Exagen (XGN) Q3 2026 earnings review
Exagen test prices keep rising, but operating losses widen again
Exagen, a maker of blood tests for autoimmune diseases, slipped back into wider losses after a one-off collection boost faded. Third-quarter revenue rose 7% from a year ago to $18 million, while its operating loss widened as sales and overhead expenses climbed. Chief executive John Aballi kept the full-year outlook unchanged, which by our math leaves fourth-quarter growth near 7% as well.
| Revenue | $18.4M +6.8% from a year ago |
|---|---|
| 12-month average test price | $451 +$10 from a year ago |
| Adjusted EBITDA loss | -$1.9M -$0.1M last quarter |
| Full-year revenue outlook | Unchanged middle of the range: 10.4% growth |
⚖️ Verdict: 🔴 Bearish
The story got worse because last quarter's near-breakeven profit proved temporary rather than the new baseline. Without the big prior-period insurance collections that lifted the second quarter, quarterly sales dropped below the $20 million level the lab needs to stop losing cash, and the share count climbed by another 1.2 million shares. One bright spot: the twelve-month average test price rose for a fourteenth straight quarter.
The question now is whether Exagen can reach its $20 million quarterly break-even mark before ongoing losses require more dilution. Bulls argue that rising insurer payouts and the early-2027 myositis test launch will push sales over the line, while sceptics point out that core revenue growth has slowed to single digits. The December 15 product webcast and fourth-quarter gross margin will test both views.
🐂 Bull Case
Average Test Price Rose for a Fourteenth Quarter
Exagen sells AVISE CTD, a blood test panel that helps doctors diagnose autoimmune diseases such as lupus and rheumatoid arthritis. Chief executive John Aballi said that "test volume and ASP both ahead of the same period last year" kept the business growing, and the company presented nine studies at a major rheumatology conference covering more than 375,000 patient tests.
The average selling price (ASP) per test over the past twelve months reached $451, up $10 from a year ago and $5 higher than last quarter. That marks 14 straight quarters of price gains as commercial insurers pay more for the updated panel, although the 2.3% annual increase is slower than the 6% pace seen in the first quarter.
What to watch: the quarterly filing's breakdown of revenue from claims billed in earlier periods. A small prior-period figure would prove that third-quarter test prices rose on current collections rather than old appeals.
Drug-Maker Upfront Payments Hold Near Record Highs
Alongside patient testing, the San Diego diagnostics group runs research projects for pharmaceutical companies developing autoimmune drugs. When drug makers pay upfront for these work orders, Exagen records the cash as deferred revenue until it completes the work.
Deferred revenue ended September at $1.40 million, more than double the $641,000 on the books a year ago and only $94,000 below June's record level by our math. The press release did not update total drug-maker contract backlog, rheumatoid arthritis doctor ordering rates, or collections on claims older than a year.
What to watch: drug-maker services revenue and total contract backlog in the quarterly filing and call remarks. Holding backlog above $6 million would confirm that biopharma demand is still expanding.
🐻 Bear Case
Losses Widened Again After One-Off Collections Faded
"Our third quarter extends what is fast becoming a record year for Exagen, and our ability to execute against our vision is increasingly evident in the results," chief executive John Aballi said. Last quarter, the lab came within $114,000 of breaking even on adjusted EBITDA, a cash flow measure that excludes stock pay, interest and one-off charges.
That near-breakeven result relied on $1.3 million of payments collected from older periods, and this quarter the losses opened back up. Gross margin — the share of sales left after the cost of running tests — slipped 2.5 percentage points from the second quarter to 58.8%, while overhead and sales costs climbed.
- Operating loss: $4.4 million, wider than $3.1 million a year ago and $1.7 million last quarter
- Adjusted EBITDA loss: $1.93 million, worse than $1.90 million a year ago and $114,000 last quarter
- Sales and administrative costs: 69.7% of revenue, up 3.3 percentage points from a year ago by our math
- Research and development: 9.9% of revenue, plus a 3.2-point charge for acquired software
What to watch: fourth-quarter gross margin against Finance Chief Jeff Black's 60% year-end target. Falling short of 60% would keep quarterly cash losses wide heading into the 2027 product launch.
Revenue Growth Slowed and the Plan Stays Below Breakeven
Exagen has told investors that its laboratory needs about $80 million in yearly sales — or $20 million a quarter — to break even on adjusted EBITDA. In the second quarter, extra collections from older insurance claims lifted revenue to $19.9 million, right at that mark.
