Q3 2023 NeoGenomics Inc Earnings Call

Thank you for holding ladies and gentlemen, your conference will begin in two minutes. Please continue to hold your conference will begin in two minutes. Thank you.

[music].

Greetings and welcome to the Neogenomics third quarter 2023 earnings call.

Third quarter 2023 financial results conference call and webcast at this time all participants are in a listen only mode.

Please note. This call is being recorded and an audio replay will be available on the company's website.

Kendzior Sweeney Vice President of Investor Relations you May begin your conference.

Thank you John Good afternoon, everyone and welcome to the Neogenomics third quarter financial results call with me today to discuss the results of our Christmas Chief Executive Officer, and Jeff Sherman Chief Financial Officer additional members of the management team are available for Q&A.

Including Vishal decree president of advanced diagnostics, where I understand president of clinical services and melody Harris President of enterprise operations.

Call is being simultaneously webcast, we will be referring to a slide presentation that has been posted to the investors tab on our web site at IR Dot Neogenomics dotcom.

Starting on slide two during this call we will be making forward looking statements regarding our anticipated future performance.

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, which identify important risks and other factors that may cause our actual results to differ materially from the forward looking statements.

Forward looking statements made during this call speak only as of the original date of the call and we undertake no obligation to update or revise any of these statements.

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. The non-GAAP financial measures presented should not be considered an alternative to the financial measures required by GAAP should not be considered in 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. Thanks for joining us this afternoon to go through our third quarter financial results as always I want to begin with our mission and our vision statement, because it's what motivates our company and teammates on a daily basis, our mission at Neo as the stabilized by improving patient care.

Before we dive in I also want to thank the 'twenty 200 teammates for the impact they are making on patients lives every single day.

Now, let's move to slide four and get into the third quarter highlights as you can see we had another very strong quarter growing revenue, 18% over prior year clinical services revenue increased 20% driven by strong volumes across our modalities and an increase in revenue per test as a highlight and GFS grew in excess of 35%.

And now represents approximately 25% of our total clinical revenue.

Advanced diagnostics revenue, which includes pharma services and informatics increased 8% from prior year driven by continued growth in informatics and a ramp in radar as we continue to execute on the transformation of the business. Our progress has outpaced our internal plans. We started the year with the outlook that we would be adjusted positive in the fourth.

Quarter, However, in the third quarter adjusted EBIT significantly improved 129% as compared to Q3 of last year to a positive $3 million.

Adjusted gross profit was $67 million, representing a 25% increase over the prior year or 44%.

For the 10th consecutive quarter, we saw an increase in revenue per test versus prior year NGL growth continues to be a driver of improvements in revenue per test and is growing well above the estimated market growth. In addition revenue cycle management and pricing initiatives also are contributing to revenue growth per test.

In terms of other key quarterly business updates, we completed three submissions to mol Dx, including one additional breast application as well as two new indications one in lung and one in head and neck.

Slide five demonstrates the consistent performance with third quarter delivering sustained improvement in revenue gross margin and adjusted EBITDA were.

We are proud of this year over year accelerated growth because it's a direct result of the strong execution by our neo teammates and the growing demand for our products from existing clients as well as new customers.

Our operating and revenue cycle initiatives implemented in the second half of 2020 to continue to enable accelerated growth and we believe they have the ability to continue to drive improvement in the business through the end of the year and beyond.

Let's move on to slide six.

We've kept the narrow focus on our strategic priorities laid out at the beginning of the year.

<unk> grow the core business accelerate advanced diagnostics drive value creation, and enhanced people and culture. Our new teammates are the foundation of the company and continuing to enhance this team and our strong mission driven culture is critical to our long term success. This afternoon I'm going to focus on our other financial priorities.

We continue to profitably grow our core clinical business as we execute our commercial strategy, which is protect expand and acquire.

This has helped us deliver strong volume and improved mix.

Our continued improvement and turnaround time has allowed all modalities to grow faster than the market. In addition, the mix shift towards more comprehensive panels to supported the delivery of yet another quarterly improvement in revenue per test.

Medical adjusted gross profit increased to $13 million or 28% versus the prior year.

Our newest NGF CGP panel for heme malignancies Neo comprehensive scheme was launched a few weeks ago and strengthens our leadership position in the heme oncology services.

We also launched the therapy selection panel, providing comprehensive overview of Biomarkers for detecting early stage lung cancer.

Finally, we continued our sales force expansion that we disclosed in Q2.

Within advanced Diagnostics Division, which includes pharma services informatics in R&D, we continue to focus on innovation as mentioned during the third quarter. We submitted three radar applications to Mol Dx collectively now have 27 studies in progress utilizing radar technology.

