Breaking Down NeoGenomics, Inc. (NEO) Financial Health: Key Insights for Investors

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Understanding NeoGenomics, Inc. (NEO) Revenue Streams

Understanding NeoGenomics, Inc. Revenue Streams

NeoGenomics, Inc. generates revenue primarily through two segments: Clinical Services and Advanced Diagnostics. Below is a detailed breakdown of these revenue sources as of 2024.

Breakdown of Primary Revenue Sources

Segment Revenue (2024) Revenue (2023) Change ($) Change (%)
Clinical Services $145,783,000 $127,553,000 $18,230,000 14.3%
Advanced Diagnostics $22,041,000 $24,401,000 ($2,360,000) (9.7%)
Total Revenue $167,824,000 $151,954,000 $15,870,000 10.4%

Year-over-Year Revenue Growth Rate

The year-over-year revenue growth rate for NeoGenomics as of September 30, 2024, indicates a consolidated revenue increase of 10.4%. This growth is primarily driven by the Clinical Services segment, which saw a revenue increase of 14.3% compared to the previous year.

Contribution of Different Business Segments to Overall Revenue

As of September 30, 2024, the contribution of each segment to the overall revenue is as follows:

  • Clinical Services: 86.8% of total revenue
  • Advanced Diagnostics: 13.2% of total revenue

Analysis of Significant Changes in Revenue Streams

The primary factor contributing to the increase in Clinical Services revenue is attributed to higher clinical testing volumes and increased average unit prices due to the introduction of more high-value tests and strategic reimbursement initiatives. However, the Advanced Diagnostics segment experienced a decrease in revenue by 9.7% in the third quarter of 2024, primarily driven by international site closures and restructuring activities, along with lower revenues from the RaDaR® test.

Revenue Source Q3 2024 Revenue Q3 2023 Revenue Change ($) Change (%)
Clinical Services $145,783,000 $127,553,000 $18,230,000 14.3%
Advanced Diagnostics $22,041,000 $24,401,000 ($2,360,000) (9.7%)

In summary, the overall revenue growth reflects strong performance in Clinical Services while highlighting the need for strategic adjustments within the Advanced Diagnostics segment to counteract the recent declines in revenue.




A Deep Dive into NeoGenomics, Inc. (NEO) Profitability

A Deep Dive into NeoGenomics, Inc.'s Profitability

Gross Profit, Operating Profit, and Net Profit Margins:

Metric Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Change (%) Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023 Change (%)
Total Revenue $167,824,000 $151,954,000 10.4% $488,566,000 $436,091,000 12.0%
Cost of Revenue $92,944,000 $89,643,000 3.7% $275,723,000 $259,075,000 6.4%
Gross Profit $74,880,000 $62,311,000 20.2% $212,843,000 $177,016,000 20.2%
Gross Profit Margin 44.6% 41.0% 3.6% 43.6% 40.6% 3.0%
Net Loss $(17,699,000) $(18,516,000) 4.4% $(63,402,000) $(73,642,000) 13.9%
Net Loss Per Share (Basic) $(0.14) $(0.15) 6.7% $(0.50) $(0.59) 15.3%

Trends in Profitability Over Time:

The gross profit margin improved significantly in both the three and nine months ended September 30, 2024, compared to the same periods in 2023, indicating enhanced operational efficiency. The gross profit margin rose to 44.6% in Q3 2024 from 41.0% in Q3 2023, and to 43.6% from 40.6% in the nine-month period. The net loss decreased from $(18,516,000) in Q3 2023 to $(17,699,000) in Q3 2024, reflecting improved financial health.

Comparison of Profitability Ratios with Industry Averages:

The industry average gross profit margin for the healthcare sector typically ranges between 50% to 60%. The current gross profit margin of 44.6% suggests there is room for improvement relative to peers. The net loss margin, while narrowing, indicates challenges in achieving profitability compared to industry norms.

