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NeoGenomics Reports 40% Revenue Growth to $107 Million in the Fourth Quarter

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Fourth-Quarter 2019 Highlights:

  • Consolidated revenue increased 39.7% to $106.9 million

  • Clinical Services revenue increased 41.7% to $93.4 million

  • Pharma Services revenue increased 27.5% to $13.5 million

  • Pharma Services backlog increased 31.8% to $130.3 million

  • Company issues 2020 financial guidance

FT. MYERS, FL / ACCESSWIRE / February 27, 2020 / NeoGenomics, Inc. (NEO), a leading provider of cancer-focused genetic testing services, today announced fourth-quarter and full-year 2019 results for the period ended December 31, 2019.

"Our fourth quarter performance concludes a very successful year for NeoGenomics in which our company grew by nearly 50% and our competitive position strengthened dramatically", said Douglas M. VanOort, the Company's Chairman and CEO.

"In the fourth quarter, our Clinical Services Division once again reported excellent volume growth of 27% driven by market share gains and the addition of Genoptix. We are particularly pleased that combined molecular and Next Generation Sequencing test volume continued to grow at rates approximating 50%, and that average-revenue-per-test improved by over 10% from last year. Pharma Services Division growth was also excellent with strong revenue gains, a record amount of newly-signed contracts, and a current backlog of approximately $130 million in signed contracts."

"Perhaps more importantly, we are very excited about the opportunities in front of us. We've made significant investments in a variety of growth initiatives over the past year, including our recent acquisition of the Oncology Division of Human Longevity, Inc., investments in Next Generation Sequencing, and Informatics. We believe that NeoGenomics has significant, sustainable competitive advantages and is well positioned for growth in each of the markets in which we operate."

Fourth-Quarter Results

Consolidated revenue for the fourth quarter of 2019 was $106.9 million, an increase of 40% over the same period in 2018. Clinical test volume(1) increased by 27% year over year. Average revenue per clinical test ("revenue per test") increased by 11% to $370, primarily due to the acquisition of Genoptix and the impact of favorable test mix and growth in next-generation sequencing. Clinical Services revenue was $93.4 million, resulting in a 42% increase over the fourth quarter of 2018. Pharma Services revenue was $13.5 million, which represented a 27% increase over the fourth quarter of 2018.

Gross profit improved by $12.8 million, or 34.5%, compared to the fourth quarter of 2018, to $49.9 million. Gross margin decreased by approximately 181 basis points year-over-year to 46.7%. Gross margin decreases are primarily due to the integration of Genoptix. Average cost of goods sold per clinical test ("cost per test") increased by 14% year over year, reflecting the impact of the Genoptix acquisition, including integration-related activities, and test mix. The increase was partially offset by continued efficiencies as we integrate Genoptix.

Operating expenses increased by $13.3 million, or 39%, compared to the fourth quarter of 2018, primarily due to the Genoptix acquisition, investments in research and development, and growth initiatives.

Net income for the fourth quarter was $6.3 million compared to net income of $0.4 million for the fourth quarter of 2018.

Adjusted EBITDA(2) was $13.6 million for the fourth quarter, a 5% improvement from the prior year. Adjusted Net Income(2) was $10.9 million compared to $5.5 million in the fourth quarter of 2018.

Cash and cash equivalents were $173.0 million and days sales outstanding were 81 days at the end of the fourth quarter.

Full Year Results

Consolidated revenues for 2019 were $408.8 million, an increase of 48% over 2018 primarily due to continued volume growth and the acquisition of Genoptix. Net income for 2019 was $8.0 million compared to $2.6 million in 2018. Adjusted EBITDA(2) for 2019 was $57.2 million, a 31% increase from the prior year. Adjusted Net Income(2) for 2019 was $32.3 million compared to $17.9 million in 2018.

2020 Financial Outlook:

The Company also issued 2020 guidance today.

