UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193 For the transition period from to Commission File Number: 001-35756 NEOGENOMICS, INC. (Exact name of registrant as specified in its charter) Nevada 74-2897368 (State or other jurisdiction of incorpora ...

NeoGenomics Conference Call Prepared Remarks Good morning. I'd like to welcome everyone to NeoGenomics' 2021 Third Quarter conference call. Joining me for this call from our new headquarters in Fort Myers are George Cardoza, President and Chief Operating Officer of our Lab Operations, Doug Brown, our Chief Strategy and Corporate Development Officer and Charlie Eidson, our Director of Investor Relations. Joining on the call via phone from California is Dr. Gina Wallar, President of our Pharma Services Divisi ...

Financial Data and Key Metrics Changes - Company revenue increased by 12% year-over-year to $121 million in Q3 2021, excluding discontinued COVID-19 PCR testing revenue [14][38] - Clinical revenues grew 11% year-over-year to $102 million, driven by a 7% increase in clinical volume and a 4% increase in revenue per test [38] - Adjusted EBITDA was a loss of $3 million in Q3, reflecting lower than anticipated revenues and expenses from recent acquisitions [47] Business Line Data and Key Metrics Changes - Pharma Services revenue grew 14% year-over-year to $19 million, with a year-to-date growth rate of 36% [42][43] - Pharma Services bookings increased by 41% year-over-year, reaching an all-time high of $49 million, with a record backlog of $261 million [16][43] Market Data and Key Metrics Changes - The company was significantly impacted by the Delta variant, particularly in Florida and Texas, which together represent over 20% of total revenue [39][40] - Daily volume trends in Florida were approximately 5% below previous lows, contrasting with a 9% increase in other sales regions nationwide [41] Company Strategy and Development Direction - The company presented a five-year growth plan to the Board, focusing on strengthening leadership in oncology diagnostics and launching the RaDaR assay for minimal residual disease testing [17][18] - Plans to double the customer-facing sales force and expand Precision Medicine teams to accelerate growth and market penetration [19][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, expecting higher rates of growth in core Clinical business and Pharma Services as COVID-19 cases decline [16] - The company is committed to investing in the RaDaR assay, anticipating it will significantly increase long-term growth rates [18][57] Other Important Information - The company is undergoing an internal investigation related to compliance with federal healthcare laws, with a reserve of $10.5 million accrued for potential damages [49][50] - The company is lowering its annual revenue guidance to a range of $482.5 million to $487.5 million due to the impact of the Delta variant [51][52] Q&A Session Summary Question: Can you provide insights on the EBITDA guidance and its trajectory? - Management indicated that limited access for the sales team in Q3 will impact Q4 topline, but investments in the sales team will begin to reflect in Q4 [63][65] Question: How do you view the competitive landscape in NGS and liquid biopsy? - Management emphasized their established relationships with community hospitals and oncologists as a competitive advantage, alongside their commitment to lead in the MRD market with RaDaR [79][80] Question: What is the expected timeline for the RaDaR assay's reimbursement? - Management is confident in their reimbursement strategy and plans to submit for initial reimbursement around the turn of the year [87][110] Question: Can you elaborate on the backlog in Pharma Services? - The backlog generally converts over an average of three years, with 60% to 80% of contracts expected to come through [102] Question: How will the company differentiate itself in the crowded MRD market? - Management highlighted their potentially class-leading sensitivity and established channels to customers as key differentiators [128][130]

[FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the nature of forward-looking statements, cautioning readers about inherent risks and uncertainties that could cause actual results to differ materially from projections - This section outlines the nature of forward-looking statements within the report, cautioning readers about inherent risks and uncertainties that could cause actual results to differ materially from projections[7](index=7&type=chunk) - Key risks include the ability to respond to rapid scientific change, liability in clinical trials, business strategy implementation, the potential impact of the COVID-19 pandemic, expected reimbursement levels, regulatory developments, and the ability to protect intellectual property[8](index=8&type=chunk) - The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made[9](index=9&type=chunk) PART I FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, significant transactions, and financial position for the periods ended June 30, 2021, and December 31, 2020 [Consolidated Balance Sheets](index=5&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time **Consolidated Balance Sheet Highlights (in thousands):** | Metric | June 30, 2021 (unaudited) | December 31, 2020 | Change | | :--------------------------------- | :------------------------ | :---------------- | :----- | | Total current assets | $721,795 | $448,730 | +60.8% | | Total non-current assets | $1,174,516 | $539,601 | +117.7% | | Total assets | $1,896,311 | $988,331 | +91.9% | | Total current liabilities | $99,131 | $73,183 | +35.5% | | Total long-term liabilities | $648,822 | $220,854 | +193.8% | | Total liabilities | $747,953 | $294,037 | +154.4% | | Total stockholders' equity | $1,148,358 | $694,294 | +65.4% | - Cash and cash equivalents increased from **$228.7 million to $368.8 million**, and marketable securities increased from **$67.5 million to $203.0 million**[12](index=12&type=chunk) - Convertible senior notes, net, increased significantly from **$168.1 million to $531.1 million**, reflecting new debt issuances[12](index=12&type=chunk) [Consolidated Statements of Operations](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section details the company's revenues, expenses, and net income or loss over specific reporting periods **Consolidated Statements of Operations Highlights (in thousands, except per share data):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (YoY) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (YoY) | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------- | :------------------------------- | :------------------------------- | :------------- | | Total revenue | $121,724 | $86,977 | +39.9% | $237,257 | $193,007 | +22.9% | | Gross profit | $52,990 | $28,006 | +89.2% | $94,564 | $74,375 | +27.1% | | Loss from operations | $(22,367) | $(18,907) | +18.3% | $(37,474) | $(24,200) | +54.8% | | Gain on investment in affiliate, net | $(96,534) | $0 | N/A | $(91,510) | $0 | N/A | | Net income (loss) | $75,873 | $(6,824) | N/A | $53,759 | $(13,802) | N/A | | Basic EPS | $0.64 | $(0.06) | N/A | $0.46 | $(0.13) | N/A | | Diluted EPS | $0.59 | $(0.06) | N/A | $0.44 | $(0.13) | N/A | - The significant net income for Q2 and H1 2021 was largely due to a **$96.5 million (Q2) and $91.5 million (H1) gain on investment** in and loan receivable from a non-consolidated affiliate[14](index=14&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)) This section presents the company's net income or loss and other comprehensive income or loss, reflecting all changes in equity during the period **Consolidated Statements of Comprehensive Income (Loss) (in thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $75,873 | $(6,824) | $53,759 | $(13,802) | | Total other comprehensive (loss) income, net of tax | $(183) | $2,699 | $(343) | $1,661 | | Comprehensive income (loss) | $75,690 | $(4,125) | $53,416 | $(12,141) | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) This section details changes in the company's equity, including common stock, additional paid-in capital, and retained earnings, over the reporting period **Stockholders' Equity Changes (in thousands, except share data):** | Metric | December 31, 2020 | June 30, 2021 | Change | | :------------------------- | :---------------- | :------------ | :----- | | Common Stock (Shares) | 112,075,474 | 122,711,352 | +9.5% | | Common Stock (Amount) | $112 | $123 | +9.8% | | Additional Paid-In Capital | $701,357 | $1,101,298 | +57.0% | | Retained Earnings | $(7,185) | $47,270 | N/A | | Total Stockholders' Equity | $694,294 | $1,148,358 | +65.4% | - Significant increases in additional paid-in capital were driven by common stock issuances from public offerings (**$218.5 million**) and private placements (**$189.9 million**), and common stock issued for acquisition (**$29.2 million**)[19](index=19&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) - Retained earnings shifted from a deficit of **$7.2 million to a positive balance of $47.3 million**, reflecting net income for the period[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific reporting periods **Consolidated Statements of Cash Flows Highlights (in thousands):** | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | Change | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----- | | Net cash provided by (used in) operating activities | $820 | $(5,051) | +$5,871 | | Net cash used in investing activities | $(608,098) | $(59,871) | -$548,227 | | Net cash provided by financing activities | $729,545 | $223,217 | +$506,328 | | Net change in cash, cash equivalents and restricted cash | $122,267 | $158,295 | -$36,028 | | Cash, cash equivalents and restricted cash, end of period | $372,899 | $331,311 | +$41,588 | - Operating activities generated **$0.8 million in cash** in H1 2021, a significant improvement from a **$5.1 million use** in H1 2020, despite a large non-cash gain on investment and COVID-19 PCR testing write-offs[25](index=25&type=chunk)[263](index=263&type=chunk) - Investing activities used **$608.1 million** in H1 2021, primarily due to **$419.4 million for acquisitions** (Inivata and Trapelo) and **$136.5 million in net investments** in marketable securities[25](index=25&type=chunk)[264](index=264&type=chunk) - Financing activities provided **$729.5 million** in H1 2021, mainly from **$418.3 million in equity offerings** and **$334.4 million from convertible debt issuance**[25](index=25&type=chunk)[265](index=265&type=chunk) [Note 1. Nature of the Business](index=12&type=section&id=Note%201.%20Nature%20of%20the%20Business) This note describes the company's core operations as a clinical laboratory, the impact of the COVID-19 pandemic, and related financial adjustments - NeoGenomics operates as a certified, high complexity clinical laboratory providing diagnostic services to healthcare providers and clinical trial services to pharmaceutical firms[29](index=29&type=chunk) - The COVID-19 pandemic materially adversely affected the Company's operations, but cash on hand and marketable securities are anticipated to be sufficient to fund near-term capital and operating needs for at least the next 12 months[30](index=30&type=chunk)[31](index=31&type=chunk) - The Company exited COVID-19 PCR testing at the end of Q1 2021, recording a **$6.1 million expense** related to inventory and equipment write-offs[32](index=32&type=chunk) - The Company recognized **$0.3 million and $0.7 million** under the Employee Retention Tax Credit (ERTC) for the three and six months ended June 30, 2021, respectively, with no CARES Act grant income recognized in 2021[35](index=35&type=chunk)[37](index=37&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=14&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles, estimates, and recent accounting standard adoptions used in preparing the interim financial statements - The interim financial statements are unaudited and prepared in accordance with GAAP, with certain information condensed or omitted compared to annual reports[39](index=39&type=chunk)[41](index=41&type=chunk) - Significant estimates and judgments are made for revenues, accounts receivable, long-term assets, income taxes, stock-based compensation, business combinations, and goodwill impairment[43](index=43&type=chunk) - The Company adopted ASU 2020-06 on January 1, 2021, using a modified retrospective approach, simplifying accounting for convertible instruments and impacting deferred income tax liabilities and additional paid-in capital[63](index=63&type=chunk)[64](index=64&type=chunk) - A valuation allowance of approximately **$15.5 million** was established against U.S. deferred income tax assets as of June 30, 2021, due to a three-year cumulative loss position[56](index=56&type=chunk)[57](index=57&type=chunk) [Note 3. Acquisitions](index=18&type=section&id=Note%203.