So the go-forward guide for the fourth quarter, we just posted a plus $5 million revenue quarter from Q2 to Q3, and we’d expect something similar in the fourth quarter as we’re starting to see a normalization of what we can expect in terms of that CMA to exome conversion.
Mark Massaro: Okay. That is helpful. So it looks like the midpoint of your guide would imply about 10% or 11% revenue growth for the full year. Recognizing that you are picking up a higher mix from exomes. Is it reasonable as we think about our models for 2024 that greater than 10% should be readily achievable. But any other granularity or commentary about the levers of growth in ‘24 would be helpful.
Kevin Feeley: Yes. I mean — so we’re not providing full year ‘24 guidance. We’ll do that in early January. But tried to outline for you in my prepared remarks, and there’s a page in our earnings materials as the deck we posted to our website really to sketch out what we believe is an illustration of the path to profitability. And believe firmly we can get there to breakeven and beyond, even if you assumed year-over-year revenue growth of around 20%. And if you think about the go-forward base, all of our growth is really going to come from the exome portfolio, which just grew well in excess of that mark. And so I really believe that you should expect similar exome growth year-over-year moving forward. If you recall, this year was impacted earlier from some price concessions we offer to the marketplace at the end of next year.
So that played with the year-over-year growth rate some. That’s all worked through the system and believe at this point, you should expect on exome only sequential ASP improvements moving forward. So we might expect a greater growth rate year-over-year from 23% to 24% than what we posted this year.
Mark Massaro: Okay. That’s helpful. And if I can sneak one last one. The adjusted gross margin from continuing ops of 48%, that was strong and well above our modeling. Do you think that’s perhaps a level that you can build off from here? Or were there any one timers in Q3?
Kevin Feeley: Yes. We do think it’s a new level or a base to work off of. There were no meaningful onetime items in that number either in terms of ASPs revenue or COGS. To your point, we are seeing some efficiency initiatives take hold and provide results ahead of schedule. I tried to call out a few in my opening remarks. But yes, we’ve outperformed in the cost per test, in particular, cost per test around exome and think that those efficiency gains are here to stay.
Mark Massaro: Okay. That’s it from me. Thank you
Operator: Thank you. One moment for our next question. And our next question will come from the line of Brandon Couillard from Jefferies, your line is open.
Matt Kim: Thanks. This is Matt on for Brandon. Maybe sticking with gross margin there. I appreciate all the color, Kevin. In terms of the 3 buckets you spiked out for the sequential improvement in gross margin, should we think about each one of those kind of having a similar contribution? Or is there one in there that kind of was an outsized driver to the improvement here we saw in 3Q?
Kevin Feeley: It’s really the — I would say, take them in the relative order that I outlined with cost per test leading the way there. And those are coming from a number of areas, both in the wet and dry side of the laboratory. Some are process related, some are technology related. The new machinery from Illumina is paying off as expected. I think what gives us the most comfort and conviction moving forward is we’ve got a large road map going forward of additional efficiency items that are near-term line of sight and can be relied on. And so we’re only just getting started in driving down cost per test of exome. That one probably leads the way, and you can take them into ranked order in which I outlined.
Matt Kim: That’s helpful. And then I appreciate all the color on the cost outs. I just wanted to ask, so $40 million of further cost outs reiterated your profitability target for 2025, so not pulling it forward on those or anything. I mean are we supposed to think about that when that profitability of custom comes it could be more meaningful given the additional $40 million that’s coming out today or just trying to get hands around using the profitability target now pulling it forward, but taking another $40 million out of the cost structure, thanks.
Kevin Feeley: Yes, I think the marker of 2025 acknowledges that the revenue base came in a bit lower than expected for this full year. The $40 million really meant to ensure we meet the commitment we made, which was to turn this company profitable by the end of 2025. We’re more convicted today in our ability to do that. Frankly, we found more efficiencies as part of a recent review than we thought we might on the outside — outset of that analysis. I think any upside to be able to pull profitability into 2024 would come from outsized revenue growth, which, of course, we’re aiming to achieve, but wanted to be careful not to overpromise.
Matt Kim: I guess, last one maybe for Katherine. You guys have made a lot of changes on the commercial side, working on new territories, new outreach programs, things like that. Maybe just talk a little bit about what needs and hire for your Chief Growth Officer, should we expect any kind of change or additional things there in the commercial side or more just kind of a continuation of some of the moves you guys have made so far this year? Thanks.
Katherine Stueland: Certainly. So just added Melanie Duquette, who joined in September to lead the overall commercial strategy to working off of a strong foundation that we have in place, I think, to take us to kind of the 2.0 version of where we want to go in terms of commercial efficiency. So really, what we expect is, I would say, the cross-functional teams that are focusing on growth and on account profitability, to be really working more efficiently together. So I would say she has done a tremendous job when she was at her prior company, really shifting the focus from volume to keeping the team focused on volume on revenue, on ASPs and overall account profitability. So I would say that’s what we’re looking for in terms of the shifts moving forward and just some continued improvement on overall efficiency and ensuring that those teams that we’re working with are working in a more singular way and support of account growth.
So continued focus on opening up markets but doing it in a way that will align with our P&L, and we’ll continue to focus on delivering on good patient care.
Operator: One moment for our next question. And our next question will come from the line of Matt Sykes from Goldman Sachs.
Prashant Kota: This is Prashant Kota on for Matt. What split do you see between inpatient and outpatient exome testing? And do you see that evolving over time?
Katherine Stueland: Hey Prashant. Yes. So the vast majority, I think 97%, 98% is in the outpatient setting today, really predominantly focused on exome versus genome in outpatient setting. I would say though that the rapid setting in the inpatient, which is primarily a utilization of our rapid genome product, that is growing quickly. It’s just a very small portion of the business. I think that’s going to fall into the category of longer-term market building. There’s a lot of fundamental dynamics that we have to continue to work through in order to drive utilization. That being said, we just had a really nice win at a health system in Florida, where we’ve been able to get institutional contracts set up to be able to drive utilization of our rapid genome in the NICU.
