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NeoGenomics Reports 51% Revenue Growth to Record $96 Million in the First Quarter

FT. MYERS, FL / ACCESSWIRE / April 30, 2019 / NeoGenomics, Inc. (NASDAQ: NEO), a leading provider of cancer-focused genetic testing services, today reported its results for the first quarter of 2019.

First Quarter 2019 Highlights:

Consolidated revenue increased 51% to $95.6 million
Clinical Services revenue increased 51% to $86.2 million
Pharma Services revenue increased 45% to $9.4 million
Gross profit increased 73% to $47.1 million

Douglas M. VanOort, the Company’s Chairman and CEO, commented, “We are certainly pleased with our very strong first quarter financial results. Revenue growth in both our Clinical and Pharma services divisions exceeded expectations, and momentum accelerated throughout the quarter. The integration of Genoptix, while demanding, is progressing well and is on track. Profitability improved significantly as a result of better operating leverage and cost efficiency. We are excited with our excellent start to 2019, and by the opportunities for continued growth in revenue and profitability as the year unfolds.”

First Quarter Results

Consolidated Revenues for the first quarter of 2019 were $95.6 million, an increase of 51% over the same period in 2018. Clinical test volume(1) increased by 31% year over year. Average revenue per clinical test (“Revenue per Test”) increased by 15% to $368 primarily due to the acquisition of Genoptix as well as the benefit of reimbursement initiatives.

Consolidated gross profit improved by $19.8 million, or 73%, compared to the first quarter of 2018, to $47.1 million. Consolidated gross margin improved by approximately 625 basis points year-over-year to 49%. 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 5%, reflecting the impact of the Genoptix acquisition, partially offset by continued efficiency.

Consolidated operating expenses increased by $19.8 million, or 80%, compared to the first quarter of 2018, primarily due to the Genoptix acquisition as well as increases in payroll and payroll related costs as a result of an increased number of employees, and $1.3 million in acquisition and integration related costs.

Net loss in the Quarter was $2.4 million compared to net income of $0.6 million in the prior year’s first quarter. The net loss for the quarter reflects an accrual related to Health Discovery Corporation litigation of $4.9 million, net of tax.

Adjusted EBITDA(2) was $13.8 million in the Quarter, a 49% improvement from the prior year. Adjusted Net Income(2) was $7.2 million compared to Adjusted Net Income of $2.5 million in the prior year.

Cash collections remained strong with Days Sales Outstanding (“DSO”) stable at 78 days.

2019 Financial Outlook:

NeoGenomics is raising its full year 2019 guidance, initially issued on February 19, 2019.

(in millions)

Previous Guidance

Updated Guidance

Consolidated Revenue

$
379 – $395

$
384 – $400

Net Income/(Loss)

$
(3) – $3

$
(3) – $1

Adjusted EBITDA(2)

$
49 – $53

$
52 – $56

Please also refer to the tables reconciling forecasted Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA to their closest GAAP equivalents 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.
____________________

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

(2) NeoGenomics 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,” and the basis for using these measures is explained in the section entitled “Basis for Non-GAAP Adjustments.” See also the tables reconciling such measures to their closest GAAP equivalent.

Conference Call

The Company has scheduled a web-cast and conference call to discuss its first quarter results on Tuesday, April 30, 2019 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 on May 7, 2019, and can be accessed by dialing (877) 481-4010 (domestic) and (919) 882-2331 (international). The playback conference ID Number is 45776. The web-cast 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 on July 30, 2019.

