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Third Quarter Performance Review
Third quarter revenues increased 61.7% to approximately $5.1 million on ayear-over-year basis from Q3 07. Requisitions increased 38.0% and averagerevenue/requisition increased 17.2% to $800.70. The increase in averagerevenue/requisition was driven by a greater percentage of higher priced, flowcytometry tests in our mix as well as increases in the Medicare reimbursementrates for the technical component of certain tests relative to last year.Gross profit increased 57.1% to approximately $2.5 million in Q3 08. Selling,general and administrative ("SG&A") expenses increased 21.0% to approximately$2.6 million. However, SG&A expenses as a percentage of revenue fell to 52.2%in Q3 08 from 69.8% in Q3 07. Net loss decreased by approximately $396,000 to($195,000) or ($0.01)/share in Q3 08 from ($591,000) or ($0.02/share) in Q307.
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Robert Gasparini, the Company's President and Chief Scientific Officer,stated, "As we have often discussed in the past, the third quarter is alwaysour most seasonal quarter as a result of the significant reduction in theelderly population in Florida during the summer months. Although we have mademuch progress in diversifying our revenue stream to 29 states across the US,Florida still accounts for 35-45% of our total revenue depending on thequarter. While seasonality in our Florida-based business lowered our overallsequential revenue growth from Q2 08, our revenue from states other thanFlorida grew at a robust 16.9% sequential rate in the third quarter, which isequivalent to the overall sequential growth rate from Q1 08 to Q2 08. Thisseasonality has already subsided, and I am happy to report that we had arecord month in September, with revenue growing 15.6% sequentially fromAugust. This strong revenue momentum continued into October allowing us topost a second record month in a row. Indeed, we believe this momentum willallow us to post a 15-20% overall sequential revenue growth rate from Q3 toQ4."
Mr. Gasparini continued, "We also continue to make excellent progress onachieving economies of scale in our business. I am delighted to report thatduring the third quarter, SG&A expenses increased by only 3.1% from the levelreported in Q2 08. I am also pleased to report that collections in Q3continued at a very strong pace. Our accounts receivable balance at the endof Q3 expressed in terms of days sales outstanding ("DSO") improved to 61 daysfrom 68 days at the end of Q2. This enabled us to produce approximately$340,000 of positive cash flow from operations in Q3 and be free cash flowpositive(1) for the quarter. Our new billing team continues to do anexcellent job and we believe that by year-end, we can reduce our DSO evenfurther."
Mr. Gasparini concluded, "As a result of our continued performance, ourliquidity position is much stronger than it has been at any point this year.As of yesterday, we had approximately $625,000 of cash on hand andapproximately $1.25 million of availability under our credit facility. Werecently augmented our liquidity position further by entering into a masterlease agreement with Leasing Technologies International, Inc. ("LTI") whichgives us the ability, at our discretion, to access up to $1.0 million of leasefinancing for future capital expenditure needs on what we believe arefavorable terms."
"In addition, we also recently entered into a 30 month common stockpurchase agreement with Fusion Capital Fund II, LLC ("Fusion") which providesfor future funding of up to $8.0 million from sales of our common stock toFusion on a when and if needed basis as determined by us in our solediscretion. Although we have no plans in the near future to raise any equitycapital through this agreement or any other arrangement, we believe the Fusionagreement gives us tremendous financing flexibility if we ever do decide toraise more equity. It will allow us to raise equity capital opportunisticallyduring periods of favorable market conditions without having to go through thetime and resource consuming steps of a traditional fund raising process. Itwill also give us the financial flexibility to pursue growth initiatives whichmay be beyond the scope of our current business plan and/or cash resourcesshould opportunities arise. Importantly, if we ever do decide to sell stockto Fusion under this agreement, we can do so in increments of as little as$50,000 and up to $1,000,000 depending on our stock price at the time of thesale, and there are no fees or warrants associated with any such sales. Inconsideration for entering into this agreement, we issued 400,000 shares ofrestricted common stock to Fusion as a commitment fee. These shares are theonly fees payable to Fusion over the life of the agreement, and they can onlybe sold by Fusion under limited circumstances. Please refer to our QuarterlyReport on Form 10-Q for the third quarter for a more complete description ofboth the LTI and Fusion agreements."
Nine Month Performance Review
For the first nine months of 2008, revenues increased by 82.8% to $14.1million from the comparable period in 2007. Requisitions increased by 57.9%and average revenue/requisition increased by 15.8%. Gross profit increased by84.0% or approximately $3.4 million to approximately $6.6 million in the firstnine months of 2008. SG&A expenses increased 36.1% to approximately $7.7million for the first nine months of 2008. The increases in SG&A areprimarily the result of adding sales and marketing and corporate personnel tocontinue to scale our business. SG&A as a percentage of revenue fell to 54.7%in the first nine months of 2008 from 73.5% in the comparable period in 2007.Net loss decreased by approximately $1,396,000 to ($388,000) or ($0.01/share)for the first nine months of 2008 from ($1,784,000) or ($0.06/share) for thecomparable period in 2007.
Conference Call
The Company has scheduled a webcast and conference call to discuss theseresults later this morning at 11:00 AM EST. Interested investors should dial(866) 524-3160 (domestic) and (412) 317-6760 (international) at least fiveminutes prior to the call. A replay of the conference call will be availableuntil 9:00 AM on November 21, 2008 and can be accessed by dialing (877) 344-7529 (domestic) and (412) 317-0088 (international). The playback ConferenceID Number/PIN Number is 425105. The web-cast may be accessed under theInvestor Relations section of our website at http://www.neogenomics.org or atthe website of our Investor Relations firm, Hawk Associates, athttp://www.hawkassociates.com/clients/additional/index.cfm?client_id=10 or athttp://www.vcall.com/IC/CEPage.asp?ID=129616. An archive of the webcast willbe available until 11:59 PM EST on February 7, 2009.
About NeoGenomics, Inc.
NeoGenomics, Inc. is a high-complexity CLIA-certified clinical laboratorythat specializes in cancer genetics diagnostic testing, the fastest growingsegment of the laboratory industry. The company's testing services includecytogenetics, fluorescence in-situ hybridization (FISH), flow cytometry,morphology studies, anatomic pathology and molecular genetic testing.Headquartered in Fort Myers, FL, NeoGenomics has labs in Nashville, TN,Irvine, CA and Fort Myers and services the needs of pathologists, oncologists,urologists, and hospitals throughout the United States. For additionalinformation about NeoGenomics, visit http://www.neogenomics.org.
Forward Looking Statements
Except for historical information, all of the statements, expectations andassumptions contained in the foregoing are forward-looking statements. Theseforward looking statements involve a number of risks and uncertainties thatcould cause actual future results to differ materially from those anticipatedin the forward looking statements, Actual results could differ materially fromsuch statements expressed or implied herein. Factors that might cause such adifference include, among others, the company's ability to continue gainingnew customers, offer new types of tests, and otherwise implement its businessplan. As a result, this press release should be read in conjunction with thecompany's periodic filings with the SEC.Third Quarter 2008 Highlights: -- 61.7% year-over-year increase in revenue vs. Q3 07 -- 16.9% sequential increase in revenue from states other than Florida offset by a 15.3% sequential decrease in Florida-based revenue due to seasonality -- Record monthly revenues in September and strong start to Q4 -- Partnership Agreement for KRAS panel testing with Response Genetics -- Days Sales Outstanding (DSO) reduced to 61 days from 68 days at end of Q2 08 -- Free cash flow positive(1) during Q3 08 -- Substantial improvements in liquidity; new liquidity measures put in place
SOURCE NeoGenomics, Inc.
