NeoGenomics, Inc.

Welcome to the Neogenomics Second Quarter 2023 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. Please note this call is being recorded and an audio replay will be available on the company's website. Kendra Sweeney, Vice President of Investor Relations, you may begin your conference.

Thank you, Jenny. Good morning, everyone, and welcome to the Neogenomics Second Quarter Financial Results Call. With me today to discuss the results are Chris Smith, Chief Executive Officer, and Jeff Sherman, Chief Financial Officer. Additional members of the management team are available for Q&A, including Vishal Sikri, President of Advanced Diagnostics, Warren Stone, President of Clinical Services, and Melody Harris, President of Enterprise Operations. This call is being simultaneously webcast. We'll be referring to a slide presentation that has been posted to the Investors tab on our website at ir.neogenomics.com. Starting on slide two, during this call, we will make forward-looking statements regarding our anticipated future performance, such as our operational and financial outlooks and projections, our assumptions for that outlook, opportunities and strategies for our products, and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual event or results could differ materially. Please refer to our most recent form of 10-K and 10-Q and the 8-K we filed with the SEC to identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward-looking statement. The forward-looking statements made during this call speak only as of the original date of the call and we undertake no obligation to update or revise any of these statements. During this conference call, in order to provide greater transparency regarding our operating performance, we will refer to certain non-GAAP financial measures that involve adjustments to GAAP results. The non-GAAP financial measures presented should not be considered an alternative to the financial measures required by GAAP. should not be considered measures of liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure in a table available in the press release we issued this morning. I'll now turn the call over to Chris Smith, Chief Executive Officer of Neogenomics.

Thanks, Kendra, and welcome, everyone. Thanks for joining us this morning to go through our second quarter financial results. We like to begin every presentation we do, whether it's to our teammates, our customers, or our investors, with our mission and vision statement because it's what motivates our company and our teammates on a daily basis. Our mission is to save lives by improving patient care. And before we dive in, I want to thank all our teammates for the impact that they make on patients every single day. Now let's move to slide four and get into the second quarter financial highlights. We had another strong quarter as we continue the momentum from Q1 into Q2. Second quarter revenue was $147 million, an 18% increase over the prior year. Clinical service revenue increased 17% driven by strong volumes across our modalities and an increase in revenue per test. Notably, the second quarter was the ninth consecutive quarterly increase versus prior year in revenue per test. In addition, we had significant NGS revenue growth well above our 20% stated internal targets. Advanced diagnostic revenue, which includes pharma services and informatics, increased 22% from prior year, driven by the strength of our core pharma business, informatics, and the ramp-up in radar. Adjusted EBITDA improved 87% to a negative $2 million, and adjusted growth profit was $65 million, representing a 44% margin and a 33% increase over prior year. Turning to slide five, Our second quarter financial results contributed to strong numbers for the first half of 2023. For the half, revenue was up 17% versus prior year to $284 million, driven by an increase in both clinical and advanced diagnostics revenue. Adjusted growth profit was $124 million, representing an adjusted gross margin of 44%. Adjusted EBITDA was a negative $9 million, an improvement of $26 million, or 74%, over the first half of 2022. During the first half of the year, we served well over 300,000 individual patients, which is a testament to the mission of our company and a leading indicator of the improved operational capacity within our labs. Going back to Q2, on the next slide, six, the second quarter delivered sustained performance improvement in revenue, gross margin, and adjusted EBITDA. We are proud of this year-over-year accelerated growth because it's a direct result of the strong execution by our NEO teammates and the growing demand for our products from our existing clients as well as new customers. Our operating and revenue cycle initiatives implemented in the second half of 2022 continue to enable accelerated growth and we believe we have the ability to continue to drive improvement in the business throughout the second half of 2023 and beyond. As we move to slide seven, Let me remind you of the strategic priorities we laid out at the beginning of the year. Profitably grow the core business, accelerate advanced diagnostics, drive value creation, and enhance people and culture. As we look at transforming the business, it's about focus, collaboration, and execution, and our team continues to deliver results against these strategic initiatives. We have a great team at Neogenomics, and continuing to enhance this team and our strong mission-driven culture is critical to our long-term success. While much of this won't be visible outside of the organization, this work is foundational for everything else we do operationally. This morning, I'm going to focus on our other three priorities. Turning to slide eight, let me touch on a few highlights from these strategic priorities for the quarter. We continue to see strong growth in clinical volumes across all modalities. Our product offering and our sales force optimization continues to deliver significant NGS revenue growth, as well as growth in revenue per test. Additionally, we continue to refine our laboratory operations. We set an internal record for the number of test process in the quarter, and thanks to our teammates in the lab who support this core business growth. Even with these strong volume trends, we continue to grow revenue faster than volume. Following our last three quarters of significant improvement in turnaround time, we saw a more normal improvement of 3% in the second quarter aligned with a significant growth in volume. In July, we received our first Medicare coverage decision for radar and breast cancer. Following this approval, which effective retroactively as of March 24th, 2023, the radar assay is now covered for certain Medicare patients in the US with HR positive and HER2 negative breast cancer. This decision is a major milestone for us following our acquisition of Innovata. We always believed radar superior sensitivity and specificity would enhance patient care and improve outcomes and are thrilled that the sporting clinical evidence met MoldDx program's high standard for coverage. Additionally, we remain on plan for submitting two additional indications as well as expanded breast indication to MoldDx by year end. In June, our radar assay received its first pan-cancer commercial coverage by Blue Shield of California. This decision is a good indicator of the progress we and the industry are making as commercial payers are beginning to acknowledge the clinical and economic utility of radar in the MRD setting. The pan-cancer coverage highlights the breadth of our data across various cancer types, which we believe is a key differentiator. Looking forward to the rest of the year, we think there are opportunities to expand coverage with additional indications. We published compelling data at ASCO in June with five poster presentations and one oral abstract in long, breast, and head and neck cancers. These posters highlighted radar's accuracy and sensitivity over current standards of care and its use across tumor types and settings. We have data complete or in progress and additional indications where we can pursue payer coverage. We have focused on driving value creation from a financial perspective and are pleased that we have delivered even further margin expansion from Q1 and have generated significant operating leverage as revenue favorability fell through to the bottom line. Last month, we added three excellent directors to our board of directors. I'm confident that their varied backgrounds, experience, and professional accomplishments will provide NEO with additional skills and insights that will enhance our execution against our strategic priorities and long-range planning. Now let me turn the call over to Jeff to review our financial results in more detail. Jeff?