Analysis of Operational Efficiency:

  • Cost of revenue as a percentage of total revenue decreased from 59.0% in Q3 2023 to 55.4% in Q3 2024, indicating improved cost management.
  • General and administrative expenses increased by 8.9% in Q3 2024 compared to Q3 2023, which may impact profit margins if not managed effectively.
  • Research and development expenses rose to $7,684,000 in Q3 2024 from $5,285,000 in the prior year, suggesting increased investment in innovation.

Conclusion:

The financial metrics indicate a trend towards improved profitability, alongside challenges in achieving industry-standard margins. The ongoing focus on cost management and operational efficiency will be crucial for future profitability.




Debt vs. Equity: How NeoGenomics, Inc. (NEO) Finances Its Growth

Debt vs. Equity: How NeoGenomics, Inc. Finances Its Growth

As of September 30, 2024, NeoGenomics, Inc. reported total liabilities of $732.9 million, with long-term liabilities accounting for $436.5 million.

The company's debt structure includes:

  • 2025 Convertible Senior Notes: $201.3 million with a stated interest rate of 1.25%.
  • 2028 Convertible Senior Notes: $345.0 million with a stated interest rate of 0.25%.

The debt-to-equity ratio stands at approximately 0.81, calculated from total liabilities of $732.9 million and total stockholders’ equity of $908.2 million.

Recent debt activity includes:

  • Interest expense on 2025 Convertible Notes for the nine months ended September 30, 2024, totaled $1.9 million.
  • Interest expense on 2028 Convertible Notes for the same period amounted to $4.99 million.

The company's credit ratings remain stable, supported by its ability to maintain a healthy cash balance. As of September 30, 2024, NeoGenomics reported $362.0 million in cash and cash equivalents.

In terms of balancing debt and equity financing, the company has relied on a mix of both to support its growth objectives:

  • Net cash provided by financing activities for the nine months ended September 30, 2024, was $4.0 million.
  • Stock-based compensation for the same period was $25.1 million, indicating a significant reliance on equity instruments.
Debt Instrument Principal Amount Interest Rate Maturity Date Estimated Fair Value (as of September 30, 2024)
2025 Convertible Senior Notes $201.3 million 1.25% May 1, 2025 $196.2 million
2028 Convertible Senior Notes $345.0 million 0.25% January 15, 2028 $285.9 million

Overall, NeoGenomics has strategically utilized both debt and equity to finance its growth, ensuring flexibility in its capital structure while maintaining a manageable debt load relative to its equity base.




Assessing NeoGenomics, Inc. (NEO) Liquidity

Assessing NeoGenomics, Inc. Liquidity

Current Ratio: As of September 30, 2024, the current ratio is calculated as follows: Current Assets = $361,992,000; Current Liabilities = $68,157,000; thus, Current Ratio = 5.31.

Quick Ratio: The quick ratio is also strong, calculated as follows: Quick Assets (Cash + Marketable Securities + Accounts Receivable) = $361,992,000 + $25,800,000 + $30,500,000 = $418,292,000; Quick Liabilities (Current Liabilities) = $68,157,000; thus, Quick Ratio = 6.14.

Analysis of Working Capital Trends

As of September 30, 2024, working capital stands at $293,835,000, a decrease from $494,024,000 in the previous year. This indicates a significant decline in liquidity despite a high current ratio.

Cash Flow Statements Overview

Cash Flow Activity 2024 (in thousands) 2023 (in thousands)
Net Cash (used in) provided by Operating Activities $(2,777) $(19,737)
Net Cash provided by Investing Activities $18,322 $59,512
Net Cash provided by Financing Activities $3,959 $3,284
Net Change in Cash and Cash Equivalents $19,504 $43,059
Cash and Cash Equivalents, End of Period $361,992 $306,239

Potential Liquidity Concerns or Strengths

The company has $362 million in cash and cash equivalents and $25.8 million in marketable securities as of September 30, 2024, indicating robust liquidity. However, the decline in working capital signals potential operational challenges that may affect future liquidity. The cash flows from operating activities improved significantly, with a reduction in cash used from $19.7 million in 2023 to $2.8 million in 2024, showcasing operational efficiency improvements.

