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NeoGenomics Reports 51% Revenue Growth to $105 Million in the Third Quarter

Tuesday, 29 October 2019 07:00 AM

NeoGenomics, Inc.

Topic:
Earnings

Third-Quarter Highlights:

  • Consolidated revenue increased 51% to $104.7 million
  • Clinical Services revenue increased 56% to $92.6 million
  • Pharma Services revenue increased 26% to $12.1 million
  • Pharma Services backlog increased 22% to $118.3 million
  • Gross profit increased 57% to $50.8 million
  • Full-year 2019 guidance increased

FORT MYERS, FL / ACCESSWIRE / October 29, 2019 / NeoGenomics, Inc. (NASDAQ:NEO) (the "Company"), a leading provider of cancer-focused genetics testing services, today announced third-quarter and nine-month results for the period ended September 30, 2019.

Douglas M. VanOort, the Company's Chairman and CEO, commented, "Our Company's third-quarter results were excellent. Our Clinical Services Division reported accelerating volume growth, and average revenue-per-test increased on a year-over-year basis for the fifth consecutive quarter. We also continued to drive efficiencies in our laboratory operations. Our Pharma Services Division reported record new business wins and our backlog of signed contracts is at an all-time high.

During the quarter, we made significant investments in research and development, including substantial upgrades to our next-generation sequencing offerings and capabilities. We also hired nearly 200 full-time employees to accommodate our growth and ensure that we maintain industry leading quality and service. Finally, we continued to make good progress with our integration of Genoptix and look forward to that work being substantially complete by the middle of next year.

We are pleased with our performance this year, are investing to expand our capabilities, and remain confident in our outlook for future growth."

Third-Quarter Results

Consolidated revenue for the third quarter of 2019 was $104.7 million, an increase of 51% over the same period in 2018. Clinical test volume(1) increased by 35% year over year. Average revenue per clinical test ("revenue per test") increased by 15% to $369, primarily due to the acquisition of Genoptix, and the impact of favorable test mix. Clinical Services revenue was $92.6 million resulting in a 56% increase over the third quarter of 2018. Pharma Services revenue was $12.1 million, which represented a 26% increase over the third quarter of 2018.

Gross profit improved by $18.5 million, or 57%, compared to the third quarter of 2018, to $50.8 million. Gross margin improved by approximately 180 basis points year-over-year to 48.6%. Gross margin improvement reflects the impact of volume growth, higher revenue per test, productivity gains, and cost efficiencies. Average cost of goods sold per clinical test ("cost per test") increased by 12% year over year, reflecting the impact of the Genoptix acquisition, partially offset by continued efficiencies.

Operating expenses increased by $18.8 million, or 66%, compared to the third quarter of 2018, primarily due to the Genoptix acquisition, investments in research and development, and growth initiatives.

Net income for the quarter was $2.1 million compared to net income of $2.0 million for the third quarter of 2018.

Adjusted EBITDA(2) was $14.9 million for the quarter, a 32% improvement from the prior year. Adjusted Net Income(2) was $7.5 million compared to $4.6 million in the third quarter of 2018.

Cash and cash equivalents were $178.9 million at the end of the third quarter, primarily reflecting the proceeds from the equity offering that occurred in the second quarter of 2019 as well as strong cash flow in the third quarter. Days sales outstanding ("DSO") decreased 1 day to 80 days when compared to the second quarter of 2019.

2019 Financial Outlook:

The Company is increasing its recently revised full-year 2019 guidance, initially issued on February 19, 2019.

(in millions)
  Initial Guidance     Q1 Revised Guidance     Q2 Revised Guidance     Q3 Revised Guidance  
Consolidated revenue
      $379 - $395       $384 - $400       $388 - $402       $401 - $406  
Net (loss)/income
      ($3) - $3       ($3) - $1       ($1) - $3       $1 - $3  
Adjusted EBITDA(2)
      $49 - $53       $52 - $56       $54 - $58       $56 - $58  
                                   

Please also refer to the tables reconciling forecasted Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted EPS to their closest generally accepted accounting principles ("GAAP") equivalent in the section of this report entitled "Reconciliation of Non-GAAP Financial Guidance to Corresponding GAAP Measures."

