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8-K - FORM 8-K - NEOGENOMICS INCd13023d8k.htm

EXHIBIT 99.1

 

LOGO

NEOGENOMICS, INC.

PRESS RELEASE

FOR IMMEDIATE RELEASE

NeoGenomics Reports 18% Revenue Growth and Strong Gains in Adjusted

EBITDA

Significant Expansion in Gross Margin as Costs per Test Fall to Record Levels

Ft. Myers, Florida – July 23, 2015 - NeoGenomics, Inc. (NASDAQ: NEO), a leading provider of cancer-focused genetic testing services, today reported its results for the second quarter of 2015.

Second Quarter 2015 Highlights:

 

    18% increase in consolidated revenue

 

    9% growth in base(1) revenue despite $2.1 million reduction in FISH reimbursement

 

    21% growth in base(1) test volume despite FISH insourcing by one large client

 

    Record low $215 Avg Cost per Test in base(1) business

 

    300 basis point expansion in gross margin from 41.4% in Q1, to 44.4% in Q2

 

    Adjusted EBITDA(2) increase of 16% to $2.4 million, and EPS of ($.00) per share

Revenue for the second quarter was $24.3 million, an increase of 18% over last year. The PathLogic acquisition accounted for $1.9 million or half of the revenue growth, and organic growth in the base(1) business accounted for the rest. Test volume in the base business grew by 21% and average revenue per test decreased by 11%, primarily as a result of significant decreases in reimbursement for Fluorescence in-situ Hybridization (“FISH”) testing as a result of new FISH billing codes introduced in 2015.

Consolidated gross margin, including PathLogic, was 44.4% for the quarter, representing an increase of 300 basis points from levels reported in Quarter 1 and a reduction of 510 basis points from last year’s second quarter. The sequential increase was largely driven by a 9% reduction in average cost-of-goods-sold per test (“Cost per Test”) in the base business from Quarter 1. The year-over-year decrease was the result of the inclusion of Path Logic’s results in the second quarter of this year and the FISH reimbursement declines.

Consolidated selling, general and administrative expenses (“SG&A”) increased by 12%, or $1.1 million, from the second quarter of last year. All of this increase was due to the inclusion of PathLogic’s SG&A expenses into consolidated results.

 

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Second quarter net loss was ($176,000), or $(0.00) per share versus net income of $274,000 or $0.01 per share in Quarter 2 of last year and net loss of ($761,000), or $(0.01) in the first quarter of 2015. Consolidated Adjusted EBITDA(2) for the quarter, after adding back non-cash, stock-based compensation charges, was $2.4 million, an increase of 16% versus last year. Adjusted EBITDA for NeoGenomics’ base business was $3.1 million and Adjusted EBITDA for PathLogic was ($709,000) in the second quarter.

Douglas M. VanOort, the Company’s Chairman and CEO commented, “Our base business had very strong results in the second quarter, which were partially masked by exceptionally large decreases in FISH reimbursement and the continued insourcing of certain FISH tests by our largest client. Excluding the impacts of this insourcing, test volume growth in the base business would have been above 28%. Our Sales team continues to perform at a very high level and we exited the quarter with a robust pipeline of large client opportunities.”

“Our laboratory teams are also performing exceptionally well. Service levels were extremely strong during the quarter, even with the record volumes, as our quality and process initiatives continued to bear fruit. Our teams reduced Costs per Test in our base business by 9% compared with last quarter to their lowest levels in our corporate history by dramatically increasing Lab Productivity(3) and reducing supplies cost per test. We now believe that we can achieve a 6-8% reduction in Costs per Test in our base business for the full year 2015.”

Mr. VanOort continued, “We are also particularly pleased that there was no increase in SG&A expenses in our base business, despite the fact that we performed almost 10,000 more tests than in Quarter 2 of last year. Our ability to reduce Costs per Test and control SG&A expenses resulted in the third highest quarterly Adjusted EBITDA in corporate history despite $2.1 million less FISH reimbursement, continued insourcing by one large client, and continued losses caused from the acquisition of PathLogic.”

