NeoGenomics Reports 50% Revenue Growth to Record $102 Million in the Second Quarter

Second-Quarter Highlights:

Consolidated revenue increased 50% to $101.7 millionClinical Services revenue increased 49% to $89.0 millionPharma Services revenue increased 55% to $12.7 millionPharma Services backlog increased 18% to $106.1 millionGross profit increased 60% to $49.0 millionCompleted $160.8 million net equity offering and refinanced credit facility to $250.0 millionFull-year 2019 guidance increased

FORT MYERS, FL / ACCESSWIRE / July 30, 2019 / NeoGenomics, Inc. (NASDAQ: NEO) (the “Company”), a leading provider of cancer-focused genetics testing services, today announced second-quarter and first-half results for the period ended June 30, 2019.

Douglas M. VanOort, the Company’s Chairman and CEO, commented, “Our second quarter financial results were strong, building on the momentum that we saw in the first quarter. Our Clinical Services revenue growth remains well above our expectations and is driven by continued market share gains. Our Pharma Services revenue growth accelerated to more than 50%, even as we grew our backlog of contracted business to record levels. The integration of Genoptix is proceeding on schedule and profitability continued to improve as a result of better operating leverage and cost efficiency.

During the quarter we significantly strengthened our Balance Sheet, launched a critical new companion diagnostic test for breast cancer patients and announced plans for a new state-of-the art laboratory and global headquarters.

We are pleased with our 2019 first-half performance, optimistic about our prospects for the second half of this year, and confident in our strategies for the future.”

Second-Quarter Results

Consolidated revenues for the second quarter of 2019 were $101.7 million, an increase of 50% over the same period in 2018. Clinical test volume(1) increased by 34% year over year. Average revenue per clinical test (“revenue per test”) increased by 12% to $355, primarily due to the acquisition of Genoptix. Clinical Services revenue was $89.0 million resulting in a 49% increase over the second quarter of prior year. Pharma Services reported record revenue of $12.7 million, which represented a 55% growth rate over the second quarter of 2018.

Gross profit improved by $18.4 million, or 60%, compared to the second quarter of 2018, to $49.0 million. Gross margin improved by approximately 300 basis points year-over-year to 48.1%. 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 8% year over year reflecting the impact of the Genoptix acquisition, partially offset by continued efficiencies.

Operating expenses increased by $14.8 million, or 50%, compared to the second quarter of 2018, primarily due to the Genoptix acquisition and an increase in investments in information technology and growth initiatives.

Net income for the quarter was $2.0 million compared to a net loss of $0.4 million for the same period a year ago.

Adjusted EBITDA(2) was $14.9 million for the quarter, a 49% improvement from the prior year. Adjusted Net Income(2) was $7.2 million compared to Adjusted Net Income of $4.5 million in the prior year.

Cash and cash equivalents was $167.4 million at the end of the second quarter, reflecting the proceeds from the equity offering. Days sales outstanding (“DSO”) increased 3 days to 81 days when compared to the first quarter of 2019.

2019 Financial Outlook:

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

(in millions)

Initial Guidance Q1 Updated Guidance Q2 Revised Guidance Consolidated revenue

$379 – $395 $384 – $400 $388 – $402 Net (loss)/income

($3)- $3 ($3) – $1 ($1) – $3 Adjusted EBITDA(2)

$49 – $53 $52 – $56 $54 – $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.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.”

____________________

(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.

Conference Call

The Company has scheduled a webcast and conference call to discuss its second-quarter results on Tuesday, July 30, 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 EDT on August 6, 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 EDT on October 30, 2019.

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)
bill.bonello@neogenomics.com

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

ASSETS

June 30, 2019 December 31, 2018 Cash and cash equivalents

$ 167,436 $ 9,811 Accounts receivable

89,991 76,919 Inventory

8,733 8,650 Other current assets

10,185 8,288 Total current assets

276,345 103,668 Property and equipment (net of accumulated depreciation and amortization of $59,455 and $50,127, respectively)

59,334 60,888 Operating lease right-of-use assets

26,057 – Intangible assets, net

135,301 140,029 Goodwill

196,298 197,892 Other assets

3,332 2,538 TOTAL ASSETS

$ 696,667 $ 505,015

LIABILITIES AND STOCKHOLDERS??? EQUITY

Accounts payable and other current liabilities

$ 44,909 $ 46,753 Short-term portion of financing obligations

10,825 14,172 Short-term portion of operating lease liabilities

3,428 – Total current liabilities

59,162 60,925

Long-term portion of financing obligations

99,032 98,130 Long-term portion of operating lease liabilities

24,179 – Deferred income tax liability, net

20,117 22,457 Other long-term liabilities

4,443 3,060 Total long-term liabilities

147,771 123,647 TOTAL LIABILITIES

206,933 184,572

TOTAL STOCKHOLDERS’ EQUITY

489,734 320,443 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 696,667 $ 505,015