Overall, while the current and quick ratios suggest strong liquidity, the decreasing working capital trend and operational cash flow usage warrant close monitoring for potential liquidity pressures going forward.




Is NeoGenomics, Inc. (NEO) Overvalued or Undervalued?

Valuation Analysis

In evaluating the financial health of the company, key valuation ratios provide insight into whether the stock is overvalued or undervalued. The following ratios are commonly analyzed:

  • Price-to-Earnings (P/E) Ratio: As of September 30, 2024, the P/E ratio is not applicable due to a net loss.
  • Price-to-Book (P/B) Ratio: The book value per share as of September 30, 2024, is approximately $7.09 (calculated from total stockholders' equity of $908,210,000 and shares outstanding of 128,061,944).
  • Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV as of September 30, 2024, is approximately $1,647,107,000 (total liabilities of $732,901,000 plus market cap of $908,210,000). The Adjusted EBITDA for the nine months ended September 30, 2024, is $27,735,000, resulting in an EV/EBITDA of approximately 59.4.

Stock Price Trends

The stock price has shown the following trends over the last 12 months:

  • 12-Month High: $14.75 on September 30, 2024.
  • 12-Month Low: $8.00 recorded in early 2024.
  • Current Price: As of September 30, 2024, the stock price is $14.75.

Dividend Yield and Payout Ratios

The company does not currently pay a dividend, resulting in a dividend yield of 0% as of September 30, 2024. The payout ratio is also 0%.

Analyst Consensus

Analyst consensus for the stock as of October 2024 is as follows:

  • Buy: 5 analysts
  • Hold: 3 analysts
  • Sell: 2 analysts

Summary Table of Key Valuation Metrics

Metric Value
P/E Ratio N/A (Net Loss)
P/B Ratio $7.09
EV/EBITDA 59.4
12-Month High $14.75
12-Month Low $8.00
Current Price $14.75
Dividend Yield 0%
Payout Ratio 0%
Analyst Consensus (Buy) 5
Analyst Consensus (Hold) 3
Analyst Consensus (Sell) 2



Key Risks Facing NeoGenomics, Inc. (NEO)

Key Risks Facing NeoGenomics, Inc.

NeoGenomics, Inc. faces a range of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and shifting market conditions.

Industry Competition

The competitive landscape in the clinical laboratory services market is intense. The company reported a net revenue increase of 10.4% year-over-year, totaling $167.8 million for the three months ended September 30, 2024, compared to $151.9 million in 2023 . However, competition from both established players and new entrants could impact market share and pricing strategies.

Regulatory Changes

Regulatory risks are significant, particularly concerning the FDA's recent stance on Laboratory Developed Tests (LDTs). The FDA's final rule issued on April 29, 2024, requires LDTs to undergo pre-market review. This could lead to increased compliance costs and potential disruptions in service offerings .

Market Conditions

Economic fluctuations and changes in healthcare policies can adversely affect demand for diagnostic services. The company's revenue from Advanced Diagnostics declined by 9.7% in the third quarter of 2024, amounting to $22.0 million, down from $24.4 million in the same period of 2023 . This decline reflects potential vulnerabilities in this segment of the business.

Operational Risks

Operational risks include challenges in clinical testing volumes and the management of laboratory facilities. The company has reported restructuring activities that could lead to increased operational costs. For instance, restructuring charges for the nine months ended September 30, 2024, totaled $4.9 million, compared to $9.9 million in the same period in 2023 .

Financial Risks

Financial risks stem from the company's debt obligations, particularly the $345 million in 2028 Convertible Notes and $201.3 million in 2025 Convertible Notes . Interest expenses for the three months ended September 30, 2024, were $1.6 million, reflecting the fixed interest rates of 0.25% for the 2028 notes and 1.25% for the 2025 notes . A cumulative loss position may also affect future financing and investment opportunities.

Mitigation Strategies

To address these risks, the company is focusing on enhancing operational efficiency and increasing market penetration. The planned capital expenditures for 2024 are projected between $35 million to $40 million to support growth initiatives . Additionally, the company maintains $361.9 million in cash and cash equivalents as of September 30, 2024, which provides substantial liquidity to navigate potential challenges .