“While 2015 results continue to be significantly impacted by the draconian reductions to FISH reimbursement, it appears that CMS is seeking to correct the 2015 reimbursement levels based on the recently released proposed 2016 rule for the Physician Fee Schedule. If the proposed reimbursement levels are maintained in the final 2016 rule, flow cytometry reimbursement rates will see significant declines but they will be more than offset by increases for FISH and other test types. If the rule is implemented as drafted, we estimate that approximately $6 - 8 million of the $12 million 2-year reduction in FISH reimbursement would be reversed assuming most commercial insurances will follow Medicare’s lead. After factoring in the reductions to flow cytometry and other proposed changes in reimbursement, we estimate that there would be an overall positive impact to revenue of approximately $4-6 million in 2016. After five years of annual price declines, this would be a welcome respite.”

Mr. VanOort concluded, “Although PathLogic is still operating well below capacity, our base business continues to perform extremely well. We are attracting many new customers and are well positioned to maintain strong growth far into the future. We remain enthusiastic about the future of NeoGenomics and believe we are well on the way to achieving our vision of becoming America’s premier cancer testing laboratory.”

 

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Full-Year 2015 Financial Outlook:

As a result of larger overall reductions to FISH reimbursement in 2015 than originally expected and continued softness in the revenue of PathLogic, the Company also announced that it was lowering its previously issued revenue guidance for the full year 2015 to $100 - 103 million, versus the previous guidance of $103 – 108 million. However, the Company reiterated its expectation of a return to profitability in the second half of 2015. 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) PathLogic was acquired by NeoGenomics on July 8, 2014. To facilitate year-over-year comparisons, base NeoGenomics figures exclude the impact from the consolidation of PathLogic.
(2) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and non-cash stock-based compensation expenses. See table for a reconciliation to net income.
(3) Lab Productivity is defined as the average number of laboratory tests performed per laboratory full-time equivalent (FTE) personnel per month.

Conference Call

The Company has scheduled a web-cast and conference call to discuss their Q2 2015 results on Thursday July 23, 2015 at 11:00 AM EDT. Interested investors should dial (877) 407-0782 (domestic) and (201) 689-8567 (international) at least five minutes prior to the call and ask for Conference ID Number 13612719. A replay of the conference call will be available until 11:59 PM on August 6, 2015 and can be accessed by dialing (877) 660-6853 (domestic) and (201) 612-7415 (international). The playback conference ID Number is 13612719. The web-cast may be accessed under the Investor Relations section of our website at www.neogenomics.com or http://www.investorcalendar.com/IC/CEPage.asp?ID=174093. An archive of the web-cast will be available until 11:59 PM on October 23, 2015.

About NeoGenomics, Inc.

NeoGenomics, Inc. is a high-complexity CLIA–certified clinical laboratory that specializes in cancer genetics diagnostic testing, the fastest growing segment of the laboratory industry. The company’s testing services include cytogenetics, fluorescence in-situ hybridization (FISH), flow cytometry, immunohistochemistry, anatomic pathology and molecular genetic testing.

Headquartered in Fort Myers, FL, NeoGenomics has laboratories in Nashville, TN, Irvine, Fresno and West Sacramento CA, Tampa and Fort Myers, FL. NeoGenomics services the needs of pathologists, oncologists, other clinicians and hospitals throughout the United States. For additional information about NeoGenomics, visit http://www.neogenomics.com.

Interested parties can also access investor relations material from Hawk Associates at http://www.hawkassociates.com or neogenomics@hawk.com.

 

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Forward Looking Statements

Except for historical information, all of the statements, expectations and assumptions contained in the foregoing are forward-looking statements. 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. Actual results could differ materially from such statements expressed or implied herein. Factors that might cause such a difference include, among others, the company’s ability to continue gaining new customers, offer new types of tests, and otherwise implement its business plan. As a result, this press release should be read in conjunction with the company’s periodic filings with the SEC.

