NeoGenomics(US:NEO)2022-08-09 16:36Financial Data and Key Metrics Changes - Revenue increased 3% year-over-year to $125 million [27] - Clinical services revenue increased 4% year-over-year to $106 million [27] - Average revenue per test increased 7% year-over-year to $387 [27] - GAAP gross margin was 35.1%, while adjusted gross margin was 39%, a decline of 450 basis points year-over-year [31] - Adjusted EBITDA loss was $16 million for the quarter, which is a $3 million improvement from Q1 [35] Business Line Data and Key Metrics Changes - Clinical test volume increased 3% sequentially but was down 3% year-over-year [27] - Pharma services bookings were $46 million in Q2, with a backlog of $299 million, up 6% sequentially and 26% year-over-year [28] - Pharma services revenue increased 6% sequentially to $19 million but was down 4% year-over-year [29] - Informatics revenue continues to grow rapidly within pharma services [30] Market Data and Key Metrics Changes - Volume growth continues to be impacted by operational challenges and a market shift from smaller panels to larger offerings [27] - The company is working to upgrade its NGS product offering and improve lab operations [27] Company Strategy and Development Direction - The company is focused on an 18-month performance improvement initiative called Project Catalyst, which encompasses lab optimization, people and capabilities, competitive growth, and insights and analytics [40][42] - The company is pursuing reimbursement for additional cancer types and anticipates filing a second submission for breast cancer in the first half of 2023 [24] - The incoming CEO, Chris Smith, emphasizes the strategic value of combining clinical business with Pharma Services capabilities and Inivata's liquid biopsy technology [54] Management's Comments on Operating Environment and Future Outlook - Management views 2022 as a rebuilding year, focusing on improving product offerings and operational efficiency [36] - The company expects Q3 revenue to be modestly below Q2, with full-year revenue expected to be flat to up modestly year-over-year [37] - Management anticipates improvement in Q4 and plans to reinstate guidance when reporting Q4 earnings in February [38] Other Important Information - The company has made significant leadership changes, including the appointment of Chris Smith as the new CEO [12][15] - The transition to a new lab facility has been completed, which is expected to lead to improvements in service levels and gross margins [33][130] Q&A Session Summary Question: What is impacting clinical testing volumes? - Management indicated that volume decline is primarily due to internal operational service levels and a shift to more comprehensive offerings, rather than solely a COVID-related hangover [68] Question: Can you elaborate on RaDaR's resubmission to MolDX? - The resubmission was prompted by requests for additional information regarding whole exome sequencing data, and management is confident about meeting the criteria for approval [74] Question: What is the status of the pharma services business? - There is a growing backlog, but revenue conversion has been softer due to sample makeup from clinical trials, which the company is actively addressing [85] Question: What is the outlook for NGS contributions? - The company is seeing growth in NGS, but it is not yet at market rates, and they are working on broader panel offerings [86] Question: What are the expectations for profitability exiting 2023? - Management is working towards profitability but is cautious about committing to specific metrics until the new CEO has assessed the business [99]