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NeoGenomics Reports Revenue of $121 Million in the Third Quarter

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  • NEO

Third-Quarter 2021 Results and Highlights:

  • Consolidated revenue of $121 million, comprised of Clinical Services revenue of $102 million and Pharma Services revenue of $19 million

  • Consolidated revenue decreased 3% due to the discontinuation of prior year COVID-19 revenue; consolidated revenue increased 12% when excluding prior year COVID-19 revenue

  • Announces plan to double its Clinical Services sales and medical affairs teams to further support RaDaR™ and drive the next phase of the Company's growth

FT. MYERS, FL / ACCESSWIRE / November 4, 2021 / NeoGenomics, Inc. (NASDAQ:NEO) (the " Company "), a leading provider of cancer-focused genetics testing services and global oncology contract research services, today announced its third-quarter results for the period ended September 30, 2021.

"In the third quarter, our Clinical Services revenue increased 11% when excluding COVID-19 PCR testing revenue in prior year. We also had record bookings for Pharma despite challenges the COVID-19 Delta variant surge presented for our business. These challenges were particularly impactful in our home state of Florida where the related incidence was hardest felt," said Mark Mallon, CEO of NeoGenomics. "While this dynamic impacted near-term results and our sales teams' access to clients, we remain excited about our longer-term growth prospects across the company and today we are announcing a major step towards accelerating that growth by sharing our intent to double our sales team to support RaDaR™. It is clear to us that RaDaR™ is a special asset and we are committed to making the investments necessary to realize its sizable Clinical and Pharma market opportunities for minimal residual disease and recurrence testing."

Third-Quarter Results

Consolidated revenue for the third quarter of 2021 was $121 million, a decrease of 3% over the same period in 2020. Clinical Services revenue of $102 million was a decrease year-over-year of 6%. Excluding COVID-19 PCR testing, Clinical Services revenue increased by 11% year-over-year. Clinical test volume (1) increased by 7% year-over-year. Average revenue per clinical test ("revenue per test") increased by 4% to $375. Pharma Services revenue increased by 14% to $19 million compared to the third quarter of 2020, primarily due to an increase in revenue related to research studies and informatics.

Consolidated gross profit for the third quarter of 2021 was $47 million, a decrease of 12.6%, compared to the third quarter of 2020. This decrease was the result of the termination of COVID-19 PCR testing, amortization of acquired Inivata developed technology intangibles and higher payroll and payroll-related costs. Consolidated gross profit margin, including amortization of acquired Inivata developed technology intangible assets, was 38.9%. Adjusted Gross Profit Margin (2) , excluding amortization of acquired Inivata developed technology intangible assets, was 42.9%.

Operating expenses increased by $38 million, or 76%, compared to the third quarter of 2020, which includes significant operating expenses related to 2021 acquisitions of Inivata and Trapelo Health subsidiaries. Operating expenses in the third quarter of 2021 also a included loss contingency for the regulatory matter, legal and strategic deal expenses, higher commissions, and payroll and payroll-related costs to support the Company's strategic growth initiatives, including Informatics and Pharma.

Net loss for the quarter was $20 million compared to net income of $3 million for the third quarter of 2020. The net loss for the third quarter of 2021 includes an $18 million gain related to the acquisition of Inivata Limited, a private limited company incorporated in England and Wales, and respective prior loan receivable. Net loss for the quarter when excluding this gain was $38 million. Adjusted Net Loss (2) was $10 million compared to Adjusted Net Income (2) of $7 million in the third quarter of 2020.

Adjusted EBITDA (2) was negative $3 million compared to positive $17 million in the third quarter of 2020, which includes negative Adjusted EBITDA of $9 million attributable to Inivata and Trapelo Health. COVID-19 PCR testing contributed significant Adjusted EBITDA in the third quarter of 2020.

Cash and cash equivalents, including restricted cash, and marketable securities totaled $546 million at quarter end. Days sales outstanding ("DSO") was 80 days at the end of the third quarter of 2021.

