NeoGenomics Reports Revenue of $87 Million in the Second Quarter amid COVID-19 Pandemic
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NeoGenomics Reports Revenue of $87 Million in the Second Quarter amid COVID-19 Pandemic

Tuesday, July 28, 2020 7:00 AM
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Topic:
Earnings

Second-Quarter 2020 Results and Highlights:

  • Consolidated revenue decreased 14% to $87 million
  • Clinical Services revenue decreased 17% to $74 million
  • Pharma Services revenue increased 3% to $13 million
  • Pharma Services backlog increased 63% to $173 million
  • Financial position strengthened with $322 million net convertible note and equity offerings
  • Test menu expanded with suite of solid tumor liquid biopsy tests
  • Strategic collaboration and minority investment in Inivata established
  • High-capacity COVID-19 testing lab operationalized

FORT MYERS, FL / ACCESSWIRE / July 28, 2020 / NeoGenomics, Inc. (NASDAQ:NEO) (the "Company"), a leading provider of cancer-focused genetics testing services, today announced its second-quarter results for the period ended June 30, 2020.

"As expected, second quarter financial results were challenging due to the global COVID-19 crisis, which reduced both revenue and earnings," said Douglas M. VanOort, Chairman and CEO of NeoGenomics.

"Even in the midst of this pandemic, we made several strategic moves and invested in our business. We fortified our balance sheet with a successful offering of both common stock and convertible securities, we strategically invested in Inivata for access to liquid biopsy and minimal residual disease testing capabilities, we launched a suite of liquid biopsy tests, we moved forward with investments to further globalize our Pharma Services business, and we built and operationalized a high-capacity COVID-19 testing laboratory. We believe these investments will deliver both near-term and long-term growth, and that we exited the second quarter in a stronger competitive position for the future."

Second-Quarter Results

Consolidated revenue for the second quarter of 2020 was $87 million, a decrease of 14% over the same period in 2019. Clinical Services revenue decreased year-over-year by 17% to $74 million driven by a clinical test volume(1) decrease of 18%. Average revenue per clinical test ("revenue per test") remained stable at $351. Pharma Services revenue grew by 3% to $13 million compared to the second quarter of 2019, primarily due to the January 10, 2020 acquisition of the Oncology Division assets of Human Longevity, Inc. ("HLI - Oncology"). While disruptions in volume stemming from the COVID-19 pandemic reduced growth in both Divisions, there was steady improvement throughout the quarter.

Gross profit was $28.0 million, a decline of 42.8%, compared to the second quarter of 2019. This reduction was the result of the combined effect of lower test volume due to the impact of the COVID-19 pandemic and our decision to retain employees.

Operating expenses increased by $2 million, or 5%, compared to the second quarter of 2019, reflecting investments in informatics, growth initiatives and costs associated with the integration of HLI - Oncology.

Net loss for the quarter was $7 million compared to net income of $2 million for the second quarter of 2019.

Adjusted EBITDA(2) was negative $7 million for the quarter compared to positive $15 million in the second quarter of 2019. Adjusted Net (Loss) Income(2) was a loss of $4 million compared to income of $7 million in the second quarter of 2019.

Cash and cash equivalents, including restricted cash, was $331 million and days sales outstanding ("DSO") was 92 days at the end of the second quarter of 2020 due to the impact of COVID-19 and the distribution of revenue.

(1) Clinical tests exclude requisitions, tests, revenue and costs for Pharma Services and COVID-19 Polymerase Chain Reaction ("PCR") tests.

(2) The Company has provided adjusted financial information that has not been prepared in accordance with GAAP, including Adjusted EBITDA, Adjusted Net (Loss) 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.

Conference Call

The Company has scheduled a webcast and conference call to discuss their first quarter results on Tuesday, July 28, 2020 at 8:30 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 8:30 AM EDT on August 11, 2020, and can be accessed by dialing (877) 481-4010 (domestic) and (919) 882-2331 (international). The playback conference ID Number is 35578. The webcast may be accessed under the Investor Relations section of our website at www.neogenomics.com. An archive of the webcast will be available until 08:30 AM EDT on October 28, 2020.