%20Acquisitions) This note details the acquisitions of Trapelo Health and Inivata Limited, including their financial impact on goodwill, intangible assets, and the gain on investment - On April 7, 2021, NeoGenomics acquired Trapelo Health for **$64.8 million**, consisting of **$35.6 million cash** and **$29.2 million in common stock**, enhancing clinical decision support in precision oncology[69](index=69&type=chunk)[70](index=70&type=chunk) - The Trapelo acquisition resulted in **$44.7 million in goodwill**, assigned to the Clinical Services segment, and identifiable intangible assets of **$19.0 million for developed technology** and **$0.5 million for marketing assets**[70](index=70&type=chunk)[73](index=73&type=chunk) - On June 18, 2021, NeoGenomics acquired the remaining equity interests in Inivata Limited for **$398.6 million cash**, adding liquid biopsy platform technology and minimal residual disease testing capabilities[76](index=76&type=chunk)[77](index=77&type=chunk) - The Inivata acquisition was accounted for as a business combination achieved in stages, resulting in a **$96.5 million gain on investment** in and loan receivable from non-consolidated affiliate[78](index=78&type=chunk)[123](index=123&type=chunk) - The Inivata acquisition generated **$244.2 million in goodwill** (**$214.5 million to Clinical Services, $29.7 million to Pharma Services**) and identifiable intangible assets of **$303.0 million for developed technology, $31.7 million for trademarks, and $2.3 million for trade name**[81](index=81&type=chunk)[86](index=86&type=chunk) [Note 4. Fair Value Measurements](index=21&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note explains the company's fair value measurement hierarchy for financial and non-financial assets, primarily marketable securities and intangible assets - Fair value is defined as the exit price in an orderly transaction between market participants, categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) **Marketable Securities at Fair Value (in thousands):** | Type | June 30, 2021 | December 31, 2020 | | :------------------------ | :------------ | :---------------- | | U.S. Treasury securities | $51,560 | $21,340 | | Yankee bonds | $3,069 | — | | Agency bonds | $17,635 | — | | Municipal bonds | $12,472 | — | | Commercial paper | $22,658 | $14,543 | | Asset-backed securities | $26,467 | $14,538 | | Corporate bonds | $69,089 | $17,125 | | **Total** | **$202,950** | **$67,546** | - The majority of cash equivalents (**$263.9 million**) and U.S. Treasury securities (**$51.6 million**) are classified as Level 1 fair value measurements as of June 30, 2021[101](index=101&type=chunk) - Non-financial assets like intangible assets and goodwill are measured at fair value on a nonrecurring basis using primarily unobservable (Level 3) inputs for impairment evaluations[105](index=105&type=chunk) [Note 5. Leases](index=25&type=section&id=Note%205.%20Leases) This note provides details on the company's operating lease liabilities, lease costs, and future minimum lease payments, including commitments for new facilities **Operating Lease Liabilities (in thousands):** | Period | Remaining Lease Payments | | :------------------ | :----------------------- | | Remainder of 2021 | $3,671 | | 2022 | $8,043 | | 2023 | $7,638 | | 2024 | $7,885 | | 2025 | $5,087 | | Thereafter | $37,142 | | **Total** | **$69,466** | | Less: imputed interest | $(14,200) | | **Total operating lease liabilities** | **$55,266** | | Weighted-average remaining lease term | 10.67 years | | Weighted-average discount rate | 4.1% | - Operating lease costs for the six months ended June 30, 2021, were **$4.7 million**, up from **$4.3 million** in the prior year[108](index=108&type=chunk) - The Company has **$33.8 million** in contractually binding minimum lease payments for executed but not yet commenced leases, primarily for a new laboratory and headquarters facility in Fort Myers, Florida, expected to commence in Q3 2021[108](index=108&type=chunk) [Note 6. Goodwill and Intangible Assets](index=25&type=section&id=Note%206.%20Goodwill%20and%20Intangible%20Assets) This note details the changes in goodwill and intangible assets by segment, primarily driven by recent acquisitions, and related amortization expenses **Goodwill by Segment (in thousands):** | Segment | December 31, 2020 | June 30, 2021 | Change | | :---------------- | :---------------- | :------------ | :----- | | Clinical Services | $179,534 | $438,761 | +144.4% | | Pharma Services | $31,549 | $61,216 | +94.0% | | **Total** | **$211,083** | **$499,977** | +137.0% | - Goodwill increased significantly due to the acquisitions of Trapelo (**$44.7 million**, all to Clinical Services) and Inivata (**$244.2 million**, with **$214.5 million to Clinical Services** and **$29.7 million to Pharma Services**)[109](index=109&type=chunk)[111](index=111&type=chunk) **Intangible Assets, Net (in thousands):** | Type | June 30, 2021 | December 31, 2020 | | :------------------------ | :------------ | :---------------- | | Customer Relationships | $102,290 | $107,206 | | Developed Technology | $320,855 | — | | Marketing Assets | $517 | — | | Trademarks | $31,624 | — | | Trade Name | $2,305 | — | | Trademark - Indefinite lived | $13,447 | $13,447 | | **Total** | **$471,038** | **$120,653** | - Amortization expense for intangibles was **$3.8 million for Q2 2021** (up from **$2.5 million in Q2 2020**) and **$6.2 million for H1 2021** (up from **$4.9 million in H1 2020**)[111](index=111&type=chunk) [Note 7. Investment in Non-Consolidated Affiliate](index=27&type=section&id=Note%207.%20Investment%20in%20Non-Consolidated%20Affiliate) This note describes the company's prior strategic alliance and investment in Inivata, leading to its eventual acquisition and the recognition of a significant gain - NeoGenomics formed a strategic alliance with Inivata on May 22, 2020, acquiring a minority interest for **$25 million** and a fixed-price option to purchase the remainder[114](index=114&type=chunk) - Prior to the June 18, 2021 acquisition, the investment in Inivata (Preference Shares and Purchase Option) was measured at cost, adjusted for observable price changes, and a **$15 million Line of Credit** was extended to Inivata[116](index=116&type=chunk)[117](index=117&type=chunk)[119](index=119&type=chunk) - Upon acquiring control of Inivata on June 18, 2021, the previously-held equity interest and Purchase Option were remeasured to acquisition-date fair values of **$62.9 million and $58.5 million**, respectively[123](index=123&type=chunk) - The acquisition resulted in a total **gain on investment** in and loan receivable from non-consolidated affiliate, net, of **$96.5 million for Q2 2021** and **$91.5 million for H1 2021**[123](index=123&type=chunk) [Note 8. Debt](index=29&type=section&id=Note%208.%20Debt) This note details the company's long-term debt, including convertible senior notes issued in 2028 and 2025, and their associated terms and effective interest rates **Long-Term Debt, Net (in thousands):** | Debt Type | June 30, 2021 | December 31, 2020 | | :--------------------------------- | :------------ | :---------------- | | 0.25% Convertible Senior Notes due 2028 | $335,088 | — | | 1.25% Convertible Senior Notes due 2025 | $195,989 | $168,120 | | Equipment financing obligations | $2,361 | $3,808 | | **Total long-term debt, net** | **$531,525** | **$169,087** | - On January 11, 2021, the Company sold **$345 million of 0.25% Convertible Senior Notes due 2028**, with net proceeds of approximately **$334.4 million**[126](index=126&type=chunk) - The 2028 Convertible Notes have an initial conversion price of **$66.15 per share** and an effective interest rate of **0.70%**[128](index=128&type=chunk)[134](index=134&type=chunk) - In connection with the 2028 Convertible Notes, the Company entered into Capped Call Transactions at a cost of **$29.3 million** to reduce potential stock dilution, classified as equity[135](index=135&type=chunk) - The 2025 Convertible Senior Notes (issued May 4, 2020) have an initial conversion price of **$36.34 per share** and an effective interest rate of **1.96%**[142](index=142&type=chunk)[148](index=148&type=chunk) [Note 9. Equity Transactions](index=33&type=section&id=Note%209.%20Equity%20Transactions) This note outlines significant equity transactions, including public offerings and private placements of common stock, and shares issued for acquisitions - On June 18, 2021, the Company completed a private placement of **4,444,445 common shares at $45.00 per share**, generating net proceeds of approximately **$189.9 million**, used for the Inivata acquisition[152](index=152&type=chunk)[271](index=271&type=chunk) - In April 2021, **597,712 shares of common stock** were issued as consideration for the Trapelo acquisition[153](index=153&type=chunk) - On January 6, 2021, the Company completed a public offering of **4,081,632 common shares** (plus an over-allotment option for **612,244 shares**), generating net proceeds of approximately **$218.3 million**[154](index=154&type=chunk)[155](index=155&type=chunk)[267](index=267&type=chunk) [Note 10. Stock-Based Compensation](index=34&type=section&id=Note%2010.%20Stock-Based%20Compensation) This note details the company's stock-based compensation expense, unrecognized compensation, and the valuation methods for stock options and restricted stock **Stock-Based Compensation Expense (in thousands):** | Period | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Stock-based compensation expense | $4,500 | $2,600 | $7,200 | $4,800 | - As of June 30, 2021, there was **$15 million of unrecognized stock-based compensation expense** for stock options (weighted-average period of **2.2 years**) and **$12.1 million for restricted stock** (weighted-average period of **1.9 years**)[160](index=160&type=chunk)[161](index=161&type=chunk) - The Company uses the Black-Scholes option valuation model for new stock option awards since January 1, 2021, with a weighted average fair value of **$18.53 per share** at grant date for H1 2021[160](index=160&type=chunk) - Employees purchased **55,756 shares** under the ESPP for H1 2021, resulting in an expense of approximately **$0.5 million**[163](index=163&type=chunk) [Note 11. Revenue Recognition](index=35&type=section&id=Note%2011.