Operational Updates

The Company's data generation efforts in our Inivata subsidiary continued to progress during the quarter and the Company presented new data in early breast cancer at the European Society for Medical Oncology (ESMO) Congress, highlighting RaDaR™ as a highly sensitive, personalized assay for the detection of residual disease and recurrence. Additionally, in October the Company announced clinical collaborations with Princess Margaret Cancer Center in Toronto, Canada for the use of RaDaR™ and InVisionFirst-Lung™ in two separate prospective lung cancer studies.

To further support the upcoming clinical launch of RaDaR™ as well as support InVisionFirst-Lung™, the Company today also announced plans to double the size of its Clinical Services sales team through the addition of 50 Precision Medicine Managers as well as plans to hire an additional 10 Medical Science Liaisons.

Additionally, during the third quarter NeoGenomics began transitioning its Fort Myers operations into our new headquarters and laboratory facility and has successfully moved its administrative functions into the new space. The laboratory operations will be transitioning into the new facility over the upcoming months, which provides significant additional capacity for future growth.

2021 Financial Outlook

The Company revised its full-year 2021 guidance, initially issued on May 5, 2021.

(in millions)

Initial Guidance (3)

Revised Guidance

Consolidated revenue

$490 - $510

$482.5 - $487.5

Net (loss) income

$(70) - $(65)

$(0.8) - $4.2

Adjusted EBITDA

$10 - $15

$(2.5) - $2.5

Please refer to the tables reconciling forecasted Adjusted EBITDA, Adjusted Net (Loss) 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 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 (Loss) Income, Adjusted Diluted EPS, Adjusted Cost of Revenue, Adjusted Gross Profit, and Adjusted Gross Profit Margin. 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.

(3) Due to the issue date of initial guidance, these ranges excluded the impact of amortization of 2021 acquired Inivata developed technology intangible assets and the impact of the net gain on investment in and loan receivable from non-consolidated affiliate upon acquisition.

Conference Call

The Company has scheduled a webcast and conference call to discuss their third quarter results on Thursday, November 4, 2021 at 8:30 AM EDT. Interested investors should dial (888) 506-0062 (domestic) and (973) 528-0011 (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 18, 2021, and can be accessed by dialing (877) 481-4010 (domestic) and (919) 882-2331 (international). The playback conference ID number is 43244. The webcast may be accessed under the Investor Relations section of our website at www.neogenomics.com. An archive of the webcast will be available until 08:30 AM EDT on November 4, 2022.

About NeoGenomics, Inc.

NeoGenomics, Inc. specializes in cancer genetics testing and information services, providing 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. We routinely post information that may be important to investors, including copies of our Company Overview Presentation, on the Investors section of our website at http://ir.neogenomics.com/.

NeoGenomics is committed to connecting patients with life altering therapies and trials. We believe that, together, with our partners, we can help patients with cancer today and the next person diagnosed tomorrow. In carrying out these commitments, NeoGenomics strives to adhere to all relevant data protection laws, provides transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and has invested in leading technologies to seek to ensure the data we maintain is secured at all times.

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; Research Triangle Park, North Carolina; Houston, Texas; Atlanta, Georgia; Nashville, Tennessee; and CAP accredited laboratories in Cambridge, United Kingdom; 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.

Forward Looking Statements

Certain statements contained in this press release constitute forward-looking statements. Forward-looking statements generally can be identified by the use of words such as "anticipate," expect," plan," "could," "would," "may," "will," "believe," "estimate," "forecast," "goal," "project, "guidance," "plan," "potential" and other words of similar meaning, although not all forward-looking statements include these words. These forward-looking statements address various matters, including the Company's 2021 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. These risks and uncertainties include 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, including the Inivata acquisition, 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 25, 2021, as such information has been updated in subsequent SEC filings. As a result, this press release should be read in conjunction with the Company's periodic filings with the SEC.

Forward-looking statements speak only as of the date such statements are made (unless another date is indicated) and should not be relied upon 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.