For further information, please contact:

 

NeoGenomics, Inc.   Hawk Associates, Inc.

Steven C. Jones

  Ms. Julie Marshall
Director of Investor Relations   (305) 451-1888
(239) 325-2001   neogenomics@hawkassociates.com
sjones@neogenomics.com  

 

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NeoGenomics, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

     June 30,
2015
     December 31,
2014
 

ASSETS

     

Cash, cash equivalents

   $ 32,952       $ 33,689   

Accounts Receivable (net of allowance for doubtful accounts of $4,194 and $4,180, respectively)

     21,130         20,475   

Other Current Assets

     5,519         4,578   
  

 

 

    

 

 

 

TOTAL CURRENT ASSETS

     59,601         58,742   

PROPERTY AND EQUIPMENT (net of accumulated depreciation of $23,069 and $19,822, respectively)

     16,286         15,082   

INTANGIBLE ASSETS (net of accumulated amortization of $890 and $700, respectively)

     4,022         4,212   

GOODWILL

     2,929         2,929   

OTHER ASSETS

     128         141   
  

 

 

    

 

 

 

TOTAL

   $ 82,966       $ 81,106   
  

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

     

CURRENT LIABILITIES

   $ 15,125       $ 14,623   

LONG TERM LIABILITIES

     6,974         6,078   
  

 

 

    

 

 

 

TOTAL LIABILITIES

     22,099         20,701   

STOCKHOLDERS’ EQUITY

     60,867         60,405   
  

 

 

    

 

 

 

TOTAL

   $ 82,966       $ 81,106   
  

 

 

    

 

 

 

 

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NeoGenomics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

 

     For the Three-Months Ended
June 30,
    For the Six-Months Ended
June 30,
 
     2015     2014     2015     2014  

NET REVENUE

   $ 24,370      $ 20,670      $ 47,396      $ 38,852   

COST OF REVENUE

     13,557        10,431        27,040        19,904   
  

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT

     10,813        10,239        20,356        18,948   
  

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES

        

General and administrative

     7,075        5,870        13,598        10,924   

Research and development

     803        633        1,471        1,261   

Sales and marketing

     2,907        3,158        5,821        5,791   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     10,785        9,661        20,890        17,976   

INCOME (LOSS) FROM OPERATIONS

     28        578        (534     972   
  

 

 

   

 

 

   

 

 

   

 

 

 

INTEREST AND OTHER INCOME (EXPENSE) - NET

     (189     (253     (384     (518
  

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) BEFORE TAXES

     (161     325        (918     454   

INCOME TAXES

     15        51        19        78   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

   $ (176   $ 274      $ (937   $ 376   
  

 

 

   

 

 

   

 

 

   

 

 

 

NET INOME (LOSS) PER SHARE

        

- Basic

   $ (0.00   $ 0.01      $ (0.02   $ 0.01   
  

 

 

   

 

 

   

 

 

   

 

 

 

- Diluted

   $ (0.00   $ 0.01      $ (0.02   $ 0.01   
  

 

 

   

 

 

   

 

 

   

 

 

 

WEIGHTED AVG NUMBER OF SHARES OUTSTANDING

        

- Basic

     60,425        49,890        60,352        49,590   
  

 

 

   

 

 

   

 

 

   

 

 

 

- Diluted

     60,425        53,733        60,352        53,551   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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NeoGenomics, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

     For the
Six Months
Ended
June 30,
2015
    For the
Six Months
Ended
June 30,
2014
 

NET CASH PROVIDED BY OPERATING ACTIVITIES

   $ 1,897      $ 5,298   

NET CASH USED IN INVESTING ACTIVITIES

     (1,180     (1,966

NET CASH USED INFINANCING ACTIVITIES

     (1,454     (3,143
  

 

 

   

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

     (737     189   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     33,689        4,834   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 32,952      $ 5,023   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

    

Interest paid

   $ 417      $ 498   
  

 

 

   

 

 

 

Income taxes paid

   $ 20      $ 170   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

    

Equipment leased under capital lease and equipment loans

   $ 3,400      $ 3,321   
  

 

 

   

 

 

 

 

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NeoGenomics, Inc.

