NeoGenomics(NEO) - 2025 Q2 - Quarterly Report

Report Overview Filing Information This report is NEOGENOMICS, INC.'s quarterly report (Form 10-Q) for the period ended June 30, 2025, incorporated in Nevada, trading under the ticker NEO on Nasdaq, classified as a large accelerated filer, and having submitted all required reports and interactive data files - Company Name: NEOGENOMICS, INC. (Registrant)[2] - Report Type: Quarterly Report (Form 10-Q)[2] - Reporting Period: Ended June 30, 2025[2] - Ticker Symbol: NEO, listed on the Nasdaq Stock Market[3] - Company Classification: Large accelerated filer[4] - As of July 25, 2025, 129,178,622 shares of common stock were outstanding[4] Forward-Looking Statements This report contains forward-looking statements regarding the company's strategy, future operations, financial condition, revenue, reimbursement levels, Pathline acquisition synergies, costs, capital expenditures, prospects, and management objectives, which involve known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, with no obligation for the company to update any such statements - Forward-looking statements cover the company's strategy, future operations, financial condition, revenue, reimbursement levels, Pathline acquisition synergies, anticipated costs and capital expenditures, prospects, and management plans and objectives[7] - These statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from forward-looking statements[7] - The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the report date[7] Glossary This section provides definitions for abbreviations, acronyms, and terms used in this quarterly report to aid reader comprehension of the content - Definitions are provided for key abbreviations and terms used in the report, such as ACA (Affordable Care Act), ACLA (American Clinical Laboratory Association), FDA (U.S. Food and Drug Administration), GAAP (U.S. Generally Accepted Accounting Principles), and NGS (Next-Generation Sequencing)[8] PART I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with related notes, providing the financial position and operating results as of June 30, 2025 Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $1,393,950 thousand, a decrease from $1,638,038 thousand on December 31, 2024, driven by a significant reduction in cash and cash equivalents and a notable decrease in total liabilities primarily due to the repayment of convertible senior notes Condensed Consolidated Balance Sheets (Thousands of Dollars) | Metric (Thousands of Dollars) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Assets | | | | Cash and cash equivalents | 154,723 | 367,012 | | Marketable securities | 8,962 | 19,832 | | Accounts receivable, net | 153,125 | 150,540 | | Inventories | 34,171 | 26,748 | | Assets held for sale | 8,956 | — | | Total current assets | 392,553 | 596,019 | | Property and equipment, net | 85,462 | 94,103 | | Intangible assets, net | 301,795 | 339,681 | | Goodwill | 524,143 | 522,766 | | Total assets | 1,393,950 | 1,638,038 | | Liabilities and Stockholders' Equity | | | | Accounts payable | 27,492 | 21,607 | | Accrued compensation | 48,557 | 62,443 | | Current convertible senior notes, net | — | 200,777 | | Liabilities held for sale | 456 | — | | Total current liabilities | 100,120 | 301,241 | | Long-term convertible senior notes, net | 341,095 | 340,335 | | Total liabilities | 539,910 | 735,699 | | Total stockholders' equity | 854,040 | 902,339 | | Total liabilities and stockholders' equity | 1,393,950 | 1,638,038 | - As of June 30, 2025, cash and cash equivalents were $154,723 thousand, a significant decrease from $367,012 thousand on December 31, 2024[10] - Total current liabilities decreased from $301,241 thousand on December 31, 2024, to $100,120 thousand on June 30, 2025, primarily due to the repayment of 2025 convertible senior notes[10] Condensed Consolidated Statements of Operations For the three and six months ended June 30, 2025, the company experienced revenue growth, but net loss expanded year-over-year due to a significant increase in operating expenses, particularly impairment charges Condensed Consolidated Statements of Operations (Thousands of Dollars) | Metric (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | 181,330 | 164,502 | 349,365 | 320,742 | | Cost of revenue | 104,072 | 92,008 | 198,861 | 182,779 | | Gross profit | 77,258 | 72,494 | 150,504 | 137,963 | | Total operating expenses | 124,886 | 94,435 | 225,957 | 190,471 | | Operating loss | (47,628) | (21,941) | (75,453) | (52,508) | | Net loss | (45,092) | (18,642) | (71,015) | (45,703) | | Basic net loss per share | (0.35) | (0.15) | (0.56) | (0.36) | | Diluted net loss per share | (0.35) | (0.15) | (0.56) | (0.36) | - For the three months ended June 30, 2025, net revenue increased by 10.2% to $181,330 thousand year-over-year, but net loss expanded from $18,642 thousand to $45,092 thousand, primarily impacted by $20,041 thousand in impairment charges[13] - For the six months ended June 30, 2025, net revenue increased by 8.9% to $349,365 thousand, and net loss expanded from $45,703 thousand to $71,015 thousand, also significantly impacted by impairment charges[13] Condensed Consolidated Statements of Comprehensive Loss For the three and six months ended June 30, 2025, comprehensive loss expanded to $45,007 thousand and $70,780 thousand, respectively, compared to the prior year, primarily reflecting the increased net loss, partially offset by unrealized gains on marketable securities Condensed Consolidated Statements of Comprehensive Loss (Thousands of Dollars) | Metric (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | (45,092) | (18,642) | (71,015) | (45,703) | | Other comprehensive income (loss): | | | | | | Unrealized gain on marketable securities, net | 