NeoGenomics, Inc.

Thank you for holding ladies and gentlemen. Your conference will begin in two minutes. Please continue to hold. Your conference will begin in two minutes. Thank you. We'll be right back. Thank you. Greetings. Welcome to the NeoGenomics third quarter 2023 earnings call. Third 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, John. Good afternoon, everyone, and welcome to the Neogenomics Third 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 will 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 be making forward-looking statements regarding our anticipated future performance. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to our most recent forms 10-K, 10-Q, and 8-K we filed with the SEC to identify important risks and other factors that may cause our actual results to differ materially from the forward-looking statements. 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 call, in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to CAAP 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 afternoon. I will now turn the call over to Chris Smith, Chief Executive Officer of Neogenomics.

Thanks, Kendra, and welcome, everyone. Thanks for joining us this afternoon to go through our third quarter financial results. As always, I want to begin with our mission and our vision statement because it's what motivates our company and teammates on a daily basis. Our mission at NEO is to save lives by improving patient care. Before we dive in, I also want to thank the 2,200 teammates for the impact they're making on patients' lives every single day. Now let's move to slide four and get into third quarter highlights. As you can see, we had another very strong quarter, growing revenue 18% over prior year. Clinical services revenue increased 20%, driven by strong volumes across our modalities and an increase in revenue per test. As a highlight, NGS grew in excess of 35% and now represents approximately 25% of our total clinical revenue. Advanced diagnostic revenue, which includes pharma services and informatics, increased 8% from prior year, driven by continued growth in informatics and a ramp in radar. As we continue to execute on the transformation of the business, our progress has outpaced our internal plans. We started the year with the outlook that we would be adjusted positive in the fourth quarter. However, in the third quarter, adjusted EBITDA significantly improved 129% as compared to Q3 of last year to a positive $3 million. Adjusted gross profit was $67 million, representing a 25% increase over the prior year, or 44%. For the 10th consecutive quarter, we saw an increase in revenue per test versus prior year. NGS growth continues to be a driver of improvements in revenue per test and is growing well above the estimated market growth. In addition, revenue cycle management and pricing initiatives also are contributing to revenue growth per test. In terms of other key quarterly business updates, we completed three submissions to MoldyX, including one additional breast application, as well as two new indications, one in lung and one in head and neck. Slide five demonstrates the consistent performance with third quarter delivering sustained improvement in revenue, gross margin, and adjusted EBITDA. We are proud of this year over your accelerated growth because it's a direct result of the strong execution by our NEO teammates and the growing demand for our products from 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 they have the ability to continue to drive improvement in the business.