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

Three Months Ended June 30, Six Months Ended June 30,

2019 2018 2019 2018 Net revenue:

Clinical Services

$ 88,982 $ 59,540 $ 175,192 $ 116,511 Pharma Services

12,731 8,206 22,098 14,658 Total revenue

101,713 67,746 197,290 131,169

Cost of revenue

52,747 37,216 101,209 73,336 Gross profit

48,966 30,530 96,081 57,833

Operating expenses:

General and administrative

29,577 20,983 61,719 38,050 Research and development

2,587 1,073 3,796 2,029 Sales and marketing

12,324 7,680 23,540 14,455 Total operating expenses

44,488 29,736 89,055 54,534 Income from operations

4,478 794 7,026 3,299

Interest expense, net

1,304 1,407 3,130 2,892 Other (income) expense

(10) 124 5,159 62 Loss on extinguishment of debt

1,018 – 1,018 – Income (loss) before taxes

2,166 (737) (2,281) 345 Income tax expense (benefit)

175 (357) (1,848) 81 Net income (loss)

$ 1,991 $ (380) $ (433) $ 264

Deemed dividends on preferred stock

– 947 – 1,950 Amortization of preferred stock beneficial conversion feature

– 1,824 – 3,677 Gain on redemption of preferred stock

– (9,075) – (9,075)Net income (loss) attributable to common stockholders

$ 1,991 $ 5,924 $ (433) $ 3,712

Net income per common share:

Basic

$ 0.02 $ 0.07 $ – $ 0.05 Diluted

$ 0.02 $ 0.07 $ – $ 0.04

Weighted average shares used in computation of earnings per common share:

Basic

98,297 81,017 96,734 80,789 Diluted

102,336 90,168 96,734 89,305

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

Six Months Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES

2019 2018 Net (loss) income

$ (433) $ 264 Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

10,352 7,444 Impairment/loss on sale of assets

404 106 Loss on debt extinguishment

1,018 – Amortization of intangibles

5,102 2,834 Amortization of debt issue costs

250 242 Stock based compensation

4,452 3,957 Non cash operating lease expense

2,218 – Changes in assets and liabilities, net

(21,987) 6,105 NET CASH PROVIDED BY OPERATING ACTIVITIES

$ 1,376 $ 20,952

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(6,637) (8,943)Acquisition working capital adjustment

399 – NET CASH USED IN INVESTING ACTIVITIES

$ (6,238) $ (8,943)

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) – Repayment of equipment and other loans

(3,644) (3,014)Proceeds from term loan

100,000 30,000 Repayment of term loan

(96,750) (7,275)Payments of debt issue costs

(954) (576)Issuance of common stock, net

8,061 5,588 Proceeds from equity offering, net

160,774 – NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

$ 162,487 $ (15,373)Effects of foreign exchange rate changes on cash and cash equivalents

– (22)NET CHANGE IN CASH AND CASH EQUIVALENTS

$ 157,625 $ (3,386)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

9,811 12,821 CASH AND CASH EQUIVALENTS, END OF PERIOD

$ 167,436 $ 9,435

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 June 30, Six Months Ended June 30,

2019 2018 2019 2018 Net income (loss) (GAAP)

$ 1,991 $ (380) $ (433) $ 264 Adjustments to net income (loss):

Interest expense, net

1,304 1,407 3,130 2,892 Income tax expense (benefit)

175 (357) (1,848) 81 Amortization of intangibles

2,543 1,421 5,102 2,834 Depreciation

5,081 3,810 10,352 7,444 EBITDA (non-GAAP)

$ 11,094 $ 5,901 $ 16,303 $ 13,515 Further adjustments to EBITDA:

Acquisition and integration related expenses

512 – 1,778 – Facility moving expenses

– 1,822 – 1,816 Loss on extinguishment of debt

1,018 – 1,018 – Other significant non-recurring (income)/expense

– – 5,145 – Non-cash, stock-based compensation

2,313 2,333 4,452 3,957 Adjusted EBITDA (non-GAAP)

$ 14,937 $ 10,056 $ 28,696 $ 19,288

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 June 30, Six Months Ended June 30,