About NeoGenomics, Inc.

NeoGenomics, Inc. specializes in cancer genetics testing and information services. The Company 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, FL, NeoGenomics operates CAP accredited and CLIA certified laboratories in Fort Myers and Tampa, Florida; Aliso Viejo, Carlsbad, Fresno and San Diego, California; Houston, Texas; Atlanta, Georgia; Nashville, Tennessee; and CAP accredited laboratories in 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://www.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. 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, respond to the effects of the COVID-19 outbreak, offer new types of tests, integrate its acquisitions 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 28, 2020. 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
Director, Investor Relations
(239) 690-4238 (w)
(239) 284-4314 (m)
[email protected]

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

 
  June 30, 2020 (Unaudited)     December 31, 2019  
ASSETS
           
Cash and cash equivalents
  295,281     173,016  
Accounts receivable, net
    87,766       94,242  
Inventories
    21,627       14,405  
Other current assets
    14,326       9,075  
Total current assets
    419,000       290,738  
Property and equipment (net of accumulated depreciation of $80,143 and $68,809 respectively)
    83,969       64,188  
Operating lease right-of-use assets
    47,554       26,492  
Intangible assets, net
    125,821       126,640  
Goodwill
    210,833       198,601  
Restricted cash, non-current
    36,030       -  
Prepaid lease asset
    6,084       -  
Investment in non-consolidated affiliate
    13,137       -  
Other assets
    3,057       2,847  
TOTAL ASSETS
  945,485     709,506  
 
               
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Accounts payable and other current liabilities
  52,746     50,091  
Short-term portion of financing obligations
    4,458       10,432  
Short-term portion of operating leases
    4,496       3,381  
Total current liabilities
    61,700       63,904  
 
               
Long-term portion of financing obligations
    1,911       95,028  
Long-term portion of operating leases
    44,524       24,034  
Convertible senior notes, net
    164,544       -  
Deferred income tax liability, net
    15,422       15,566  
Other long-term liabilities
    3,155       3,566  
Total long-term liabilities
    229,556       138,194  
TOTAL LIABILITIES
  291,256     202,098  
 
               
TOTAL STOCKHOLDERS' EQUITY
  654,229     507,408  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  945,485     709,506  

 

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

 

 
  Three Months Ended June 30,     Six Months Ended June 30,  
 
  2020     2019     2020     2019  
NET REVENUE:
                       
Clinical Services
  73,884     88,982     166,866     175,192  
Pharma Services
    13,093       12,731       26,141       22,098  
Total revenue
    86,977       101,713       193,007       197,290  
 
                               
COST OF REVENUE
    58,971       52,747       118,632       101,209  
 
                               
GROSS PROFIT
    28,006       48,966       74,375       96,081  
Operating expenses:
                               
General and administrative
    34,613       29,577       70,957       61,719  
Research and development
    2,105       2,587       4,165       3,796  
Sales and marketing
    10,195       12,324       23,453       23,540  
Total operating expenses
    46,913       44,488       98,575       89,055  
(LOSS) INCOME FROM OPERATIONS
    (18,907 )     4,478       (24,200 )     7,026  
Interest expense, net
    1,548       1,304       2,367       3,130  
Other (income) expense, net
    (7,405 )     (10 )     (7,628 )     5,159  
Loss on extinguishment of debt
    1,400       1,018       1,400       1,018  
Loss on termination of cash flow hedge
    3,506       -       3,506       -  
(Loss) income before taxes
    (17,956 )     2,166       (23,845 )     (2,281 )
Income tax (benefit) expense
    (11,132 )     175       (10,043 )     (1,848 )
NET (LOSS) INCOME
  (6,824 )   1,991     (13,802 )   (433 )
 
                               
NET (LOSS) INCOME PER SHARE
                               
Basic
  (0.06 )   0.02     (0.13 )   0.00  
Diluted
  (0.06 )   0.02     (0.13 )   0.00  
 
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                               
Basic
    107,887       98,297       106,209       96,734  
Diluted
    107,887       102,336       106,209       96,734  