The Company reserves the right to adjust this guidance at any time based on the ongoing execution of its business plan. Current and prospective investors are encouraged to perform their own due diligence before buying or selling any of the Company's securities, and are reminded that the foregoing estimates should not be construed as a guarantee of future performance.

Conference Call

The Company has scheduled a webcast and conference call to discuss its third quarter results on Tuesday, October 29, 2019 at 08:30 AM EDT. Interested investors should dial (844) 602-0380 (domestic) and (862) 298-0970 (international) at least five minutes prior to the call. A replay of the conference call will be available until 08:30 AM EST on November 5, 2019, and can be accessed by dialing (877) 481-4010 (domestic) and (919) 882-2331 (international). The playback conference access code is 49691. The webcast may be accessed under the Investor Relations section of our website at http://neogenomics.com/. An archive of the webcast will be available until 08:30 AM EST on January 29, 2020.

About NeoGenomics, Inc.

NeoGenomics, Inc. specializes in cancer genetics testing and information services. The Company's Clinical Services division provides one of the most comprehensive oncology-focused testing menus in the world for physicians to help them diagnose and treat cancer. The Company's Pharma Services division serves pharmaceutical clients in clinical trials and drug development.

Headquartered in Fort Myers, Florida, NeoGenomics operates College of American Pathologists ("CAP") accredited and Clinical Laboratory Improvement Amendments ("CLIA") certified laboratories in Fort Myers and Tampa, Florida; Aliso Viejo, Carlsbad and Fresno, California; Houston, Texas; Atlanta, Georgia; Nashville, Tennessee; Rolle, Switzerland, and Singapore. NeoGenomics serves the needs of pathologists, oncologists, academic centers, hospital systems, pharmaceutical firms, integrated service delivery networks, and managed care organizations throughout the United States, and pharmaceutical firms in Europe and Asia. For additional information about NeoGenomics, visit http://neogenomics.com/.

Forward Looking Statements

Certain information contained in this press release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995, including the information set forth in the "Full-Year 2019 Financial Outlook". These forward looking statements involve a number of risks and uncertainties that could cause actual future results to differ materially from those anticipated in the forward-looking statements as the result of the Company's ability to continue gaining new customers, offer new types of tests, integrate its acquisition of the Genoptix business and otherwise implement its business plan, as well as additional factors discussed under the heading "Risk Factors" and elsewhere in the Company's Annual Report on Form 10-K filed with the SEC on February 26, 2019, amended by a 10K/A filed with the SEC on May 8, 2019. As a result, this press release should be read in conjunction with the Company's periodic filings with the SEC. In addition, it is the Company's practice to make information about the Company available by posting copies of its Company Overview Presentation from time to time on the Investor Relations section of its website at http://ir.neogenomics.com/.

Forward-looking statements represent the Company's estimates only as of the date such statements are made (unless another date is indicated) and should not be relied upon as representing the Company's estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its estimates change.

For further information, please contact:

NeoGenomics, Inc.

William Bonello
Chief Strategy and Corporate Development Officer
Director, Investor Relations
(239)690-4238 (w) (239)284-4314 (m)
[email protected]

NeoGenomics, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

ASSETS
  September 30, 2019 (Unaudited)     December 31, 2018  
Cash and cash equivalents
  $ 178,891     $ 9,811  
Accounts receivable, net
    91,133       76,919  
Inventories
    12,632       8,650  
Other current assets
    9,345       8,288  
Total current assets
    292,001       103,668  
Property and equipment (net of accumulated depreciation of $64,165 and $50,127, respectively)
    62,488       60,888  
Operating lease right-of-use assets
    25,797       -  
Intangible assets, net
    129,084       140,029  
Goodwill
    198,571       197,892  
Other assets
    3,214       2,538  
TOTAL ASSETS
  $ 711,155     $ 505,015  
 
