NeoGenomics, Inc.

Welcome to the Neogenomics Third Quarter 2024 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. Please note this conference is being recorded, and an audio replay will be available on the company's website. I will now hand the call over to Kendra Sweeney, Vice President of Investor Relations. You may begin.

Thank you, Jenny. Good morning, everyone, and welcome to the Neogenomics Third Quarter 2024 Financial Results Call. With me today to discuss the results are Chris Smith, Chief Executive Officer, 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, Andrew Lukowiak, Chief Innovation Officer, Dr. Nate Montgomery, Head of Medical, and Kareem Saad, Head of Strategy and Transformation. 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. 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 this call, and we undertake no obligation to update or revise any of these statements. During this call, we refer to non-GAAP financial measures that involve adjustments to GAAP results. The non-GAAP financial measures are presented should not be considered an alternative to the financial measures required by GAAP 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 Smith, Chief Executive Officer of Neogenomics.

Thanks, Kendra. Good morning, everyone, and thank you for joining us today. On today's call, we'll discuss the highlights of our strong third quarter performance and provide an update on the progress made in accelerating profitable, sustainable growth. Before we discuss our financial results, I do want to take a moment and acknowledge the communities in North Carolina and Florida, including our headquarters in the city of Fort Myers, which has shown incredible resilience following the impacts of Hurricane Helene and Milton. I'm especially grateful to our NEO teammates for the continued commitment to our patients, our mission, and our vision. It's a testament to our one NEO culture that our labs throughout the country stepped up and covered an increased workload to ensure there was minimal disruption to patients while our employees in the storm's path were seeking shelter. So thanks to all of our teammates. I believe our people are what makes NEO such a special place to work. On the business side, our position between large reference labs and the niche oncology companies is what sets us apart. Our value proposition stems from our mission to be a comprehensive oncology testing and information partner to providers serving cancer patients in the community setting. Approximately 85% of all cancer patients are traditionally seen in the community setting And we believe that trend is likely to persist for the foreseeable future, given the convenience, cost-effectiveness, and level of personalization that can be delivered to cancer patients in that setting. We believe neogenomics is leading the democratization of precision oncology testing and information and enabling cancer patients in rural America to have access to the same level of care as a patient has access to an NCI-designated cancer center in a large metropolitan setting. Neogenomics has and will continue to build the industry-leading community oncology translation platform, which is where a vast majority of our investment is being directed today. This platform comprises three layers. First, an industry-leading customer experience layer with the flexibility and the versatility to deliver a comprehensive oncology solution portfolio with internally developed and externally sourced products across heme and solid tumor indications, and that are fit for the community generalist. Second, an increasingly automated production capability where our geographical balanced footprint drives operational efficiencies across all test modalities and delivers best-in-class turnaround times and cost-effective solutions to patients and providers. And finally, a data interoperability layer that allows us to deliver integrated, seamless, and user-friendly clinical reports and associated insights to our customers. Combined, these three building blocks of our Community Oncology Translation Platform are what we believe continue to lead to sustainable competitive differentiation for NEO as a leading comprehensive cancer testing and information partner. Now let's get into the Q3 highlights on the next slide. We continue to execute on our goal to deliver double-digit year-over-year growth. In Q3, total revenues grew 10% and the clinical business revenues actually grew 14% as compared to the third quarter of last year and was a record quarter in total test volume and revenues. This was on top of Q3 of 2023, which was our strongest revenue growth quarter last year with 18% growth. To achieve this result, we grew volumes by 9% and revenue per test by 5%. NGS continues to be a key driver for growth, increasing 26% and representing 31% of our total clinical volume and revenue. We are also proud that we've improved adjusted EBITDA by 10 million or 305% from prior year, making that five consecutive quarters a positive adjusted EBITDA. We are seeing the benefits of the investments that we made in our commercial business over the last few quarters. Sales optimization efforts with a focus on support team and customer experience are increasing the effectiveness of our sales force which has enabled us to serve more patients in a single quarter than ever before. Since our investor day last year, our focus has been set on delivering long-term sustainable growth. Core to achieving this optimization of our commercial business, our clinical business continues to execute on our commercial strategy to deliver volume growth enhanced by success of our customer connectivity digital strategy, an