85 | 308 | 235 | 652 | | Comprehensive loss | (45,007) | (18,334) | (70,780) | (45,051) | - For the three months ended June 30, 2025, comprehensive loss was $45,007 thousand, compared to $18,334 thousand in the prior year period[16] - For the six months ended June 30, 2025, comprehensive loss was $70,780 thousand, compared to $45,051 thousand in the prior year period[16] Condensed Consolidated Statements of Stockholders' Equity As of June 30, 2025, total stockholders' equity was $854,040 thousand, a decrease from $902,339 thousand on December 31, 2024, primarily due to the net loss during the period, partially offset by stock issuances under equity incentive plans and stock-based compensation expense Condensed Consolidated Statements of Stockholders' Equity (Thousands of Dollars) | Metric (Thousands of Dollars) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Total stockholders' equity | 854,040 | 902,339 | | Accumulated deficit | (396,796) | (325,781) | | Additional paid-in capital | 1,250,679 | 1,228,198 | | Accumulated other comprehensive income (loss) | 29 | (206) | - As of June 30, 2025, total stockholders' equity was $854,040 thousand, a decrease of $48,299 thousand from December 31, 2024[18] - Accumulated deficit increased from $325,781 thousand on December 31, 2024, to $396,796 thousand on June 30, 2025, reflecting the net loss during the reporting period[18] - Additional paid-in capital increased, primarily due to employee stock purchase plan (ESPP) and stock option issuances, and stock-based compensation expense[18] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, cash outflows from operating activities decreased, cash outflows from investing activities increased, and cash outflows from financing activities significantly increased, primarily due to the repayment of $201.3 million in convertible debt, leading to a notable decrease in cash and cash equivalents at period-end Condensed Consolidated Statements of Cash Flows (Thousands of Dollars) | Metric (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | (4,997) | (12,023) | | Net cash provided by (used in) investing activities | (5,754) | 21,838 | | Net cash provided by (used in) financing activities | (201,484) | 2,782 | | Net change in cash and cash equivalents | (212,289) | 12,597 | | Cash and cash equivalents at end of period | 154,723 | 355,085 | - Cash outflow from operating activities decreased from $12,023 thousand in the prior year period to $4,997 thousand in the current period[22] - Cash flow from investing activities shifted from an inflow of $21,838 thousand in the prior year period to an outflow of $5,754 thousand in the current period, primarily due to decreased proceeds from marketable securities maturities and the Pathline acquisition[22] - Cash outflow from financing activities was $201,484 thousand, compared to an inflow of $2,782 thousand in the prior year period, primarily due to the repayment of $201.3 million of 2025 convertible senior notes[22] Notes to Consolidated Financial Statements This section provides detailed notes to the company's consolidated financial statements, covering key information such as the nature of business, significant accounting policies, acquisitions and disposals, fair value measurements, goodwill and intangible assets, debt, stock-based compensation, revenue recognition, restructuring, income taxes, net loss per share, and commitments and contingencies Note 1. Nature of the Business NeoGenomics, Inc. and its subsidiaries provide a broad range of oncology diagnostic testing and consulting services, including technical laboratory services and professional interpretation of laboratory test results by specialized pathologists and oncologists, operating a network of cancer-focused laboratories in the U.S. and U.K. - The company provides oncology diagnostic testing and consulting services, including technical laboratory services and professional interpretations[25] - The company operates a network of cancer testing laboratories in the U.S. and U.K.[25] Note 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies followed in preparing the unaudited condensed consolidated financial statements, including the GAAP basis of presentation, consistency with annual report policies, use of estimates, classification of assets held for sale, and recognition of self-insurance liabilities, also discussing recent accounting standard updates pending adoption - Financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), with all intercompany transactions and balances eliminated[26] - Management is required to make estimates, judgments, and assumptions when preparing financial statements, which may differ from actual results[30] - The company became self-insured for employee medical benefits starting January 2025, recording $1.5 million in self-insurance liabilities as of June 30, 2025[32] - The company combined its two primary reportable segments (Clinical Services and Advanced Diagnostics) into a single segment in the fourth quarter of 2024[34] - FASB issued ASU No. 2024-03 (Expense Disaggregation Disclosures) and ASU No. 2023-09 (Improvements to Income Tax Disclosures), and the company is evaluating their impact on financial statements[36][37] Note 3. Acquisitions and Disposals On April 4, 2025, the company completed the acquisition of Pathline LLC for a total purchase consideration of $8.275 million to expand its presence in the Northeast, generating $4.8 million in goodwill; additionally, the company plans to sell its wholly-owned subsidiary Trapelo Health, LLC, recognizing an $8.2 million impairment loss, including $3.5 million in goodwill and $4.7 million in developed technology - On April 4, 2025, the company acquired Pathline LLC for a total purchase consideration of $8.275 million to