NeoGenomics, Inc.

Welcome to the Neogenomics First Quarter 2024 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, Holly. Good morning, everyone, and welcome to the Neogenomics First Quarter 2024 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 Warren Stone, Chief Commercial Officer, Melody Harris, Chief Operations Officer and President of Informatics, and Ali Olivo, Executive Vice President, General Counsel in Business Development. 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 make 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 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 measures in a table available in the press release we issued this morning. I will now turn the call over to Chris Mintz, Chief Executive Officer of NeoGenomics.

Thanks, Kendra, and welcome, everyone. Thanks for joining us this morning to go through our first quarter financial results. As always, I want to begin with our mission and vision statements 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. And before we get into the financial results, I just want to thank our teammates for everything they do every single day to make a difference in so many patients' lives. Now let's move to slide four and get into the first quarter highlights. As you can see, we delivered another quarter of strong revenue growth, growing 14% over prior year to $156 million. Clinical services revenue increased 17% to $135 million, primarily driven by execution of the commercial strategy and increased adoption of our NGS products. The compounding effect of volume and revenue cycle management initiatives, including an AUP lift, enabled NGS growth of over 50%, and now is approaching 30% of our total clinical revenue. As growth rates accelerate and NGS becomes a larger portion of our base business, the comparables will become tougher as the year progresses. Advanced diagnostics revenue declined by 3% over prior year in part due to macro conditions in the pharma sector and margin optimization initiatives for 2023. As a business adjusted gross profit was up 19% to $71 million and adjusted EBITDA improved 149% or $11 million over Q1 of last year to a positive 3 million. Now on slide five, I'm very pleased that the first quarter continued the trend we've seen since the fourth quarter of 2022 of consistent year-over-year improvements in revenue, adjusted growth profit, and adjusted EBITDA. This is especially noteworthy as we did not see the typical industry seasonality in Q1, with total revenue actually increasing sequentially from the fourth quarter. We believe that we've laid a solid foundation for growth in 2023 and expect that momentum will continue as we move forward. Let's move on to slide six. On our full year 2023 call, we laid out our strategic priorities for 2024. They included properly growing the core business, accelerating advanced diagnostics, driving value creation, and enhancing our people and culture. Our people are our greatest asset, and we are devoting time and resources to enhance teammate development and engagement. Everything we do internally is centered around developing a customer-oriented and growth mindset. and our teammates show each day their dedication to improving patient care. This morning, though, I'm going to focus on our three financial priorities. As we continue to properly grow our core clinical business, as we execute on our commercial strategy, which is protect, expand, acquire, this has contributed to our strong volume growth, increased AUP, and improved MIX. The MIX shift towards higher value modalities and tests has supported the delivery of yet another quarterly improvement in revenue per test, Even with the focus on growing NGS, we continue to see growth in clinical volumes across all modalities. To win in oncology, we have the breadth of menu and the products that deliver value in real-world clinical settings through high-quality, actionable, differentiated tests that help support treatment decisions as well as best-in-class customer-focused mindset. Earlier this month, we announced senior leadership promotions as part of our ongoing efforts to optimize our operating structure. Warren Stone is now NEO's chief commercial officer and will lead our clinical and pharma service commercial teams. Melody Harris is now NEO's chief operations officer and president of informatics and will oversee data-oriented teams and continue to manage all enterprise operations. Warren and Melody have shown exceptional leadership and performance in their roles, and I'm confident their new responsibilities will strengthen the commercial synergies and drive growth as well as improving operating efficiencies. As a result of these changes, the legacy pharma business is now reporting to Warren. Informatics is now under Melody's leadership, and R&D will be reporting to me. We remain focused on R&D as we believe that innovation is a turbocharger for growth. Specifically, we're committed to offering an MRD product to patients and healthcare providers, and we believe we have several viable pathways to accomplish that. As we noted over the past several quarters, macro trends as well as operational challenges continue to impact our pharma revenue. Building on the strength and our go-to-market strategies seen in our clinical business, we are integrating the pharma commercial organization under Warren's leadership to leverage the success and the commercial execution seen in the clinical business. We are expanding our pharma sales organization as it moves under Warren's leadership and expect to see benefits from this initiative in the future. In addition, our margin optimization efforts in ADX have continued to improve adjusted gross margin performance. Informatics revenue continues to grow as we drive increased investment and look to expand product offerings. We continue to focus on the acceleration of innovation in R&D, including the launch of a new liquid biopsy comprehensive genomic profile test expected in late 2024. Additionally, building on the success of the Neo Comprehensive 1.0, we are focusing on the development of our next generation broad solid tumor panel, which is targeted to be one of the largest solid tumor CGP panels on the market while providing industry-leading turnaround times. We believe this new large NGS panel will provide additional growth opportunities in clinical, pharma, and the informatics space. We remain focused on driving value creation from a financial perspective. In late 2023, we kicked off our LIMS project that will consolidate fragmented systems into one end-to-end solution, which will serve as the foundation for our digital transformation strategy while enhancing operating efficiencies. driving gross margin expansion through investing in automation and lab and supply chain optimization. We also continue to invest in our quality programs to improve our products and services, as well as to prepare the company for increasing regulatory oversight. Yesterday, the FDA released its final ruling regarding regulation of lab-developed tests. Our initial view is that the rule is favorable to our business. The rule significantly expands LTTs that would not be required to get pre-market approval from the FDA, including tests marketed before May 6, 2024, and those approved by the New York State. This enforcement discretion is favorable to our broad test menu and should reduce the anticipated cost of compliance. We've been preparing for the increasing regulation, and we believe we're well positioned to comply with the rule. From a legal perspective, we are vigorously defending our radar technology. A hearing to appeal the preliminary injunction against Radar was held on March 29th in the Federal Circuit Court, and we are awaiting that outcome. The North Carolina District Court case is currently in discovery, and the jury trial is scheduled for March of 2025. We have also filed IPR petitions with the U.S. Patent and Trademark Office, seeking to determine that Natera's two patents at issue are unpatentable in the view of prior art. With that, I will now turn the call over to Jeff to review our first quarter financial results in more detail. Jeff?