               
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Accounts payable and other current liabilities
  $ 53,380     $ 46,753  
Short-term portion of financing obligations
    12,000       14,172  
Short-term portion of operating leases
    3,527       -  
Total current liabilities
    68,907       60,925  
 
               
Long-term portion of financing obligations
    97,009       98,130  
Long-term portion of operating leases
    23,870       -  
Deferred income tax liability, net
    19,688       22,457  
Other long-term liabilities
    4,674       3,060  
Total long-term liabilities
    145,241       123,647  
TOTAL LIABILITIES
    214,148       184,572  
 
               
TOTAL STOCKHOLDERS' EQUITY
    497,007       320,443  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 711,155     $ 505,015  
                 

NeoGenomics, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
 
  2019     2018     2019     2018  
NET REVENUE:
                       
Clinical Services
  $ 92,565     $ 59,449     $ 267,757     $ 175,960  
Pharma Services
    12,107       9,647       34,205       24,306  
Total revenue
    104,672       69,096       301,962       200,266  
 
                               
COST OF REVENUE
    53,840       36,775       155,049       110,111  
GROSS PROFIT
    50,832       32,321       146,913       90,155  
 
                               
Operating expenses:
                               
General and administrative
    33,054       21,055       94,773       59,106  
Research and development
    2,611       446       6,407       2,475  
Sales and marketing
    11,508       6,900       35,048       21,355  
Total operating expenses
    47,173       28,401       136,228       82,936  
INCOME FROM OPERATIONS
    3,659       3,920       10,685       7,219  
 
                               
Interest expense, net
    203       1,873       3,333       4,766  
Other (income) expense
    (35 )     (30 )     5,124       31  
Loss on extinguishment of debt
    -       -       1,018       -  
Income before taxes
    3,491       2,077       1,210       2,422  
Income tax expense (benefit)
    1,348       54       (500 )     135  
NET INCOME
  $ 2,143     $ 2,023     $ 1,710     $ 2,287  
 
                               
Deemed dividends on preferred stock and amortization of beneficial conversion feature
    -       -       -       5,627  
Gain on redemption of preferred stock
    -       -       -       (9,075 )
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
  $ 2,143     $ 2,023     $ 1,710     $ 5,735  
 
                               
INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
                               
Basic
  $ 0.02     $ 0.02     $ 0.02     $ 0.07  
Diluted
  $ 0.02     $ 0.02     $ 0.02     $ 0.06  
 
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                               
Basic
    103,899       87,253       99,149       87,381  
Diluted
    107,880       90,899       102,766       89,925  
                                 

NeoGenomics, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

 
  Nine Months Ended September 30,  
CASH FLOWS FROM OPERATING ACTIVITIES
  2019     2018  
Net income
  $ 1,710     $ 2,287  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    15,200       11,477  
Loss on disposal of assets
    451       278  
Loss on debt extinguishment
    1,018       -  
Amortization of intangibles
    7,482       4,255  
Amortization of debt issue costs
    323       392  
Non-cash stock based compensation
    7,727       5,148  
Non-cash operating lease expense
    3,224       -  
Changes in assets and liabilities, net
    (17,125 )     5,496  
Net cash provided by operating activities
  $ 20,010     $ 29,333  
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchases of property and equipment
    (13,953 )     (11,091 )
Acquisition adjustment
    399       -  
Net cash used in investing activities
  $ (13,554 )   $ (11,091 )
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Advances on revolving credit facility
    -       10,000  
Redemption of preferred stock
    -       (50,096 )
Repayment of revolving credit facility
    (5,000 )     (35,400 )
Repayment of equipment and other loans
    (5,481 )     (4,774 )
Proceeds from term loan
    100,000       30,000  
Repayment of term loan
    (96,750 )     (3,187 )
Payments of debt issue costs
    (1,051 )     (576 )
Issuance of common stock, net
    10,132       6,535  
Proceeds from equity offering, net
    160,774       134,910  
Net cash provided by financing activities
  $ 162,624     $ 87,412  
Effects of foreign exchange rate changes on cash and cash equivalents
    -       (35 )
Net change in cash and cash equivalents
  $ 169,080     $ 105,619  
 