For further information, please contact:

NeoGenomics, Inc.
Doug Brown
Chief Strategy and Corporate Development Officer
T: 239.768.0600 x2539
M: 704.236.2064
doug.brown@neogenomics.com

Charlie Eidson
Director, Investor Relations and Corporate Development
T: 239.768.0600 x2726
M: 952.221.8816
charlie.eidson@neogenomics.com

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



September 30, 2021

(unaudited)

December 31, 2020

ASSETS

Cash and cash equivalents

$

340,565

$

228,713

Marketable securities, at fair value

202,144

67,546

Accounts receivable, net

104,964

106,843

Inventories

21,834

29,526

Prepaid assets

14,618

11,547

Assets held for sale

10,050

-

Other current assets

15,755

4,555

Total current assets

709,930

448,730

Property and equipment (net of accumulated depreciation of $112,185 and $92,895, respectively)

107,172

85,873

Operating lease right-of-use assets

102,310

45,786

Intangible assets, net

450,802

120,653

Goodwill

525,802

211,083

Restricted cash

3,161

21,919

Investment in non-consolidated affiliate

-

29,555

Prepaid lease asset

-

20,229

Other assets

7,210

4,503

Total non-current assets

$

1,196,457

$

539,601

TOTAL ASSETS

$

1,906,387

$

988,331

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and other current liabilities

$

84,185

$

65,375

Current portion of equipment financing obligations

1,564

2,841

Current portion of operating lease liabilities

6,988

4,967

Total current liabilities

92,737

73,183

Convertible senior notes, net

531,779

168,120

Operating lease liabilities

72,336

42,296

Deferred income tax liabilities, net

57,706

5,415

Other long-term liabilities

14,584

5,023

Total long-term liabilities

676,405

220,854

TOTAL LIABILITIES

$

769,142

$

294,037

TOTAL STOCKHOLDERS' EQUITY

$

1,137,245

$

694,294

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,906,387

$

988,331

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



Three Months Ended September 30,

Nine Months Ended September 30,




2021

2020

2021

2020

NET REVENUE:









Clinical Services

$

102,227

$

108,733

$

300,119

$

275,599

Pharma Services

19,113

16,711

58,478

42,852

Total revenue

121,340

125,444

358,597

318,451

COST OF REVENUE

74,101

71,379

216,794

190,011

GROSS PROFIT

47,239

54,065

141,803

128,440

Operating expenses:

General and administrative

63,839

36,128

158,953

107,085

Research and development

7,409

1,964

13,360

6,129

Sales and marketing

15,704

11,304

46,677

34,757

Total operating expenses

86,952

49,396

218,990

147,971

(LOSS) INCOME FROM OPERATIONS

(39,713

)

4,669

(77,187

)

(19,531

)

Interest expense, net

1,296

2,458

3,375

4,825

Other income, net

(89

)

(11

)

(431

)

(7,639

)

Gain on investment in and loan receivable from non-consolidated affiliate, net

(17,750

)

-

(109,260

)

-

Loss on extinguishment of debt

-

-

-

1,400

Loss on termination of cash flow hedge

-

-

-

3,506

(Loss) income before taxes

(23,170

)

2,222

29,129

(21,623

)

Income tax benefit

(2,822

)

(335

)

(4,283

)

(10,378

)

NET (LOSS) INCOME

$

(20,348

)

$

2,557

$

33,412

$

(11,245

)

Adjustment to net (loss) income for convertible notes in diluted EPS (4)

NET (LOSS) INCOME

(20,348

)

2,557

33,412

(11,245

)

Convertible note accretion, amortization, and interest, net of tax

-

1,975

-

-

NET (LOSS) INCOME USED IN DILUTED EPS

$

(20,348

)

$

4,532

$

33,412

$

(11,245

)

NET (LOSS) INCOME PER SHARE

Basic

$

(0.17

)

$

0.02

$

0.28

$

(0.10

)

Diluted

$

(0.17

)

$

0.04

$

0.28

$

(0.10

)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Basic

122,559

110,461

119,087

107,605

Diluted

122,559

119,191

121,356

107,605

(4) This adjustment compensates for the effects of the if-converted impact of convertible notes in 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, net income 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,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

33,412

$

(11,245

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation

21,807

18,705

Amortization of intangibles

14,683

7,387

Non-cash stock-based compensation

12,396

7,536

Non-cash operating lease expense

6,167

6,365

Gain on investment in and loan receivable from non-consolidated affiliate, net

(109,260

)