increased AUP, Improved mix driven by the strength of NGS. Neogenomics drove significant organic volume growth in the third quarter across the portfolio as our commercial and our lab ops team continued to execute. We believe all of our modalities grew faster than the overall market based on the review of industry data. Growth is especially robust across NGS with revenue growth of 26% driven by competitive count wins, improved mix, and adoption of larger test panels. As we discussed on our last quarter call, we will continue to invest in our commercial team to drive incremental volumes and capture market share. This is taking hold as we experience our highest quarterly retention rate and had several key hospital wins. To further drive market penetration into community ecology, we are expanding our commercial resources. These new teammates are joining at a very exciting time for NEO as we look to launch new tests in the coming months. In October, we launched NeoAML Express, a rapid AML test to help patients diagnosed with AML begin their treatment up to two times faster than our previous test. AML Express, when combined with our accessional customer experience, enhances our position as the market leader in heme. We also gained conditional approval in New York State for NeoComprehensive Solid Tumor. This approval broadens patient access to our NGS test, delivering better diagnostics value, and cost effectiveness than single gene testing. We are only scratching the surface of potential customers, and with more reach and frequency of an expanded commercial organization, we will continue to penetrate both new and existing accounts with our comprehensive menu of oncology testing solutions. Through RCM initiatives, we are continuing to expand commercial coverage and having success in reducing denials to ensure we're getting paid for the work that we do. The most important factor in growing the commercial business is keeping the patient as our top priority. We know the difference a day can make while waiting for test results, so we put a premium on turnaround time. I am pleased to say that this quarter our lab improved turnaround time by 10% compared to Q3 of 2023, even with significant increase in test volumes. With a focus on customer satisfaction in early 2025, we will launch Neo Helix, an exceptional end-to-end digital experience for our customers. NeoHelix is an intuitive platform that supports physicians and patients from order to results, provides guideline-driven decision support, and future patient education. Turning to slide eight, let's talk about innovation. We believe innovation is a turbocharger for growth, and as we look to the future of the industry with new technologies and data. Utilizing our current resources and executing on the right opportunity positions us well for long-term sustainable growth. In the last 18 months, we brought several new and upgraded products to market to improve patient care. I just mentioned our newly available AML Express test. Neopantracer, a liquid biopsy CGP test, launched commercially for pharma in Q3 and will launch commercially in the clinical business in the first half of next year. In the clinical test setting, Pantracer liquid biopsy will be a comprehensive and highly sensitive liquid biopsy test complementing traditional tissue testing for therapy selection in advanced stage solid tumor patients. To further accelerate our innovation, I'm pleased to share that Andrew Lukowiak has joined NEO as our Chief Innovation Officer. With nearly 25 years of experience in the clinical diagnostic industry, Andrew brings a wealth of experience specializing in developing strategic programs and processes to introduce innovative, regulated products to the market. As CIO, Andrew will lead our new Office of Innovation driving cutting-edge R&D while ensuring continuous advancement and integration of new technologies. Finally, we are executing on margin expansion initiatives to deliver sustainable, profitable growth. Through a combination of efforts including automation, staffing efficiencies, and technology investments, we drove 355 basis points of gross margin improvement in the quarter. Earlier this year, we shared our plans to improve and upgrade our lab information management system. In Q3, we successfully launched the first LIMS module and have accession to over 350,000 new cases in the quarter through this new system. Additionally, version one of the new test compendium has launched and is now being populated. The migration to one single LIMS system is a multi-year process, and these milestones represent significant progress. From a legal perspective, in September, we announced that we had negotiated a settlement relating to the ongoing litigation with Matera in which we agreed to a permanent injunction on Radar 1.0 as we focused our efforts resources on the development of Radar 1.1. Importantly, the carve-outs in this preliminary injunction remain in place so there is no disruption to patients already utilizing the technology. Radar 1.1 is now through the feasibility stage and progressing through development and is expected to clear CLIA validation in the first half of 2025. Beyond the litigation pathway, we continue to develop new MRD assays as well as evaluate opportunities for enlightening our strategic partnership arrangements to enhance and bolster our efforts to drive innovation and bring optionality to patients who can benefit from MRD testing. As we stated in the past, we are committed to being in the MRD market and supporting patients throughout their cancer journey from diagnosis to monitoring. And now let me hand it over to Jeff to go through the financial results. Thanks, Chris.