expand its business and capabilities in the Northeast region[38][41] - The Pathline acquisition generated $4.8 million in goodwill, primarily attributable to business synergies, increased market penetration, and expanded service capabilities[42] - Pathline contributed approximately $4.7 million in revenue and $2.7 million in net loss during the second quarter of 2025[45] - The company plans to sell its wholly-owned subsidiary Trapelo Health, LLC, and has classified its assets and liabilities as held for sale[46][48] - Due to the planned sale of Trapelo, the company recognized an $8.2 million impairment loss, comprising $3.5 million in goodwill and $4.7 million in developed technology[49] Note 4. Fair Value Measurements This note explains how the company measures the fair value of financial assets and liabilities based on a fair value hierarchy (Level 1, Level 2, Level 3); as of June 30, 2025, the company's cash equivalents and available-for-sale marketable securities, totaling $159,075 thousand, are primarily measured at Level 1 and Level 2 - Fair value hierarchy is categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[53][54] Fair Value Measurements (Thousands of Dollars) | (Thousands of Dollars) | Level 1 | Level 2 | Level 3 | Total | | :--------------------- | :---------- | :---------- | :------ | :---------- | | June 30, 2025 | | | | | | Cash equivalents: Money market funds | 150,113 | — | — | 150,113 | | Marketable securities: Municipal bonds | 5,980 | — | — | 5,980 | | Marketable securities: Corporate bonds | — | 2,982 | — | 2,982 | | Total | 156,093 | 2,982 | — | 159,075 | | December 31, 2024 | | | | | | Cash equivalents: Money market funds | 364,815 | — | — | 364,815 | | Marketable securities: Municipal bonds | 9,436 | — | — | 9,436 | | Marketable securities: Corporate bonds | — | 10,396 | — | 10,396 | | Total | 374,251 | 10,396 | — | 384,647 | - As of June 30, 2025, the company's cash equivalents and available-for-sale marketable securities totaled $159,075 thousand, primarily measured at Level 1 and Level 2[63] Note 5. Goodwill and Intangible Assets As of June 30, 2025, total goodwill was $524,143 thousand, a slight increase from December 31, 2024, primarily due to $4.8 million from the Pathline acquisition, offset by $3.5 million in goodwill impairment related to the Trapelo disposal; net intangible assets were $301,795 thousand, including $16.1 million in impairment losses recognized from the termination of the InVisionFirst®-Lung product portfolio and the Trapelo disposal Goodwill (Thousands of Dollars) | Metric (Thousands of Dollars) | December 31, 2024 | Goodwill from acquisitions | Impairment charges | June 30, 2025 | | :---------------------------- | :---------------- | :------------------------- | :----------------- | :------------ | | Goodwill | 522,766 | 4,840 | (3,463) | 524,143 | - The Pathline acquisition generated $4.8 million in goodwill[66] - Due to the planned disposal of Trapelo, the company recognized a goodwill impairment loss of $3.5 million[66] Intangible Assets (Thousands of Dollars) | Intangible Assets (Thousands of Dollars) | Amortization Period (Years) | Cost | Accumulated Amortization | Net | | :--------------------------------------- | :-------------------------- | :-------- | :----------------------- | :-------- | | Customer relationships | 7 - 15 | 144,301 | 80,410 | 63,891 | | Developed technology | 10 - 15 | 276,825 | 74,487 | 202,338 | | Trademarks | 15 | 30,261 | 8,142 | 22,119 | | Trademarks - indefinite life | — | 13,447 | — | 13,447 | | Total | | 464,834 | 163,039 | 301,795 | - The company recognized $10.5 million in developed technology losses and $0.9 million in trademark losses due to the termination of the InVisionFirst®-Lung product portfolio, and $4.7 million in developed technology losses due to the Trapelo disposal[68][71] Note 6. Debt This note details the company's convertible senior notes; the 2028 Convertible Notes carry a 0.25% coupon rate, with a fair value of $293.3 million and a net carrying value of $341.1 million as of June 30, 2025, while the 2025 Convertible Notes were repaid on May 1, 2025, with a principal of $201.3 million - The 2028 Convertible Senior Notes were issued on January 11, 2021, totaling $345.0 million, with a 0.25% coupon rate and maturity on January 15, 2028[72] - As of June 30, 2025, the estimated fair value (Level 2) of the 2028 Convertible Senior Notes was $293.3 million, with a net carrying value of $341.1 million[75] - The 2025 Convertible Senior Notes were repaid on May 1, 2025, with a principal of $201.3 million and interest of $1.3 million[78] Note 7. Stock-Based Compensation For the six months ended June 30, 2025, the company recognized $22,968 thousand in stock-based compensation expense, an increase from the prior year; this note details stock option, restricted stock, and performance share unit (PSU) activity, discloses unrecognized stock-based compensation expense and its amortization period, and reveals $2.6 million in additional stock-based compensation expense from accelerated vesting due to executive promotions and departures Stock-Based Compensation Expense (Thousands of Dollars) | Stock-Based Compensation Expense (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | 302 | 358 | 718 | 753 | | General and administrative expenses | 10,408 | 7,493 | 19,190 | 14,156 | | Research and development expenses | 675 | 237 | 1,272 | 408 | | Sales and marketing expenses | 830 | 753 | 1,788 | 1,298 | | Total stock-based compensation expense | 12,215 | 8,841 | 22,968 | 16,615 | - As of June 30, 2025, unrecognized stock-based compensation expense related to stock options was approximately $19.4 million, to be recognized over approximately 1.6 years[83] - As of June 30, 2025, unrecognized stock-based