Some of these are in eventual trials, including Meridian and head and neck can her two in breast and a randomize Cte DNA lung trial in December additional radar breast cancer data will be presented at the San Antonio breast cancer Symposium and we also have three posters featuring other niche.

He modalities accepted at Ash.

We hired a new head of R&D, who will implement a new structure focus on accelerating new product development and driving innovation that will benefit both our clinical and our pharma customers. While it's still early days with radar. We are very pleased that our technology is that a low positive clinical samples highlighting the value of sensitivity for radar.

We are focused on driving value creation from a financial perspective and are pleased that we've delivered even further margin expansion from Q2 and have generated significant operating leverage as revenue favorability fell through to the bottom line.

As we continue to optimize our lab operation, we achieved approximately a 20% improvement in turnaround time over Q2.

Because of several key acquisitions over the last five years, we have been operating under multiple limb systems to further enhance operating efficiencies. We launched a key initiative to move the organization to one limb system. This project will provide a new system, which will become the backbone of digitization of our labs, allowing for.

Tighter integration between our CRM system ordering systems, and ERP backend and allow increased efficiency across our entire enterprise will start to see the benefits in 2024.

To further reduce costs and improve margins, we have completed the consolidation of our international labs into one lab in Cambridge, UK and have improved processes on procurement and supply chain. We expect to see these benefits continue in 2024 and beyond.

Before I turn the call over to Jeff I want to take a minute to address the Fda's proposed unilateral regulation of lab developed tests as medical devices.

Even the substance of the proposed rule is in draft form and the agency has requested public comments on the topics that includes grandfathering is important to note that many instances around this topic are still hypothetical that being said Neil has a strong history of complying with cap and clear regulatory standards and we have also been working with multi excellent corporate coverage.

Termination.

We believe these factors taken together give us a head start over many other reference labs and providers performing similar testing we've operated our business in preparation for regulations for some time now and have executives and teams in place who have experience with the FDA approval process, including quality regulatory and R&D. Furthermore.

Our assay development over the last 12 to 18 months has been incorporating FDA design control and preparation for future submissions as.

As a member of ACL, a we will work with the association to ensure the continuation of patient care with limited business impact now, let me turn the call over to Jeff to review, our financial results in more detail Jeff.

Thanks, Chris and good afternoon, everyone I'll begin with a little more detail on our operating results for the quarter as Chris said, we continued the year with revenue experiencing accelerated double digit growth over prior year third quarter revenue was $152 million, an 18% increase over the prior year at three four.

The increase from Q2 of 'twenty three revenue growth was driven by growth in clinical test volumes are continuing shift to higher complexity test and improvement in revenue per test driven by business mix and revenue cycle improvements.

Adjusted EBITDA improved 129% from prior year to a positive $3 million Q3 marks the fourth consecutive quarter that adjusted EBIT increased from prior year.

We generated significant operating leverage as revenue favorability fell through to the bottom line with over 60% of revenue growth slowing to adjusted EBITDA.

Looking at slide eight clinical services revenue of $128 million was an increase of 20% year over year, driven by a 7% increase in volume and a 12% increase in revenue per test.

Higher volume is driven by growth within our existing client base as well as newly acquired customers and demonstrates that our sales force optimization strategy is enabling us to reach the oncologist pathologist and other physicians and providers we serve.

Turning to slide nine average revenue per clinical test increased by 12% over prior year to $440, representing an improvement for the 10th consecutive quarter versus prior year as we maintain our focus on higher value test and revenue cycle management initiatives as we've previously noted.

<unk> growth is a focus of our sales team with Ngls revenue approaching approximately 25% of our total clinical revenue for the year.

As a result of our strong performance in Ngls and the expansion of our sales team, we continue to see accelerated growth in Ngls.

On slide 10, as we noted on our Q2 call advanced diagnostics revenue growth slowed in Q3, with an increase of 8% versus prior year.

<unk> revenue grew slower than the third quarter due to macroeconomic conditions in pharma R&D spend as well as our decision to rationalize our global testing sites and low margin business.

This is expected to continue into the fourth quarter and early 2024. However, the focus on profitability and margin growth is driving performance with adjusted gross profit for AVX, improving by $6 4 million or 32% and adjusted gross margins improving by 440 basis points on it.

Year to date basis versus prior year.

Looking at the income statement on Slide 11, adjusted gross margin was 44, 2% an improvement of 247 basis points over the third quarter of last year, adjusted EBITDA was positive $3 million at $15 million or 129% improvement over the third 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.

