NeoGenomics Inc. Q1 2023 Earnings Call
Okay.
Welcome to the Neogenomics first quarter 2023 financial results conference call and webcast at this time, all participants alright, I listen only mode.
Note. This call is being recorded and an audio replay will be available on the company's website, Kansas.
Kendra Sweeney Vice President of Investor Relations you May begin your conference.
Thank you Paul Good afternoon, everyone and welcome to the Neogenomics first quarter financial results call with me today to discuss the results are Chris Smith, Chief Executive Officer, and Jeff Sherman <unk> Financial Officer.
Additional members of the management team are available for Q&A, including Vishal CIT group President of advanced diagnostic worn stone president of clinical services and melody Harris President of enterprise operations.
This call is being simultaneously webcast, we will be referring to a slide presentation that has been posted to the investors tab on our website at IR Dot Neogenomics Dot com.
Starting on slide two during this call we will make forward looking statements regarding our anticipated future performance, such as our operational and financial outlooks in projections, our assumptions for that outlook opportunities and strategies for our products and related effects on our financial and operating results. We caution you that such statements reflect.
Our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to our most recent forms 10-K, 10-Q and 8-K, we filed with the SEC to identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward looking statements.
The forward looking statements made during this call speak only of the original date of the call and we undertake no obligation to update or revise any of these statements and.
In addition, during this call in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results to.
The non-GAAP financial measures.
Presented should not be considered an alternative to the financial measures required by GAAP should not be considered measures of liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies.
Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measure in a table available in the press release, we issued this afternoon I will now turn the call over to Chris Smith, Chief Executive Officer of Neogenomics.
Thanks, Kendra and welcome everyone. Thank.
Thanks for joining us this afternoon to go through our first quarter financial results, we're going to start on slide three we'd like to begin every presentation, we do whether its to our teammates or customers or our investors with our mission and vision statement, because it's what motivates our company and teammates on a daily basis.
Our mission is to save lives by improving patient care.
Before we dive in I do want to thank all of our teammates for everything they do every single day to make such a great place to be and to transform so many patients' lives.
Now, let's move to slide four and get into the first quarter financial highlights we.
We started the year very strong as we continue to win win them from 2022 into 2023 first quarter revenue was $137 million, a 17% increase over the prior year clinical services revenue increased 16% driven by strong volumes across our modalities and an increase in revenue per test.
Notably the first quarter was our eighth consecutive quarterly increase versus prior year and revenue per test. In addition, and GFS revenue growth continued to be strong.
Pharma services revenue, which includes informatics increased 22% driven by improved growth in high margin modalities.
Adjusted EBITDA improved 63% and adjusted gross profit was $60 million or 38, 5% increase over the prior year.
Moving to slide five.
The first quarter continued momentum we have seen throughout the past four quarters historically, our business is seasonal with the first quarter being a little softer than others. So this year over year accelerated growth is a testament to the strong execution by our teammates and the growing demand for our products from our existing client base as well as new customers.
We are pleased with the performance at some of our operating and revenue cycle initiatives are taking hold and we believe that we have the ability to continue to drive improvements in the business throughout the remainder of 2023 and beyond.
Turning to slide six our Neogenomics, we have approximately 2200 teammates worldwide focus on developing innovative oncology diagnostic solutions, we have a significant share of oncology patient testing volume in the U S and one of the largest patient oncology databases. Our belief is that everything we do starts with our pace.
And if we do the right things in this underserved and growing market. We are ultimately going to create long term shareholder value at our Investor day last month, we laid out our strategic priorities for the next 18 to 24 months, which are profitably grow our core business.
Accelerated advanced diagnostics drive value creation, and enhanced people and culture, we have a great team at Neogenomics and continue to enhance this team and our strong mission driven culture is critical to our long term success, while much of this won't be visible to the outside the organization. This work is key foundation everything else we do.
Operationally.
For todays call Im going to focus on our other three priorities in Q1, we made great progress in all three.
As we move to slide seven let me touch on a few highlights in each of the focus areas.
Beginning with profitably growing the core business, we continue to see strong growth in our clinical volumes across all modalities and GFS revenue growth continued to be strong a result of our product offering and ongoing sales force expansion and optimization, which has allowed us to reach oncologists and pathologists more effectively as well as creating strong.