compensation expense related to restricted stock was approximately $22.5 million, to be recognized over approximately 1.4 years[84] - As of June 30, 2025, unrecognized stock-based compensation expense related to non-vested PSUs was approximately $5.5 million, to be recognized over approximately 1.4 years[86] - In the second quarter of 2025, $2.6 million in stock-based compensation expense was recognized due to accelerated vesting from executive promotions and departures[87] Note 8. Revenue Recognition The company primarily recognizes revenue from oncology diagnostic testing and consulting services, pharmaceutical development services, and oncology data solutions; clinical service revenue is recognized upon service completion and delivery of results to physicians, pharmaceutical development service revenue is typically recognized per unit of service or over time, and oncology data solution revenue is recognized upon data delivery or over time, with this note also providing a breakdown of revenue by customer type - Clinical service revenue is recognized when services are completed and results are delivered to physicians[90] - Pharmaceutical development service revenue is typically recognized per unit of service or over time[91] - Oncology data solution revenue is recognized upon delivery for retrospective data or over time for prospective data[92] Net Revenue by Category (Thousands of Dollars) | Net Revenue by Category (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Direct bill to clients | 131,157 | 118,305 | 253,195 | 230,493 | | Commercial insurance | 28,766 | 24,843 | 53,623 | 48,447 | | Medicare and other government | 21,387 | 21,197 | 42,488 | 41,566 | | Patient pay | 20 | 157 | 59 | 236 | | Total net revenue | 181,330 | 164,502 | 349,365 | 320,742 | Note 9. Restructuring The company completed a restructuring plan in 2024 aimed at improving execution and organizational efficiency; for the three and six months ended June 30, 2025, no restructuring charges were incurred, compared to $1.5 million and $3.9 million in the respective prior year periods - The company completed a restructuring plan in 2024, aimed at improving execution and organizational efficiency[99][100] - For the three and six months ended June 30, 2025, the company incurred no restructuring charges[100] - As of December 31, 2024, current liabilities related to the company's restructuring plan were $0.9 million, becoming immaterial by June 30, 2025[101] Note 10. Income Taxes The company estimates its annual effective tax rate based on projected pre-tax results; as of June 30, 2025, both U.S. and U.K. operations were in a three-year cumulative loss position, with U.S. operations incurring tax expense due to valuation allowances, while U.K. operations generated a tax benefit from deferred tax liability reversals related to intangible asset impairment losses, exceeding U.S. tax expense; additionally, the U.S. 'One Big Beautiful Bill Act' signed on July 4, 2025, is not expected to materially impact the company's financial statements - As of June 30, 2025, the company's U.S. and U.K. operations were both in a three-year cumulative loss position[104][105] - U.S. operations incurred tax expense due to valuation allowances against deferred tax assets[104] - U.K. operations generated a tax benefit from deferred tax liability reversals related to intangible asset impairment losses, which exceeded the U.S. tax expense[108] - The 'One Big Beautiful Bill Act' signed on July 4, 2025, is not expected to materially impact the company's financial statements[109] Note 11. Net Loss Per Share For the three and six months ended June 30, 2025, basic and diluted net loss per share were $0.35 and $0.56, respectively, an expansion from the prior year; due to the company's net loss position, all potentially dilutive shares, including stock options, restricted stock, 2025 and 2028 convertible notes, and PSUs, were excluded from diluted net loss per share calculations as they were anti-dilutive Net Loss Per Share (Thousands of Dollars, except per share data) | Metric (Thousands of Dollars, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | (45,092) | (18,642) | (71,015) | (45,703) | | Basic weighted-average common shares outstanding | 127,949 | 126,405 | 127,664 | 126,257 | | Diluted weighted-average common shares outstanding | 127,949 | 126,405 | 127,664 | 126,257 | | Basic net loss per share | (0.35) | (0.15) | (0.56) | (0.36) | | Diluted net loss per share | (0.35) | (0.15) | (0.56) | (0.36) | - Due to the company's net loss position, potentially dilutive shares such as stock options, restricted stock, 2025 and 2028 convertible notes, and PSUs were excluded from diluted net loss per share calculations as they were anti-dilutive[111] Note 12. Commitments and Contingencies The company faces multiple legal proceedings and regulatory investigations, including ongoing patent infringement litigation by Natera involving InVisionFirst®-Lung and RaDaR® tests, where RaDaR® 1.0 was settled with a permanent injunction but RaDaR® 1.1 litigation is pending; additionally, the company faces shareholder class action and derivative lawsuits, and regulatory investigations related to federal healthcare law compliance, for which $11.2 million has been accrued - Natera, Inc. filed patent infringement lawsuits against Inivata Limited and its subsidiaries, involving InVisionFirst®-Lung and RaDaR® tests[115] - A partial settlement and permanent injunction were issued for the RaDaR® 1.0 test, but litigation regarding RaDaR® 1.1 and the '454 and '596 patents is expected to proceed to trial in October 2025[116] - The company faces a shareholder class action lawsuit (Goldenberg Matter) and multiple shareholder derivative lawsuits alleging material misstatements and/or