-

Amortization of convertible debt discount and debt issue costs

2,037

2,843

Loss on debt extinguishment

-

1,400

Loss on termination of cash flow hedge

-

3,506

Write-off of COVID-19 PCR testing inventory and equipment

6,061

-

Other non-cash items

997

371

Changes in assets and liabilities, net

4,753

(41,393

)

Net cash used in operating activities

(6,947

)

(4,525

)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of marketable securities

(180,961

)

(53,396

)

Proceeds from sales and maturities of marketable securities

44,736

3,000

Purchases of property and equipment

(52,155

)

(17,591

)

Business acquisitions, net of cash acquired

(419,404

)

(37,000

)

Loan receivable from non-consolidated affiliate

(15,000

)

-

Investment in non-consolidated affiliate

-

(25,600

)

Net cash used in investing activities

(622,784

)

(130,587

)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of equipment financing obligations

(2,537

)

(4,331

)

Repayment of term loan

-

(97,540

)

Cash flow hedge termination

-

(3,317

)

Issuance of common stock, net

12,110

10,761

Proceeds from issuance of convertible debt, net of issuance costs

334,410

194,466

Premiums paid for capped call confirmations

(29,291

)

-

Proceeds from equity offerings, net of issuance costs

408,133

127,293

Net cash provided by financing activities

722,825

227,332

Net change in cash, cash equivalents and restricted cash

93,094

92,220

Cash, cash equivalents and restricted cash, beginning of period

250,632

173,016

Cash, cash equivalents and restricted cash, end of period

$

343,726

$

265,236

Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:

Cash and cash equivalents

$

340,565

$

233,233

Restricted cash, non-current

3,161

32,003

Total cash, cash equivalents and restricted cash

$

343,726

$

265,236

Use of Non-GAAP Financial Measures

The financial results and financial guidance include the use of 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 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 business. Management believes that these non-GAAP financial measures may assist investors in evaluating the operating results and future prospects. 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 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 recorded costs against its net revenue. In addition, the 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 (loss) income from continuing operations before: (i) interest expense, (ii) tax (benefit) or 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) write-off of COVID-19 PCR testing inventory and equipment, (vii) new headquarters moving expenses, (viii) gain on investment in and loan receivable from non-consolidated affiliate, net, (ix) loss contingency for regulatory matter, and (x) other significant or non-operating (income) or expenses, net.

Non-GAAP Adjusted Cost of Revenue, Adjusted Gross Profit and Adjusted Gross Profit Margin

"Adjusted cost of revenue" is defined by NeoGenomics as cost of revenue before: (i) amortization expense of acquired Inivata developed technology intangibles, and (ii) the write-off of COVID-19 PCR testing inventory equipment. "adjusted gross profit" is defined by NeoGenomics as total revenue less adjusted cost of revenue. "Adjusted gross profit margin" is defined by NeoGenomics as adjusted cost of revenue divided by total revenue.

Non-GAAP Adjusted Net (Loss) Income

"Adjusted net (loss) income" is defined by NeoGenomics as net (loss) income from continuing operations plus: (i) non-cash amortization of intangible assets, (ii) non-cash stock-based compensation expense, and, if applicable in a reporting period, (iii) acquisition and integration related expenses, (iv) write-off of COVID-19 PCR testing inventory equipment, (v) new headquarters moving expenses, (vi) gain on investment in and loan receivable from non-consolidated affiliate, net, (vii) loss contingency for regulatory matter, and (viii) other significant or non-operating (income) or expenses. If GAAP net (loss) income is negative and adjusted net (loss) income is positive, adjusted net (loss) income will also be adjusted to reverse any recognized interest expense (including any amortization of discounts) on the convertible notes using the if-converted method unless the effect of this adjustment on both the adjusted net (loss) income and weighted average diluted common shares outstanding would be anti-dilutive. If GAAP net (loss) income is positive and adjusted net (loss) income is negative, adjusted net (loss) income 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 (loss) income divided by adjusted diluted shares outstanding. If GAAP net (loss) income is negative and adjusted net (loss) income is positive, adjusted diluted shares outstanding will also include any options or restricted stock that would be outstanding as dilutive instruments using the treasury stock method 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, until the effect of these adjustments are anti-dilutive. If GAAP net (loss) income is positive and adjusted net (loss) income is negative, adjusted diluted shares outstanding will exclude any options or restricted stock that would be outstanding as dilutive instruments using the treasury stock method 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.

