is typically due after the claim has been processed by the payer, generally
of $30-120
days from date of service. While management believes that the estimates are accurate, actual results could differ and the potential impact on the financial statements could be significant. The Company recognized revenue for clinical ordersFor direct bill orders from research institutions, pharmaceutical companies, or other third parties, the Company determines the transaction prices based on established contractual rates with the customer, net of any applicable discounts. Payment is typically due between 30 and 60 days following the date of invoice. The Company recognized Genomics revenue for direct bill orders of $10.6 million and $7.5 million for the three months ended June 30, 2024 and 2023, respectively19.8 million and $17.1 million for the six months ended June 30, 2024 and 2023, respectively.
and
$NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Data and services
Data and services revenue primarily represents data licensing and clinical trial services that the Company provides to pharmaceutical and biotechnology companies. The Company’s arrangements with these customers often have terms that span multiple years. However, these contracts generally also include customer
opt-in
or early termination clauses after twelve months without contractual penalty. The customer’s option to renew is generally not viewed as a material right, and as a result, the Company’s contract period for these agreements is generally considered less than one year. The Company determines the transaction price based on established contractual rates with the customer, net of any applicable discounts. The Company recognizes revenue for its Data and services product offering when it has met its performance obligation under the terms of the agreement with the customer. The Company’s two product offerings are as follows: Insights
The Company’s Insights product consists primarily of licensing and analysis of
de-identified
records. Each Insights contract is unique and may include multiple promises, including the delivery of licensed de-identified
records, including refreshes, analytical services or access to the Company’s enhanced Lens application. The Company evaluates each contract to determine which performance obligations are capable of being distinct and separately identifiable from other promises in the contract and, therefore, represent distinct performance obligations. The actual timing of data deliveries can be based on a variety of factors, including, but not limited to, the customer’s requirement and/or the Company’s technological, operational, and human capital capacity; in addition, management assesses relevant contractual terms in contracts with customers and applies significant judgment in identifying and accounting for all terms and conditions in certain contracts. The transaction price is allocated to the distinct performance obligations and revenue is recognized once the performance obligation has been fulfilled. The standalone selling prices are based on the Company’s normal pricing practices when sold separately with consideration of market conditions and other factors, including customer demographics. The Company has determined that the delivery of
de-identified
records and, when applicable, analytical services, and access to its enhanced Lens application are separate and distinct performance obligations. The primary Insights contract types are as follows: | • | Data licensing on a one-time or limited duration basis |
| • | Multi-year data subscriptions de-identified records, and the Company accounts for the service as a right to access license and one performance obligation. Revenue is recognized as access to the dataset is provided, ratably over-time, with the measure of progress time-based. |
| • | Analytical services and other services |
| • | Enhanced Lens application subscription services software-as-a-service |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company recognized revenue from Insights products of $40.7 million and $29.1 million for the three months ended June 30, 2024 and 2023, respectivel72.0 million and $51.9 million for the six months ended June 30, 2024 and 2023, respectively.
y
and
$Trials
The Company’s Trials product includes TIME clinical trial matching services and other clinical trial services.
TIME consists primarily of matching patients to clinical trial sponsors of a potential match. To the extent the contract requires, the Company may also assist in opening the clinical trial site and enrolling the patient in the clinical trial. The Company has determined that, depending on the type of agreement, the performance obligation of these contracts is the delivery of a notification or the enrollment of a patient in a clinical trial. As such, revenue is recognized upon one of the following: delivery of a notification to the physician alerting them to a clinical trial match, or once a patient is enrolled in a trial. Concurrently, the customer, which is the clinical trial sponsor, also receives notification from the Company to establish the performance obligations delivered or fulfilled for the billing period.
In addition to TIME, the Company provides other clinical trial services conducting or supporting studies. Tempus Compass LLC, a subsidiary of the Company, is a contract research organization, or CRO, which manages and executes early and late-stage clinical trials, primarily in oncology. Contracts for clinical trial services can take the form of or fixed-price contracts. contracts are typically priced based on time and materials, and revenue is recognized based on hours and materials used as the services are provided. Fixed-price contracts generally represent a single performance obligation and are recognized over-time using a cost-based input method. Progress on the performance obligation is measured by the proportion of actual costs incurred to the total costs expected to complete the contract. This cost-based method of revenue recognition requires the Company to make estimates of costs to complete its projects on an ongoing basis. Contract costs principally include direct labor and reimbursable costs.
fee-for-service
Fee-for-service
out-of-pocket
The Company recognized revenue from Trials products of $10.5 million and $10.6 million for the three months ended June 30, 2024 and 2023, respectively 21.8 million and $20.9 million for the six months ended June 30, 2024 and 2023, respectively.
and
$For Insights and Trials arrangements, pricing is fixed and the Company may be compensated through a combination of an upfront payment and performance-based, and researchers of $53.6 million and $40.5 million for the three months ended June 30, 2024 and 2023, respectively and $96.9 million and $74.1 million for the six months ended June 30, 2024 and 2023, respectively.
non-refundable
payments due upon completion of the stated performance obligation(s). Payment is generally due 60 to 90 days after the date of service. The Company has no significant obligations for refunds, warranties, or similar obligations for Data and services product offerings. The Company has elected the practical expedient, which allows the Company to not disclose remaining performance obligations for contracts with original terms of twelve months or less. Cancelable contracted revenue is not considered a remaining performance obligation. The Company recognized Data and other revenue from pharmaceutical companies, non-for-profits,
Multi-year contract performance obligations
The Company has limited multi-year contracts that do not contain early termination or customer 197.3 million as of June 30, 2024, of which the Company expects to recognize approximately 42 34 %, 19 %, and 5
opt-in
clauses. These contracts contained defined, noncancelable performance obligations that will be fulfilled in future years. The Company’s remaining performance obligations related to multi-year contracts was $
%
as revenue over the next year, and the remaining %
of its remaining performance obligations as revenue in years two, three, and four, respectively.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Contract Assets
Timing of revenue recognition may differ from the timing of invoicing to customers. Certain performance obligations may require payment before delivery of the service to the customer. The Company recognizes contract assets when the Company has an unconditional right to payment, and when revenues earned on a contract exceeds the billings. Contract assets are presented under accounts receivable, net. Accounts receivable as of June 30, 2024 and December 31, 2023 included contract assets
During the fourth quarter of 2021, and in conjunction with the signing of a November 2021 Master Services Agreement (“the MSA”) with customer AstraZeneca AB (“AstraZeneca”), the Company recognized a contract asset for consideration payable concurrent with the issuance of the common stock warrant in accordance with ASC 606. The contract asset was initially measured equal to the initial fair value of the warrant liability based on the authoritative guidance under FASB ASC 718 . As revenue is recognized over the period of the contractual commitment of the MSA, the associated contract asset amortization is recorded as reduction of revenue. At each reporting period, the short-term portion of the warrant asset is adjusted based on the financial commitment and reclassified to Prepaid expenses and other current assets.
Compensation—Stock Compensation
The following summarizes the warrant contract asset presentation as of June 30, 2024 and December 31, 2023 (in thousands):
June 30, 2024 |
December 31, 2023 |
|||||||
Prepaid expenses and other current assets |
$ | |
$ | |||||
Warrant contract asset, less current portion |
||||||||