Growth in revenue per test.
Additionally, we set a record in Q1 for the highest volume of test processed per quarter in the history of Neogenomics, a testament to our core business growth.
For our second priority accelerating advanced diagnostics, we repositioned our go to market approach with successful launch of radar and Mardi assay in four indications breast lung head and neck and colorectal.
The radar assay has been available over the last year for use in clinical research studies in pharmaceutical collaboration.
Now, it's fully available to U S clinicians to detect small amounts of cancer fragments with up to 10 times greater sensitivity than other tests available on market, which allows clinicians to identify cancer recurrence earlier.
In the first quarter, we also expanded our Ngls portfolio with three new tests, including Neo comprehensive for solid tumors.
We have completed our multi X submission for radar in breast cancer and our track for submitting two additional indications by year end and.
In addition, we have completed the build out of our pharma and informatics sales force teams, which positions us well for continued growth.
Yes.
And our third priority driving value creation is well underway. We are prioritizing the increase in productivity and efficiency and we're beginning to see results here as well, even with a significant increase in testing volumes.
We have continued to improve turnaround times by 17% in the first quarter, thereby delivering results to patients and clinicians even sooner. Additionally, we have generated significant operating leverage as a large percentage of revenue favorability fell through to the bottom line overall it was a fantastic quarter now I'd like to turn the call over.
To Jeff to review, our financial results in more detail.
Thanks, Chris Good afternoon, everyone I'll begin with a little more detail on our operating results for the quarter as Chris said, we started the year with accelerating revenue growth and continued improving financial performance first quarter revenue was 137 million a 17% increase over the prior year Q1 rep.
Presents the highest revenue growth by quarter since Q2 of 2021.
Revenue growth was driven by growth in clinical test volume, a continuing shift to higher complexity test improvement in revenue per test and reductions and turnaround times.
Turning to slide nine clinical services revenue of $115 million was an increase of 16% year over year, driven by a 7% increase in volume and higher revenue per test. We are encouraged that our sales force optimization strategies, enabling us to reach oncologists and pathologists continue to show progress.
Yes.
Turning to slide 10 average revenue per clinical test increased by 8% to $402, representing an improvement for the eighth consecutive quarter versus the prior year as we turn our focus to higher value tests and revenue cycle management initiatives.
Turning to slide 11 pharma services revenue increased by 22% to $22 million compared to the first quarter of 2022, driven by both price and higher volume in pharma as well as by strong revenue growth from informatics.
Looking at the income statement on Slide 12, adjusted gross margin was 43, 5% an improvement of 670 basis points over the first quarter of last year, adjusted EBITDA was negative $7 million or $12 million or 63% improvement over the first quarter of 2022.
These significant improvements were driven by both higher gross profit and lower operating expenses and highlight the operating leverage in the business.
Regarding operating expenses sales and marketing expense was $16 3 million G&A was $61 5 million and R&D expense was $7 4 million. In addition, there was $4 7 million in restructuring costs in the quarter related to the previously announced organizational restructuring and footprint optimization.
<unk>.
Turning to the balance sheet on slide 13, we ended the first quarter with cash and marketable securities of $418 million.
Our cash burn in the quarter was $20 million, an improvement of $14 million or over 40% from Q1 2022.
Our strong financial position provides us a financial flexibility to continue to invest in the business and achieve our strategic and financial objectives.
Given our Q1 financial performance and continued progress executing on our strategic priorities, we are revising our revenue and adjusted EBITDA guidance for the year.
Turning to slide 15, we previously had revenues at $545 million to $555 million, representing 7% to 9% growth. In 2023, we are revising that range upward and now expect total revenue between $555 and $565 million for the year, representing 9% to 11%.
Growth.
Adjusted EBITDA was negative 27% to negative $22 million and is now a negative <unk> 22 to negative $18 million, representing a 54% to 63% improvement.
We continue to see strong revenue growth and an increase in NGL product mix and are very encouraged by the opportunities for radar in neo comprehensive as.
As the year progresses, our year over year comparisons will get more difficult, but we believe we have a strong foundation and dedicated teammates to deliver financial results. While we continue to be focused on driving operational efficiencies. We will also continue to invest in the business to capitalize on our future growth opportunities are.
