NeoGenomics Reports Revenue Growth of 20% to Record $125 Million in the Third Quarter
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NeoGenomics Reports Revenue Growth of 20% to Record $125 Million in the Third Quarter

Tuesday, October 27, 2020 7:00 AM
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Earnings

Third-Quarter 2020 Results and Highlights:

  • Consolidated revenue increased 20% to $125 million
  • Clinical Services revenue increased 17% to $109 million
  • Pharma Services revenue increased 38% to $17 million
  • Pharma Services backlog increased 57% to $185 million

FORT MYERS, FL / ACCESSWIRE / October 27, 2020 / NeoGenomics, Inc. (NASDAQ:NEO) (the "Company"), a leading provider of cancer-focused genetics testing services, today announced its third-quarter results for the period ended September 30, 2020.

"Third quarter results were strong as we bounced back nicely from a challenging second quarter and set new company records for quarterly consolidated revenue and pharma services revenue and backlog. Importantly, test volume in our core clinical(1) oncology business continued to trend higher on what looks to be a V-Shaped recovery and the majority of our pharma clients' clinical trial sites are now open," said Douglas M. VanOort, Chairman and CEO of NeoGenomics.

We have continued to make strategic investments, even in the midst of the pandemic, to put us in a stronger position for growth. We are particularly excited about our investments in global Pharma Services, Informatics, strategic marketing initiatives, liquid biopsy, including our investment in Inivata, certain research and development priorities, and the on-going construction of our new state-of-the-art laboratory and global headquarters in Fort Myers.

Even in this uncertain and challenging operating environment, the dedication of NeoGenomics' employees has been extraordinary as we have stayed laser-focused on patient care."

Third-Quarter Results
Consolidated revenue for the third quarter of 2020 was $125 million, an increase of 20% over the same period in 2019. Clinical Services revenue increased year-over-year by 17% to $109 million, primarily driven by COVID-19 Polymerase Chain Reaction ("PCR") testing revenue of $17 million. Clinical testing volume(1) grew 2% year-over-year and improved month-to-month as the quarter progressed. Average revenue per clinical test ("revenue per test") decreased by less than 3% to $359. Pharma Services revenue grew by 38% to $17 million compared to the third quarter of 2019, primarily due to an increase in revenue related to clinical trials.

Gross profit was $54.1 million, an increase of 6.4%, compared to the third quarter of 2019. This increase was the result of higher test volume.

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

Net income for the quarter was $3 million compared to net income of $2 million for the third quarter of 2019.

Adjusted EBITDA(2) was $17 million compared to $15 million in the third quarter of 2019. Adjusted Net Income (2) was $7 million compared $8 million in the third quarter of 2019.

Cash and cash equivalents, including restricted cash, was $265 million and short-term marketable securities were $50 million. Days sales outstanding ("DSO") was 76 days at the end of the third quarter of 2020.

____________________

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

(2) The Company has provided adjusted financial information that has not been prepared in accordance with GAAP, including Adjusted EBITDA, Adjusted Net Income (Loss), 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 third quarter results on Tuesday, October 27, 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 EST on November 10, 2020, and can be accessed by dialing (877) 481-4010 (domestic) and (919) 882-2331 (international). The playback conference ID number is 37902. The webcast may be accessed under the Investor Relations section of our website at www.neogenomics.com. An archive of the web-cast will be available until 08:30 AM EDT on October 27, 2021.

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 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 a 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. Accordingly, 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.

Doug Brown
Chief Strategy and Corporate Development Officer
T: 239.768.0600 x2539
M: 704.236.2064
[email protected]

Charlie Eidson
Manager of Investor Relations and Manager of Strategy and Corporate Development
T: 239.768.0600 x2726
M: 952.221.8816
[email protected]

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

 
  September 30, 2020 (Unaudited)     December 31, 2019  
ASSETS
           
Cash and cash equivalents
  233,233     173,016  
Marketable securities, at fair value
    50,375       -  
Accounts receivable, net
    103,697       94,242  
Inventories
    20,643       14,405  
Other current assets
    14,427       9,075  
Total current assets
    422,375       290,738  
Property and equipment (net of accumulated depreciation of $85,987 and $68,809 respectively)
    85,449       64,188  
Operating lease right-of-use assets
    45,856       26,492  
Intangible assets, net
    123,353       126,640  
Goodwill
    210,833       198,601  
Restricted cash, non-current
    32,003       -  
Prepaid lease asset
    10,142       -  
Investment in non-consolidated affiliate
    25,600       -  
Other assets
    3,817       2,847  
TOTAL ASSETS
  959,428     709,506  
 
               
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Accounts payable and other current liabilities
  56,211     50,091  
Short-term portion of financing obligations
    3,700       10,432  
Short-term portion of operating leases
    4,701       3,381  
Total current liabilities
    64,612       63,904  
 
               
Convertible senior notes, net
    166,440       -  
Long-term portion of financing obligations
    1,399       95,028  
Long-term portion of operating leases
    43,123       24,034  
Other long-term liabilities
    3,937       3,566  
Deferred income tax liability, net
    13,554       15,566  
Total long-term liabilities
    228,453       138,194  
TOTAL LIABILITIES
  293,065     202,098  
 