               
Cash and cash equivalents, beginning of period
    9,811       12,821  
Cash and cash equivalents, end of period
  $ 178,891     $ 118,440  
                 

Use of Non-GAAP Financial Measures

The Company's financial results and financial guidance are provided in accordance with GAAP and using certain non-GAAP financial measures. Management believes that the presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of the Company's core operating results and comparison of core operating results across reporting periods. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the Company's business. Management believes that these non-GAAP financial measures enable investors to evaluate the Company's operating results and future prospects in the same manner as management. The non-GAAP financial measures do not replace the presentation of GAAP financial results and should only be used as a supplement to, and not as a substitute for, the Company's financial results presented in accordance with GAAP. There are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation, and do not present the full measure of the Company's recorded costs against its net revenue. In addition, the Company's definition of the non-GAAP financial measures below may differ from non-GAAP measures used by other companies.

Definitions of Non-GAAP Measures

Non-GAAP Adjusted EBITDA

"Adjusted EBITDA" is defined by NeoGenomics as net income from continuing operations before: (i) interest expense, (ii) tax expense, (iii) depreciation and amortization expense, (iv) non-cash stock-based compensation expense, and, if applicable in a reporting period, (v) acquisition and integration related expenses, (vi) non-cash impairments of intangible assets, (vii) debt financing costs, (viii) and other significant non-recurring or non-operating (income) or expenses.

Non-GAAP Adjusted Net Income

"Adjusted Net Income" is defined by NeoGenomics as net income available to common shareholders from continuing operations plus: (i) non-cash amortization of customer lists and other intangible assets, (ii) non-cash stock-based compensation expense, (iii) non-cash deemed dividends on preferred stock, (iv) non-cash amortization of preferred stock beneficial conversion feature, and, if applicable in a reporting period, (v) acquisition and integration related expenses, (vi) non-cash impairments of intangible assets, (vii) debt financing costs, (viii) and other significant non-recurring or non-operating (income) or expenses.

Non-GAAP Adjusted Diluted EPS

"Adjusted Diluted EPS" is defined by NeoGenomics as adjusted net income divided by adjusted diluted shares outstanding. Adjusted diluted shares outstanding is the sum of diluted shares outstanding and the weighted average number of common shares that would be outstanding if the preferred stock were converted into common stock on the original issue date based on the number of days such common shares would have been outstanding in the reporting period. In addition, if GAAP net income is negative and adjusted net income is positive, adjusted diluted shares will also include any options or warrants that would be outstanding as dilutive instruments using the treasury stock method.

Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Adjusted EBITDA
(Unaudited)
(In thousands)

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
 
  2019     2018     2019     2018  
Net income (GAAP)
  $ 2,143     $ 2,023     $ 1,710     $ 2,287  
Adjustments to net income:
                               
Interest expense, net
    203       1,873       3,333       4,766  
Income tax expense (benefit)
    1,348       54       (500 )     135  
Amortization of intangibles
    2,380       1,421       7,482       4,255  
Depreciation
    4,848       4,034       15,200       11,477  
EBITDA (non-GAAP)
  $ 10,922     $ 9,405     $ 27,225     $ 22,920  
Further adjustments to EBITDA:
                               