%20Revenue%20Recognition) This note explains the company's revenue recognition policies for its Clinical Services and Pharma Services segments, including disaggregation of revenue by payer - The Company has two operating segments: Clinical Services (diagnostic testing for healthcare providers) and Pharma Services (clinical trial services and data analytics for pharmaceutical firms)[165](index=165&type=chunk) - Clinical Services revenue is recognized upon performance and delivery of diagnostic services, billed to various payers based on expected collection amounts[166](index=166&type=chunk) - Pharma Services revenue is generally recognized on a unit-of-service basis, with upfront fees or milestones recognized over time, and includes validation studies and informatics[167](index=167&type=chunk)[168](index=168&type=chunk) **Disaggregation of Revenue (in thousands):** | Segment/Payer | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Clinical Services: | | | | | | Client direct billing | $63,137 | $45,244 | $123,846 | $99,535 | | Commercial Insurance | $20,528 | $15,148 | $39,102 | $37,142 | | Medicare and Medicaid | $17,484 | $13,541 | $34,634 | $30,024 | | Self-Pay | $256 | $(49) | $310 | $165 | | **Total Clinical Services** | **$101,405** | **$73,884** | **$197,892** | **$166,866** | | **Pharma Services** | **$20,319** | **$13,093** | **$39,365** | **$26,141** | | **Total Revenue** | **$121,724** | **$86,977** | **$237,257** | **$193,007** | [Note 12. Net Income (Loss) Per Share](index=37&type=section&id=Note%2012.%20Net%20Income%20(Loss)%20Per%20Share) This note details the calculation of basic and diluted net income or loss per share, including the impact of potential dilutive securities - Basic EPS is computed by dividing net income (loss) by weighted-average common shares outstanding, while diluted EPS reflects potential dilution from stock awards and convertible notes using the if-converted method[177](index=177&type=chunk) **Net Income (Loss) Per Share (in thousands, except per share amounts):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $75,873 | $(6,824) | $53,759 | $(13,802) | | Net income (loss) used in diluted EPS | $77,425 | $(6,824) | $56,756 | $(13,802) | | Basic weighted average shares outstanding | 118,287 | 107,887 | 117,249 | 106,209 | | Diluted weighted average shares outstanding | 131,237 | 107,887 | 130,247 | 106,209 | | Basic net income (loss) per share | $0.64 | $(0.06) | $0.46 | $(0.13) | | Diluted net income (loss) per share | $0.59 | $(0.06) | $0.44 | $(0.13) | - Dilutive effects for Q2 2021 included **2,027 thousand stock options, 170 thousand restricted stock awards, 5,538 thousand 2025 Convertible Notes shares, and 5,215 thousand 2028 Convertible Notes shares**[178](index=178&type=chunk) - Potential dilutive shares from stock options, restricted stock awards, and 2025 Convertible Notes were excluded from diluted EPS in Q2 and H1 2020 due to their anti-dilutive effect[178](index=178&type=chunk) [Note 13. Defined Contribution Plans](index=38&type=section&id=Note%2013.%20Defined%20Contribution%20Plans) This note describes the company's 401(k) retirement plan for U.S. employees and other country-specific pension plans, including matching contributions - The Company maintains a 401(k) retirement plan for U.S. employees, matching **100% of contributions up to 3% of compensation** and an additional **50% on the next 2% (4% maximum match)**[181](index=181&type=chunk) - Matching contributions were **$1.5 million for Q2 2021** (up from **$1.2 million in Q2 2020**) and **$3.1 million for H1 2021** (up from **$2.6 million in H1 2020**)[181](index=181&type=chunk) - Post-Inivata acquisition, the Company also operates country-specific defined contribution pension plans for Inivata employees, with immaterial contributions for the period through June 30, 2021[182](index=182&type=chunk) [Note 14. Commitments and Contingencies](index=38&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) This note discloses a patent infringement lawsuit filed against Inivata, which the company intends to vigorously defend, with an uncertain outcome - On January 20, 2021, Natera, Inc. filed a patent infringement complaint against Inivata Limited and Inivata, Inc., alleging infringement by Inivata's InVisionFirst-Lung cancer diagnostic test[183](index=183&type=chunk)[287](index=287&type=chunk) - The Company intends to vigorously defend the matter, believing it has good and substantial defenses, but the outcome is not estimable or probable at the time of filing[183](index=183&type=chunk)[287](index=287&type=chunk) [Note 15. Related Party Transactions](index=39&type=section&id=Note%2015.%20Related%20Party%20Transactions) This note details transactions with Inivata prior to its acquisition, including testing services and a line of credit, now consolidated post-acquisition - Prior to the Inivata acquisition, Inivata provided **$0.4 million and $0.8 million** in testing services to NeoGenomics for the three and six months ended June 30, 2021, respectively[186](index=186&type=chunk) - The **$15 million Line of Credit** between NeoGenomics and Inivata was settled after the Inivata Acquisition Date, with no outstanding amounts as of June 30, 2021[187](index=187&type=chunk) - As of June 18, 2021, Inivata became a wholly-owned consolidated subsidiary, and its financial activities are now consolidated within NeoGenomics' financial statements[188](index=188&type=chunk) [Note 16. Segment Information](index=40&type=section&id=Note%2016.%20Segment%20Information) This note provides financial information disaggregated by the company's Clinical Services and Pharma Services operating segments, including net revenues and gross profit - NeoGenomics operates two segments: Clinical Services (diagnostic testing for healthcare providers) and Pharma Services (clinical trials and research for pharmaceutical firms)[191](index=191&type=chunk) **Segment Net Revenues (in thousands):** | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Clinical Services | $101,405 | $73,884 | $197,892 | $166,866 | | Pharma Services | $20,319 | $13,093 | $39,365 | $26,141 | | **Total Revenue** | **$121,724** | **$86,977** | **$237,257** | **$193,007** | **Segment Gross Profit (in thousands):** | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Clinical Services | $44,172 | $25,127 | $79,094 | $69,186 | | Pharma Services | $8,818 | $2,879 | $15,470 | $5,189 | | **Total Gross Profit** | **$52,990** | **$28,006** | **$94,564** | **$74,375** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and operational results for the three and six months ended June 30, 2021, compared to the prior year It covers revenue, expenses, liquidity, capital resources, and the impact of the COVID-19 pandemic and recent acquisitions [Introduction](index=41&type=section&id=Introduction) This introduction emphasizes reading the discussion in conjunction with financial statements and acknowledges the presence of forward-looking statements subject to risks - The discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and notes, and includes forward-looking statements subject to certain risks and uncertainties[194](index=194&type=chunk) [COVID-19 Pandemic](index=41&type=section&id=COVID-19%20Pandemic) This section discusses the material adverse impact of the COVID-19 pandemic on operations and test volumes, alongside the company's measures to ensure testing continuity - The COVID-19 pandemic materially adversely affected the Company's operations, volume growth, and test volumes in 2020 and H1 2021, with future impact dependent on the pandemic's duration and severity[195](index=195&type=chunk)[196](index=196&type=chunk) - The Company implemented significant actions to protect employees and maintain critical oncology testing continuity, including de-densifying laboratories, adjusting shifts, and restricting travel[197](index=197&type=chunk) - All main laboratory facilities have remained open, ensuring uninterrupted high-quality testing services for clients[197](index=197&type=chunk) [Overview](index=41&type=section&id=Overview) This overview describes NeoGenomics' global network of cancer-focused testing laboratories, its comprehensive service offerings, and its Clinical and Pharma Services segments - NeoGenomics operates a network of cancer-focused testing laboratories in the United States, Europe, and Asia, aiming to be the world's leading cancer testing and information company[199](index=199&type=chunk) - The company offers a broad range of testing services including Cytogenetics, FISH, Flow cytometry, Immunohistochemistry (IHC) and Digital Imaging, Molecular testing (including NGS and liquid biopsy), and Morphologic analysis[200](index=200&type=chunk)[204](index=204&type=chunk) - Clinical Services provide diagnostic services to pathology practices, hospitals, and academic centers, with a focus on comprehensive and tech-only offerings[203](index=203&type=chunk)[207](index=207&type=chunk) - Pharma Services support pharmaceutical firms in drug development, clinical trials, and research, including biomarker discovery, companion diagnostic development, and informatics[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[212](index=212&type=chunk) [2021 Focus Areas](index=43&type=section&id=2021%20Focus%20Areas) This section outlines the company's strategic priorities for 2021, including culture, quality, innovation, growth initiatives, and business development - Key focus areas for 2021 include strengthening world-class culture through investment in people development, coaching, and training[216](index=216&type=chunk)[218](index=218&type=chunk) - The Company is committed to providing uncompromising quality and exceptional service by improving laboratory operations, increasing automation, and enhancing turnaround times[219](index=219&type=chunk)[220](index=220&type=chunk) - Innovation and growth initiatives include pursuing market share gains, improving reimbursement effectiveness, and developing new assays and product offerings like liquid biopsy and MRD[221](index=221&type=chunk)[222](index=222&type=chunk) - The Company also seeks growth opportunities through mergers and acquisitions and investing in business development and informatics capabilities[223](index=223&type=chunk) [Competitive Strengths](index=44&type=section&id=Competitive%20Strengths) This section highlights the company's competitive advantages, such as industry-leading turnaround times, a world-class medical team, innovative service offerings, and a national sales force - Competitive strengths include industry-leading turnaround times for test results in both Clinical and Pharma Services, enabling rapid treatment decisions[225](index=225&type=chunk)[227](index=227&type=chunk) - A world-class medical and scientific team of approximately **120 M.D.s and Ph.Ds.