2024 Overview and Highlights

In 2024, NeoGenomics reported strong financial performance, with several key highlights:

• Revenue increased by 11.6% compared to 2023
• Net cash used in operations improved by $9.0 million compared to 2023
• Adjusted EBITDA increased by $36.1 million to $39.6 million compared to 2023
• Gross margin improved by 259 basis points while also improving turnaround time

Company Outlook

NeoGenomics is well-positioned to capitalize on the rapid advancements in oncology diagnostics and therapies. As a leading global oncology diagnostics company, the company facilitates the adoption of advanced diagnostic tools beyond academic settings and into community practices.

NeoGenomics plans to continue expanding its test menu and capabilities, including leading-edge next-generation sequencing (NGS) tools. The company is also developing its oncology data solutions to leverage its expertise and market position to solve real-world problems for stakeholders.

To drive growth and value creation, NeoGenomics has identified four critical success factors for 2025:

1. Profitably Grow the Core Business
2. Accelerate Innovation
3. Drive Value Creation
4. Enhance People and Culture

Regulatory Environment

The regulatory landscape for laboratory developed tests (LDTs) remains uncertain. In 2024, the FDA announced a final rule to regulate LDTs, phasing out its enforcement discretion approach over four years. NeoGenomics is closely monitoring regulatory changes and does not anticipate significant revenue impacts in 2025 from known legislative or regulatory actions.

Reportable Segments and Revenue Streams

In 2024, NeoGenomics simplified its operational approach, combining its Clinical Services and Advanced Diagnostics segments into a single segment. This decision aims to streamline operations and enhance service offerings to the company’s diverse client base.

The company’s revenue streams now encompass a comprehensive range of services, including:

• Clinical cancer testing
• Interpretation and consultative services
• Molecular and NGS testing
• Clinical trials and research
• Validation laboratory services
• Oncology data solutions

Service Offerings

NeoGenomics’ service offerings are designed to complement and empower community-based pathologists and oncologists. The company provides both technical component (TC) and professional component (PC) services, allowing clients to participate in the diagnostic process.

The company is a leading provider of hematology and solid tumor molecular and NGS testing, with a comprehensive test menu that enables clients to obtain most of their molecular oncology testing needs from a single laboratory. NeoGenomics also supports pharmaceutical clients throughout the drug development continuum, from biomarker discovery to companion diagnostic development.

Financial Impact

The combined segment accounted for 100% of NeoGenomics’ consolidated revenue in 2024, with the previous Clinical Services and Advanced Diagnostics segments contributing 84% and 16%, respectively, in 2023. This streamlined approach is expected to drive growth and operational efficiencies.

Critical Accounting Policies and Estimates

NeoGenomics’ critical accounting policies and estimates include:

1. Goodwill: The company evaluates goodwill for impairment annually or more frequently if indicators of impairment exist. In 2024, a qualitative assessment determined that it is not more likely than not that the fair value of the reporting units is less than their carrying amounts.

2. Contingencies: The company accrues contingent losses when estimated impacts of various conditions, situations, or circumstances involve uncertain outcomes.

3. Revenue Recognition and Accounts Receivable: Revenue is recognized when clinical services have been performed and the results have been delivered to the ordering physician. Accounts receivable are reported based on the amount expected to be collected, considering implicit price concessions.

Results of Operations

Revenue in 2024 increased 11.6% to $660.6 million, driven by an increase in test volume, a more favorable test mix, and strategic reimbursement initiatives, partially offset by lower RaDaR® revenue.

Gross profit margin improved to 43.9% in 2024, up from 41.3% in 2023, primarily due to the increase in revenue partially offset by higher compensation, benefits, and supplies expenses.

General and administrative expenses increased 6.8% to $259.7 million, primarily due to higher legal and professional fees, compensation and benefits, and depreciation, partially offset by decreases in amortization and credit card fees.

Research and development expenses increased 14.1% to $31.2 million, driven by increases in professional fees, a decrease in research and development tax credits, and higher compensation and benefits.

Sales and marketing expenses increased 19.5% to $84.7 million, reflecting higher compensation and benefits, increased sales commissions, and greater travel expenses.

Restructuring charges decreased 40.0% to $6.7 million, as the company continues to execute its program to improve execution and drive efficiency.

Net loss improved from $88.0 million in 2023 to $78.7 million in 2024, primarily due to the increase in gross profit.

Non-GAAP Measures

NeoGenomics uses non-GAAP financial measures, including Adjusted EBITDA, to provide greater transparency into its operating performance. Adjusted EBITDA increased from $3.5 million in 2023 to $39.6 million in 2024, driven by the improvement in gross profit.

Liquidity and Capital Resources

As of December 31, 2024, NeoGenomics had $367.0 million in cash and cash equivalents and $19.8 million in marketable securities, which the company believes is sufficient to fund its near-term capital and operating needs.

Cash provided by operating activities was $7.0 million in 2024, compared to cash used of $2.0 million in 2023, primarily due to the improvement in gross profit.

Capital expenditures for 2024 were $41.1 million, and the company expects capital expenditures for 2025 to be in the range of $30 million to $35 million.

Conclusion

NeoGenomics delivered strong financial performance in 2024, with double-digit revenue growth, improved gross margins, and a reduction in net loss. The company’s streamlined operational approach, focus on innovation, and commitment to value creation position it well to capitalize on the growing demand for advanced oncology diagnostics and support the development of new cancer therapies.

Despite the uncertain regulatory environment for laboratory developed tests, NeoGenomics remains optimistic about its growth opportunities and is taking proactive steps to enhance its service offerings, operational efficiency, and financial position. With a strong balance sheet and strategic priorities aligned with industry trends, the company is well-equipped to navigate the challenges and seize the opportunities in the dynamic oncology diagnostics market.