omissions in its public disclosures[116] - The company is cooperating with investigations by the U.S. Department of Health and Human Services Office of Inspector General (OIG) and the Department of Justice (DOJ) into the compliance of certain consulting and service agreements with federal healthcare laws and regulations, for which $11.2 million has been accrued[117][119] Note 13. Segment Information In the fourth quarter of 2024, the company combined its former Clinical Services and Advanced Diagnostics reportable segments into a single segment to streamline operations and enhance service offerings; the CEO, as Chief Operating Decision Maker (CODM), uses net loss from the consolidated statements of operations to monitor budget versus actual results, assess profitability, and allocate resources - The company combined its two primary reportable segments (Clinical Services and Advanced Diagnostics) into a single segment in the fourth quarter of 2024[120] - The Chief Executive Officer, as Chief Operating Decision Maker (CODM), uses net loss from the consolidated statements of operations to monitor budget versus actual results, assess profitability, and allocate resources[121] Segment Information (Thousands of Dollars) | Segment Information (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | 181,330 | 164,502 | 349,365 | 320,742 | | Operating loss | (47,628) | (21,941) | (75,453) | (52,508) | | Net loss | (45,092) | (18,642) | (71,015) | (45,703) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed discussion and analysis of the company's financial condition and operating results, covering an overview, strategic focus, competitive strengths, seasonality, recent regulatory changes, and a comparison of financial performance for the three and six months ended June 30, 2025; the report indicates net revenue growth but expanded net loss due to increased impairment charges and operating costs, also discussing non-GAAP financial measures, liquidity, and capital resources Introduction This introduction emphasizes that this discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and their notes, and cautions that forward-looking statements contained herein are subject to risks and uncertainties that could cause actual results to differ materially from expectations - This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and their notes[124] - The report contains forward-looking statements, involving risks and uncertainties that could cause actual results to differ materially from expectations[124] Overview NeoGenomics provides a broad range of oncology diagnostic testing and consulting services, including technical laboratory services and professional interpretations, operating a network of cancer testing laboratories in the U.S. and U.K.; the company's mission is to save lives by improving patient care, with a vision to be a global leader in cancer testing, information, and decision support - The company provides a broad range of oncology diagnostic testing and consulting services, including technical laboratory services and professional interpretations[125] - The company operates a network of cancer testing laboratories in the U.S. and U.K.[125] - The company offers various testing services, including cytogenetics, fluorescence in situ hybridization (FISH), flow cytometry, immunohistochemistry (IHC) and digital imaging, molecular testing, and morphological analysis[126] Reportable Segments In 2024, the company streamlined its operational approach by combining its former Clinical Services and Advanced Diagnostics segments into a single reportable segment, aiming to optimize operations and enhance service to diverse client groups, including community pathology and oncology practices, hospital pathology laboratories, reference laboratories, academic centers, and pharmaceutical companies - The company combined its former Clinical Services and Advanced Diagnostics segments into a single reportable segment in 2024[129] - This decision aims to streamline operations and enhance service to diverse client groups, including community pathology and oncology practices, hospital pathology laboratories, reference laboratories, academic centers, and pharmaceutical companies[129] Revenue Streams The company's single operating segment encompasses a broad range of services, including clinical cancer testing, interpretation and consulting, molecular and NGS testing, comprehensive technical and professional services, clinical trials and research, validation laboratory services, and oncology data solutions, all designed to support pathologists and oncologists and provide drug development support to pharmaceutical companies - The company's revenue streams include clinical cancer testing, interpretation and consulting services, molecular and NGS testing, comprehensive technical and professional services, clinical trials and research, validation laboratory services, and oncology data solutions[134] - The company offers Technical Component (TC) and Professional Component (PC) services, enabling clients to participate in the diagnostic process[130][131] - The company is a leading provider of hematologic oncology diagnostic testing, including molecular and NGS testing, and a key provider of solid tumor NGS testing solutions[133] - The company enhanced its oncology liquid biopsy technology through the acquisition of Inivata, including RaDaR®, used to detect residual disease and recurrence in solid tumor patients[136] - Pharmaceutical development services support pharmaceutical companies' drug development programs from biomarker discovery to commercialization, including clinical trials, research, and companion diagnostic development[137] Strategic Focus By streamlining segments, the company aims to provide seamlessly