Guarding operating expenses sales and marketing expense was $17 6 million as we continued to invest in the expansion of our Salesforce G&A was 61 5 million and R&D expense was $5 3 million. We did have a favorable R&D tax credit related to fiscal year 2022 1 million.

In the quarter.

In addition, there was $2 1 million in restructuring costs in the quarter related to the previously announced organizational restructuring and footprint optimization, which is part of our value capture program to gain operating leverage we.

We have revised our original restructuring plan cost and timing of projects and as a result, now anticipate these costs extending into 2024.

These charges will ultimately result in enhanced operational efficiencies as we continue to optimize our geographic presence.

Turning to the balance sheet on slide 12, we ended the third quarter with cash and marketable securities of $402 million, we continue to make good progress and diligently managing our cash burn and are focused on accountability and disciplined oversight of operating expenses.

<unk> flow from operations improved $11 million or 66% from Q3 2022 on a year to date basis cash flow from operations improved by $43 million or 68% in the year to date cash burn improved by $36 million or 50% over the first nine months of 2020 twos are strong.

<unk> financial position provides us the financial flexibility to continue to invest in the business and achieve our stages and financial objectives.

Given our Q3 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 14, we previously had revenues of $565 million to $575 million, representing 11% to 13% growth in 2023, we're revising that range upward and now expect total revenue between $585 and $592 million for the year representing 15%.

16% growth adjusted EBITDA was negative <unk> 13 to negative $10 million and is now negative four to negative $1 million and at the midpoint represents an improvement of $46 million or 95% from year end 2022.

We continue to see strong revenue growth and an increase in NGL product mix and are very encouraged by the opportunities for radar and other newly launched tests, which provide accelerated leverage to the bottom line.

As we stated at the beginning of the year our year over year comparisons will be more difficult in the fourth quarter, 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. Our strategic focus remains to deliver long term sustainable growth with that I'll turn it back over to Chris Thanks, Jeff.

As you can see we are very pleased with our year over year progress, including strong revenue growth of 18% and significant improvement in adjusted EBITDA. We now have three pending submissions for radar with multi X and we are generating additional data that will support expanded coverage in the future we.

We saw meaningful progress in the execution of our strategic priorities and therefore are raising our guidance for the full year results. We are well on our way to becoming the leading cancer testing information decision support company will continue to build on the foundation, we have laid out over the past several quarters to deliver long term sustainable growth I'm excited for our teammates.

Our customers, but for most of all the patients that we get to serve on a daily basis. Thanks, and we will turn it back over to the operator to open the call up for questions.

Thank you at this time, we will be conducting a question and answer session.

If you would 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 <unk>.

<unk>.

Once again Thats Star one if you have a question or comment.

First question comes from.

Mark Massaro with BT.

Please proceed.

Hey, Mark.

Hey, this is <unk> on for Mike Thanks for taking the questions and congrats on the strong quarter.

Just wondering any.

Any data points should we be keybanc foreign radar.

<unk> thousand seven clinical trials.

Typically Wang.

When might we be able to see a head to head comparison with a competitor.

Thanks.

Yes, why don't I, let vishal I'll take that you can talk a little bit about some of the key trials that we've got ongoing.

So one of the trials, we will have some initial data coming out of San Antonio, which is the tracer clinical trial.

Otherwise, we'll see data readouts throughout the year in 2024 in terms of head to head.

That's still something that we are considering it is not something that.

As a main focus for us where our focus is developing our own clinical data to get published and also to get <unk> approval.

Okay.

And then.

Two people from here with respect to operating leverage and Opex management.

Think about most of the improvement from here to be a dropdown in revenue growth and what are some areas you might be looking to optimize from hereon.

Okay.

Yes, I think as we've said in previous quarters, I think from an operating leverage standpoint, we continue to see a lot of different opportunities that can continue to drive results. We are seeing good progress on the volume front. This year and continue to see opportunities to drive volume growth, we've seen good growth in pricing as.

We focus our attention on higher complexity tasks, we talked about mgs growth represents only about 25% of our total clinical revenue today, and it's growing faster much faster than the overall market growth and so that area is going to drive performance as well, we continue to see opportunities to grow.

AVX business and we've talked about a few things for the for the margin perspective, implementing a new <unk> system is going to help us be more efficient to drive more improvement on the adjusted gross margin line.

Procurement and systematic buying will also help us drive performance there and then below the line on the Opex side, we're continuing to look for opportunities to get more efficient there as well you see our year to year Opex expense is down year to year.

Within the quarter and on a year to date basis, and Thats before even taking into account restructuring costs that we're hitting this year. So I think as we think about our drivers we see a lot of opportunity to continue to do what we've done this year and we'll talk more about 2024, when we give our Q4 guidance in February but we still see a.