<unk> focus remains to deliver long term sustainable growth with that I'll turn it back over to Chris.
Four we are raising our full year guidance.
We are well on our way to becoming the leading cancer testing information and decision support company. We will continue to build on the foundation, we have laid over the past several months to deliver long term sustainable growth I am excited for our teammates and our customers and most of all the patients with cancer, who we serve on a daily basis.
Yes.
At this point, we will open the line for questions. The company asks that each person limit their questions to one so that we may hear from everyone within the hour allotted for this call.
If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
And the first question today is coming from Puneet <unk> from Seb Securities needs.
<unk> how are you doing.
Hey, good Chris Thanks for taking the questions here.
First one and congrats on the strong quarter here.
And when we look through the cadence for the rest of the year what are some of the things that you're sort of watching out for I mean, because the guide increase you beat our number by $10 million guide was increased by a proportionate amount.
But just sort of wondering.
What sort of things that you are counting as prudent in the guidance if I may.
Yes look I think Thats, a fair question and we're probably going to get it asked I mean, you are asking for this for folks that have been following us and look I think there were a couple of things for <unk> I think we.
He came in and evaluated the business is a relatively new leadership team. We saw a great franchise with significant opportunities and we put these strategic focus initiatives into place and really began executing it and candidly I think that those are coming to fruition.
Quickly right.
And I think in any business you like how long does it take for a rep to become effective or how quickly can you improve operating efficiencies or how do you get leverage I mean, launching new products with that and I think what youre seeing is that these like I always talk about the portfolio effect, but what's happening is a lot of things are coming together and so we feel very comfortable raising the guidance you know that our.
<unk> is generally we want to over promise.
Excuse me under promise and over deliver and I think thats, what we tried to do by setting initial guidance and I think as we're getting to know the business is performing well, we feel really good about where that's going so I don't know I hope that answers your question.
I would say Mardi.
Get radar.
<unk>, we submitted in the first quarter for breast, which is one where we believe we're incredibly differentiated.
On sensitivity, we launched we were probably behind our competitors on solid tumor with engie as we launched the new new solid tumor product for <unk>. So I think those are important things and then these reps that we're hiring whether it's an informatics pharma or in the clinical getting them to get traction and so now it's about this long term sustainable growth. So we just we have.
<unk> talked a lot about expanding use and that's well underway and so theres a lot of things operationally.
It infrastructure setup that we're working on but I think some of these initiatives where you can move the lever from a financial perspective are taking hold and I would just add I think we just need to continue to focus on strategic execution as Chris noted with the new salespeople coming on ramping them up making sure we're getting the right education and training.
On that I think will also have an impact and look we're going to continue to make investments as we said as year progresses as well. So we'll continue to make investments in the second third and fourth quarters, which will have long term benefit as well and we've talked about this as a great business, but it needs it needs to execute and I think what youre, saying is execution.
Got it.
Super helpful.
<unk>.
<unk>.
That obviously improved in the quarter.
How much of that was <unk> contribution and sort of when we think about the overall guide.
How are you contemplating that.
The AARP within within the context of this guidance. Thank you Jeff.
Yes, I think when we gave guidance we didn't break out the different buckets, but I would say we had good progress in revenue cycle initiatives. The Ngls volume mix continued to be strong and that also contributed to the revenue growth and we've also talked about we've had some pricing success as well. So I'd say all of those are factors that contribute.
And I think give us pretty good visibility for the remainder of the year on A&P.
Got it okay, great guys. Thank you.
Thank you. The next question is coming from Alex Nowak from Craig Hallum Capital Group, Alex Alex lives.
Hey, Chris it's actually chase umbrella, thanks for taking the questions.
I guess first from us a little bit more on the.
Qualitative side.
You've split the organizations and salesforce into that new structure that you outlined pretty well in the analyst day.
I guess any more kind of smaller.
Kind of more specific kind of details that you can give us on any major wins or kind of new progress that you've seen that maybe you were a little bit stagnant on before that this new structure is kind of allows you to target to your customer base in a different way.
Yes, I'll take it and then I'll, let Warren who is here, who is leaving leading that group follow up.