               
TOTAL STOCKHOLDERS' EQUITY
  666,363     507,408  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  959,428     709,506  

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

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
 
  2020     2019     2020     2019  
NET REVENUE:
                       
Clinical Services
  108,733     92,565     275,599     267,757  
Pharma Services
    16,711       12,107       42,852       34,205  
Total revenue
    125,444       104,672       318,451       301,962  
 
                               
COST OF REVENUE
    71,379       53,840       190,011       155,049  
 
                               
GROSS PROFIT
    54,065       50,832       128,440       146,913  
Operating expenses:
                               
General and administrative
    36,128       33,054       107,085       94,773  
Research and development
    1,964       2,611       6,129       6,407  
Sales and marketing
    11,304       11,508       34,757       35,048  
Total operating expenses
    49,396       47,173       147,971       136,228  
INCOME (LOSS) FROM OPERATIONS
    4,669       3,659       (19,531 )     10,685  
Interest expense, net
    2,458       203       4,825       3,333  
Other (income) expense, net
    (11 )     (35 )     (7,639 )     5,124  
Loss on extinguishment of debt
    -       -       1,400       1,018  
Loss on termination of cash flow hedge
    -       -       3,506       -  
Income (loss) before taxes
    2,222       3,491       (21,623 )     1,210  
Income tax (benefit) expense
    (335 )     1,348       (10,378 )     (500 )
NET INCOME (LOSS)
  2,557     2,143     (11,245 )   1,710  
 
                               
Adjustment to the numerator for convertible notes in diluted EPS (3)
                               
NET INCOME (LOSS)
    2,557       2,143       (11,245 )     1,710  
Convertible note accretion, amortization, and interest, net of tax
    1,975       -       -       -  
NET INCOME (LOSS) USED IN DILUTED EPS
  4,532     2,143     (11,245 )   1,710  
 
                               
NET INCOME (LOSS) PER SHARE
                               
Basic
  0.02     0.02     (0.10 )   0.02  
Diluted
  0.04     0.02     (0.10 )   0.02  
 
                               
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                               
Basic
    110,461       103,899       107,605       99,149  
Diluted
    119,191       107,880       107,605       102,766  

(3) This adjustment compensates for the effects of the if-converted impact of convertible notes in adjusted net income. Since an entity using the if-converted method assumes that a convertible debt instrument was converted into common shares at the beginning of the reporting period, the numerator is adjusted to reverse any recognized interest expense (including any amortization of discounts).

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

 
  Nine Months Ended September 30,  
 
 
  2020     2019  
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net (loss) income
  (11,245 )   1,710  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    18,705       15,200  
Loss on disposal of assets
    371       451  
Loss on debt extinguishment
    1,400       1,018  
Loss on termination of cash flow hedge
    3,506       -  
Amortization of intangibles
    7,387       7,482  
Amortization of debt issue costs
    138       323  
Amortization of convertible debt discount
    2,705       -  
Non-cash stock-based compensation
    7,536       7,727  
Non-cash operating lease expense
    6,365       3,224  
Changes in assets and liabilities, net
    (41,393 )     (17,125 )
Net cash (used in) provided by operating activities
  (4,525 )   20,010  
CASH FLOWS FROM INVESTING ACTIVITIES
               
Purchases of marketable securities
    (53,396 )     -  
Proceeds from sale of marketable securities
    3,000       -  
Purchases of property and equipment
    (17,591 )     (13,953 )
Business acquisition
    (37,000 )     -  
Investment in non-consolidated affiliate
    (25,600 )     -  
Acquisition working capital adjustment
    -       399  
Net cash used in investing activities
  (130,587 )   (13,554 )
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayment of revolving credit facility
    -       (5,000 )
Repayment of equipment financing obligations
    (4,331 )     (5,481 )
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
    -       (1,051 )
Issuance of common stock, net
    10,761       10,132  
Proceeds from issuance of convertible debt, net of issuance costs
    194,466       -  
Proceeds from equity offering, net of issuance costs
    127,293       160,774  
Net cash provided by financing activities
  227,332     162,624  
Net change in cash, cash equivalents and restricted cash
  92,220     169,080  
 
               
Cash, cash equivalents and restricted cash, beginning of period
    173,016       9,811  
Cash, cash equivalents and restricted cash, end of period
  265,236     178,891  
 
               
Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:
               
Cash and cash equivalents
  233,233     178,891  
Restricted cash, non-current
    32,003       -  
Total cash, cash equivalents and restricted cash
  265,236     178,891  

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 (loss) 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 Income
"Adjusted Net Income" is defined by NeoGenomics as net income (loss) 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. In addition, if GAAP net income is negative and adjusted net income is positive, adjusted diluted net income (loss) will also be adjusted to reverse any recognized interest expense (including any amortization of discounts) on the convertible notes using the if-converted method.