Risk Factor Description Impact Mitigation Strategy
Industry Competition Increased competition may reduce market share and pricing power. Potential revenue decline. Enhance service offerings and market penetration.
Regulatory Changes New FDA regulations on LDTs could increase compliance costs. Operational disruptions and increased costs. Invest in compliance and regulatory affairs.
Market Conditions Economic and healthcare policy changes may affect demand. Revenue variability. Diversify service offerings to mitigate risk.
Operational Risks Challenges in clinical testing volumes and lab management. Increased operational costs. Streamline operations and reduce inefficiencies.
Financial Risks Debt obligations and cumulative loss positions may limit funding. Potential liquidity issues. Maintain strong cash reserves and cost control.



Future Growth Prospects for NeoGenomics, Inc. (NEO)

Future Growth Prospects for NeoGenomics, Inc. (NEO)

The growth opportunities for NeoGenomics, Inc. are driven by several key factors including product innovations, market expansions, and strategic partnerships.

Analysis of Key Growth Drivers

Product Innovations: The company continues to enhance its product offerings, particularly in clinical services and advanced diagnostics. For the three months ended September 30, 2024, Clinical Services net revenue was $145.8 million, a 14.3% increase from $127.6 million in the same period of 2023. This growth reflects an increase in clinical testing volume and higher average unit prices due to more valuable tests and strategic reimbursement initiatives .

Market Expansions: The Advanced Diagnostics segment, while experiencing a slight decline, still contributes significantly to revenue. In the three months ended September 30, 2024, Advanced Diagnostics revenue was $22.0 million, down 9.7% from $24.4 million in the previous year . The focus on expanding into new geographic markets and enhancing service offerings is expected to stabilize and eventually grow this segment.

Acquisitions: The company has a history of strategic acquisitions that bolster its capabilities and market presence. The integration of Inivata has positioned NeoGenomics to leverage advanced genomic testing technologies, which are crucial for personalized medicine.

Future Revenue Growth Projections and Earnings Estimates

The company projects a continued increase in revenues, with total net revenue for the nine months ended September 30, 2024, reaching $488.6 million, up 12.0% from $436.1 million in the same period of 2023 . Analysts forecast that continued demand for oncology testing will drive revenue growth, with estimates suggesting annual growth rates of approximately 10-15% over the next several years.

Strategic Initiatives or Partnerships That May Drive Future Growth

NeoGenomics is actively pursuing partnerships with pharmaceutical companies to support drug development programs, which is expected to enhance its revenue streams. Collaborations with biotech firms for clinical trials are also on the rise, as evidenced by the revenue recognized from contracts with HOOKIPA Pharma, amounting to $0.1 million for the three months ended September 30, 2023.

Competitive Advantages That Position the Company for Growth

NeoGenomics holds several competitive advantages, including a robust portfolio of diagnostic tests and a strong reputation in the oncology market. The company's gross profit margin improved to 44.6% for the three months ended September 30, 2024, compared to 41.0% in the same period of 2023 . This margin improvement is indicative of effective cost management and the ability to command higher prices for its premium services.

Financial Metric Q3 2024 Q3 2023 Change (%)
Total Revenue $167.8 million $152.0 million 10.4%
Clinical Services Revenue $145.8 million $127.6 million 14.3%
Advanced Diagnostics Revenue $22.0 million $24.4 million (9.7%)
Gross Profit Margin 44.6% 41.0% 3.6%
Net Loss $(17.7) million $(18.5) million 4.4%

In summary, NeoGenomics is strategically positioned to capitalize on growth opportunities through product innovation, market expansion, and strategic partnerships. The company’s ability to maintain competitive advantages will be crucial in navigating the evolving landscape of oncology diagnostics.

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Resources:

  1. NeoGenomics, Inc. (NEO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of NeoGenomics, Inc. (NEO)' financial performance, including balance sheets, income statements, and cash flow statements.
  2. SEC Filings – View NeoGenomics, Inc. (NEO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.