Reconciliation of GAAP Net (Loss) Income to Non-GAAP EBITDA and Adjusted EBITDA
(Unaudited)
(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net (loss) income (GAAP)

$

(20,348

)

$

2,557

$

33,412

$

(11,245

)

Adjustments to net (loss) income:

Interest expense, net

1,296

2,458

3,375

4,825

Income tax benefit

(2,822

)

(335

)

(4,283

)

(10,378

)

Amortization of intangibles

8,474

2,468

14,683

7,387

Depreciation

8,178

6,528

21,807

18,705

EBITDA (non-GAAP)

$

(5,222

)

$

13,676

$

68,994

$

9,294

Further adjustments to EBITDA:

Acquisition and integration related expenses

1,533

446

13,345

1,852

Write-off of COVID-19 PCR testing inventory and equipment

-

-

6,061

-

New headquarters moving expenses

775

-

1,143

-

Non-cash stock-based compensation expense

5,237

2,715

12,396

7,536

Gain on investment in and loan receivable from non-consolidated affiliate, net

(17,750

)

-

(109,260

)

-

Loss contingency for regulatory matter

10,500

-

10,500

-

Other significant expenses (income), net (5)

1,814

(105

)

2,445

(2,100

)

Adjusted EBITDA (non-GAAP)

$

(3,113

)

$

16,732

$

5,624

$

16,582

(5) Other significant expenses (income), net, includes strategic deal costs, CEO transition costs, reimbursements received related to the CARES Act, cash flow hedge termination fees, debt retirement fees, and certain non-recurring items.

Reconciliation of GAAP Cost of Revenue, Gross Profit and Gross Profit Margin to Non-GAAP Adjusted Cost of Revenue, Adjusted Gross Profit and Adjusted Gross Profit Margin
(Unaudited)
(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

%
Change


2021

2020

% Change

Total revenue (GAAP)

$

121,340

$

125,444

(3.3

)%

$

358,597

$

318,451

12.6

%

Cost of revenue (GAAP)

$

74,101

$

71,379

3.8

%

$

216,794

$

190,011

14.1

%

Adjustments to cost of revenue (6)

(4,824

)

-

(10,853

)

-

Adjusted cost of revenue (non-GAAP)

$

69,277

$

71,379

(2.9

)%

$

205,941

$

190,011

8.4

%

Gross profit (GAAP)

$

47,239

$

54,065

(12.6

)%

$

141,803

$

128,440

10.4

%

Adjusted gross profit (non-GAAP )

$

52,063

$

54,065

(3.7

)%

$

152,656

$

128,440

18.9

%

Gross profit margin (GAAP)

38.9

%

43.1

%

39.5

%

40.3

%

Adjusted gross profit margin (non-GAAP)

42.9

%

43.1

%

42.6

%

40.3

%

(6) Cost of revenue adjustment for the three months ended September 30, 2021 includes $4.8 million of amortization of acquired Inivata developed technology intangible assets. Cost of revenue adjustments for the nine months ended September 30, 2021 includes $5.6 million of amortization of acquired Inivata developed technology intangible assets and write-offs of $5.3 million for COVID-19 PCR testing inventory.

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

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Adjustment to net (loss) income for convertible notes in diluted EPS

Net (loss) income (GAAP)

$

(20,348

)

$

2,557

$

33,412

$

(11,245

)

Adjustments to net (loss) income, net of tax:

Amortization of intangibles

8,474

1,949

14,683

5,836

Acquisition and integration related expenses

1,533

353

13,345

1,463

Write-off of COVID-19 PCR testing inventory and equipment

-

-

6,061

-

New headquarters moving expenses

775

-

1,143

-

Non-cash stock-based compensation expense

5,237

2,185

12,396

6,233

Gain on investment in and loan receivable from non-consolidated affiliate, net

(17,750

)

-

(109,260

)

-

Loss contingency for regulatory matter

10,500

-

10,500

-

Other significant expenses (income), net (7)