(in millions)

Guidance

Consolidated revenue

$

464 - $474

Net (loss)/income

$

8 - $13

Adjusted EBITDA(2)

$

60 - $65

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.

(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 web-cast and conference call to discuss their fourth quarter and full year results on Thursday, February 27, 2020 at 8:30 AM EST. 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 March 5, 2020, and can be accessed by dialing (877) 481-4010 (domestic) and (919) 882-2331 (international). The playback conference ID Number is 58948. 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 EDT on May 27, 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 Ft. 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, 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 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
Director, Investor Relations
(239)690-4238 (w) (239)284-4314 (m)
bill.bonello@neogenomics.com

NeoGenomics, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

December 31,

2019

December 31,

2018

ASSETS

Cash and cash equivalents

$

173,016

$

9,811

Accounts receivable, net

94,242

76,919

Inventories

14,405

8,650

Other current assets

9,075

8,288

Total current assets

290,738

103,668

Property and equipment (net of accumulated depreciation of $68,809 and $50,127, respectively)

64,188

60,888

Operating lease right-of-use assets

26,492

-

Intangible assets, net

126,640

140,029

Goodwill

198,601

197,892

Other assets

2,847

2,538

TOTAL ASSETS

$

709,506

$

505,015

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and other current liabilities

$

50,091

$

46,753

Short-term portion of financing obligations

10,432

14,172

Short-term portion of operating leases

3,381

-

Total current liabilities

63,904

60,925

Long-term portion of term loan and financing obligations

95,028

98,130

Long-term portion of operating leases

24,034

-

Deferred income tax liability, net

15,566

22,457

Other long-term liabilities

3,566

3,060

Total long-term liabilities

138,194

123,647

TOTAL LIABILITIES

$

202,098

$

184,572

TOTAL STOCKHOLDERS' EQUITY

507,408

320,443

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

709,506

$

505,015

NeoGenomics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

For the Three Months Ended December 31,

For the Year Ended December 31,

2019

2018

2019

2018

NET REVENUE

Clinical services

$

93,405

$

65,913

$

361,161

$

241,873

Pharma services

13,463

10,562

47,669

34,868

Total revenue

106,868

76,475

408,830

276,741

COST OF REVENUE

56,945

39,364

211,994

149,476

GROSS PROFIT

49,923

37,111

196,836

127,265

Operating Expenses:

General and administrative

33,220

25,717

127,993

84,822

Research and development

2,080

526

8,487

3,001

Sales and marketing

12,302

8,047

47,350

29,402

Total operating expenses

47,602

34,290

183,830

117,225

INCOME FROM OPERATIONS

2,321

2,821

13,006

10,040

Interest expense, net

380

1,464

3,713

6,230

Other (income) expense

(494

)

(46

)

4,630

(14

)

Loss on extinguishment of debt

-

-

1,018

-

Income before taxes

2,435

1,403

3,645

3,824

Income tax (benefit) expense

(3,861

)

1,050

(4,361

)

1,184

NET INCOME

6,296

353

8,006

2,640

Deemed dividends on preferred stock andamortization of beneficial conversion feature

-

-

-

5,627

Gain on redemption of preferred stock

-

-

-

(9,075

)

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

$

6,296

$

353

$

8,006

$

6,088

INCOME PER COMMON SHARE

Basic

$

0.06

$

0.00

$

0.08

$

0.07

Diluted

$

0.06

$

0.00

$

0.08

$

0.07

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Basic

104,393

93,270

100,470

85,618

Diluted

107,816

96,874

103,615

91,568

NeoGenomics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

For the Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2019

2018

Net income

$

8,006

$

2,640

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of property and equipment

20,346

15,804

Loss on disposal of assets

472

404

Loss on debt extinguishment

1,018

-

Amortization of intangibles

9,925

5,928

Amortization of debt issue costs

390

542

Non-cash stock based compensation

10,000

6,955

Non-cash operating lease expense

5,635

-

Changes in assets and liabilities, net

(32,423

)