And then I think Warren talked a little bit about that at Investor day, but you want to add any more color without specific accounts, yes, I think thats spot on Chris We spoke about this the commercial strategy at the Investor Day, which was protect expand in women and ultimately that's played out creating well in quarter. One ultimately we won more new customers than we are.
Specifically, we may have lost seven and we won 28. So the net effect is positive there and that's ultimately as we start to use digital tools, particularly the sales force and other AI enabled tools, we're able to gain execution traction and these are some of the results that we're starting to see.
Yeah, and I think a testament is look what the volume growth was.
North of 7% so.
I think youre getting both.
Yes.
Yes that makes sense and then last months.
Now, becoming kind of competition, there and certainly theyre going to bring in.
Large non NRT menu as well how.
How do you think you're kind of youll compete there with them.
Im also being able to offer kind of a full service offering tenants like your value proposition.
Yes, so couple of things I'm going to answer and then I'll, let vishal who's on the line also so look at the end of the day I mean, <unk> was a big competitor already that offered a heck of a lot of tests in oncology and <unk>.
So we're competing against them everyday and look I think that acquisition is great for the market to $20 billion are going to be a $20 billion market is less than 1% penetrated. So I think competition is great that being said the haystacks not even commercial yet so there's a long way to go before <unk> is in the bag.
With quest being sold and I always joke that people don't die of indigestion of starvation of dive indigestion with acquisitions, so they've got a still.
Yeah.
We're sticking to our plan and I think look I applaud the acquisition I think it was a good acquisition that would be good for the market but.
I wouldn't yes, we're now.
Not something that you were focusing on our own knitting versus worrying about them right now do you want to comment any more vishal.
Thank you setup, Chris I think it's overall good for the <unk> market as a whole shows you that they are and Thats, where the market at the clinical practices moving to having said that there are pre revenue right now and they are a long way to go so we're pretty comfortable where we are today.
Thanks for the thoughts guys.
Thank you. Our next question is coming from David Westenburg from Piper Sandler.
Hi, Thank you so much for taking the question and congrats ongoing on really a strong print here.
Hello.
So I just wanted to get back to the gross margins gross margins were way up sequentially on mix is really good I think historically in 2019.
19 ish.
We're in the high <unk> do you have.
Higher confidence now that you can really get to that are you seeing that leverage and the GM. So we could see that maybe get up into the <unk>, maybe faster than we thought initially just given the really good sequential step up in returning to that.
Yes, I think we said on Investor day, we expect to return to the company's historical margins by 2026, obviously, continuing to perform well and execute or gives us more confidence of getting there over time, but I think again similar to Q4 Q1 is just a good example.
The companys ability to generate operating leverage on that revenue growth and so I think adding growth will certainly certainly happen. We will certainly help drive that as you look at Q4 versus <unk>.
You did see clinical gross margins.
Up $3 6 million in pharma down five six but we're expecting that so overall.
It came in stronger than we were initially expecting so I think clinical is really helping to drive that so I think the mix of the business in any particular quarter can have an impact but overall, we are very focused on returning the company to profitability and producing free cash flow and I think this was another good quarter.
And progress to get to that point.
Got you do you have a lot of analysts I think this is a short question here can you remind us where you were at I think on the Analyst Day, you said you talked about the sales force hires.
Where are you at in those hires and has just been hitting the P&L yet because again you get did get really good operating leverage, but so anyway I'll just just a quick reminder.
I'll, let Warren go into the detail of the Shaw wants to comment at all on his but I mean, the shelves is full with pharma and radar much smaller sales forces, but you also want to give an update I'll start just on the cost side. So youre not youre not seeing much of a ramp yet in sales and marketing expense look we also did some revisions in some of our comp plans as well. So I think there is a lot of factors.
In there, but I think I would expect to see sales and marketing ramp as the year progresses as more of these reps come on and start being productive having commission in salary cost and so there was some in the quarter. It was offset by some other things in the quarter, but I would expect more more to progress and that is part of the investment we talked about and.
Investor Day for our guidance are you should expect that number to ramp throughout the year, Yes, David very similar I think if you take what Jeff said from a cost perspective, I think this the sales or revenue evolution is pretty self explanatory, we rapidly bringing people on I think we have six more positions to fall, which will be done by by the end of this month.