1,814

(83

)

2,445

(1,659

)

Adjusted net (loss) income (non-GAAP)

$

(9,765

)

$

6,961

$

(15,275

)

$

628

Net (loss) income per common share (GAAP)

Diluted EPS

$

(0.17

)

$

0.04

$

0.28

$

(0.10

)

Adjustments to diluted (loss) income per share:

Amortization of intangibles

0.07

0.02

0.12

0.05

Acquisition and integration related expenses

0.01

-

0.11

0.01

Write-off of COVID-19 PCR testing inventory and equipment

-

-

0.05

-

New headquarters moving expenses

0.01

-

0.01

-

Non-cash stock-based compensation expense

0.04

0.02

0.10

0.06

Gain on investment in and loan receivable from non-consolidated affiliate, net

(0.14

)

-

(0.90

)

-

Loss contingency for regulatory matter

0.09

-

0.09

-

Other significant expenses (income), net (7)

0.01

-

0.02

(0.02

)

Rounding and impact of diluted shares in adjusted diluted shares (8)

-

(0.02

)

(0.01

)

0.01

Adjusted diluted EPS (non-GAAP)

$

(0.08

)

$

0.06

$

(0.13

)

$

0.01

Weighted average shares used in computation of adjusted diluted EPS:

Diluted common shares (GAAP)

122,559

119,191

121,356

107,605

Dilutive effect of options, restricted stock, and converted shares (9)(10)

-

-

(2,269

)

-

Adjusted diluted shares outstanding (non-GAAP)

122,559

119,191

119,087

107,605

(7) Other significant expenses (income), net, includes strategic deal costs, CEO transition costs, reimbursements received related to the CARES Act, cash flow hedge termination fees, debt retirement fees, and certain non-recurring items.

(8) This adjustment is for rounding and, in those periods in which GAAP net (loss) income is negative and adjusted net (loss) income is positive or GAAP net (loss) income is positive and adjusted net (loss) income is negative, also compensates for the effects of additional diluted shares included or excluded in adjusted diluted shares outstanding for the treasury stock impact of outstanding stock options and restricted stock and the if-converted impact of convertible notes.

(9) In those periods in which GAAP net (loss) income is negative and adjusted net (loss) income is positive, this adjustment includes any options or restricted stock that would be outstanding as dilutive instruments using the treasury stock method 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, until the effect of these adjustments are anti-dilutive.

(10) In those periods in which GAAP net (loss) income is positive and adjusted net (loss) income is negative, this adjustment excludes any options or restricted stock that would be outstanding as dilutive instruments using the treasury stock method 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.

Reconciliation of Non-GAAP Financial Guidance to Corresponding GAAP Measures
(Unaudited)
(In thousands, except per share amounts)

GAAP net (loss) income in 2021 will be impacted by certain charges, including: (i) expense related to the amortization of intangible assets, (ii) non-cash stock based compensation, (iii) acquisition and integration related expenses, (iv) write-off of COVID-19 PCR testing inventory equipment, (v) gain on investment in and loan receivable from non-consolidated affiliate, net, (vi) loss contingency for regulatory matter, and (vii) other one-time expenses. These charges have been included in GAAP net (loss) income available to common shareholders and GAAP net (loss) income per share; however, they have been removed from adjusted net loss and adjusted diluted net loss per share.

The following table reconciles the Company's 2021 outlook for net loss (income) and EPS to the corresponding non-GAAP measures of adjusted net loss, adjusted EBITDA and adjusted diluted EPS:

For the Year Ended

December 31, 2021

Low Range

High Range

Net (loss) income (GAAP)

$

(800

)

$

4,200

Amortization of intangibles

24,000

24,000

Non-cash, stock-based compensation

18,000

18,000

Acquisition and integration related expenses

14,000

14,000

Write-off of COVID-19 PCR testing inventory and equipment

6,100

6,100

Gain on investment in and loan receivable from non-consolidated affiliate, net

(109,300

)

(109,300

)

Loss contingency for regulatory matter

10,500

10,500

Other one-time expenses

3,000

3,000

Adjusted net loss (non-GAAP)

$

(34,500

)

$

(29,500

)

