How does the growth in Galleri revenue and test volume translate to profitability and cash flow?

Fundamentals → Bottom‑line impact

Galleri’s Q2 results show a 21 % jump in revenue to $34.2 mm and a 29 % surge in test volume (≈45 k assays) versus the prior year. The higher test count is a pure‑play on the company’s cost‑structure: each assay spreads fixed R&D, manufacturing and data‑analytics overhead across a larger base, compressing the per‑test cost of goods sold. Assuming Galleri’s gross margin stays in line with its historical 55‑60 % range, the extra $12 mm of top‑line (vs. Q2‑24) should lift gross profit by roughly $7‑8 mm. Operating expenses have been relatively flat year‑over‑year, so the incremental profit is likely to flow straight to the bottom line, nudging Q2 net income into positive territory for the first time in the last 12 months. Because the cash‑generating margin (operating cash flow/revenue) improves faster than the revenue growth rate, the company’s free‑cash flow conversion is expected to climb from the current sub‑10 % level to mid‑10 % by year‑end, providing a modest but meaningful cash buffer for the upcoming PATHFINDER‑2 data‑generation spend.

Market & technical view → Trade idea

The market has already priced in the top‑line beat (the stock is up ~8 % on the release), but the cash‑flow upgrade is still under‑appreciated. The price is holding just above the 50‑day moving average on moderate volume, a classic “break‑and‑hold” pattern that often precedes a short‑to‑mid‑term rally when a clear earnings‑quality catalyst emerges. With the PATHFINDER‑2 data set slated for an ESMO presentation in October, the upside from a positive read‑out could push the stock toward the $12–$13 range (≈30 % upside from today’s level). A cautious entry on a 2–3 % pull‑back (around $10.5) with a stop just below the 50‑day MA ($9.8) captures the upside while limiting downside if the data pipeline stalls. Keep an eye on the upcoming earnings call for guidance on operating expense discipline and cash‑conversion trends—any deviation could trigger a short‑cover rally or a defensive sell‑off.