12,513

Net cash provided by operating activities

$

23,369

$

44,786

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(20,029

)

(14,310

)

Acquisition adjustment

399

(125,377

)

Net cash used in investing activities

$

(19,630

)

$

(139,687

)

CASH FLOWS FROM FINANCING ACTIVITIES

Redemption of preferred stock

-

(50,096

)

Advances on revolving credit facility

-

15,000

Repayment of revolving credit facility

(5,000

)

(35,400

)

Repayment of equipment and other loans

(7,201

)

(6,563

)

Proceeds from term loan

100,000

30,000

Repayment of term loan

(99,250

)

(4,500

)

Payments of debt issue costs

(1,059

)

(576

)

Issuance of common stock, net

11,202

9,023

Proceeds from equity offering, net

160,774

135,071

Net cash provided by financing activities

$

159,466

$

91,959

Effects of foreign exchange rate changes on cash and cash equivalents

-

(68

)

Net change in cash and cash equivalents

$

163,205

$

(3,010

)

Cash and cash equivalents, beginning of period

9,811

12,821

Cash and cash equivalents, end of period

$

173,016

$

9,811

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) net interest expense, (ii) tax (benefit) 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)

For the Three Months Ended December 31,

For the Year Ended December 31,

2019

2018

2019

2018

NET INCOME (GAAP)

$

6,296

$

353

$

8,006

$

2,640

Adjustments to net income:

Interest expense, net

380

1,464

3,713

6,230

Amortization of intangibles

2,443

1,672

9,925

5,928

Income tax (benefit) expense

(3,861

)

1,050

(4,361

)

1,184

Depreciation of property and equipment

5,146

4,327

20,346

15,804

EBITDA (non-GAAP)

10,404

8,866

37,629

31,786

Further Adjustments to EBITDA:

Acquisition and integration related expenses

1,052

2,325

3,195

2,325

Loss on extinguishment of debt

-

-

1,018

-

Other significant non-recurring expense

(134

)

-

5,375

2,486

Non-cash, stock-based compensation

2,273

1,807

10,000

6,955

ADJUSTED EBITDA (non-GAAP)

$

13,595

$

12,998

$

57,217

$

43,552

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)

For the Three Months Ended December 31,

For the Year Ended December 31,

2019

2018

2019

2018

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS (GAAP)

$

6,296

$

353

$

8,006

$

6,088

Adjustments to Net Income, net of tax:

Amortization of intangibles

1,930

1,321

7,841

4,683

Deemed dividends on preferred stock and amortization ofbeneficial conversion feature

-

-

-

(3,448

)

Non-cash stock-based compensation expenses

1,971

1,695

8,910

6,534

Acquisition and integration related expenses

831

2,116

2,500

2,116

Other significant non-recurring expenses

(106

)

-

4,247

1,964

Loss on extinguishment of debt

-

-

804

-

ADJUSTED NET INCOME (non-GAAP)

$

10,922

$

5,485

$

32,308

$

17,937

NET INCOME PER COMMON SHARE (GAAP)

Diluted EPS

$

0.06

$

-

$

0.08

$

0.07

Adjustments to diluted income per share:

Amortization of intangibles

0.02

0.01

0.08

0.05

Deemed dividends on preferred stock and amortization ofbeneficial conversion feature

-

-

-

(0.04

)

Non-cash stock based compensation expenses

0.02

0.02

0.09

0.07

Acquisition and integration related expenses

0.01

0.02

0.02

0.02

Other significant non-recurring expenses

-

-

0.04

0.02

Loss on extinguishment of debt

-

-

0.01

-

Rounding and impact of stock options in adjusted diluted

shares in net loss periods (3)

(0.01

)

0.01

(0.01

)

0.01

ADJUSTED DILUTED EPS (non-GAAP)

$

0.10

$

0.06

$

0.31

$

0.20

WEIGHTED AVERAGE DILUTED COMMON SHARES OUTSTANDING:

Diluted common shares (GAAP)

107,816

96,874

103,615

91,568

Dilutive effect of options, restricted stock and preferred shares

-

-

-

-

ADJUSTED DILUTED SHARES OUTSTANDING(non-GAAP)

107,816

96,874

103,615

91,568

_________________

(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, both of which are not included in GAAP Diluted Shares outstanding.

