Exagen Earnings Call Highlights Growth Amid Headwinds

Exagen ((XGN)) has held its Q1 earnings call. Read on for the main highlights of the call.

Exagen’s latest earnings call painted a cautiously optimistic picture, with management emphasizing record quarterly revenue, double‑digit test volume growth and steady improvements in profitability metrics. Executives highlighted consistent average selling price expansion and a growing pharma services backlog, while acknowledging ongoing GAAP losses, reimbursement uncertainties and some one‑off headwinds that temper the otherwise constructive tone.

Record First Quarter Revenue and Growth

Exagen reported record first‑quarter revenue of $17.3 million, representing a 12% increase versus the prior year and underscoring solid demand for its autoimmune testing portfolio. Management framed the quarter as an important proof point on their growth trajectory and used the performance to justify reaffirming their 2026 revenue outlook of $70 million to $73 million.

Test Volume Growth and Market Share Gains

AVISE CTD test volume climbed 10% year over year, with overall testing activity holding at a mid‑30,000 quarterly run rate despite weather disruption. Given management’s estimate that the broader market is growing around 5%, Exagen believes it is steadily gaining share from a current base of roughly 3% market penetration.

ASP Expansion and Revenue Cycle Tailwinds

The trailing 12‑month average selling price rose to $444, up $25 or 6% compared with last year and marking 12 straight quarters of ASP gains. Q1 benefited from over $900,000 in collections on claims older than 360 days, which added roughly $25 to in‑period ASP and showcased both revenue cycle progress and some lumpiness in reported pricing.

Improvement in Profitability Metrics

Adjusted EBITDA loss narrowed to $2.2 million, a 14% improvement from the prior year as operating leverage started to show in the model. Gross margin reached 59% in the quarter, up 360 basis points sequentially, and management reiterated a long‑term target in the mid‑60s that will require further ASP gains, scale and cost discipline.

Commercial Momentum and Sales Productivity

The commercial engine continued to strengthen, with ordering clinicians increasing about 15% year over year to just over 2,700. Trailing 12‑month volume per territory improved around 4%, and the company expanded its territory footprint while signaling that newer sales reps still have room to ramp and contribute additional growth.

Biopharma Services and Backlog Development

Pharma services generated roughly $300,000 of revenue in the quarter, a relatively modest top‑line contributor but strategically important for diversification. Exagen reported a contract backlog exceeding $5 million expected over the next two to three years, suggesting a growing annuity‑like stream that can complement the core testing business.

Pipeline Progress and Scientific Visibility

On the innovation front, R&D efforts are advancing with a stand‑alone myositis test targeted for early 2027, extending the company’s reach into additional autoimmune indications. Scientific visibility is increasing as evidenced by nine abstracts accepted at Autoimmunity 2026, two manuscripts accepted for publication and new markers such as PAD4 and RA33 already supporting pharma partnerships.

Liquidity Position and Cash Runway

Exagen ended the first quarter with just under $22 million in cash, cash equivalents and restricted cash, providing a meaningful buffer as it works toward breakeven. Management expressed confidence that this liquidity, combined with improving margins and disciplined spending, gives the company runway toward sustainable positive free operating cash flow.

Weather‑Driven Volume Disruption

Severe winter storms in late January and early February curtailed patient access and reduced physician office days, creating a temporary but material headwind. Management estimates that roughly one‑third of volume was lost across two weeks, equating to a couple of thousand tests and a non‑recoverable drag on first‑quarter volume growth.

Ongoing Operating Loss and Elevated OpEx

Despite notable improvement, the business remains unprofitable with an adjusted EBITDA loss of $2.2 million and GAAP operating losses continuing. Operating expenses reached $13.6 million, up around 9% year over year as SG&A topped $12 million and R&D rose more than 20%, reflecting ongoing investment in growth and pipeline rather than cost retrenchment.

Reliance on Lumpy Prior‑Period Collections

A significant slice of the ASP uplift in the quarter stemmed from approximately $900,000 in prior‑period collections on claims older than 360 days, highlighting progress in revenue cycle management. However, management cautioned that these collections are inherently lumpy and not assumed to recur at the same level, introducing some uncertainty into near‑term ASP trends.

Coverage and Reimbursement Uncertainty

The company’s MolDX local coverage determination remains pending with no clear timeline, leaving certain reimbursement questions unresolved. Until that LCD is finalized, Exagen may have less leverage in expanding Medicare and Medicare Advantage adoption and in negotiating with commercial payers, prolonging a key policy overhang for investors.

Client‑Bill Contract Loss and Concentration Risk

Exagen also addressed the earlier loss of a client‑bill contract with Northwell in July of last year, which removed a notable customer from its base. While management characterized the event as largely a one‑off, it underscores the concentration risk inherent in large institutional accounts and the importance of broadening the customer footprint.

First‑Half Cash Use from A/R Timing

Cash flow in the first half is being pressured by the timing of claims as management deliberately holds certain submissions early in the year, boosting accounts receivable. They expect this working capital dynamic to normalize in the second half, but in the interim it elevates cash use and may obscure underlying operating progress for some quarters.

Gross Margin Still Below Long‑Term Target

While the 59% gross margin marks meaningful progress, it remains below the company’s long‑term goal of reaching the mid‑60s. Achieving that target will likely require further ASP expansion toward management’s reimbursement objectives, ongoing scale benefits from higher volumes and continued cost optimization in lab operations.

Forward‑Looking Guidance and Outlook

Management reaffirmed full‑year 2026 revenue guidance of $70 million to $73 million, with the midpoint assuming high‑single‑digit volume growth and low‑single‑digit ASP gains off a Q4 2025 ASP of around $430. They expect ASP to trend toward at least half of Medicare reimbursement, gross margins to step up into the mid‑60s over time and AR‑driven cash usage to ease in the second half, while reminding investors that prior‑period collections and seasonality can make quarterly results choppy.

Exagen’s earnings call ultimately balanced solid operational momentum against a still‑developing profitability profile and lingering reimbursement risk. For investors, the story hinges on whether sustained volume growth, ASP expansion and a growing pharma services backlog can outpace weather, policy and collection noise and eventually carry the company to durable positive cash flow.