And some of those before the earlier in January as they are starting to get to productivity now.
And we really feel that we are in full stride as we get into <unk>.
Those six are for your H, one hires and then you've got a rather six.
Six of the <unk> hires and then there is a phase III in terms of further sales force expansion that we will do in the latter part of this year.
Thank you.
The next question is coming from Dan Brennan from TD count.
Hey, Dan Great. Thanks, Chris.
Chris how are you doing thanks for thanks for the question Tim Congrats on the quarter.
Maybe starting off just on in Nevada, and kind of radar.
Just kind of remind us so youre expecting decision this year.
Back half Q3, Q4, any any any ways any way for us to think about timing there and then.
Did you say during the prepared remarks, youre expecting two more indications this year I thought I don't know at the Investor Day, you said three but maybe just maybe a little more color on that front as well.
Yes, I'll, let I'm going to let vishal jump in but I want to clarify we submitted breast in Q1 and historically they take us 60 ish.
First pass review timeline, so we'll be in communication with them in Q2.
Just so you know on that one and maybe Michel can even talk about how we're managing all of that around a multi X and breaking a breast in a different.
Z States et cetera, Michel you want to take that.
Yeah, absolutely so yeah as Chris mentioned, we submitted in Q1, we do expect to have that conversation with them in Q2, and early Q3 and it all depends on the timelines from their side, but we do expect two additional indications to go in this year.
A total of three for the year is what we had said.
Got it okay.
And then maybe just on Ngls, I know youre, not giving us too much color there, but just any way to think about the impact.
Yes, I'll, let both of those guys take that but look remember that our thing was to.
To be above 20%. So I can tell you that we were well above 20% for the quarter, but do you guys want to give.
In terms of new comprehensive we only launched the product in mid March and I'd say, we met our expectations in the month of March and that trend continues.
Hey, Richard you got anything else.
No I think thats right.
On target to where we thought we would be so.
Got it Okay, alright, I will get back in the queue. Thank you.
Thank you and the next question is coming from Andrew Brockman from William Blair.
Hey, Andrew Hey, guys, Hey, Chris Good afternoon, maybe on our pharma services revenue line. So can you maybe peel back the onion, there a little bit and just sort of talk about the makeup of that number.
Sort of take this is to be more of a more healthy number I guess with more of those profitable profitable projects coming through or is that still something thats sort of influx and that should start to improve throughout the year.
Yes, let me let.
But I think Jeff and Vishal can probably paint some color, yes, so I'll start and I'll, let vishal jump in so we said Q4 was pretty strong right and we had some we had some big <unk>.
Overall.
All three have had good growth in our legacy pharma informatics and in Nevada in the quarter. So I'd say, we're certainly on track to where we expect it to be we havent gotten into the specifics, but I think we are I think we are set up pretty well as we look at the rest of the year and Vishal, if you want to add anything else.
Okay I'll stick to one thanks guys.
Thank you.
Thank you and the next question is coming from David Delahunt from Goldman Sachs.
Hey, Dave.
Hey, guys. Congrats on a strong quarter any additional color on the drivers of that increased volume.
Led to the beat.
Yes, I mean, we kind of hit it I mean, we really spent a lot of time look I think we've talked about that we hired we started hiring 20.
Oncology reps in the second half of the year and then have been rapidly tried to expand that we've been pretty open that we're going to get to 45 by the end of the year I think we will get to.
Two thirds of the way there in the first half I think when you start to get new folks and to be fair I would say a lion's share of that group is coming from the industry. So they have deep relationships and knowledge I think they can make an impact relatively quickly I mean, I think one of the things we've talked about this business that we like is that United is not youre not placing an analyzer in the.
It'll basement for five year contract right you can move business pretty quick and so I think I'd say the expansion and the optimization definitely of the field.
I would say that.
Warren talked about this I think our go to market strategy and the way that we think about winning accounts and doing bid process.
Thoughtful in places, where we maybe don't have a product category. So remember we have over 600 test I think I think and I use that a lot of the word optimization I think what youre seeing is a lot of things around execution and thats.
Yes, and I would add just a couple of things that a couple of themes that we hit on Investor day.