integrated services and leverage its oncology and molecular diagnostics expertise to more effectively support clinical and pharmaceutical clients; strategic priorities for 2025 include profitably growing the core business, accelerating innovation, driving value creation, and elevating people and culture - By streamlining segments, the company aims to provide seamlessly integrated services and leverage its oncology and molecular diagnostics expertise to more effectively support clinical and pharmaceutical clients[139] - Key focus areas for 2025 include: profitably growing the core business (accelerating volume growth, accelerating oncologist partnerships, executing pharmaceutical client strategy), accelerating innovation (delivering product roadmap, successful and timely product launches, driving data solution productization and sales excellence), driving value creation (improving operating efficiency and gross margins, transforming the digital ecosystem, achieving positive cash flow from operations), and elevating people and culture (enhancing Neo culture, expanding scientific, medical, and product capabilities)[140][141] Competitive Strengths The company's competitive strengths include superior testing technology and instrumentation, laboratory information systems, client education programs, and domestic and international business presence; additionally, the company enhances its market competitiveness through continuous improvement in test result turnaround times, offering a comprehensive oncology test menu, and maintaining a dedicated national direct sales force - The company's competitive strengths include superior testing technology and instrumentation, laboratory information systems, client education programs, and domestic and international business presence[140] - The company continuously focuses on improving test result turnaround times to ensure physicians receive timely information for treatment initiation[142] - The company offers comprehensive technical and professional interpretation services, meeting client needs across various testing modalities[143] - The company maintains a dedicated national direct sales force, extensively trained in cancer genomic testing and consultative selling skills, to meet client needs[145] Seasonality and Other Factors Affecting the Business The company's clinical testing volumes are subject to seasonality, typically declining during summer, year-end holidays, and severe weather; pharmaceutical development service volumes depend on contract terms and clinical trial patient enrollment rates; additionally, product launches, business investments, and annual resets of patient deductibles impact revenue, with higher revenue typically in the third and fourth quarters; changes in tariff policies may also affect supply chains and profitability - Clinical testing volumes typically experience a modest decline during summer, year-end holidays, and other major holidays, and are affected by extreme adverse weather conditions[146] - Pharmaceutical development service volumes are uncertain, influenced by contract terms and the pace of clinical trial patient enrollment[147] - Due to factors such as product launches, business investments, and annual resets of patient deductibles, the company's revenue is typically higher in the third and fourth quarters[148] - Changes in tariff policies could lead to supply chain challenges and customer demand uncertainty, impacting net sales and profitability[149] Laboratory Developed Tests (LDTs) The U.S. Food and Drug Administration (FDA) previously issued a final rule to phase out its general enforcement discretion over Laboratory Developed Tests (LDTs); however, on March 31, 2025, the U.S. District Court for the Eastern District of Texas vacated the FDA's final rule, ruling that the FDA exceeded its statutory authority, thus LDTs will continue to be regulated under the existing framework - The FDA previously issued a final rule to phase out its general enforcement discretion over LDTs[150] - On March 31, 2025, the U.S. District Court for the Eastern District of Texas vacated the FDA's final rule, ruling that the FDA exceeded its statutory authority[151] - LDTs will continue to be regulated under the existing framework[151] One Big Beautiful Bill Act of 2025 On July 4, 2025, the U.S. enacted the 'One Big Beautiful Bill Act' (OBBBA), which made significant changes to federal tax law and other regulatory provisions; the company is evaluating the impact of OBBBA on its business, prospects, and financial statements - On July 4, 2025, the U.S. enacted the 'One Big Beautiful Bill Act' (OBBBA), which made significant changes to federal tax law and other regulatory provisions[152] - The company is evaluating the impact of OBBBA on its business, prospects, and financial statements[152] Results of Operations for the Three and Six Months Ended June 30, 2025 as Compared to the Three and Six Months Ended June 30, 2024 This section details the company's operating results for the three and six months ended June 30, 2025, compared to the prior year; despite net revenue growth, operating and net losses significantly expanded due to increased cost of revenue, general and administrative expenses, research and development expenses, sales and marketing expenses, and notably, impairment charges; interest income decreased, while interest expense declined due to the repayment of 2025 convertible notes Revenue For the three and six months ended June 30, 2025, net revenue grew by 10.2% and 8.9%, respectively, primarily driven by increased testing volumes, higher average unit prices from strategic reimbursement initiatives, and revenue contributions from the Pathline acquisition, partially offset by a decline in non-clinical revenue and an unfavorable test mix