NeoGenomics(US:NEO)2020-07-28 18:23Financial Data and Key Metrics Changes - Consolidated revenue declined 14% year-over-year to $87 million due to the impact of the COVID-19 pandemic [27] - Adjusted EBITDA was negative $7.2 million reflecting significant volume declines and challenges related to COVID-19 [34] - Gross margin declined year-over-year to 32.2% as a result of volume and cost impacts from the pandemic [33] Business Line Data and Key Metrics Changes - Clinical division test volume excluding COVID-19 testing declined 18% year-over-year, with April representing the lowest point [28] - Pharma services revenue increased 3% year-over-year to $13 million, with net bookings of signed contracts at an all-time high of $40 million during the quarter [32] - Revenue per test in the clinical division was $351, down 1% year-over-year and down sequentially from $371 [30] Market Data and Key Metrics Changes - The COVID impact on testing volume was most severe in April, with volume down nearly 30% year-over-year [24] - Volume began to recover in May and June, with June 2020 volume essentially in line with June 2019 volume, though still about 15% below pre-COVID expectations [25] - The backlog of signed contracts in pharma services increased 63% year-over-year to $173 million [32] Company Strategy and Development Direction - The company retained all employees during the crisis and built a COVID testing lab, currently capable of performing over 10,000 tests per day [9][12] - A strategic collaboration and $25 million minority investment in Inivata was formed to enhance liquid biopsy testing capabilities [15] - Continued investment in informatics and pharma services, with a focus on international expansion and strengthening testing capabilities [20][80] Management's Comments on Operating Environment and Future Outlook - Management expects a rapid and strong recovery in financial results in the third quarter, with organic revenue growth in excess of 20% anticipated [23] - There is uncertainty about the volume and duration of demand for COVID-19 testing, but it is expected to result in incremental revenue and profit [12] - Management expressed confidence in the company's competitive position and long-term growth prospects, stating that strategic decisions made during the pandemic have positioned the company for recovery [26][45] Other Important Information - The company successfully completed an offering of common stock and convertible securities resulting in net proceeds of $322 million, enhancing financial flexibility [14] - Days sales outstanding increased six days sequentially to 92 days due to revenue distribution being heavily weighted towards June [37] - The construction of a new state-of-the-art laboratory and global headquarters in Fort Myers, Florida, is on track for opening in the fall of 2021 [35] Q&A Session Summary Question: Details on rolling out newer liquid biopsy tests - The company is providing extensive education for clients regarding the new liquid biopsy tests, as many clients have limited experience with liquid-based tests [50] Question: Volume recovery compared to pre-COVID levels - Management believes there is pent-up demand, but many cancer patients have delayed visits due to COVID-19 concerns [52] Question: Contribution of COVID testing to organic growth guidance - The company expects the 20% revenue growth to be driven by modest growth in core oncology and COVID testing, but there is uncertainty in the numbers [57][58] Question: Margin expectations from COVID testing - The margin profile for COVID testing is lower than normal clinical testing margins, and overall margins are expected to remain under pressure until volumes stabilize [60][107] Question: Competitive environment in pharma services - The company has a strong service focus and global capabilities, which differentiate it from smaller competitors [92] Question: Impact of COVID on clinical trial activities - COVID has caused delays in clinical trials, but there are signs of recovery with new trials starting in July [95] Question: Future of oncology testing outsourcing - Management does not foresee a fundamental shift towards more in-house oncology testing by hospitals, as they continue to refer work to the company [110]