One is a sense of urgency into his accountability and I think Warren and the leadership team have certainly brought that so I just think its focus on execution.
Its leadership and its holding people accountable for results.
And maybe just two other things then I'll add obviously I would say I'd do a shout out to melody to I would say our turnaround time, no one's asking <unk> question, but <unk> on the call and we should talking about turnaround I'm sorry, we're not immune we're interrupt you may have been throwing our.
I wanted just domain and the and just say thanks, I think ultimately it's much easier to execute a strategy. When you turnaround times are good and continued to improve in a number of our clients recognize that so net deposits seven and that helps us and also expand share of wallet, which as we ended the year in athletic fan wind strategies is nothing about retaining existing customers winning new.
It's selling more to existing customers and we've done that effectively and that's really supported by the improved turnaround times that many of the team from the upside of doing a great job on.
Fantastic Great work.
Thanks.
Thank you and the next question is coming from Treehouse Savant.
From Morgan Stanley .
Okay.
Hey, Chris Good evening.
Good start to the year so congratulations.
Just one on on Neo comprehensive perhaps to kick things off I know you had mentioned it's still early days in the launch, but perhaps vishal can take this.
Any color you can share on the degree of switching Youre seeing.
In those sort of oncology accounts from existing sort of users of other people's desks.
And how many of those are essentially sort of first time CGP users.
At least so far vishal.
Market share taking from other competitors and so on.
Got it Okay fair enough.
Then on the pharma side of things guys I mean any evolution in your thought process around just smid cap biotech funding.
Any sort of sample shipment delays or budget constraints that youre picking up on.
Especially at your smaller customers.
See a little bit of impact, but we think that we can make it up on the other side.
Thank you. The next question is coming from Andrew Cooper from Raymond James.
Hey, Andrew.
That automation journey that sort of lab optimization expanding in Houston all of those moving parts that I think are.
I'll give the high level ill, let <unk> give you more color look I think we're still early I would say you know second.
Any I mean, I think look I think when we bought in Nevada. They had pretty good innovate I mean automation, we didn't have a lot of that is one of the things meli spending time on the <unk> do you want to give some more color around what's going on.
Sure. So I would agree with Chris where maybe inning to inning threes for this journey automation.
As Chris said the bottom line was fully automated that remains fully automated and so we'll replicate that in the Houston expansion as we go there and then we're slowly starting to add automation to our other modalities and so we showed you some of that Investor day with the <unk>.
Deep neural network AI that we're starting to use in our cytogenetics line, we're adding more automation in our molecular lines. So so thats beginning we're taking good steps there, yes about some of the risk points supply chain will of course being risk as we expand into as soon as we're trying to get some of our long lead items for that build out and then.
Similar supply chain issues on automation pieces, but because that rolls out relatively slowly that's not going to be as much of a risk for us.
Primarily I want to also talk about your networking youre, starting to think about and pull together with all the dry labs.
Absolutely so.
We are scanning more and more of our images and are we're doing digital age needs and uploading to the network. So that we can move our analysis of waste from the wet lab itself the locations for the wet lab and the build out around that can be more expensive than if we are in office space or less expensive real estate.
Where we can hold our analysts in those locations and so by digitizing our work, we're able to load into the network do the analysis over the network and then we're also gaining some advantage across time zones that is helping us improve our turnaround times there.
Thanks.
Historically, a lot more sort of hospital billing versus maybe where you end up whats the whats the spend what's the lift that you need to do and where are you in that process.
To stay up to speed and keep up with hopefully the growing volumes that maybe go a little bit more.
Kind of the traditional payer out then what what your historical business might have been.
Yes, I think from the revenue cycle side as part of our evaluation, where we are clearly evaluating our current <unk>.
Revenue cycle platform.
And seeing how do we enhance that so I do think that's probably more of a 2024 from a capital investment perspective, we're certainly sizing that and looking at that for the back half of the year.
But I think.
The infrastructure is in place, but I do think there are some technology investments that we can make that will help accelerate revenue cycle and give us a little bit better visibility, but I think we have we have a good structure in place I think some technology adds will help on that.
And that will clearly be a focus as we go in the back half of the year looking at how do we optimize going forward in 2024 and beyond.