** provides expertise for challenging cases and study design[228](index=228&type=chunk) - Innovative service offerings include extensive tech-only FISH, flow cytometry, and IHC testing, as well as a broad Molecular and Next Generation Sequencing test menu, making NeoGenomics a 'one-stop shop'[229](index=229&type=chunk)[231](index=231&type=chunk) - A national direct sales force, extensively trained in cancer genetic testing, utilizes a custom Customer Relationship Management System (CRM) and Laboratory Information Services (LIS) to manage territories and educate clients[232](index=232&type=chunk) [Seasonality](index=45&type=section&id=Seasonality) This section explains the seasonal variations in clinical testing volume and the inconsistent revenue patterns in Pharma Services due to contract terms and trial enrollment - Clinical testing volume generally declines modestly during summer vacation, year-end holidays, and due to extreme adverse weather conditions[233](index=233&type=chunk) - Pharma Services testing volume varies based on contract terms and patient enrollment rates for trials, which can be impacted by seasonality, leading to inconsistent revenue among periods[234](index=234&type=chunk)[236](index=236&type=chunk) [Results of Operations for the Three and Six Months Ended June 30, 2021 as Compared to the Three and Six Months Ended June 30, 2020](index=46&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202021%20as%20Compared%20to%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202020) This section provides a comparative analysis of the company's operational results for the specified periods, presented as a percentage of net revenue **Consolidated Statements of Operations as a Percentage of Net Revenue:** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net revenue | 100.0% | 100.0% | 100.0% | 100.0% | | Cost of revenue | 56.5% | 67.8% | 60.1% | 61.5% | | Gross Profit | 43.5% | 32.2% | 39.9% | 38.5% | | General and administrative | 44.9% | 39.8% | 40.1% | 36.7% | | Research and development | 2.9% | 2.4% | 2.5% | 2.2% | | Sales and marketing | 14.2% | 11.7% | 13.1% | 12.2% | | Loss from operations | (18.5)% | (21.7)% | (15.8)% | (12.6)% | | Income (loss) before taxes | 60.2% | (20.6)% | 22.0% | (12.3)% | | Net income (loss) | 62.2% | (7.8)% | 22.6% | (7.1)% | [Revenue](index=46&type=section&id=Revenue) This section analyzes the company's consolidated and segment-specific revenue growth, driven by increased testing volume and recovery from the COVID-19 pandemic **Net Revenue by Segment (in thousands):** | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | $ Change | % Change | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | $ Change | % Change | | :---------------- | :------------------------------- | :------------------------------- | :------- | :------- | :------------------------------- | :------------------------------- | :------- | :------- | | Clinical Services | $101,405 | $73,884 | $27,521 | 37.2% | $197,892 | $166,866 | $31,026 | 18.6% | | Pharma Services | $20,319 | $13,093 | $7,226 | 55.2% | $39,365 | $26,141 | $13,224 | 50.6% | | **Total Revenue** | **$121,724** | **$86,977** | **$34,747** | **39.9%** | **$237,257** | **$193,007** | **$44,250** | **22.9%** | - Consolidated revenues increased by **39.9% YoY for Q2 2021** and **22.9% YoY for H1 2021**, primarily driven by increased patient access to testing as COVID-19 pandemic recovery continued[238](index=238&type=chunk) - Clinical testing volume increased by **37.3% for Q2 2021** and **19.1% for H1 2021**, while average revenue per test increased **2.6% for Q2 2021** and was flat for H1 2021[238](index=238&type=chunk)[241](index=241&type=chunk) - Pharma Services backlog grew from **$208.9 million as of December 31, 2020, to $238.1 million as of June 30, 2021**, indicating expected higher future revenues[239](index=239&type=chunk)[240](index=240&type=chunk) [Cost of Revenue and Gross Profit](index=47&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit) This section analyzes changes in cost of revenue and gross profit, highlighting improvements in gross profit margin due to higher testing volume and cost efficiencies **Cost of Revenue and Gross Profit (in thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change | | :------------------------ | :------------------------------- | :------------------------------- | :------- | :------------------------------- | :------------------------------- | :------- | | Total cost of revenue | $68,734 | $58,971 | 16.6% | $142,693 | $118,632 | 20.3% | | Cost of revenue as a % of revenue | 56.5% | 67.8% | | 60.1% | 61.5% | | | Total gross profit | $52,990 | $28,006 | 89.2% | $94,564 | $74,375 | 27.1% | | Gross profit margin | 43.5% | 32.2% | | 39.9% | 38.5% | | - Average cost per clinical test decreased by **13.0% for Q2 2021** and **3.8% for H1 2021**, reflecting increased volume and the fixed nature of many laboratory costs[243](index=243&type=chunk) - Gross profit margin improved due to higher testing volume and recovery from the COVID-19 pandemic in both segments[246](index=246&type=chunk) - Clinical cost of revenue for H1 2021 included **$5.3 million in write-offs** for COVID-19 PCR testing inventory[245](index=245&type=chunk) [General and Administrative Expenses](index=48&type=section&id=General%20and%20Administrative%20Expenses) This section details the increase in general and administrative expenses, primarily due to acquisition-related costs and higher payroll, with expectations for future efficiency **General and Administrative Expenses (in thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | $ Change | % Change | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | $ Change | % Change | | :--------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | :------------------------------- | :------------------------------- | :------- | :------- | | General and administrative expenses | $54,638 | $34,613 | $20,025 | 57.9% | $95,114 | $70,957 | $24,157 | 34.0% | | As a % of revenue | 44.9% | 39.8% | | | 40.1% | 36.7% | | | - Increases were driven by approximately **$11 million (Q2) and $11.8 million (H1) in acquisition and integration costs** related to Inivata and Trapelo, and higher payroll costs due to increased personnel[248](index=248&type=chunk) - General and administrative expenses are expected to increase in total but decrease as a percentage of revenue over time due to facility expansion and infrastructure investments[249](index=249&type=chunk) [Research and Development Expenses](index=48&type=section&id=Research%20and%20Development%20Expenses) This section discusses the increase in research and development expenses, driven by investments in new test development and future innovation projects **Research and Development Expenses (in thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | $ Change | % Change | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | $ Change | % Change | | :--------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | :------------------------------- | :------------------------------- | :------- | :------- | | Research and development expenses | $3,495 | $2,105 | $1,390 | 66.0% | $5,951 | $4,165 | $1,786 | 42.9% | | As a % of revenue | 2.9% | 2.4% | | | 2.5% | 2.2% | | | - Increases were driven by investments in new test development, particularly in next-generation sequencing and FDA initiatives[250](index=250&type=chunk) - R&D expenditures are anticipated to significantly increase in future quarters due to continued investment in innovation projects and new test market entry[251](index=251&type=chunk) [Sales and Marketing Expenses](index=48&type=section&id=Sales%20and%20Marketing%20Expenses) This section analyzes the increase in sales and marketing expenses, attributed to higher commissions, sales team expansion, and continued marketing investments **Sales and Marketing Expenses (in thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | $ Change | % Change | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | $ Change | % Change | | :--------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | :------------------------------- | :------------------------------- | :------- | :------- | | Sales and marketing expenses | $17,224 | $10,195 | $7,029 | 68.9% | $30,973 | $23,453 | $7,520 | 32.1% | | As a % of revenue | 14.2% | 11.7% | | | 13.1% | 12.2% | | | - Increases primarily reflect higher commissions due to increased revenues, expansion of the sales team, and continued marketing investment[254](index=254&type=chunk) - Sales and marketing expenses are expected to align with changes in revenue over the long term[254](index=254&type=chunk) [Interest Expense, net](index=49&type=section&id=Interest%20Expense%2C%20net) This section details the net interest expense, reflecting the effective interest rates of the company's convertible senior notes - Net interest expense decreased by **$0.6 million for Q2 2021** and **$0.3 million for H1 2021** compared to the same periods in 2020[255](index=255&type=chunk) - Interest expense reflects effective interest rates of **0.70% for the 2028 Convertible Notes** and **1.96% for the 2025 Convertible Notes**[255](index=255&type=chunk) [Income (Loss) Per Share](index=49&type=section&id=Income%20(Loss)%20Per%20Share) This section presents the basic and diluted net income or loss per share, highlighting the significant improvement in diluted EPS for the current period **Net Income (Loss) Per Share (in thousands, except per share data):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $75,873 | $(6,824) | $53,759 | $(13,802) | | Basic net income (loss) per share | $0.64 | $(0.06) | $0.46 | $(0.13) | | Diluted net income (loss) per share | $0.59 | $(0.06) | $0.44 | $(0.13) | - Diluted EPS for Q2 2021 was **$0.59**, a significant improvement from **$(0.06)** in Q2 2020, reflecting the net income turnaround[256](index=256&type=chunk) [Non-GAAP Measures](index=49&type=section&id=Non-GAAP%20Measures) This section explains the use of non-GAAP financial measures like Adjusted EBITDA to provide supplemental information and facilitate analysis of core operating results - Management uses non-GAAP financial measures, such as Adjusted EBITDA, to provide useful supplemental information for investors and facilitate analysis of core operating results[257](index=257&type=chunk) - Adjusted EBITDA is defined as net income (loss) from continuing operations before interest, tax, depreciation, amortization, non-cash stock-based compensation, acquisition/integration expenses, COVID-19 PCR write-offs, new headquarters moving expenses, gain on investment in affiliate, and other significant non-recurring items[259](index=259&type=chunk) **Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA (in thousands):** | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) (GAAP) | $75,873 | $(6,824) | $53,759 | $(13,802) | | EBITDA (non-GAAP) | $85,038 | $(8,004) | $74,215 | $(4,382) | | Adjusted EBITDA (non-GAAP) | $4,550 | $(7,224) | $8,736 | $(151) | [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financing strategies, cash flow summary, and the sufficiency of cash and marketable securities to fund near-term capital and operating needs - The Company's operations are financed primarily through cash generated from operations, public and private sales of debt and equity securities, and bank debt borrowings[261](index=261&type=chunk) **Summary of Consolidated Cash Flows (in thousands):** | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :---------------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $820 | $(5,051) | | Net cash used in investing activities | $(608,098) | $(59,871) | | Net cash provided by financing activities | $729,545 | $223,217 | | Net change in cash, cash equivalents and restricted cash | $122,267 | $158,295 | | Cash, cash equivalents and restricted cash, end of period | $372,899 | $331,311 | | Working Capital, end of period | $622,664 | $357,300 | - As of June 30, 2021, the Company had **$368.8 million in unrestricted cash and cash equivalents** and **$203 million in marketable securities**, deemed sufficient to fund near-term capital and operating needs for at least the next 12 months[266](index=266&type=chunk)[272](index=272&type=chunk) - Recent financing activities include **$218.3 million net proceeds** from a January 2021 common stock offering, **$334.4 million net proceeds** from 2028 Convertible Notes, and **$189.9 million net proceeds** from a June 2021 private placement (used for Inivata acquisition)[267](index=267&type=chunk)[269](index=269&type=chunk)[271](index=271&type=chunk) [Capital Expenditures](index=52&type=section&id=Capital%20Expenditures) This section outlines the forecast for capital expenditures for the year, including amounts spent on equipment, software, and leasehold improvements during the period - Capital expenditures for the year ending December 31, 2021, are forecast to be in the range of **$55 million to $70 million**, including capital expenditures related to Trapelo and Inivata[273](index=273&type=chunk) - During H1 2021, **$37.2 million was spent on capital equipment**, software, and leasehold improvements, funded by cash and financing[273](index=273&type=chunk) [Critical Accounting Policies](index=52&type=section&id=Critical%20Accounting%20Policies) This section notes that financial statement preparation involves significant estimates and refers to the detailed disclosure of critical accounting policies in other reports - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts, with actual results potentially differing from estimates[274](index=274&type=chunk) - Critical accounting policies are disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, and Note 2 of the accompanying unaudited Consolidated Financial Statements[274](index=274&type=chunk) [Off-balance Sheet Arrangements](index=52&type=section&id=Off-balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet financing arrangements that would significantly impact the company's financial condition - As of June 30, 2021, the Company does not use special purpose entities or other off-balance sheet financing techniques that are expected to have a material effect on its financial condition or results of operations[275](index=275&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate risk on short-term investments and foreign currency exchange risk from international operations, concluding that these risks are not currently significant [Interest Rate Risk](index=53&type=section&id=Interest%20Rate%20Risk) This section addresses the company's exposure to interest rate risk on short-term investments, emphasizing principal preservation and minimal impact from rate changes - The Company is exposed to interest rate risk on its short-term investments, with the primary objective to preserve principal while maximizing yields without significantly increasing risk[278](index=278&type=chunk) - Investments are made in highly liquid, high-quality U.S. government and other highly credit-rated debt securities with short maturities to minimize exposure to adverse interest rate shifts[278](index=278&type=chunk) - A **1% change in interest rates** on June 30, 2021, would not have had a material effect on the fair value of the investment portfolio[278](index=278&type=chunk) [Foreign Currency Exchange Risk](index=53&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section discusses the company's exposure to foreign currency fluctuations from international operations, noting that these risks are not currently considered significant - Operations in Cambridge, United Kingdom; Rolle, Switzerland; Suzhou, China; and Singapore expose the Company to foreign currency exchange rate fluctuations against the U.S. dollar[279](index=279&type=chunk) - The Company does not hedge foreign currency exchange risks and does not currently believe these risks are significant[279](index=279&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the company's disclosure controls and procedures, confirming their effectiveness, and notes the transition to a new ERP system with ongoing internal control monitoring [Disclosure Controls and Procedures](index=53&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures in ensuring timely and accurate reporting of required information - Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported timely[280](index=280&type=chunk) - Management, including the principal executive officer and principal financial officer, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021[281](index=281&type=chunk) [Changes in Internal Control over Financial Reporting](index=53&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting, while noting the transition to a new Oracle ERP system post-period end - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the six months ended June 30, 2021[282](index=282&type=chunk) - On July 1, 2021, the Company transitioned from its Great Plains Dynamics ERP system to a hosted, cloud-based Oracle ERP system, with pre-implementation planning, design, and testing of internal controls completed[283](index=283&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses ongoing legal proceedings, specifically a patent infringement complaint filed against the company's newly-acquired subsidiary, Inivata, which the company intends to vigorously defend - On January 20, 2021, Natera, Inc. filed a patent infringement complaint against Inivata Limited and Inivata, Inc., alleging infringement by Inivata's InVisionFirst-Lung cancer diagnostic test[287](index=287&type=chunk) - The Company intends to vigorously defend the matter, believing it has good and substantial defenses to the claims alleged in the suit, but there is no guarantee that the Company will prevail[287](index=287&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section highlights additional risk factors, particularly those arising from the recent acquisitions of Trapelo and Inivata, including challenges in integrating internal controls and potential unknown liabilities - The Company may be unable to make necessary changes to its internal control structure resulting from the acquisitions of Trapelo and Inivata, potentially causing difficulties or delays in compliance with Sarbanes-Oxley Act requirements[289](index=289&type=chunk) - Trapelo and Inivata may have unknown, unasserted, or contingent liabilities that could adversely affect the Company's business if not covered by indemnification or insurance[290](index=290&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the company's purchases of common stock to satisfy tax withholding obligations related to restricted stock vesting, with no unregistered sales of equity securities during the period - No unregistered sales of equity securities occurred for the quarterly period ended June 30, 2021[291](index=291&type=chunk) **Issuer Purchases of Equity Securities (Common Stock):** | Period of Repurchase | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------------- | :------------------------------- | :--------------------------- | | April 1, 2021 - April 30, 2021 | — | $— | | May 1, 2021 - May 31, 2021 | 3,212 | $48.92 | | June 1, 2021 - June 30, 2021 | 143 | $42.19 | | **Total** | **3,355** | **$48.64** | - The shares purchased were acquired from participants to satisfy tax withholding obligations related to the vesting of their restricted stock under the Company's Equity Incentive Plan[293](index=293&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - Not applicable for defaults upon senior securities[294](index=294&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that there are no mine safety disclosures applicable to the company - Not applicable for mine safety disclosures[295](index=295&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report for the period - No other information to report[296](index=296&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including various agreements, certifications, and financial statements in iXBRL format - Exhibits include Securities Purchase Agreement, Registration Rights Agreement, Share Purchase Agreement, Services Agreement, Employment Agreements, and certifications by executive officers[299](index=299&type=chunk) - The Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Cash Flows, Consolidated Statements of Comprehensive Income (Loss), and related notes are formatted in Inline Extensible Business Reporting Language (iXBRL)[299](index=299&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) This section formally attests to the accuracy and completeness of the report, signed by the company's principal executive and financial officers - The report is duly signed on behalf of NeoGenomics, Inc. by Mark W. Mallon, Director and Chief Executive Officer, and Kathryn B. McKenzie, Chief Financial Officer, on August 9, 2021[301](index=301&type=chunk)[302](index=302&type=chunk)

NeoGenomics, Inc. (NASDAQ:NEO) Q2 2021 Earnings Conference Call August 6, 2021 8:30 AM ET Company Participants Doug VanOort - Chairman Mark Mallon - CEO Kathryn McKenzie - CFO George Cardoza - President, Pharma Services Division Bill Bonello - President, Informatics Division Doug Brown - Chief Strategy and Corporate Development Officer Clive Morris - CEO, Inivata Conference Call Participants David Westenberg - Guggenheim Brian Weinstein - William Blair Alex Nowak - Craig-Hallum Capital Group Mark Massaro - ...

[PART I FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) Presents the unaudited financial statements and management's discussion for the quarter ended March 31, 2021 [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements for NeoGenomics, Inc., including the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, significant accounting policies, fair value measurements, leases, goodwill, intangible assets, investments, debt, equity transactions, stock-based compensation, revenue recognition, net loss per share, related party transactions, and segment information for the period ended March 31, 2021 [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Details the company's financial position, including assets, liabilities, and equity, as of March 31, 2021, and December 31, 2020 Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | Change ($) | Change (%) | | :-------------------------------- | :------------- | :---------------- | :--------- | :--------- | | **ASSETS** | | | | | | Cash and cash equivalents | $611,970 | $228,713 | $383,257 | 167.5% | | Marketable securities, at fair value | $190,710 | $67,546 | $123,164 | 182.3% | | Total current assets | $942,732 | $448,730 | $494,002 | 110.1% | | Total assets | $1,494,413 | $988,331 | $506,082 | 51.2% | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | | | Convertible senior notes, net | $530,378 | $168,120 | $362,258 | 215.5% | | Total liabilities | $650,699 | $294,037 | $356,662 | 121.3% | | Total stockholders' equity | $843,714 | $694,294 | $149,420 | 21.5% | | Total liabilities and stockholders' equity | $1,494,413 | $988,331 | $506,082 | 51.2% | [Consolidated Statements of Operations](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Reports the company's revenues, expenses, and net loss for the three months ended March 31, 2021 and 2020 Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Clinical Services Revenue | $96,487 | $92,982 | $3,505 | 3.8% | | Pharma Services Revenue | $19,046 | $13,048 | $5,998 | 46.0% | | Total revenue | $115,533 | $106,030 | $9,503 | 9.0% | | Cost of revenue | $73,959 | $59,661 | $14,298 | 24.0% | | Gross profit | $41,574 | $46,369 | $(4,795) | (10.3)% | | Loss from operations | $(15,107) | $(5,293) | $(9,814) | (185.4)% | | Net loss | $(22,114) | $(6,978) | $(15,136) | (216.9)% | | Basic Net Loss Per Share | $(0.19) | $(0.07) | $(0.12) | (171.4)% | | Diluted Net Loss Per Share | $(0.19) | $(0.07) | $(0.12) | (171.4)% | [Consolidated Statements of Comprehensive Loss](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20LOSS) Presents the net loss and other comprehensive loss components for the three months ended March 31, 2021 and 2020 Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | NET LOSS | $(22,114) | $(6,978) | | Total other comprehensive loss, net of tax | $(160) | $(1,038) | | COMPREHENSIVE LOSS | $(22,274) | $(8,016) | [Consolidated Statements of Stockholders' Equity](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Outlines changes in the company's equity accounts, including common stock and accumulated deficit, for the period Stockholders' Equity Changes (in thousands, except share amounts) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Common stock, $0.001 par value (shares issued and outstanding) | 117,136,654 | 112,075,474 | | Common stock (amount) | $117 | $112 | | Additional paid-in capital | $872,350 | $701,357 | | Accumulated other comprehensive (loss) income | $(150) | $10 | | Accumulated deficit | $(28,603) | $(7,185) | | Total stockholders' equity | $843,714 | $694,294 | - The company recorded a cumulative-effect adjustment from a change in accounting principle (ASU 2020-06) which decreased additional paid-in capital by **$23.271 million** and increased accumulated deficit by **$0.696 million**, resulting in a net decrease of **$22.575 million** in total equity[19](index=19&type=chunk)[56](index=56&type=chunk) - Premiums paid for capped call confirmations also decreased additional paid-in capital by **$29.291 million**[19](index=19&type=chunk)[56](index=56&type=chunk) - A public offering of common stock generated **$218.500 million** in proceeds, increasing common stock and additional paid-in capital[19](index=19&type=chunk)[56](index=56&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2021 and 2020 Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $2,210 | $(6,933) | | Net cash used in investing activities | $(154,688) | $(41,708) | | Net cash provided by financing activities | $524,935 | $617 | | Net change in cash, cash equivalents and restricted cash | $372,457 | $(48,024) | | Cash, cash equivalents and restricted cash, end of period | $623,089 | $124,992 | - Operating activities generated **$2.2 million** in cash in Q1 2021, a significant improvement from a **$6.9 million** use of cash in Q1 2020, primarily due to adjustments for non-cash items like COVID-19 PCR testing inventory and equipment write-offs (**$6.1 million**)[22](index=22&type=chunk)[232](index=232&type=chunk) - Investing activities used **$154.7 million**, an increase of **$113.0 million** year-over-year, driven by increased investments in marketable securities (**$123.9 million**) and a **$15 million** loan to a non-consolidated affiliate[22](index=22&type=chunk)[235](index=235&type=chunk) - Financing activities provided **$524.9 million**, largely from **$334.4 million** in convertible debt proceeds and **$218.3 million** from an equity offering, partially offset by **$29.3 million** for capped call confirmations[22](index=22&type=chunk)[236](index=236&type=chunk) [Note 1. Nature of the Business](index=12&type=section&id=Note%201.