A lot of runway to drive improved performance.

Thanks.

John can we move to the next question.

Absolutely. The next question comes from Andrew <unk> with William Blair. Please proceed.

Hey, guys. Good afternoon, Hey, Chris how are you doing thanks for taking the question, maybe if I could start on the durability of growth for that revenue per test metric you may be just sort of talk about how youre thinking about some of those drivers are sort of some moderation in that rate over time, just trying to figure out how much how much juice is left to squeeze just from internal initiatives.

Thanks.

So I'll hit at a high level, but I'll, let Jeff kind of walk through because there are really three main levers, but I think look one of them. Obviously has been mixed around Ngls and this is the first quarter as you know, we've kind of come out and disclose the growth on Ngls.

And the amount of revenue and look at being only 25% of clinical revenue. It gives us lots of runway because of where the ASP is and so that mix, we're able to continue to manage especially as we expand the sales force and continue to expand our presence with the oncologists versus pathologists in hospital, but Jeff do you want to kind of talk through the levers in the way because I know you do.

And the team and warrants spent a lot of time there. Yes. If you go back to 2021 and 2022, our revenue per test was growing anywhere between two and 7%.

Clearly seen an uptick in 2023 with our revenue per test with our Ngls growth now averaging almost 10% for the year. So I think we're going to continue to stay focused on growing Ngls and expect to continue to see growth over time and in revenue per test.

I'm not sure I would extrapolate 12% in one quarter over time, but I think we continue to expect to see growth and then I think there are two other areas that we have focused initiatives on the first is our revenue cycle just collecting more for their work. We're currently doing we've seen good improvements in that for the year and I think we actually have.

A multiyear opportunity there and then the last area is just price and we are seeing price increases our direct client build contracts and we're working on taking a more coordinated approach with our managed care pricing as well and this is an area, where we think dedicating some resources in some talent is going to help drive drive that rare.

So I think as we stand back and look at it we've had very strong growth. This year, but we still see I think a multi year opportunity to see revenue per test grow overtime, yes. So I think from a durability perspective, we see that continuing to run for.

For the next several years.

Okay. That's perfect and then I appreciate you guys actually given that color around sort of the NGF next year I wanted to ask on the non NGL side, because I think by my math, you guys put up growth call. It in the low teens to mid teens in the quarter can you maybe just talk about the durability of growth in that category as well just as we did.

Look at those more traditional test well.

Well I think look I would say that a couple of things are impacting that one is look I would say and we share this pretty publicly starting at the end of last year that we are winning much more now than we're losing so we're moving share and moving share is obviously, helping move modalities and I think when you think about those modalities they would grow I guess any.

We're from probably 2% to 4% would be normal market growth rates, we're growing faster than market. In every single one of our modalities, but in addition, with Jeff just talked about this whole strategy that we're that we're having around revenue cycle management doesn't just help with Ngls, but it helps across the board and so that's helping us from a revenue perspective.

And all of those modalities. So we're seeing really nice growth there and I think that look we still when you look at the whole market. There is still lots of runway where from a market share perspective, where we believe that we can we can only not only win new accounts, but also expand and I think more in the east here. So we can.

Towards the warrants, but I think one of his strategy Hasnt been just go win new accounts would go into your current accounts, we don't have the business and start moving share there, but is there anything else because I think thats, probably the high level Christian is that ultimate commercial strategy.

And again.

We're losing less than what we have in the past a fundamental for us to build one.

And we are expanding share of wallet is obviously significantly easier to existing customers.

And we've actually really really effective at it.

The area of largest growth and then obviously when EU estimates, which is <unk>.

We've expanded our sales resources net to another area that we focus in on and we feel that a lot of the wins that we secured in 2020.

Between two and four which obviously provides some tailwind as you move into next year, that's really effective execution of the strategy, which is driving above market growth.

And then I think that we can clearly see a correlation between improved turnaround time and sales growth as well as our operational efficiencies continue to improve.

It's helping us drive incremental volume.

Okay that was great. Thanks, guys.

Thanks, Ed.

The next question comes from Alex Nowak with Craig Hallum. Alex. Please proceed.

Hey, Alex Okay, great. Good afternoon, Hey, good afternoon, everyone.

Strong NGL gains as we've talked about here so far in the call.

The company lost market share in Ngls in the molecular business over the last couple of years really for the new team has joined so is this really taking back market share from those gains that were laws or is it better penetration of ngls into your existing customers that maybe haven't used and GFS.

<unk> expense.