Great. Thanks, guys I'll stop there.
Thank you. The next question is coming from Mike Matson from Needham.
Hey, Mike.
Hey, guys. This is Joseph on for Mike.
I think probably only one question maybe love to ask.
So appreciate all the color you guys gave on the increases in revenue per test.
Okay.
Revenue cycle management as well as just this higher priced assays.
<unk>.
Right.
I didn't hear any.
You say anything around maybe pruning of the test menu I believe maybe at the Investor day or previously.
There had been talk about maybe.
Taking out some of the lower priced tests or maybe test I don't really see a large amount of volume arent really ones that really move the needle so.
Was curious about that if any works been done on there.
Yes, I think I think thats, an ongoing effort I am not sure youll see material impact in AEP from that but that is an ongoing effort that we're looking at and I think we will continue to refine over time.
Okay. Okay, and then I guess, maybe similar question for pharma services, though.
In terms of shifting towards trying to get to the earlier phases, where it can be completed the truth is higher.
And similar thing Thats, just going to be an ongoing thing work over time.
I think yes, I think we started certainly in the second half of 2022, I think that continues and I think we've had a.
Near term revenue generation, both in how we are compensating reps and even our whole approach I think the whole the whole.
Our approach of really taking our bookings even from our earnings release says we're focused on.
Clear revenue drivers that we have better visibility on in the next couple of quarters versus over multiyear periods.
Yes, absolutely. Thank you very much for taking our questions.
Thank you.
Thank you. The next question is coming from Derik de Bruin from Bank of America.
Hey, Derik.
Hi, good afternoon, how are you.
Sure.
So couple of questions. So you had a it looks like a 5% quarter on quarter increase in price.
Is that sustainable that sort of run rate.
Anything unusual just basically thinking about how to look at pricing.
The rest of the year.
And I guess when you sort of look at this are you getting are you.
Are you are you doing things.
Pricing at your competitors' rates are you pricing at a premium to sort of thinking about how to think about that that 402 number and how that moves up.
Well some of these obviously have said reimbursement, but not all of the thaws that process and look I think pricing is one of these levers that we significantly under managed as a company.
Whether it is a standard price increase whether it was chasing revenue cycle management or improving our relationships with payers and getting a premium for the services and things and so I do think it's sustainable I don't know that I would say what the percentage was every quarter, but look eight quarters in a row, we have been doing and I think especially when you look short term.
I think short term of 12 18 months, our mix will continue to be lifted we're a leader for sure on Ngls in here, but we're way behind.
Behind on share from a solid which is where the market's moving which is would be our probably our highest ASP and so as we continue to grow our share of that market is can also help us. So I think theres a lot of things going on and so I will say internally, it's our goal to do that.
I don't think we'd go out disclosed how much but I would say, yes, I mean, it's.
Yes, I think we have room I wouldn't extrapolate one quarter for any type of trending it was a strong it was definitely a strong quarter, but we do expect the levers that we're pulling.
Which are higher intensity test revenue cycle improvements.
As well as pricing benefits all are going to have a positive impact over time, but I wouldn't try to guide you to specific quarterly impact, but in Q1 was definitely a strong quarter.
Got it and that sort of leads to my next question on just how to think about the second quarter. I mean Q1 came in so strong and as you pointed out is usually your seasonally weakest quarter, just some thought on the.
Quarter to quarter increase there not sure.
Not quite sure what to make of the modeling at this point is there any general thoughts on it.
I mean, I don't know if you would model what you've historically seen in terms of jumping between Q1 and Q2, just any sort of like thoughts yes.
Yes, I think we said in Investor day that we expected a progression throughout the year from from on a quarter over quarter basis. So I'm kind of just stick with that as you think about the quarters versus the prior year quarters.
Are you thinking about revenue for the rest of the year, yes, but I would definitely I said that in the first question look I think we're getting momentum from the initiatives and so.
Enough that we significantly raised guide so I think we feel good about how things will continue.
Got it thank you very much.
Yes.
Thank you once again, ladies and gentlemen, if you wish to enter the Q&A queue. Please press star one on your phone at any time. The next question is coming from Mark Massaro from BTG.
Hey, Mark.
Mark you there.
Yes, Hey, guys.