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

 
  Six Months Ended June 30,  
 
 
  2020     2019  
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  (13,802 )   (433 )
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    12,177       10,352  
Loss on disposal of assets
    263       404  
Loss on debt extinguishment
    1,400       1,018  
Loss on termination of cash flow hedge
    3,506       -  
Amortization of intangibles
    4,919       5,102  
Amortization of debt issue costs
    112       250  
Amortization of convertible debt discount
    864       -  
Non-cash stock-based compensation
    4,821       4,452  
Non-cash operating lease expense
    4,113       2,218  
Changes in assets and liabilities, net
    (23,424 )     (21,987 )
Net cash (used in) provided by operating activities
  (5,051 )   1,376  
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchases of property and equipment
    (9,734 )     (6,637 )
Business acquisition
    (37,000 )     -  
Acquisition working capital adjustment
    -       399  
Investment in non-consolidated affiliate
    (13,137 )     -  
Net cash used in investing activities
  (59,871 )   (6,238 )
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayment of revolving credit facility
    -       (5,000 )
Repayment of equipment financing obligations
    (3,059 )     (3,644 )
Proceeds from term loan
    -       100,000  
Repayment of term loan
    (97,540 )     (96,750 )
Cash flow hedge termination
    (3,317 )     -  
Payments of debt issuance costs
    -       (954 )
Issuance of common stock, net
    5,469       8,061  
Proceeds from issuance of convertible debt, net of issuance costs
    194,376       -  
Proceeds from equity offering, net
    127,288       160,774  
Net cash provided by financing activities
  223,217     162,487  
Net change in cash, cash equivalents and restricted cash
  158,295     157,625  
 
               
Cash, cash equivalents and restricted cash, beginning of period
    173,016       9,811  
Cash, cash equivalents and restricted cash, end of period
  331,311     167,436  
 
               
Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:
               
Cash and cash equivalents
  295,281     167,436  
Restricted cash, non-current
    36,030       -  
Total cash, cash equivalents and restricted cash
  331,311     167,436  

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) and other significant non-recurring or non-operating (income) or expenses, including any debt financing costs.

Non-GAAP Adjusted Net (Loss) Income

"Adjusted Net (Loss) Income" is defined by NeoGenomics as net (loss) 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, and, if applicable in a reporting period, (iii) acquisition and integration related expenses, (iv) non-cash impairments of intangible assets, (v) and other significant non-recurring or non-operating (income) or expenses, including any debt financing costs.

Non-GAAP Adjusted Diluted EPS

"Adjusted Diluted EPS" is defined by NeoGenomics as adjusted net (loss) 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 (loss) 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 Loss to Non-GAAP EBITDA and Adjusted EBITDA
(Unaudited)
(In thousands)

 
  Three Months Ended June 30,     Six Months Ended June 30,  
 
  2020     2019     2020     2019  
Net (loss) income (GAAP)
  (6,824 )   1,991     (13,802 )   (433 )
Adjustments to net (loss) income:
                               
Interest expense, net
    1,548       1,304       2,367       3,130  
Income tax (benefit) expense
    (11,132 )     175       (10,043 )     (1,848 )
Amortization of intangibles
    2,467       2,543       4,919       5,102  
Depreciation
    5,937       5,081       12,177       10,352  
EBITDA (non-GAAP)
  (8,004 )   11,094     (4,382 )   16,303  
Further adjustments to EBITDA:
                               
Acquisition and integration related expenses
    110       512       1,406       1,778  
Other significant non-recurring (income) expenses (3)
    (1,965 )     1,018       (1,996 )     6,163  
Non-cash stock-based compensation expense
    2,635       2,313       4,821       4,452  
Adjusted EBITDA (non-GAAP)
  (7,224 )   14,937     (151 )   28,696  

(3) Other significant non-recurring expenses includes reimbursements received related to the CARES Act, cash flow hedge termination fees, debt retirement fees and other non-recurring items.