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 Ft. 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. 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)
bill.bonello@neogenomics.com

NeoGenomics, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

ASSETS

March 31,
2019

December 31, 2018

Cash and cash equivalents

$
13,195

$
9,811

Accounts receivable

82,585

76,919

Inventory

9,670

8,650

Other current assets

10,495

8,288

Total current assets

115,945

103,668

Property and equipment (net of accumulated depreciation and amortization of $54,512 and $50,127, respectively)

60,696

60,888

Operating lease right-of-use assets

19,734

Intangible assets, net

137,844

140,029

Goodwill

196,298

197,892

Other assets

2,826

2,538

TOTAL ASSETS

$
533,343

$
505,015

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable and other current liabilities

$
54,709

$
46,753

Short-term portion of finance leases and debt

14,374

14,172

Short-term portion of operating lease liabilities

3,620

Total current liabilities

72,703

60,925

Long-term portion of finance leases and debt

96,248

98,130

Long-term portion of operating lease liabilities

16,648

Deferred income tax liability, net

20,156

22,457

Other long-term liabilities

3,740

3,060

Total long-term liabilities

136,792

123,647

TOTAL LIABILITIES

209,495

184,572

Stockholders’ Equity

323,848

320,443

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
533,343

$
505,015

NeoGenomics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

Three Months Ended March 31,

2019

2018

Net Revenue:

Clinical Services

$
86,210

$
56,971

Pharma Services

9,367

6,452

Total Revenue

95,577

63,423

COST OF REVENUE

48,462

36,120

GROSS PROFIT

47,115

27,303

Operating expenses:

General and administrative

32,142

17,067

Research and development

1,209

956

Sales and marketing

11,216

6,775

Total operating expenses

44,567

24,798

Income From Operations

2,548

2,505

Interest expense, net

1,826

1,486

Other expense (income)

5,169

(63
)

Income (loss) before taxes

(4,447
)

1,082

Income tax expense (benefit)

(2,023
)

438

Net Income (Loss)

(2,424
)

644

Deemed dividends on preferred stock

1,003

Amortization of preferred stock beneficial conversion feature

1,853

Net Loss Attributable to Common Stockholders

$
(2,424
)

$
(2,212
)

Net Loss per Common Share:

Basic

$
(0.03
)

$
(0.03
)

Diluted

$
(0.03
)

$
(0.03
)

Weighted Average Shares Used in Computation of Earnings per Common Share:

Basic

94,740

80,507

Diluted

94,740

80,507

NeoGenomics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2019

2018

Net income (loss)

$
(2,424
)

$
644

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

5,271

3,633

(Gain) impairment/loss on sale of assets

156

(7
)

Amortization of intangibles

2,559

1,413

Amortization of debt issue costs

150

113

Stock based compensation

2,139

1,624

Changes in assets and liabilities, net

(1,754
)

6,892

NET CASH PROVIDED BY OPERATING ACTIVITIES

6,097

14,312

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(3,196
)

(4,666
)

NET CASH USED IN INVESTING ACTIVITIES

(3,196
)

(4,666
)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of finance lease obligations and loans

(1,797
)

(1,394
)

Repayment of term loan

(1,968
)

(6,338
)

Issuance of common stock, net

4,248

483

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

483

(7,249
)

Effects of foreign exchange rate changes on cash and cash equivalents

(45
)

NET CHANGE IN CASH AND CASH EQUIVALENTS

3,384

2,352

CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD

9,811

12,821

CASH AND CASH EQUIVALENTS, END OF PERIOD

$
13,195

$
15,173

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid

$
1,696

$
1,396

Income taxes paid, net of refunds

8

7

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING INFORMATION:

Equipment acquired under finance lease/loan obligations

$
2,003

$
3,355

Use of Non-GAAP Financial Measures

The Company’s financial results and financial guidance are provided in accordance with accounting principles generally accepted in the United States of America (GAAP) and using certain non-GAAP financial measures. Management believes that 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 our 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 therefore 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, non-cash stock-based compensation expense, and if applicable in a reporting period, acquisition-related transaction 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 related transaction 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.