%20Nature%20of%20the%20Business) Describes NeoGenomics' core operations as a clinical laboratory and its response to the COVID-19 pandemic - NeoGenomics operates as a certified, high complexity clinical laboratory providing diagnostic services to pathologists, oncologists, urologists, hospitals, and other laboratories, as well as clinical trial services to pharmaceutical firms[26](index=26&type=chunk) - The COVID-19 pandemic has materially adversely affected the Company's operations, but cash on hand and marketable securities are anticipated to be sufficient for near-term capital and operating needs for at least the next 12 months[27](index=27&type=chunk)[28](index=28&type=chunk) - At the end of Q1 2021, the Company exited COVID-19 PCR testing due to declining demand, recording a **$6.1 million** expense (**$5.3 million** for inventory write-off to cost of revenue and **$0.8 million** for equipment write-off to G&A)[29](index=29&type=chunk) - The Company recognized **$0.4 million** under the Employee Retention Tax Credit (ERTC) for the three months ended March 31, 2021, as extended by the American Rescue Plan Act[32](index=32&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=13&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Details the key accounting principles and recent changes applied in preparing the interim financial statements - The interim Consolidated Financial Statements are unaudited and prepared in accordance with GAAP, with certain information condensed or omitted compared to annual reports[34](index=34&type=chunk)[36](index=36&type=chunk) - Effective January 1, 2021, the Company adopted ASU 2020-06 (Accounting For Convertible Instruments and Contracts in an Entity's Own Equity) using the modified retrospective approach, which increased convertible senior notes by **$27.2 million**, decreased deferred income tax liabilities by **$6.6 million**, established a **$2 million** valuation allowance against deferred tax assets, and decreased additional paid-in capital by **$23.3 million**[55](index=55&type=chunk)[56](index=56&type=chunk) - The Company changed its stock option valuation model from a trinomial lattice model to the Black-Scholes option valuation model on a prospective basis for new awards starting January 1, 2021[40](index=40&type=chunk) - As of March 31, 2021, the Company's U.S. operations were in a three-year cumulative loss position, leading to the establishment of a **$9.3 million** valuation allowance against U.S. deferred income tax assets and a **$3 million** valuation allowance against deferred tax assets in Switzerland, Singapore, and China[49](index=49&type=chunk)[50](index=50&type=chunk) [Note 3. Fair Value Measurements](index=17&type=section&id=Note%203.%20Fair%20Value%20Measurements) Explains the valuation methods and classifications for financial assets measured at fair value on a recurring basis - The Company measures certain financial assets, including marketable securities and cash equivalents, at fair value on a recurring basis, classifying them as available-for-sale securities[64](index=64&type=chunk) Marketable Securities Fair Value (in thousands) | Type | March 31, 2021 Fair Value | December 31, 2020 Fair Value | | :---------------------- | :-------------------------- | :-------------------------- | | U.S. Treasury securities | $51,703 | $21,340 | | Commercial paper | $22,187 | $14,543 | | Asset-backed securities | $21,597 | $14,538 | | Corporate bonds | $95,223 | $17,125 | | Total | $190,710 | $67,546 | Cash Equivalents and Marketable Securities by Fair Value Hierarchy (in thousands) | Type | Level 1 (March 31, 2021) | Level 2 (March 31, 2021) | Level 3 (March 31, 2021) | Total (March 31, 2021) | | :---------------------- | :----------------------- | :----------------------- | :----------------------- | :--------------------- | | Money market funds | $570,782 | — | — | $570,782 | | Commercial paper (CE) | — | $17,795 | — | $17,795 | | U.S. Treasury securities | $51,703 | — | — | $51,703 | | Commercial paper (MS) | — | $22,187 | — | $22,187 | | Asset-backed securities | — | $21,597 | — | $21,597 | | Corporate bonds | — | $95,223 | — | $95,223 | | **Total** | **$622,485** | **$156,802** | **—** | **$779,287** | [Note 4. Leases](index=20&type=section&id=Note%204.%20Leases) Provides details on the company's operating lease liabilities, terms, and related costs Operating Lease Liabilities (in thousands) | Metric | Amount | | :-------------------------------- | :----- | | Total operating lease liabilities (March 31, 2021) | $51,548 | | Current portion | $(5,111) | | Long-term operating lease liabilities | $46,437 | | Weighted-average remaining lease term (years) | 10.95 | | Weighted-average discount rate | 4.2% | | Operating lease costs (Q1 2021) | $2,305 | | Cash paid for operating leases (Q1 2021) | $2,678 | - The Company has **$33.8 million** in contractually binding minimum lease payments for leases executed but not yet commenced, primarily for a new laboratory and headquarters facility in Fort Myers, Florida, expected to commence in 2021[78](index=78&type=chunk) - Additionally, **$25 million** for construction and **$17 million** for leasehold improvements are related to this facility[78](index=78&type=chunk) [Note 5. Goodwill and Intangible Assets](index=20&type=section&id=Note%205.%20Goodwill%20and%20Intangible%20Assets) Reports the carrying amounts of goodwill and intangible assets, along with amortization expenses - Goodwill remained constant at **$211.1 million** as of March 31, 2021, and December 31, 2020[79](index=79&type=chunk) Intangible Assets (in thousands) | Type | March 31, 2021 Net | December 31, 2020 Net | | :---------------------- | :----------------- | :-------------------- | | Customer Relationships | $104,748 | $107,206 | | Trade Name - Indefinite lived | $13,447 | $13,447 | | Total | $118,195 | $120,653 | - Amortization expense for intangible assets was approximately **$2.5 million** for both Q1 2021 and Q1 2020, recorded within general and administrative expense[81](index=81&type=chunk) [Note 6. Investment in Non-Consolidated Affiliate](index=22&type=section&id=Note%206.%20Investment%20in%20Non-Consolidated%20Affiliate) Describes the company's strategic investment and loan to Inivata Limited - The Company formed a strategic alliance with Inivata Limited in May 2020, acquiring Series C1 Preference Shares for **$25 million** and an option to purchase Inivata (Purchase Option)[84](index=84&type=chunk)[85](index=85&type=chunk) - The initial investment was allocated as **$19.6 million** for Preference Shares and **$6 million** for the Purchase Option[88](index=88&type=chunk) - In January 2021, Inivata drew on a **$15 million** Line of Credit from the Company, recorded as a loan receivable[90](index=90&type=chunk) - An imputed interest rate discount of **$5 million** was applied, increasing the investment in Inivata Preference Shares to **$30 million** and resulting in a **$10 million** present value for the loan receivable[90](index=90&type=chunk) - In Q1 2021, an observable transaction for Inivata Preference Shares led to a remeasurement, resulting in a net unrealized loss of **$5 million**[91](index=91&type=chunk) - As of March 31, 2021, the investment in non-consolidated affiliate was **$29.6 million** (**$25 million** Preference Shares, **$4.6 million** Purchase Option)[93](index=93&type=chunk) [Note 7. Debt](index=24&type=section&id=Note%207.%20Debt) Details the company's long-term debt, including convertible senior notes and equipment financing obligations Long-Term Debt, Net (in thousands) | Debt Type | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | 0.25% Convertible Senior Notes due 2028 | $334,718 | — | | 1.25% Convertible Senior Notes due 2025 | $195,660 | $168,120 | | Equipment financing obligations | $2,772 | $3,808 | | Total debt | $533,150 | $171,928 | | Less: Current portion of financing obligations | $(2,089) | $(2,841) | | Total long-term debt, net | $531,061 | $169,087 | - On January 11, 2021, the Company completed the sale of **$345 million** of 0.25% Convertible Senior Notes due January 15, 2028, generating net proceeds of approximately **$334.4 million**[98](index=98&type=chunk)[100](index=100&type=chunk) - The initial conversion rate is **15.1172 shares** per **$1,000** principal amount[100](index=100&type=chunk) - In connection with the 2028 Convertible Notes offering, the Company entered into Capped Call Transactions at a cost of approximately **$29.3 million** to reduce potential dilution to common stock[107](index=107&type=chunk) - The 1.25% Convertible Senior Notes due May 1, 2025, with a principal amount of **$201.3 million**, had an initial conversion rate of **27.5198 shares** per **$1,000** principal amount[111](index=111&type=chunk)[113](index=113&type=chunk) - Holders could convert in Q1 2021 and Q2 2021, but no conversion notices were received as of March 31, 2021[114](index=114&type=chunk) Maturities of Long-Term Debt as of March 31, 2021 (in thousands) | Year | 0.25% Convertible Senior Notes | 1.25% Convertible Senior Notes | Equipment Financing Obligations | Total Debt | | :---------------- | :----------------------------- | :----------------------------- | :------------------------------ | :--------- | | Remainder of 2021 | — | — | $1,761 | $1,761 | | 2022 | — | — | $984 | $984 | | 2023 | — | — | $27 | $27 | | 2024 | — | — | — | — | | 2025 | — | $201,250 | — | $201,250 | | Thereafter | $345,000 | — | — | $345,000 | | **Total Debt** | **$345,000** | **$201,250** | **$2,772** | **$549,022** | [Note 8. Equity Transactions](index=28&type=section&id=Note%208.%20Equity%20Transactions) Summarizes recent public offerings of common stock and their net proceeds - In January 2021, the Company completed a public offering of **4,081,632 shares** of common stock at **$49.00 per share**, plus an additional **612,244 shares** from an over-allotment option, generating approximately **$218.3 million** in net proceeds[123](index=123&type=chunk)[124](index=124&type=chunk) - In April 2020, the Company completed a public offering of **4,400,000 shares** of common stock at **$28.50 per share**, plus an additional **351,500 shares** from a partial over-allotment option exercise, generating approximately **$127.3 million** in net proceeds[125](index=125&type=chunk)[126](index=126&type=chunk) [Note 9. Stock-Based Compensation](index=29&type=section&id=Note%209.