NeoGenomics, Inc. (NASDAQ: NEO), a leading provider of cancer-focused genetic testing services today reported its results for the first quarter of 2014.
First Quarter 2014 Highlights:
Test volume growth of 21%
Revenue growth of 16%
Decline in average cost per test of 7%
Adjusted EBITDA of $1.7 million and net income of $0.1 million
Launch of next generation sequencing profiles for a variety of cancer types
Revenue for the first quarter was $18.2 million, a 16.1% increase over first quarter 2013 revenue on test volume growth of 20.7%. This revenue growth was achieved despite a $700,000 reduction in revenue recorded to account for a conservative interpretation of the unresolved National Correct Coding Initiative ("NCCI") edits relating to billing Medicare for FISH testing.
Although average revenue-per-test decreased by 3.8% from the first quarter of last year due to the NCCI FISH matter, average cost-of-goods-sold-per-test improved by 6.5%. As a result, gross margin increased to 47.9% from 46.3% in last year's first quarter.
Operating expenses increased by 19.8% to $8.3 million from $6.9 million in Quarter 1 of last year. This increase was driven by an increase in the size of our sales team, increased commission and bad debt expense related to the increase in revenue, and continued investments in facilities, information technology, and new test development activities.
Net income was $102,000 or $0.00/share versus $3,000 or $0.00/share in Quarter 1 of last year. Adjusted EBITDA1 for the quarter was $1.7 million, a 2% decrease from last year, due to the reduction in revenues from the NCCI FISH matter.
Douglas M. VanOort, the Company's Chairman and CEO, commented, "NeoGenomics performed well in the first quarter. After starting somewhat slowly as a result of weather impacts, testing volumes accelerated rapidly throughout the quarter. Indeed, the average number of tests processed per day increased by 12% from January to March. As a result of this momentum and a strong pipeline of new accounts, we are increasing our revenue and EPS guidance for the year. Although the NCCI FISH matter is still unresolved, we now believe we can reach our original revenue guidance for the year even if it is not resolved favorably. Effectively, this adds approximately $3 million to our revenue and $0.02-$0.04 per share to our net income guidance for the year."
Mr. VanOort continued, "During the first quarter, we added more talented sales representatives, and are now expanding to new geographies where we previously had little presence. We also continued to make significant investments to build our clinical trials business. We have responded to more requests for proposal from BioPharmaceutical firms than ever before, and have been awarded 7 different projects thus far. We expect to begin recognizing revenue from these projects in Quarter 3. We are also working with Covance to expand internationally later this year."
Mr. VanOort added, "Our biggest accomplishments in the quarter were in the area of innovation. We launched our first Next Generation Sequencing tests and have had strong interest in this platform and initial orders from pharmaceutical clients. Our Oncology-focused Molecular test menu continues to be one of the broadest in the world, and we intend to aggressively add more tests this year. In addition, we continue to invest in the development of our proprietary NeoSCORE™ Prostate test, and we have begun preparing for a phased market launch over the next few months."
Mr. VanOort concluded by saying, "While focused on growth and innovation, we remain committed to profitability and are continually making improvements for productivity and efficiency. Toward this end, we are nearing completion of a $1.2 million overhaul and redesign of our Fort Myers lab. Led by our internal lean team, we literally moved or changed everything in the lab, but our people managed the process well and maintained strong service levels throughout the construction process. This new laboratory facility will allow us to handle higher volumes more efficiently at lower costs, and positions us well to achieve our short and longer-term strategies. We believe these many exciting actions have set the stage for a strong 2014."
Second Quarter 2014 and Full-Year 2014 Financial Outlook:
The Company also issued guidance for the fiscal second quarter today. In Quarter 2, the Company expects revenue of $18.8 - $19.3 million and net income of $0.00 to $0.01 per share.
The Company also increased its guidance for the full year 2014 today. Previously the Company stated that it expected revenue of $73 – 77 million if the NCCI FISH matter was resolved positively with earnings of $0.05 to $0.07 per share. The Company now believes that it can achieve $73 – 77 million of revenue even if the NCCI matter is not resolved positively and earnings of $0.03 to $0.05 per share for FY 2014. If the NCCI FISH Edits are rescinded, it would have the effect of increasing revenue by another $3 million and net income by approximately $0.04 per share on top of the above guidance.
This guidance is based on organic growth in the current business, and 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.