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

 
  Three Months Ended June 30,        Six Months Ended June 30,     
 
  2020     2019     2020     2019  
Net (loss) income (GAAP)
  (6,824 )   1,991     (13,802 )   (433 )
Adjustments to net (loss) income, net of tax:
                               
Amortization of intangibles
    1,949       2,009       3,886       4,031  
Non-cash stock-based compensation expense
    2,202       2,019       4,049       3,978  
Acquisition and integration related expenses
    87       405       1,111       1,405  
Other significant non-recurring (income) expenses (4)
    (1,553 )     804       (1,577 )     4,869  
Adjusted net (loss) income (non-GAAP)
  (4,139 )   7,228     (6,333 )   13,850  
 
                               
Net (loss) income per common share (GAAP)
                               
Diluted EPS
  (0.06 )   0.02     (0.13 )   0.00  
Adjustments to diluted (loss) income per share:
                               
Amortization of intangibles
    0.02       0.02       0.04       0.04  
Non-cash stock-based compensation expense
    0.02       0.02       0.04       0.04  
Acquisition and integration related expenses
    -       -       0.01       0.01  
Other significant non-recurring (income) expenses (4)
    (0.01 )     0.01       (0.01 )     0.05  
Rounding and impact of stock options in adjusted diluted shares in net loss periods (5)
    (0.01 )     -       (0.01 )     -  
Adjusted diluted EPS (non-GAAP)
  (0.04 )   0.07     (0.06 )   0.14  
 
                               
Weighted average shares used in computation of adjusted diluted EPS:
                               
Diluted common shares (GAAP)
    107,887       102,336       106,209       96,734  
Options and restricted stock not included in GAAP diluted shares (using treasury stock method)
    -       -       -       3,664  
Adjusted diluted shares outstanding (non-GAAP)
    107,887       102,336       106,209       100,398  

(4) Other significant non-recurring expenses includes reimbursements received related to the CARES Act, cash flow hedge termination fees, debt retirement fees and other non-recurring items.(5) This adjustment is for rounding and, in those periods in which there is a net loss, will also compensate for the effects of the treasury stock impact of outstanding stock options in the Adjusted Diluted Shares outstanding, which are not included in GAAP Diluted Shares outstanding.

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

 
  Three Months Ended June 30,     Six Months Ended June 30,  
 
  2020     2019     % Change     2020     2019     % Change  
Clinical Services:
                                   
Clinical Revenue
  73,884     88,982       (17.0 )%   166,866     175,192       (4.8 )%
Cost of revenue
    48,757       46,380       5.1 %     97,680       89,031       9.7 %
Gross profit
  25,127     42,602       (41.0 )%   69,186     86,161       (19.7 )%
Gross margin
    34.0 %     47.9 %             41.5 %     49.2 %        
 
                                               
Pharma Services:
                                               
Pharma Revenue
  13,093     12,731       2.8 %   26,141     22,098       18.3 %
Cost of revenue
    10,214       6,367       60.4 %     20,952       12,178       72.0 %
Gross profit
  2,879     6,364       (54.8 )%   5,189     9,920       (47.7 )%
Gross margin
    22.0 %     50.0 %             19.9 %     44.9 %        

Supplemental Information
Clinical (6) Requisitions Received, Tests Performed, Revenue and Cost of Revenue
(Unaudited)

 
  Three Months Ended June 30,     Six Months Ended June 30,  
 
  2020     2019     % Change     2020     2019     % Change  
Clinical Services:
                                   
Requisitions (cases) received
    114,413       144,983       (21.1 )%     258,732       282,094       (8.3 )%
Number of tests performed
    204,844       250,330       (18.2 )%     455,220       484,647       (6.1 )%
Average number of tests/requisitions
    1.79       1.73       3.5 %     1.76       1.72       2.3 %
 
                                               
Average revenue/requisition
  629     614       2.4 %   637     621       2.6 %
Average revenue/test
  351     355       (1.1 )%   362     361       0.3 %
 
                                               
Average cost/requisition
  414     320       29.4 %   372     316       17.7 %
Average cost/test
  231     185       24.9 %   211     184       14.7 %

(6) Clinical tests exclude requisitions, tests, revenue and costs of revenue for Pharma Services and COVID-19 PCR tests.

SOURCE: NeoGenomics, Inc.

NeoGenomics, Inc.
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