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP EBITDA AND ADJUSTED EBITDA

(Unaudited, in thousands)

 

     For the Three-Months Ended
June 30,
     For the Six-Months Ended
June 30,
 
     2015     2014      2015     2014  

Net income (loss) (Per GAAP)

   $ (176   $ 274       $ (937   $ 376   

Adjustments to Net Income:

         

Interest expense (income), net

     189        256         384        521   

Amortization of intangibles

     97        55         190        111   

Income tax expense

     15        51         19        78   

Depreciation

     1,663        1,249         3,249        2,400   
  

 

 

   

 

 

    

 

 

   

 

 

 

EBITDA

     1,788        1,885         2,905        3,486   

Further Adjustments to EBITDA:

         

Non-cash stock-based compensation

     619        197         1,020        281   
  

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA (non-GAAP)

   $ 2,407      $ 2,082       $ 3,925      $ 3,767   
  

 

 

   

 

 

    

 

 

   

 

 

 

Non – GAAP Adjusted EBITDA Definition

“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 and warrant amortization expense and (v) other extraordinary or non-recurring charges. NeoGenomics believes that Adjusted EBITDA provides a more consistent measurement of operating performance and trends across reporting periods by excluding these cash and non-cash items of expense not directly related to ongoing operations from income. Adjusted EBITDA also assists investors in performing analysis that is consistent with financial models developed by research analysts.

Adjusted EBITDA as defined by NeoGenomics is not a measurement under GAAP and may differ from non-GAAP measures used by other companies. There are limitations inherent in non-GAAP financial measures such as Adjusted EBITDA because they exclude a variety of charges and credits that are required to be included in a GAAP presentation, and do not therefore present the full measure of NeoGenomics recorded costs against its net revenue. Accordingly, investors should consider non-GAAP results together with GAAP results in analyzing NeoGenomics financial performance.

 

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NeoGenomics, Inc.

Supplemental Information on Customer Requisitions Received and Tests Performed

(Unaudited, in thousands, except test and requisition data)

 

Neo Genomics, Inc.,

excluding Path Logic

(“Base Business”)

   For the
Three-
Months
Ended
June 30, 2015
     For the
Three-
Months
Ended
June 30, 2014
     %
Inc
(Dec)
    For the
Six-Months
Ended
June 30, 2015
     For the
Six-Months
Ended
June 30, 2014
     %
Inc
(Dec)
 

Requisitions Rec’d (cases)

     34,738         29,354         18.3     66,115         54,058         22.3

Number of Tests Performed

     55,223         45,475         21.4     104,619         84,209         24.2

Avg. # of Tests/Requisition

     1.59         1.55         2.6     1.58         1.56         1.6

Total Testing Revenue

   $ 22,433       $ 20,670         8.5   $ 43,116       $ 38,852         11.0

Avg. Revenue/Requisition

   $ 646       $ 704         (8.3 )%    $ 652       $ 719         (9.3 )% 

Avg. Revenue/Test

   $ 406       $ 455         (10.6 )%    $ 412       $ 461         (10.7 )% 

Total Cost of Revenue

   $ 11,885       $ 10,431         13.9   $ 23,540       $ 19,903         18.3

Avg. Cost/Requisition

   $ 342       $ 355         (3.7 )%    $ 356       $ 368         (3.3 )% 

Avg. Cost/Test

   $ 215       $ 229         (6.2 )%    $ 225       $ 236         (4.8 )% 

Path Logic

   For the
Three-
Months
Ended
June 30, 2015
                  For the
Six-Months
Ended
June 30, 2015
               

Requisitions Rec’d (cases)

     17,039              33,700         

Total Testing Revenue

   $ 1,937            $ 4,280         

Avg. Revenue/Requisition

   $ 114            $ 127         

Total Cost of Revenue

   $ 1,673            $ 3,500         

Avg. Cost/Requisition

   $ 98            $ 104         

 

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