Revenue (Thousands of Dollars) | Revenue (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :----------------------------- | :------------------------------- | :------------------------------- | :----- | :---------------- | | Revenue | 181,330 | 164,502 | 16,828 | 10.2 % | | Revenue (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :----------------------------- | :----------------------------- | :----------------------------- | :----- | :---------------- | | Revenue | 349,365 | 320,742 | 28,623 | 8.9 % | - Revenue growth primarily reflects increased testing volumes, higher average unit prices from strategic reimbursement initiatives, and revenue contributions from the Pathline acquisition[153] - Revenue growth was partially offset by a decline in non-clinical revenue due to macro clinical trial trends in the pharmaceutical industry and an unfavorable test mix[153] Cost of Revenue and Gross Profit For the three and six months ended June 30, 2025, cost of revenue increased by 13.1% and 8.8%, respectively, primarily due to higher compensation and benefits, supplies, and postage and shipping costs; gross profit margin decreased by 1.5 percentage points to 42.6% for the three-month period and slightly increased by 0.1 percentage point to 43.1% for the six-month period, reflecting the trade-off between revenue growth and cost increases Cost of Revenue and Gross Profit (Thousands of Dollars) | Metric (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Percentage Change | | :---------------------------- | :------------------------------- | :------------------------------- | :---------------- | | Cost of revenue | 104,072 | 92,008 | 13.1 % | | Cost of revenue as a percentage of revenue | 57.4% | 55.9% | | | Gross profit | 77,258 | 72,494 | 6.6 % | | Gross profit margin | 42.6% | 44.1% | | | Metric (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Percentage Change | | :---------------------------- | :----------------------------- | :----------------------------- | :---------------- | | Cost of revenue | 198,861 | 182,779 | 8.8 % | | Cost of revenue as a percentage of revenue | 56.9% | 57.0% | | | Gross profit | 150,504 | 137,963 | 9.1 % | | Gross profit margin | 43.1% | 43.0% | | - The increase in cost of revenue was primarily due to higher compensation and benefits costs of $7.3 million (three months) and $10.1 million (six months), increased supplies expense of $3.9 million (three months) and $5.7 million (six months), and higher postage and shipping costs[157][158] - Gross profit margin decreased by 1.5 percentage points to 42.6% for the three-month period and slightly increased by 0.1 percentage point to 43.1% for the six-month period[159] General and Administrative Expenses For the three and six months ended June 30, 2025, general and administrative expenses increased by 13.3% and 8.4%, respectively, primarily driven by higher software and software development costs, compensation and benefits, and professional service fees, partially offset by reduced equipment maintenance and facility-related expenses General and Administrative Expenses (Thousands of Dollars) | General and Administrative Expenses (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | :----- | :---------------- | | General and administrative expenses | 71,747 | 63,328 | 8,419 | 13.3 % | | As a percentage of revenue | 39.6 % | 38.5 % | | | | General and Administrative Expenses (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | :----- | :---------------- | | General and administrative expenses | 139,954 | 129,125 | 10,829 | 8.4 % | | As a percentage of revenue | 40.1 % | 40.3 % | | | - For the three-month period, general and administrative expenses increased by $8.4 million, primarily due to a $2.7 million increase in software and software development costs, a $2.4 million increase in compensation and benefits costs, and a $2.2 million increase in professional service fees[161] - For the six-month period, general and administrative expenses increased by $10.8 million, primarily due to a $6.9 million increase in compensation and benefits costs, a $4.2 million increase in software and software development costs, and a $1.7 million increase in transaction costs[162] Research and Development Expenses For the three and six months ended June 30, 2025, research and development expenses increased by 14.4% and 23.8%, respectively, primarily due to reduced U.K. R&D tax credits, higher compensation and benefits costs, increased supplies expense, and higher professional service fees; the company anticipates continued increases in future R&D expenditures Research and Development Expenses (Thousands of Dollars) | Research and Development Expenses (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :----------------------------------------------------- | :------------------------------- | :------------------------------- | :----- | :---------------- | | Research and development expenses | 9,023 | 7,886 | 1,137 | 14.4 % | | As a percentage of revenue | 5.0 % | 4.8 % | | | | Research and Development Expenses (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :----------------------------------------------------- | :----------------------------- | :----------------------------- | :----- | :---------------- | | Research and development expenses | 19,204 | 15,506 | 3,698 | 23.8 % | | As a percentage of revenue | 5.5 % | 4.8 % | | | - For the three-month period, research and development expenses increased by $1.1 million, primarily due to a $0.6 million reduction in U.K. R&D tax credits, a $0.4 million increase in compensation and benefits costs, and a $0.3 million increase in supplies expense[164] - For the six-month period, research and development expenses increased by $3.7 million, primarily due to a $1.2 million increase