Acquisition and integration related expenses
    334       -       2,143       -  
Loss on extinguishment of debt
    -       -       1,018       -  
Other significant non-recurring expense
    364       670       5,509       2,486  
Non-cash, stock-based compensation
    3,275       1,191       7,727       5,148  
Adjusted EBITDA (non-GAAP)
  $ 14,895     $ 11,266     $ 43,622     $ 30,554  
                                 

Reconciliation of GAAP Net Income Available to Common Stockholders to Non-GAAP Adjusted Net Income and GAAP EPS to Non-GAAP Adjusted EPS
(Unaudited)
(In thousands, except per share amounts)

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
 
  2019     2018     2019     2018  
Net income attributable to common stockholders (GAAP)
  $ 2,143     $ 2,023     $ 1,710     $ 5,735  
Adjustments to net income , net of tax:
                               
Amortization of intangibles
    1,880       1,123       5,911       3,362  
Deemed dividends on preferred stock
    -       -       -       10,198  
Amortization of preferred stock beneficial conversion feature
    -       -       -       (13,646 )
Non-cash stock-based compensation expenses
    2,960       941       6,939       4,068  
Acquisition and integration related expenses
    264       -       1,669       -  
Other significant non-recurring expenses
    288       530       4,352       1,964  
Loss on extinguishment of debt
    -       -       804       -  
Adjusted net income (non-GAAP)
  $ 7,535     $ 4,617     $ 21,385     $ 11,681  
 
                               
Net income per common share (GAAP)
                               
Diluted EPS
  $ 0.02     $ 0.02     $ 0.02     $ 0.06  
Adjustments to diluted income per share:
                               
Amortization of intangibles
    0.02       0.01       0.06       0.04  
Deemed dividends on preferred stock
    -       -       -       0.11  
Amortization of preferred stock beneficial conversion feature
    -       -       -       (0.15 )
Non-cash stock based compensation expenses
    0.03       0.01       0.07       0.05  
Acquisition and integration related expenses
    -       -       0.02       -  
Other significant non-recurring expense
    -       0.01       0.04       0.02  
Loss on extinguishment of debt
    -       -       0.01       -  
Rounding and impact of stock options in adjusted diluted shares in net loss periods (3)
    -       -       (0.01 )     -  
Adjusted diluted EPS (non-GAAP)
  $ 0.07     $ 0.05     $ 0.21     $ 0.13  
 
                               
Weighted average shares used in computation of adjusted diluted EPS:
                               
Diluted common shares (GAAP)
    107,880       90,899       102,766       89,925  
Options and restricted stock not included in GAAP diluted shares (using treasury stock method)
    9       28       69       69  
Adjusted diluted shares outstanding (non-GAAP)
    107,889       90,927       102,835       89,994  
                                 

 

 

Reconciliation of Non-GAAP Financial Guidance to Corresponding GAAP Measures

"Net income (GAAP)" in 2019 will be impacted by certain charges, including: (i) expense related to the amortization of customer lists and other intangibles, (ii) non-cash stock based compensation (iii) acquisition and integration related expenses and non-recurring charges, (iv) other one-time charges. These charges have been included in GAAP net income available to common shareholders and GAAP net income per share; however, they have been removed from "Adjusted net income (non-GAAP)" and "Adjusted diluted EPS (non-GAAP)."

The following table reconciles our 2019 outlook for net income and EPS to the corresponding non-GAAP measures of "Adjusted net income (non-GAAP)", "Adjusted EBITDA (non-GAAP)" and "Adjusted diluted EPS (non-GAAP)" (in thousands except per share amounts):

 
  Year Ended December 31, 2019  
 
  Low Range     High Range  
Net income (GAAP)
  $ 1,000     $ 3,000  
Amortization of intangibles
    9,000       9,000  
Non-cash, stock-based compensation (4)
    9,000       9,000  
Acquisition and integration related expenses
    2,000       2,000  
Other one-time expenses
    5,000       5,000  
Adjusted net income (non-GAAP)
  $ 26,000     $ 28,000  
Interest and taxes
    9,000       9,000  
Depreciation
    21,000       21,000  
Adjusted EBITDA (non-GAAP)
  $ 56,000     $ 58,000  
 