Thanks for taking the questions.
Can you hear me yes.
Yes, we can okay got you.
Okay, Yeah I was on mute.
So you haven't.
Not not really you guys haven't had a question on radar yet so I recognize that youre not quite two months launched but you are coming up on two months.
The market leaders seem to have some degree of entrenchment and CRC.
You guys are launched in head and neck and lung as well as breast and CRC I guess recognizing that it's really early are there any takeaways out of the first almost two months of launch in terms of volumes and I am curious if that strong volume growth that you had in Q1 included.
Some volumes from radar clinically.
Yes, it really wouldn't have had any revenue because clinical side on the clinical side. Because we are just sending kits out late so by the time. It gets out terms gets in we run the tests like we wouldn't have had any revenue for Vishal you want to talk about how it's going and more and you want to jump into.
Yes, so as Chris mentioned Q1 because of the.
How long it takes to complete the testing and so on we wouldn't have seen that in Q1, but I would say that where we feel that we have our strengths in breast cancer.
Head and neck cancer.
We're starting to see good progress there and likely what we thought we would be so I think that's really positive and the market uptake, especially because of the high sensitivity of the radar assets really is showing and those type of cancers. I would also say that we're getting good interest from.
People that are starting to use it they want to see.
Applications in other cancers, where the field of sensitivity matters. So we're also exploring those type of opportunities at the same time Mark.
Okay, and then I do want to press into volumes again.
We haven't seen volume growth like this in approximately two or three years. So I think we could investors could probably benefit from.
I know you talked about Ngls as well above 20%.
What are you seeing in terms of end market demand.
How much of the volume growth came from the hiring of new reps and any commentary about end markets like an efficient flow, yes look I would say in the quarter I will start kicking in the quarter I would say.
Really every modality grew above where we had been growing that business over the last 18 months and I think a lot of that was back to this thing of winning a lot more accounts.
I think the obvious one everybody wants to focus on <unk> and GFS, because it's kind of out there is being talked about but we're seeing really for example, heme.
And just as a business is not supposedly growing and I will tell you our business grew significantly because we're the market share leader, we were moving share that's a new rep I would say Warren talks a lot about expanding the wallet or winning.
I would say that look we know where the industry is growing and I think we were growing below the industry and I think what you're starting to see is a business that's executing from a field perspective, and I do believe our strategy of having a rep group for pathologists and a Rev group on oncologists is very unique in this industry, but making a significant impact on what the number of reps that we have can do compare.
To a rep group that causes hours on oncologists and pathologists because it is such a different call point.
Excellent congrats on the quarter.
Thanks.
Thank you and the next question is coming from Nathan Tirico from Stephens Mason Imation lives.
Hey, this is Jacob <unk> information and thanks for taking my questions and congrats on a really strong quarter.
Already been covered here. So maybe just a quick one on your revenue cycle management initiatives and this amount of already been touched on a little bit earlier, but you guys have talked about a number of initiatives on this front in your most recent analyst day. So I'm just wondering if you can maybe give us a further update on what's been implemented so far and what initiatives are still ahead of you on this front.
Yes, we've done a fair amount of work on getting more billing information upfront.
In the billing process.
When we get a test requisition and moving more to more automated ordering of our tests.
We've made good progress on both of those in the quarter I would say we've also made progress just just on getting paid for work that we're doing so I think there's a lot of focus on just looking at the tests, we've done how we've been paid historically.
Particular payers are patients and what we need to do to get actually get paid and we have seen some improvement in some lift in our revenue as a result of that we're again, we've already we already have the test volume, we already have the cost, but where we're having more success in actually getting paid for the work done. So both of those are probably two of the bigger areas that we've made progress.
And I think are still see a lot of opportunity to improve as we go throughout the year.
Alright got it I'll leave it at one thanks.
Thank you.
Thank you and there are no other questions in queue. At this time I would now like to hand, the call back to Chris Smith for closing remarks.
Alright, Thanks, Paul and everyone on the call. Thanks for catching up this afternoon. It was great to be able to share the quarter with you and then also go through some questions and we'll look forward to seeing you on the market.
Take care.
Thank you. This does conclude today's conference you may disconnect at this time and have a wonderful day. Thank you for your participation.