Interest and taxes

1,000

1,000

Depreciation

31,000

31,000

Adjusted EBITDA (non-GAAP)

$

(2,500

)

$

2,500

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

$

(0.01

)

$

0.04

Adjustments to diluted (loss) income per share:

Amortization of intangibles

0.20

0.20

Non-cash, stock based compensation expenses

0.15

0.15

Acquisition and integration related expenses

0.12

0.12

Write-off of COVID-19 PCR testing inventory and equipment

0.05

0.05

Gain on investment in and loan receivable from non-consolidated affiliate, net

(0.91

)

(0.91

)

Loss contingency for regulatory matter

0.09

0.09

Other one-time expenses

0.03

0.03

Rounding and impact of diluted shares in adjusted diluted shares (11)

(0.01

)

(0.02

)

Adjusted diluted EPS (non-GAAP) (12)

$

(0.29

)

$

(0.25

)

Weighted average assumed shares outstanding in 2021:

Diluted common shares (GAAP)

120,000

120,000

Options, restricted stock, and converted shares not included in diluted shares (12)

-

-

Adjusted diluted shares outstanding (non-GAAP)

120,000

120,000

(11) This adjustment is for rounding and, in those periods in which GAAP net (loss) income is negative and adjusted net (loss) income is positive, also compensates for the effects of additional diluted shares included in adjusted diluted shares outstanding for the treasury stock impact of outstanding stock options and restricted stock and the if-converted impact of convertible notes.

(12) In those periods in which GAAP net (loss) income is negative and adjusted net (loss) income is positive, this adjustment includes any options or restricted stock that would be outstanding as dilutive instruments using the treasury stock method 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, until the effect of these adjustments are anti-dilutive.

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

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

%
Change

2021

2020

%
Change

Clinical Services:

Revenue

$

102,227

$

108,733

(6.0

)%

$

300,119

$

275,599

8.9

%

Cost of revenue (13)

59,560

60,607

(1.7

)%

178,358

158,287

12.7

%

Gross profit

$

42,667

$

48,126

(11.3

)%

$

121,761

$

117,312

3.8

%

Gross profit margin

41.7

%

44.3

%

40.6

%

42.6

%

Pharma Services:

Revenue

$

19,113

$

16,711

14.4

%

$

58,478

$

42,852

36.5

%

Cost of revenue

14,541

10,772

35.0

%

38,436

31,724

21.2

%

Gross profit

$

4,572

$

5,939

(23.0

)%

$

20,042

$

11,128

80.1

%

Gross profit margin

23.9

%

35.5

%

34.3

%

26.0

%

(13) Clinical Services cost of revenue for the three months ended September 30, 2021 includes $4.3 million of amortization of acquired Inivata developed technology intangible assets. Clinical Services cost of revenue for the nine months ended September 30, 2021 includes $5 million of amortization of acquired Inivata developed technology intangible assets and write-offs of $5.3 million for COVID-19 PCR testing inventory. Pharma Services cost of revenue for the three and nine months ended September 30, 2021 includes $0.5 million of amortization of acquired Inivata developed technology intangible assets.

Supplemental Information
Clinical (17) Requisitions Received, Tests Performed, Revenue and Cost of Revenue
(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

% Change

2021

2021

% Change

Clinical (14) :

Requisitions (cases) received

159,625

147,518

8.2

%

473,898

406,250

16.7

%

Number of tests performed

272,732

255,458

6.8

%

815,008

710,678

14.7

%

Average number of tests/requisitions

1.71

1.73

(1.2

)%

1.72

1.75

(1.7

)%

Average revenue/requisition

$

640

$

622

2.9

%

$

630

$

632

(0.3

)%

Average revenue/test

$

375

$

359

4.5

%

$

366

$

361

1.4

%

Average cost/requisition

$

347

$

342

1.5

%

$

349

$

361

(3.3

)%

Average cost/test

$

203

$

197

3.0

%

$

203

$

206

(1.5

)%

(14) Clinical tests exclude requisitions, tests, revenue and costs of revenue for Pharma Services, COVID-19 PCR tests and the amortization for acquired Inivata developed technology intangible assets.

SOURCE: NeoGenomics, Inc.



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