%20Stock-Based%20Compensation) Reports the stock-based compensation expense and activity for stock options and restricted stock Stock-Based Compensation Expense (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Stock-based compensation expense | $2,700 | $2,200 | Stock Option Activity (Three Months Ended March 31, 2021) | Metric | Number of Shares | Weighted Average Exercise Price | | :-------------------------------- | :--------------- | :------------------------------ | | Options outstanding at December 31, 2020 | 3,785,941 | $15.21 | | Options granted | 251,771 | $53.16 | | Options exercised | (260,167) | $8.60 | | Options forfeited | (54,296) | $19.53 | | Options outstanding at March 31, 2021 | 3,723,249 | $18.17 | | Exercisable at March 31, 2021 | 2,141,203 | $11.20 | - As of March 31, 2021, there was approximately **$9 million** of unrecognized stock-based compensation expense related to stock options, to be recognized over a weighted-average period of **2.20 years**[129](index=129&type=chunk) - For restricted stock, unrecognized expense was **$7.5 million**, to be recognized over **1.68 years**[130](index=130&type=chunk) [Note 10. Revenue Recognition](index=30&type=section&id=Note%2010.%20Revenue%20Recognition) Explains the company's revenue recognition policies across its Clinical and Pharma Services segments - The Company has two operating segments: Clinical Services (diagnostic testing for pathologists, oncologists, hospitals) and Pharma Services (clinical trial services and data analytics for pharmaceutical firms)[133](index=133&type=chunk) - Clinical Services revenue is recognized upon delivery of diagnostic results, with billing to various payers[134](index=134&type=chunk)[135](index=135&type=chunk) - Pharma Services revenue is generally recognized on a unit-of-service basis for research and clinical trial services, or at a point in time for validation studies and informatics[136](index=136&type=chunk) Disaggregation of Revenue (in thousands) | Segment/Payer | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------- | :-------------------------------- | :-------------------------------- | | **Clinical Services:** | | | | Client direct billing | $60,709 | $54,292 | | Commercial Insurance | $18,574 | $21,993 | | Medicare and Medicaid | $17,150 | $16,483 | | Self-Pay | $54 | $214 | | Total Clinical Services | $96,487 | $92,982 | | **Pharma Services:** | $19,046 | $13,048 | | **Total Revenue** | **$115,533** | **$106,030** | - Revenue recognized from Pharma contract liability balances outstanding at the beginning of the period was **$2.7 million** for Q1 2021, up from **$1.2 million** in Q1 2020[140](index=140&type=chunk) [Note 11. Net Loss Per Share](index=32&type=section&id=Note%2011.%20Net%20Loss%20Per%20Share) Presents the basic and diluted net loss per share calculations and anti-dilutive items Net Loss Per Share (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(22,114) | $(6,978) | | Basic weighted average shares outstanding | 116,199 | 104,484 | | Diluted weighted average shares outstanding | 116,199 | 104,484 | | Basic net loss per share | $(0.19) | $(0.07) | | Diluted net loss per share | $(0.19) | $(0.07) | - Potential dilutive shares, including stock options (**2.4 million**), restricted stock awards (**0.2 million**), 2025 Convertible Notes (**5.5 million**), and 2028 Convertible Notes (**4.9 million**), were excluded from diluted net loss per share calculation for Q1 2021 because their effect would be anti-dilutive[147](index=147&type=chunk) [Note 12. Related Party Transactions](index=33&type=section&id=Note%2012.%20Related%20Party%20Transactions) Details transactions with related parties, specifically Inivata Limited - In Q1 2021, Inivata Limited provided **$0.4 million** of testing services to the Company, recorded in cost of revenue, as part of a strategic alliance formed in May 2020[151](index=151&type=chunk) - In January 2021, Inivata drew on a **$15 million** Line of Credit from the Company, which matures on December 1, 2025, with the principal payable on January 1, 2026, and bears **0% interest**[152](index=152&type=chunk) [Note 13. Segment Information](index=34&type=section&id=Note%2013.%20Segment%20Information) Provides financial performance data disaggregated by the Clinical Services and Pharma Services segments Segment Performance (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------- | :-------------------------------- | :-------------------------------- | | **Net revenues:** | | | | Clinical Services | $96,487 | $92,982 | | Pharma Services | $19,046 | $13,048 | | Total revenue | $115,533 | $106,030 | | **Cost of revenue:** | | | | Clinical Services | $61,565 | $48,923 | | Pharma Services | $12,394 | $10,738 | | Total cost of revenue | $73,959 | $59,661 | | **Gross Profit:** | | | | Clinical Services | $34,922 | $44,059 | | Pharma Services | $6,652 | $2,310 | | Total gross profit | $41,574 | $46,369 | | Net loss | $(22,114) | $(6,978) | - Clinical Services cost of revenue for Q1 2021 includes a **$5.3 million** write-off for COVID-19 PCR testing inventory[157](index=157&type=chunk) [Note 14. Subsequent Events](index=35&type=section&id=Note%2014.%20Subsequent%20Events) Discloses significant events occurring after the balance sheet date, including acquisitions and equity offerings - On April 7, 2021, the Company acquired Intervention Insights, Inc. d/b/a Trapelo Health, a precision oncology IT company, for **$65 million** (**$35 million** cash, **$30 million** common stock)[159](index=159&type=chunk) - On May 4, 2021, the Company entered into a Share Purchase Agreement to acquire Inivata for an aggregate of **$390 million**, to be satisfied in cash and/or common stock, making Inivata a wholly-owned subsidiary[160](index=160&type=chunk) - On May 4, 2021, the Company agreed to sell **4,444,445 shares** of common stock in a private placement for approximately **$200 million** gross proceeds, anticipated to close in June 2021, subject to the Inivata acquisition closing[161](index=161&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, compared to the same period in 2020. It covers the impact of the COVID-19 pandemic, an overview of the business segments, strategic focus areas for 2021, competitive strengths, and a detailed analysis of revenue, costs, expenses, and liquidity, including non-GAAP measures [Introduction](index=36&type=section&id=Introduction) Provides context for the management discussion and analysis, including forward-looking statements - The discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and notes, and includes forward-looking statements subject to risks and uncertainties[163](index=163&type=chunk) [COVID-19 Pandemic](index=36&type=section&id=COVID-19%20Pandemic) Discusses the adverse impact of the pandemic on operations and the company's mitigation strategies - The COVID-19 pandemic has materially adversely affected the Company's employees, patients, communities, business operations, and financial markets, impacting results of operations, volume growth rates, and test volumes in 2020 and Q1 2021[164](index=164&type=chunk)[165](index=165&type=chunk) - The Company has implemented significant actions to protect employees and maintain critical oncology testing, including de-densifying labs, adjusting shifts, restricting visitors, and managing supply chains, ensuring uninterrupted high-quality testing services[166](index=166&type=chunk) [Overview](index=36&type=section&id=Overview) Describes NeoGenomics' business, mission, vision, and range of cancer testing services - NeoGenomics operates a network of cancer-focused testing laboratories in the United States, Europe, and Asia, with a mission to improve patient care through exceptional cancer-focused testing services and a vision to become the world's leading cancer testing and information company[168](index=168&type=chunk) - The Company offers a range of testing services including Cytogenetics, Fluorescence In-Situ Hybridization (FISH), Flow cytometry, Immunohistochemistry (IHC) and Digital Imaging, Molecular testing (including liquid biopsy and NGS), and Morphologic analysis[169](index=169&type=chunk)[173](index=173&type=chunk) [Clinical Services Segment](index=37&type=section&id=Clinical%20Services%20Segment) Focuses on the services provided to pathology practices, hospitals, and academic centers - The Clinical Services segment provides cancer testing to community-based pathology practices, hospitals, reference labs, and academic centers, acting as a non-competitive partner to expand their testing capabilities[172](index=172&type=chunk) - NeoGenomics is a leading provider of Molecular and next-generation sequencing (NGS) testing, with NGS panels being one of the fastest-growing areas, offering comprehensive biomarker information from limited samples[173](index=173&type=chunk)[175](index=175&type=chunk) [Pharma Services Segment](index=38&type=section&id=Pharma%20Services%20Segment) Highlights support for pharmaceutical firms in drug development and clinical trials - The Pharma Services segment supports pharmaceutical firms in drug development, offering clinical trials and research, validation laboratory services, and informatics, from biomarker discovery to commercialization[177](index=177&type=chunk)[178](index=178&type=chunk)[182](index=182&type=chunk) - The Company aims to develop companion diagnostic (CDx) tests that can be offered immediately after FDA approval through its 'Day 1 readiness program,' leveraging its broad distribution channel in the Clinical Services segment[180](index=180&type=chunk) [2021 Focus Areas](index=38&type=section&id=2021%20Focus%20Areas) Outlines strategic priorities for the year, including culture, quality, innovation, and growth - Key focus areas for 2021 include strengthening world-class culture through employee development and well-being, continuing to provide uncompromising quality and exceptional service by improving efficiency and turnaround times, and pursuing innovation and growth through new assays (liquid biopsy, MRD), market share gains, and strategic M&A[182](index=182&type=chunk)[185](index=185&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) [Competitive Strengths](index=39&type=section&id=Competitive%20Strengths) Identifies key advantages such as turnaround times, scientific expertise, and innovative offerings - Competitive strengths include industry-leading turnaround times for test results in both Clinical and Pharma Services, a world-class medical and scientific team of approximately **120 M.D.s and Ph.Ds.