Reconciliation of Non-GAAP Financial Guidance to Corresponding GAAP Measures

"Net income (GAAP)" in 2020 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 2020 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):

For the Year Ended

December 31, 2020

Range

Net income attributable to common stockholders (GAAP)

$

8,000

$

13,000

Amortization of intangibles

10,000

10,000

Non-cash, stock-based compensation (4)

11,000

11,000

Acquisition and integration related expenses

1,000

1,000

Adjusted Net Income (non-GAAP)

$

30,000

$

35,000

Interest and taxes

8,000

8,000

Depreciation

22,000

22,000

Adjusted EBITDA (non-GAAP)

$

60,000

$

65,000

Net income per diluted common share (GAAP)

$

0.07

$

0.12

Adjustments to diluted income per share:

Amortization of intangibles

0.09

0.09

Non-cash, stock based compensation expenses

0.10

0.10

Acquisition and integration related expenses

0.01

0.01

Adjusted Diluted EPS (non-GAAP)

$

0.27

$

0.32

Weighted average assumed shares outstanding in 2020:

Diluted Common Shares (GAAP)

109,500

109,500

Options and restricted stock not included in diluted shares

-

-

Adjusted diluted shares outstanding (non-GAAP)

109,500

109,500

___________________

(4) Forecasts of non-cash, stock-based compensation expense assume consistency in the Company's stock price in 2020 and no further stock-based awards requiring variable accounting in accordance with ASU 2018-07.

Supplemental Information

Segment Revenue, Cost of Revenue and Gross Profit

(Unaudited, in thousands)

For the Three Months Ended December 31,

For the Year Ended December 31,

2019

2018

% Change

2019

2018

% Change

Clinical Services:

Clinical Revenue

$

93,405

$

65,913

41.7

%

$

361,161

$

241,873

49.3

%

Cost of revenue

49,054

33,710

45.5

%

185,612

128,297

44.7

%

Gross profit

$

44,351

$

32,203

37.7

%

$

175,549

$

113,576

54.6

%

Gross margin

47.5

%

48.9

%

48.6

%

47.0

%

Pharma Operations:

Pharma Revenue

$

13,463

$

10,562

27.5

%

$

47,669

$

34,868

36.7

%

Cost of revenue

7,891

5,654

39.6

%

26,382

21,179

24.6

%

Gross profit

$

5,572

$

4,908

13.5

%

$

21,287

$

13,689

55.5

%

Gross margin

41.4

%

46.5

%

44.7

%

39.9

%

Supplemental Information

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

(Unaudited)

For the Three Months Ended December 31,

For the Year Ended December 31,

2019

2018

% Change

2019

2018

% Change

Clinical Services:

Requisitions (cases) received

145,679

115,915

25.7

%

573,085

439,597

30.4

%

Number of tests performed

252,374

198,181

27.3

%

987,539

749,902

31.7

%

Average number of tests/requisitions

1.73

1.71

1.2

%

1.72

1.71

0.6

%

Average revenue/requisition

$

641

$

569

12.7

%

$

630

$

550

14.5

%

Average revenue/test

$

370

$

333

11.1

%

$

366

$

323

13.3

%

Average cost/requisition

$

337

$

291

15.8

%

$

324

$

292

11.0

%

Average cost/test

$

194

$

170

14.1

%

$

188

$

171

9.9

%

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

SOURCE: NeoGenomics, Inc.



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