2019 2018 2019 2018 Net income (loss) attributable to common stockholders (GAAP)

$ 1,991 $ 5,924 $ (433) $ 3,712 Adjustments to net income (loss), net of tax:

Amortization of intangibles

2,009 1,123 4,031 2,239 Deemed dividends on preferred stock

– 9,195 – 10,198 Amortization of preferred stock beneficial conversion feature

– (15,499) – (13,646)Non-cash stock-based compensation expenses

2,019 2,284 3,978 3,835 Acquisition and integration related expenses

405 – 1,405 – Other significant non-recurring (income)/expenses

– 1,439 4,065 1,439 Loss on extinguishment of debt

804 – 804 – Adjusted net income (non-GAAP)

$ 7,228 $ 4,466 $ 13,850 $ 7,777

Net income (loss) per common share (GAAP)

Diluted EPS

$ 0.02 $ 0.07 $ – $ 0.04 Adjustments to diluted income (loss) per share:

Amortization of intangibles

0.02 0.01 0.04 0.03 Deemed dividends on preferred stock

– 0.10 – 0.11 Amortization of preferred stock beneficial conversion feature

– (0.17) – (0.15)Non-cash stock based compensation expenses

0.02 0.03 0.04 0.04 Acquisition and integration related expenses

– – 0.01 – Other significant non-recurring (income)/expense

– 0.02 0.04 0.02 Loss on extinguishment of debt

0.01 – 0.01 – Rounding and impact of including preferred shares and stock options in Adjusted Diluted Shares in net loss periods (3)

– (0.01) – – Adjusted diluted EPS (non-GAAP)

$ 0.07 $ 0.05 $ 0.14 $ 0.09

Weighted average shares used in computation of adjusted diluted EPS:

Diluted common shares (GAAP)

102,336 90,168 96,734 89,305 Options and restricted stock not included in GAAP diluted shares (using treasury stock method)

– – 3,664 – Adjusted diluted shares outstanding (non-GAAP)

102,336 90,168 100,398 89,305

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(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.

Reconciliation of Non-GAAP Financial Guidance to Corresponding GAAP Measures

“Net (loss) 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 (loss) income (GAAP)

$ (1,000) $ 3,000 Amortization of intangibles

9,000 9,000 Non-cash, stock-based compensation (4)

8,000 8,000 Acquisition and integration related expenses

2,000 2,000 Other one-time expenses

6,000 6,000 Adjusted net income (non-GAAP)

$ 24,000 $ 28,000 Interest and taxes

9,000 9,000 Depreciation

21,000 21,000 Adjusted EBITDA (non-GAAP)

$ 54,000 $ 58,000

Net (loss) 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

0.08 0.08 Acquisition and integration related expenses

0.02 0.02 Other one-time expenses

0.06 0.06 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)

100,500 104,500 Options and restricted stock not included in diluted shares

4,000 – Adjusted diluted shares outstanding (non-GAAP)

104,500 104,500

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(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.

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

Three Months Ended June 30, Six Months Ended June 30, Pharma Operations:

2019 2018
(as adjusted) %Change 2019 2018
(as adjusted) %Change Pharma Revenue

$ 12,731 $ 8,206 55.2% $ 22,098 $ 14,658 50.8% Cost of revenue

$ 6,367 $ 5,181 22.9% $ 12,178 $ 10,260 18.7% Gross profit

$ 6,364 $ 3,025 110.4% $ 9,920 $ 4,399 125.5%

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

Three Months Ended June 30, Six Months Ended June 30,

Clinical Operations:

2019 2018 % Change 2019 2018 % Change

Requisitions (cases) received

144,983 109,986 31.8% 282,094 215,215 31.1%

Number of tests performed

250,330 187,189 33.7% 484,647 365,983 32.4%

Average number of tests/requisitions

1.73 1.70 1.5% 1.5 1.70 1.0%

Total clinical testing revenue

$ 88,982 $ 59,540 49.4% $ 175,192 $ 116,511 50.4%

Average revenue/requisition

$ 614 $ 541 13.4% $ 621 $ 541 14.7%

Average revenue/test

$ 355 $ 318 11.8% $ 361 $ 318 13.5%

Cost of revenue

$ 46,380 $ 32,035 44.8% $ 89,031 $ 63,076 41.1%

Average cost/requisition

$ 320 $ 291 9.8% $ 316 $ 293 7.7%

Average cost/test

$ 185 $ 171 8.3% $ 184 $ 172 6.6%

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

SOURCE: NeoGenomics, Inc.

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