Basis for Non-GAAP Adjustments

NeoGenomics’ basis for excluding certain expenses (income) from GAAP financial measures, are outlined below:

Amortization of intangible assets – The intangible assets that give rise to this amortization expense relate to acquisitions, and the amounts allocated to such intangible assets. The terms of amortization vary by acquisition and type of asset. NeoGenomics excludes these items to provide a consistent basis for comparing operating results across reporting periods, pre- and post-acquisition.

Deemed dividends on preferred stock- GAAP accounting for the unique structure of the Series A Redeemable Preferred Stock requires the Company to assume that such preferred stock would be outstanding for its entire ten-year term. In addition, GAAP requires that the escalating preferred dividend rate over time be accelerated for accounting purposes and amortized on a straight-line basis over the ten-year life of the instrument, irrespective of the minimal contractual requirements for “paid in kind” stock dividends in the early years. Since such implied dividends were not paid in cash, and since the Company believed that such preferred stock would have been redeemed within the first three years it was outstanding, before any significant dividends accrued under the contractual terms, the Company believed these non-cash expenses were not meaningful in evaluating the operating performance of the Company and it would have been misleading to not adjust for such expenses across reporting periods.

Amortization of preferred stock beneficial conversion feature – This non-cash expense is also a direct result of the complex GAAP accounting requirements for our Series A Redeemable Preferred Stock. The Company believes this expense is not meaningful in evaluating the operating performance of the Company, distorts comparisons across reporting periods, and that it would be misleading to not adjust for such expenses across reporting periods.

Non-cash, stock-based compensation expenses – Because many of the company’s full-time physicians reside in California, state regulations against the corporate practice of medicine require us to retain their professional service corporations rather than hire them as employees. Prior to ASU 2018-07, which we adopted in the second quarter of 2018, GAAP provided that variable stock- based compensation treatment be applied for non-employee service providers. This variable accounting treatment can cause significant fluctuations in quarterly expense based on changes in the Company’s stock price from one quarter to the next and result in large positive or negative impacts to total operating expenses. Without adjusting for these non-cash expenses, the Company believed it would have been been difficult to compare financial results from core operations across reporting periods on a consistent basis.

Acquisition and integration expenses – We incurred significant expenses in connection with our recent acquisition of Genoptix related to transaction costs and integration expenses. These expenses include acquisition-related transaction costs, consultants, severance, systems integration and conversion expenses, and other costs related to integration activities. In order to compare across periods on a consistent basis we believe it is appropriate to exclude these expenses.

Other significant non-recurring income and expenses – Certain other items, if any, that neither relate to the ordinary course of our business nor reflect our underlying business performance are also excluded, including applicable expenses and/or proceeds related legal settlements among other items. We believe that the exclusion of such items that are not indicative of our ordinary operations provides a more useful comparison of our underlying business performance from period to period.

Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Adjusted EBITDA

(Unaudited, in thousands)

Three Months Ended March 31,

2019

2018

Net Income (Loss) (GAAP)

$
(2,424
)

$
644

Adjustments to Net Income:

Interest expense, net

1,826

1,486

Income tax (benefit) expense

(2,023
)

438

Amortization of intangibles

2,559

1,413

Depreciation

5,271

3,633

EBITDA

5,209

7,614

Further Adjustments to EBITDA:

Acquisition and integration related expenses

1,266

Other significant non-recurring (income)

5,145

Non-cash, stock-based compensation

2,139

1,624

Adjusted EBITDA (non-GAAP)

$
13,759

$
9,238

Reconciliation of GAAP Net Income Available to Common Stockholders to Non- GAAP Adjusted Net Income and GAAP Earnings per Share to Non-GAAP Adjusted Earnings per Share

(Unaudited, in thousands except per share amounts)

Three Months Ended March 31,

2019

2018

Net Income (Loss) attributable to common stockholders (GAAP)

$
(2,424
)

$
(2,212
)

Adjustments to Net Income (loss) net of tax:

Amortization of intangibles

2,559

1,116

Deemed dividends on preferred stock

792

Amortization of preferred stock beneficial conversion feature

1,464

Non-cash stock-based compensation expenses

1,959

1,377

Acquisition and integration related expenses

1,000

Other significant non-recurring (income)/expenses

4,065

Adjusted Net Income (non-GAAP)

$
7,159

$
2,537

Net income (loss) per common share (GAAP)

Diluted EPS

$
(0.03
)

$
(0.03
)

Adjustments to diluted income (loss) per share:

Amortization of intangibles

0.03

0.01

Deemed dividends on preferred stock

0.01

Amortization of preferred stock beneficial conversion feature

0.02

Non-cash stock based compensation expenses

0.02

0.02

Acquisition and integration related expenses

0.01

Other significant non-recurring (income)/expenses

0.04

Adjusted Diluted EPS (non-GAAP)

$
0.07

$
0.03

Weighted average shares used in computation of adjusted diluted earnings per share:

Diluted Common Shares (GAAP)

94,740

80,507

Options and restricted stock not included in GAAP Diluted Shares (using treasury stock method)

3,770

1,919

Weighted Avg. Preferred Shares (as converted)

6,864

Adjusted Diluted Shares outstanding (non-GAAP)

98,510

89,290

The following table reconciles our 2019 outlook for Net Income and EPS to the corresponding non-GAAP measures of Adjusted Net Income, Adjusted EBITDA and Adjusted Diluted EPS:

For the Year Ended

December 31, 2019

Low Range

High Range

Net income (loss) (GAAP)

$
(3,000
)

$
1,000

Amortization of intangibles

11,000

11,000

Non-cash, stock-based compensation (4)

8,000

8,000

Acquisition and integration related expenses

2,000

2,000

Other one-time expenses

5,000

5,000

Adjusted Net Income (non-GAAP)

$
23,000

$
27,000

Interest and taxes

8,000

8,000

Depreciation

21,000

21,000

Adjusted EBITDA (non-GAAP)

$
52,000

$
56,000

Net income (loss) per diluted common share (GAAP)

$
(0.03
)

$
0.01

Adjustments to diluted loss per share:

Amortization of intangibles

0.12

0.11

Non-cash, stock based compensation expenses

0.08

0.08

Acquisition and integration related expenses

0.02

0.02

Other one-time expenses

0.05

0.05

Impact of dilution on Adjusted Net Income

(0.01
)

0.00

Adjusted Diluted EPS (non-GAAP)

0.23

0.27

Weighted average assumed shares outstanding in 2019:

Diluted Common Shares (GAAP)

95,500

95,500

Options and restricted stock not included in diluted shares

4,000

4,000

Adjusted diluted shares outstanding (non-GAAP)

99,500

99,500

Supplemental Information

Pharma Revenue, Cost of Revenue and Gross Profit

Three Months Ended March 31,

Pharma Operations:

2019

2018

(as adjusted)

% Change

Pharma Revenue

$
9,367

$
6,452

45.2
%

Cost of Revenue

$
5,811

$
5,078

14.4
%

Gross Profit

$
3,556

$
1,374

158.8
%

Supplemental Information

Clinical (5) Requisitions Received, Tests Performed, Revenue and Cost of Revenue (Unaudited, in thousands, except test and requisition data)

Three Months Ended March 31,

Clinical Operations:

2019

2018

(as adjusted)

% Change

Requisitions received (cases)

155,963

105,229

48.2
%

Number of tests performed

234,317

178,794

31.1
%

Average number of tests/requisition

1.50

1.70

(11.6
)%

Total clinical testing revenue

$
86,210

$
56,971

51.3
%

Average revenue/requisition

$
553

$
541

2.1
%

Average revenue/test

$
368

$
319

15.5
%

Cost of revenue

$
42,651

$
31,042

37.4
%

Average cost/requisition

$
273

$
295

(7.3
)%

Average cost/test

$
182

$
174

4.8
%

SOURCE: NeoGenomics, Inc.

ReleaseID: 543448

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