               
 
               
Net income per diluted common share (GAAP)
  $ 0.01     $ 0.03  
Adjustments to diluted (loss) income per share:
               
Amortization of intangibles
    0.09       0.09  
Non-cash, stock based compensation expenses
    0.09       0.09  
Acquisition and integration related expenses
    0.02       0.02  
Other one-time expenses
    0.05       0.05  
Rounding and impact of stock options in adjusted diluted shares in net loss periods
    (0.01 )     (0.01 )
Adjusted diluted EPS (non-GAAP)
  $ 0.25     $ 0.27  
 
               
Weighted average assumed shares outstanding in 2019:
               
Diluted common shares (GAAP)
    104,500       104,500  
Options and restricted stock not included in diluted shares
    -       -  
Adjusted diluted shares outstanding (non-GAAP)
    104,500       104,500  
                 

 

 

Supplemental Information
Segment Revenue, Cost of Revenue and Gross Profit
(Unaudited)
(In thousands)

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
Clinical Operations:
  2019     2018     % Change     2019     2018     % Change  
Clinical Revenue
  $ 92,565     $ 59,449       55.7 %   $ 267,757     $ 175,960       52.2 %
Cost of revenue
    47,526       31,509       50.8 %     136,557       94,586       44.4 %
Gross Profit
  $ 45,039     $ 27,940       61.2 %   $ 131,200     $ 81,374       61.2 %
 
                                               
Pharma Operations:
                                               
Pharma Revenue
  $ 12,107     $ 9,647       25.5 %   $ 34,205     $ 24,306       40.7 %
Cost of revenue
    6,314       5,266       19.9 %     18,492       15,525       19.1 %
Gross profit
  $ 5,793     $ 4,381       32.2 %   $ 15,713     $ 8,781       78.9 %
                                                 

Supplemental Information
Clinical (5) Requisitions Received, Tests Performed, Revenue and Cost of Revenue
(Unaudited)

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
Clinical Operations:
  2019     2018     % Change     2019     2018     % Change  
Requisitions (cases) received
    145,312       108,467       34.0 %     427,406       323,682       32.0 %
Number of tests performed
    250,518       185,738       34.9 %     735,165       551,721       33.2 %
Average number of tests/requisitions
    1.72       1.71       0.7 %     1.72       1.70       0.9 %
 
                                               
Average revenue/requisition
  $ 637     $ 548       16.2 %   $ 626     $ 544       15.2 %
Average revenue/test
  $ 369     $ 320       15.4 %   $ 364     $ 319       14.2 %
 
                                               
Average cost/requisition
  $ 327     $ 290       12.6 %   $ 320     $ 292       9.3 %
Average cost/test
  $ 190     $ 170       11.8 %   $ 186     $ 171       8.3 %
                                                 

_____________________

(1) Clinical tests exclude tests performed for Pharma Services customers.

(2) The Company has provided adjusted financial information that has not been prepared in accordance with GAAP, including Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS. Each of these measures is defined in the section of this report entitled "Use of Non-GAAP Financial Measures." See also the tables reconciling such measures to their closest GAAP equivalent.

(3) This adjustment is for rounding and, in those periods in which there is a net loss attributable to common shareholders, will also compensate for the effects of including the Series A Preferred Shares on an as-converted basis and the treasury stock impact of outstanding stock options in the "Adjusted diluted shares outstanding (non-GAAP)", both of which are not included in GAAP diluted shares outstanding.

(4) Forecasts of non-cash, stock-based compensation expense assume consistency in the Company's stock price in 2019 and no further stock-based awards requiring variable accounting in accordance with ASU 2018-07.

(5) Clinical tests exclude tests performed for Pharma Services customers.

SOURCE: NeoGenomics, Inc.

Topic:
Earnings
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