In the third quarter, revenue dropped 7.6% from the prior three months to $18.4 million, slowing annual growth from 16% to 6.8%. The diagnostics maker kept its full-year sales plan at $72 million to $75 million, which by our math leaves $17.8 million at the middle of the range for the fourth quarter.
That fourth-quarter figure represents 7.2% growth from a year ago and sits more than $2 million below the quarterly level needed to stop losing money. Because the second half is running near $18 million a quarter, reaching the break-even mark now depends on next year's test launches.
What to watch: fourth-quarter revenue against the $19.3 million needed to hit the top of the full-year range. Landing near the middle of the range would confirm that the core lupus and arthritis panel is growing in the single digits.
Share Issuance and Stock Pay Keep Diluting Owners
Cash on the balance sheet rose by $3.5 million during the third quarter to $28.1 million, even though operations posted an adjusted EBITDA loss of $1.93 million and paid $1.20 million in interest. The balance sheet shows where the extra money came from.
Common shares on issue jumped by 1.23 million in three months to 25.4 million, while paid-in capital sits $9.8 million higher than at year-end. Stock-based pay to employees also more than doubled from a year ago to $1.24 million, pushing the average share count up 8.3% over the past year.
What to watch: the financing section of the quarterly cash flow statement. It will show how much cash came from selling new stock versus warrant exercises to fund ongoing losses.
Risks This Quarter Didn't Answer
Four standing business and financial risks received no new numbers in the third-quarter earnings release and await the full quarterly filing or conference call.
- Customer concentration: two payers accounted for 42% of revenue and one held 32% of receivables in the second quarter; the filing's footnote will show if that exposure grew.
- Medicare coverage: the local coverage decision for AVISE Lupus has been pending since 2022 under a regulatory freeze; any timeline update would come on the call.
- Myositis launch reimbursement: Aballi said the team remains "on track to launch our myositis offering early in 2027", with a December 15 webcast set to detail the test.
- Debt covenants and supplier rules: the $10 million operating loan tranche expired September 30, and two suppliers provide 93% of lab reagents; the filing will update both.
👓 Other Themes
Exagen Bought an AI Software Platform for Clinics
On July 16, 2026, Exagen bought patents, source code and technology "comprising an AI-enabled rheumatology practice workflow-optimization software platform". The company treated the deal as an asset purchase and recorded a one-time research and development charge of $587,000 in the third quarter, expanding its software tools from internal billing into doctors' offices.
💲 Other KPIs
Uncollected bills owed by insurers and customers fell 7.5% from $12.4 million in the second quarter, moving in line with the 7.6% sequential drop in revenue. Receivables had spiked to $15.8 million in the first quarter when the lab held back claims, then fell in both the second and third quarters as those bills were collected.
Total borrowings and finance lease debt edged down byour math from $25.5 million in June and $26.0 million at the end of 2025. The credit facility continues to cost the business $1.20 million a quarter in interest expense, adding to net losses while operations remain below break-even.
🔮 Guidance
Unchanged. Exagen kept its full-year target calling for 10.4% growth at the middle of the range, after raising the band by $2 million last quarter. By our math, that leaves $16.3 million to $19.3 million for the fourth quarter, or $17.8 million at the middle (+7.2% from a year ago). Last year, annual revenue landed $0.9 million below the middle of the company's range.
❓ Key Questions
How much third-quarter revenue came from older claims?
In the second quarter, $1.3 million of collections from prior periods lifted revenue and profit, accounting for almost half the reported growth. Investors need the third-quarter figure from the filing to see the true underlying growth rate of the test business.
How many shares did Exagen sell to raise cash?
Cash rose by $3.5 million even though operations lost money, and common shares on issue increased by 1.23 million during the quarter. Management did not say in the release how much cash came from at-the-market stock sales versus warrant exercises.
Did Exagen draw the $10 million loan tranche before September 30?
A $10 million operating tranche under the Perceptive credit facility was available only through September 30, 2026, subject to revenue milestones. Non-current borrowings barely moved, so investors need to know if that borrowing capacity expired unused.
What are the pricing and launch costs for the myositis test?
The company plans to launch its myositis test early in 2027 and will host an educational webcast on December 15. Because sales and overhead expenses are already rising faster than revenue, the upfront commercial cost of the launch matters for cash burn.