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 convertible notes 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 (Loss) to Non-GAAP EBITDA and Adjusted EBITDA
(Unaudited)
(In thousands)

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
 
  2020     2019     2020     2019  
Net income (loss) (GAAP)
  2,557     2,143     (11,245 )   1,710  
Adjustments to net income (loss):
                               
Interest expense, net
    2,458       203       4,825       3,333  
Income tax (benefit) expense
    (335 )     1,348       (10,378 )     (500 )
Amortization of intangibles
    2,468       2,380       7,387       7,482  
Depreciation
    6,528       4,848       18,705       15,200  
EBITDA (non-GAAP)
  13,676     10,922     9,294     27,225  
Further adjustments to EBITDA:
                               
Acquisition and integration related expenses
    446       334       1,852       2,143  
Other significant non-recurring (income) expenses (4)
    (105 )     364       (2,100 )     6,527  
Non-cash stock-based compensation expense
    2,715       3,275       7,536       7,727  
Adjusted EBITDA (non-GAAP)
  16,732     14,895     16,582     43,622  

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

Reconciliation of GAAP Net Income (Loss) 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,  
 
  2020     2019     2020     2019  
Net income (loss) (GAAP)
  2,557     2,143     (11,245 )   1,710  
Adjustments to net income (loss), net of tax:
                               
Amortization of intangibles
    1,949       1,880       5,836       5,911  
Non-cash stock-based compensation expense
    2,185       2,960       6,233       6,939  
Acquisition and integration related expenses
    353       264       1,463       1,669  
Other significant non-recurring (income) expenses (5)
    (83 )     288       (1,659 )     5,156  
Adjusted net income (non-GAAP)
  6,961     7,535     628     21,385  
 
                               
Net income (loss) per common share (GAAP)
                               
Diluted EPS
  0.04     0.02     (0.10 )   0.02  
Adjustments to diluted income (loss) per share:
                               
Amortization of intangibles
    0.02       0.02       0.05       0.06  
Non-cash stock-based compensation expense
    0.02       0.03       0.06       0.07  
Acquisition and integration related expenses
    -       -       0.01       0.02  
Other significant non-recurring (income) expenses (5)
    -       -       (0.02 )     0.05  
Impact of stock options in adjusted diluted shares in net loss periods (6)
    -       -       -       -  
Rounding and impact of convertible notes in adjusted diluted shares in net loss periods (7)
    (0.02 )     -       0.01       (0.01 )
Adjusted diluted EPS (non-GAAP)
  0.06     0.07     0.01     0.21  
 
                               
Weighted average shares used in computation of adjusted diluted EPS:
                               
Diluted common shares (GAAP)
    119,191       107,880       107,605       102,766  
Options and restricted stock not included in GAAP diluted shares (using treasury stock method)
    -       9       -       69  
Adjusted diluted shares outstanding (non-GAAP)
    119,191       107,889       107,605       102,835  

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

(6) This adjustment compensates for the effects of the treasury stock impact of outstanding stock options and restricted stock in the Adjusted Diluted Shares outstanding in periods in which there is a net loss, which are not included in GAAP Diluted Shares outstanding.

(7) This adjustment is for rounding and, in those periods in which there is a net loss, also compensates for the effects of the if-converted impact of convertible notes 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 September 30,     Nine Months Ended September 30,  
 
 
  2020     2019     % Change     2020     2019     % Change  
Clinical Services:
                                   
Revenue
  108,733     92,565       17.5 %   275,599     267,757       2.9 %
Cost of revenue
    60,607       47,526       27.5 %     158,287       136,557       15.9 %
Gross profit
  48,126     45,039       6.9 %   117,312     131,200       (10.6 )%
Gross margin
    44.3 %     48.7 %             42.6 %     49.0 %        
 
                                               
Pharma Services:
                                               
Revenue
  16,711     12,107       38.0 %   42,852     34,205       25.3 %
Cost of revenue
    10,772       6,314       70.6 %     31,724       18,492       71.6 %
Gross profit
  5,939     5,793       2.5 %   11,128     15,713       (29.2 )%
Gross margin
    35.5 %     47.8 %             26.0 %     45.9 %        

Supplemental Information
Clinical(8) Requisitions Received, Tests Performed, Revenue and Cost of Revenue
(Unaudited)

 
  Three Months Ended September 30,     Nine Months Ended September 30,  
 
  2020     2019     % Change     2020     2019     % Change  
Clinical(8):
                                   
Requisitions (cases) received
    147,518       145,312       1.5 %     406,250       427,406       (4.9 )%
Number of tests performed
    255,458       250,518       2.0 %     710,678       735,165       (3.3 )%
Average number of tests/requisitions
    1.73       1.72       0.6 %     1.75       1.72       1.7 %
 
                                               
Average revenue/requisition
  622     637       (2.4 )%   632     626       1.0 %
Average revenue/test
  359     369       (2.7 )%   361     364       (0.8 )%
 
                                               
Average cost/requisition
  342     327       4.6 %   361     320       12.8 %
Average cost/test
  197     190       3.7 %   206     186       10.8 %

(8) 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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