**, innovative service offerings such as extensive tech-only FISH, flow cytometry, IHC, and a broad Molecular and NGS test menu, and a national direct sales force trained in cancer genetic testing[194](index=194&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) [Seasonality](index=40&type=section&id=Seasonality) Explains how seasonal factors and external conditions affect testing volumes and revenue - Clinical testing volume modestly declines during summer vacation, year-end holidays, and due to extreme adverse weather conditions[202](index=202&type=chunk)[203](index=203&type=chunk) - Pharma Services volume varies based on contract terms and patient enrollment rates for trials, which can also be impacted by seasonality[204](index=204&type=chunk) [Results of Operations for the Three Months Ended March 31, 2021 as Compared to the Three Months Ended March 31, 2020](index=41&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202021%20as%20Compared%20to%20the%20Three%20Months%20Ended%20March%2031%2C%202020) Analyzes the company's financial performance, including revenue, costs, and expenses Consolidated Statements of Operations as a Percentage of Revenue | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net revenue | 100.0% | 100.0% | | Cost of revenue | 64.0% | 56.3% | | Gross Profit | 36.0% | 43.7% | | Total operating expenses | 49.1% | 48.7% | | Loss from operations | (13.1)% | (5.0)% | | Net loss | (19.1)% | (6.6)% | - Consolidated revenues increased **9%** year-over-year to **$115.5 million**[205](index=205&type=chunk) - Clinical Services revenue increased **3.8%** to **$96.5 million**, with testing volume up **4.2%**[206](index=206&type=chunk) - Pharma Services revenue surged **46.0%** to **$19.0 million**, and backlog grew from **$208.9 million** to **$217.6 million**[207](index=207&type=chunk) - Consolidated cost of revenue increased **24.0%** to **$74.0 million**, and as a percentage of revenue, it increased from **56.3%** to **64.0%**[212](index=212&type=chunk) - This was largely due to a **$5.3 million** write-off of COVID-19 PCR testing inventory and fixed laboratory costs amid volume reduction[212](index=212&type=chunk) - Gross profit margin decreased from **43.7%** to **36.0%** due to lower testing volume from COVID-19 and adverse weather, increased payroll costs, and the **$5.3 million** inventory write-off[214](index=214&type=chunk) - General and administrative expenses increased **11.4%** to **$40.5 million**, driven by higher payroll, **$0.8 million** in acquisition costs, a **$0.8 million** write-off of COVID-19 PCR testing equipment, and **$0.5 million** for CEO transition costs[216](index=216&type=chunk)[217](index=217&type=chunk) - Research and development expenses increased **19.2%** to **$2.5 million**, primarily due to investments in new test development, particularly in next-generation sequencing and FDA initiatives[219](index=219&type=chunk)[220](index=220&type=chunk) - Sales and marketing expenses increased **3.7%** to **$13.7 million**, reflecting higher commissions from increased revenues, expansion of the sales team, and continued marketing investment[221](index=221&type=chunk)[223](index=223&type=chunk) - Net interest expense increased **$0.4 million**, reflecting the effective interest rates on the newly issued 2028 Convertible Notes (**0.70%**) and the 2025 Convertible Notes (**1.96%**)[224](index=224&type=chunk) [Non-GAAP Measures](index=44&type=section&id=Non-GAAP%20Measures) Defines and reconciles non-GAAP financial measures like Adjusted EBITDA - Adjusted EBITDA is a non-GAAP measure defined as net loss from continuing operations before interest, tax, depreciation, amortization, non-cash stock-based compensation, acquisition/integration expenses, CEO transition costs, COVID-19 PCR testing write-offs, and other significant non-recurring items[227](index=227&type=chunk) Non-GAAP Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss (GAAP) | $(22,114) | $(6,978) | | EBITDA (non-GAAP) | $(10,823) | $3,622 | | Acquisition and integration related expenses | $814 | $1,296 | | Write-off of COVID-19 PCR testing inventory and equipment | $6,061 | — | | CEO transition costs | $460 | — | | Non-cash stock-based compensation expense | $2,653 | $2,186 | | Other significant non-recurring expenses (income), net | $5,021 | $(30) | | **Adjusted EBITDA (non-GAAP)** | **$4,186** | **$7,074** | [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's cash position, funding sources, and future capital needs - The Company's operations have been financed through cash from operations, public/private sales of debt and equity securities, and bank debt borrowings[231](index=231&type=chunk) Summary of Consolidated Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $2,210 | $(6,933) | | Net cash used in investing activities | $(154,688) | $(41,708) | | Net cash provided by financing activities | $524,935 | $617 | | Net change in cash, cash equivalents and restricted cash | $372,457 | $(48,024) | | Cash, cash equivalents and restricted cash, end of period | $623,089 | $124,992 | | Working Capital, end of period | $874,982 | $147,793 | - As of March 31, 2021, the Company had **$612 million** in unrestricted cash and cash equivalents and **$190.7 million** in marketable securities, which are anticipated to be sufficient to fund near-term capital and operating needs for at least the next 12 months[237](index=237&type=chunk)[241](index=241&type=chunk) - Capital expenditures for the year ending December 31, 2021, are forecasted to be in the range of **$45 million** to **$55 million**[242](index=242&type=chunk) - In Q1 2021, **$15.8 million** was spent on capital equipment, software, and leasehold improvements[242](index=242&type=chunk) [Critical Accounting Policies](index=46&type=section&id=Critical%20Accounting%20Policies) Refers to the significant accounting policies requiring management judgment and estimates - The preparation of financial statements requires management to make estimates and assumptions affecting reported amounts, with actual results potentially differing[243](index=243&type=chunk) - Critical accounting policies are detailed in the Annual Report on Form 10-K for December 31, 2020, and Note 2 of the Consolidated Financial Statements[245](index=245&type=chunk) [Off-balance Sheet Arrangements](index=47&type=section&id=Off-balance%20Sheet%20Arrangements) Confirms the absence of material off-balance sheet financing arrangements - As of March 31, 2021, the Company does not have any special purpose entities or other off-balance sheet financing techniques that are believed to have a current or future material effect on its financial condition, revenues, expenses, results of operations, liquidity, or capital resources[246](index=246&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, specifically interest rate risk and foreign currency exchange risk, and management's assessment of their potential impact on financial performance - The Company is exposed to interest rate risk on short-term investments, primarily investing in highly liquid, high-quality U.S. government and credit-rated debt securities with short maturities to preserve principal and maximize yields[248](index=248&type=chunk) - A **1%** change in interest rates would not have a material effect on the fair value of the investment portfolio[249](index=249&type=chunk) - Operations in Switzerland, Singapore, and China expose the Company to foreign currency exchange risk from revenues and expenses denominated in Swiss Francs, Singapore Dollars, and Chinese Renminbi[250](index=250&type=chunk) - The Company does not hedge these risks and currently believes they are not significant[250](index=250&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting during the quarter - Management, including the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, and concluded they were effective at a reasonable assurance level[251](index=251&type=chunk)[252](index=252&type=chunk) - There were no changes in internal control over financial reporting during the three months ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[253](index=253&type=chunk) [PART II OTHER INFORMATION](index=49&type=section&id=PART%20II%20OTHER%20INFORMATION) Contains additional disclosures not included in the financial statements, such as legal and equity matters [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) This section reports on legal proceedings affecting the Company - There were no legal proceedings for the quarterly period ended March 31, 2021[256](index=256&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the Company's risk factors - There have been no material changes in risk factors from those set forth in Part I, Item 1A, 'Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2020[257](index=257&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on unregistered sales of equity securities and issuer purchases of equity securities - There were no unregistered sales of equity securities for the quarterly period ended March 31, 2021[258](index=258&type=chunk) Issuer Purchases of Equity Securities (Q1 2021) | Period of Repurchase | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------------- | :------------------------------- | :--------------------------- | | January 1, 2021 - January 31, 2021 | 182 | $52.57 | | February 1, 2021 - February 28, 2021 | 8 | $54.43 | | March 1, 2021 - March 31, 2021 | 11,963 | $50.46 | | **Total** | **12,153** | **$50.49** | - The shares purchased were acquired from participants in the Company's Equity Incentive Plan to satisfy tax withholding obligations related to the vesting of restricted stock, not as part of a publicly announced repurchase plan[259](index=259&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section addresses any defaults upon senior securities - This item is not applicable for the reporting period[260](index=260&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section addresses mine safety disclosures - This item is not applicable for the reporting period[261](index=261&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) This section includes any other information not covered elsewhere - There is no other information to report for the period[262](index=262&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - Key exhibits include underwriting agreements for common stock and convertible notes, the indenture for the 2028 Convertible Notes, the form of the 2028 Senior Convertible Notes, an employment agreement for Mark Mallon, and certifications by the Principal Executive and Financial Officers[265](index=265&type=chunk) [SIGNATURES](index=51&type=section&id=SIGNATURES) This section contains the required signatures for the Quarterly Report on Form 10-Q - The report was signed on May 6, 2021, by Mark W. Mallon, Chief Executive Officer, and Kathryn B. McKenzie, Chief Financial Officer[268](index=268&type=chunk)

Company Overview - NeoGenomics is a leading oncology diagnostic company with a diversified "One Lab" approach[12] - The company has three synergistic divisions with double-digit growth profiles: Clinical Services, Pharma Services, and Informatics[12] - In 2020, Clinical Services accounted for 85% of the company's revenue, while Pharma & Informatics accounted for 15%[14] Financial Performance (FY 2020) - Revenue was $444 million, representing a 9% growth rate[15] - The company performed 976,069 core clinical tests[15] - Adjusted EBITDA was $35 million[15] Market Trends - The oncology testing market is estimated to grow at an annual rate of 6% to 8%[23] - The number of cancer survivors is projected to increase by 31.4% to 22.2 million by 2030[29] - The late-phase targeted therapy oncology pipeline increased 100% from 2008 to 2018[40] Pharma Services - The company recorded $31 million in new signed contracts in Q1 2021[68] - The company exited Q1 2021 with a record $218 million backlog[68] Q1 2021 Financials - Total revenue was $115.533 million, with Clinical Services contributing $96.487 million and Pharma Services contributing $19.046 million[101] - Net loss was $22.114 million[101] - Adjusted EBITDA was $4.186 million[109]

NeoGenomics, Inc. (NASDAQ:NEO) Q1 2021 Earnings Conference Call May 5, 2021 8:30 AM ET Company Participants Doug VanOort - Chairman Mark Mallon - Chief Executive Officer Kathryn McKenzie - Chief Financial Officer George Cardoza - President, Pharma Services Division Bill Bonello - President, Informatics Division Doug Brown - Chief Strategy and Corporate Development Officer Charlie Eidson - Manager of Investor Relations Clive Morris - Chief Executive Officer, Inivata Conference Call Participants Puneet Souda ...

| --- | --- | --- | --- | --- | --- | --- | --- | --- | |-----------------------------------|-------|-------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | NeoGenomics Investor Presentation | | | | | | | | | | February 2021 | | | | | | | | | 1 and and and the see and 2 Forward-Looking Statements This presentation has been prepared by NeoGenomics, Inc. ("we," "us," "our," "NeoGenomics" or the "Company") and is made for informational purposes only and does not constitute an offer to se ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Nevada 74-2897368 For the transition period from _________ to __________ (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) Commission File Number: 001-35756 127 ...