in compensation and benefits costs, a $1.0 million reduction in U.K. R&D tax credits, a $0.6 million increase in supplies expense, and a $0.5 million increase in professional service fees[165] - The company anticipates increased future R&D expenditures to support innovation initiatives and new product launches[166] Sales and Marketing Expenses For the three and six months ended June 30, 2025, sales and marketing expenses increased by 11.1% and 11.6%, respectively, primarily due to higher compensation and benefits costs from sales team expansion, increased professional service fees, and travel expenses; the company expects future sales commission expenses to rise with sales team expansion and new business growth Sales and Marketing Expenses (Thousands of Dollars) | Sales and Marketing Expenses (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----- | :---------------- | | Sales and marketing expenses | 24,075 | 21,677 | 2,398 | 11.1 % | | As a percentage of revenue | 13.3 % | 13.2 % | | | | Sales and Marketing Expenses (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :-------------------------------------------------- | :----------------------------- | :----------------------------- | :----- | :---------------- | | Sales and marketing expenses | 46,758 | 41,898 | 4,860 | 11.6 % | | As a percentage of revenue | 13.4 % | 13.1 % | | | - For the three-month period, sales and marketing expenses increased by $2.4 million, primarily due to a $1.7 million increase in compensation and benefits costs from sales team expansion[167] - For the six-month period, sales and marketing expenses increased by $4.9 million, primarily due to a $3.0 million increase in compensation and benefits costs from sales team expansion[168] - The company anticipates increased future sales commission expenses with sales team expansion and new business growth[169] Restructuring charges For the three and six months ended June 30, 2025, the company incurred no restructuring charges, compared to $1.5 million and $3.9 million in the respective prior year periods, a decrease attributed to the completion of restructuring activities by December 31, 2024 Restructuring Charges (Thousands of Dollars) | Restructuring Charges (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :------------------------------------------- | :------------------------------- | :------------------------------- | :-------- | :---------------- | | Restructuring charges | — | 1,544 | (1,544) | (100.0)% | | Restructuring Charges (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :------------------------------------------- | :----------------------------- | :----------------------------- | :-------- | :---------------- | | Restructuring charges | — | 3,942 | (3,942) | (100.0)% | - Restructuring charges decreased by 100% for both the three and six months in 2025, as restructuring activities were completed by December 31, 2024[171] Impairment charges For the three and six months ended June 30, 2025, impairment charges increased by $20.0 million in both periods, compared to zero in the prior year, primarily comprising $11.4 million for InVisionFirst®-Lung intangible assets, $8.2 million for the disposal group held for sale, and $0.4 million for InVisionFirst®-Lung inventory write-offs Impairment Charges (Thousands of Dollars) | Impairment Charges (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----- | :---------------- | | Impairment charges | 20,041 | — | 20,041 | Not Applicable | | Impairment Charges (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :---------------------------------------- | :----------------------------- | :----------------------------- | :----- | :---------------- | | Impairment charges | 20,041 | — | 20,041 | Not Applicable | - Impairment charges increased by $20.0 million, primarily comprising $11.4 million for InVisionFirst®-Lung intangible assets, $8.2 million for the disposal group held for sale, and $0.4 million for InVisionFirst®-Lung inventory write-offs[173] Interest Income For the three and six months ended June 30, 2025, interest income decreased by 50.7% and 36.5%, respectively, primarily due to a lower average cash balance invested and a reduced interest rate environment Interest Income (Thousands of Dollars) | Interest Income (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :------------------------------------- | :------------------------------- | :------------------------------- | :----- | :---------------- | | Interest income | (2,263) | (4,592) | 2,329 | (50.7)% | | Interest Income (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :------------------------------------- | :----------------------------- | :----------------------------- | :----- | :---------------- | | Interest income | (5,984) | (9,426) | 3,442 | (36.5)% | - The decrease in interest income was primarily due to a lower average cash balance invested and a reduced interest rate environment[176] Interest Expense For the three and six months ended June 30, 2025, interest expense decreased by 44.0% and 23.9%, respectively, primarily attributable to the company's repayment of the 2025 convertible senior notes in the second quarter of 2025 Interest Expense (Thousands of Dollars) | Interest Expense (Thousands of Dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change | Percentage Change | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----- | :---------------- | | Interest expense | 933 | 1,666 | (733) | (44.0)% | | Interest Expense (Thousands of Dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | Percentage Change | | :-------------------------------------- | :----------------------------- | :----------------------------- | :----- | :---------------- | | Interest expense | 2,551 | 3,351 | (800) | (23.9)% | - The decrease in