I would say, yes, I mean, it's really close I mean, I think we have the market growing 15% to 20%. So when we're growing 35% plus not only are we growing at the market, but we're moving share.

So it's really a combination of both.

Okay got it and then Nebraska Mol Dx Resubmission here is that going to beat the grant of broader MRV and recurrence label versus the five year recurrence label, we have today.

Let me, let vishal and kind of take that wanted to talk about what's going on with our products ammonia. Yes. So that is correct. It is going to be an expansion to our current.

Crude oil that we have from all of the assets both in the recurrent staff surveillance space.

Very easy excellent. Thank you.

Thank you.

Up next we have David Westin Berg with Piper Sandler David. Please proceed.

Hi, David Thank you Hi, guys. Thank you for taking the questions and congrats on a really good quarter.

So I mean I appreciate all the commentary on the in the NDS growth. The ASP lift I mean, it was really big and so I wanted to actually just cut in and a little bit more into that life revenue cycle management piece.

I don't know if you can quantify it but kind of.

Help us frame the size of that lift how much meaningful what is there to chop in terms of revenue cycle management and then just may be even in this quarter was there any one time in this quarter from that revenue cycle management just to be aware of as we're modeling asps because I think you beat the street by like $40.

Or something like that in the in.

In the quarter.

Yes, let me maybe take it a couple of ways and let Jeff kind of get into the details. So we haven't disclosed how much the opportunity is but when we built.

The way we've thought about the business over the next several years there is opportunity to continue to move that up and David I think we may have even talked about this when we met in San Francisco that being new to the industry I'm incredibly surprised that just general how bad the industry is getting paid for the work that we do and I think we believe that reimburse.

First men and billings should be a core competency of the company. So we're spending a lot of time resources and energy I would say doing innovative things that we think will significantly improve our ability to get paid for what we do but Jeff do you want to give more.

Yes.

From an overall NGL perspective, I think roughly 60 plus percent of the revenue per test is driven by just Ngls mix and price within <unk> and then the balance would be revenue cycle initiatives and other other modalities that were seeing growth in and so again with that with our relatively low penetration for us.

<unk> as a percentage of our total clinical revenue and our continued focus on driving that we do see an opportunity to continue to drive that again I wouldn't extrapolate one quarter, but we've got 10% revenue per test year to date and is clearly stepped up from where we've been the previous eight to 10 quarters before that.

Got it and just a real quick one or maybe it is not really that quick but just thoughts on Panama, if and when it returns how we should think about that for 'twenty four 'twenty five in terms of our model. Thank you.

I'll take that one, yes, if and when it returns.

It's difficult to <unk> 70, the lower value modalities.

Some of the cast oscillated at the end of the day.

As we look forward into the futures, we don't see that as a material impact to job performance.

If it gets materially it will be a marginal headwind.

EBIT nothing too material because it is with the lower value modalities that are in focus.

Thank you.

Thanks, David.

Okay. The next question comes from tires seventh with Morgan Stanley. Please proceed.

Hi, This is Madison patchy Jake on for P. J.

Congrats on the strong quarter.

Just looking at the guide and what it implies fourth quarter could you maybe give us some color on why you think about the kind of sequential flat sequential growth for top line is a fair assumption for the quarter and is there any conservatism baked into the guide.

And what are you assuming on a budget flush there for a final point.

Yes last year in the middle part of your question can you say that plasma generally Julian and argument.

I lost you in the middle of <unk> can you say that again, you're talking about.

The conservative conservatism in the guide but.

Yeah, Yeah, just wondering what kind of conservatism is built into the guide for the fourth quarter and if youre, assuming kind of any budget flush just looking at it looks about flat sequentially from third quarter to fourth quarter, So trying to parse out some color there.

Yes, I mean, the midpoint is roughly flat, but it is a range of performance for Q4, So I wouldn't call. It anything unusual in Q4.

We expect to see continued improvement as we have throughout the year.

Clearly as we think about.

Guidance for Q4, I wanted to give a range that we thought it made sense.

Got you that makes sense.

You are assuming there on the on the budget flush.

And the one that just slashed.

I'm not sure what you mean by Brendan.

Okay.

I'm sorry.

Sorry, I don't understand it.

Yeah, I'll just move on to the next question Okay.

Okay.

Can you talk a bit about any conversations you've been having with biopharma customers feedback you've been getting from them.

And I know you talked a bit about that.

The tougher macro environment and AVX, so any color there you've been seeing.

Yes, I can take us so we do hear from our pharma customers that.

The risks are.

Solid data in terms of the number of clinical trials that theyre running number of compounds that they are focusing on.

Lot of it was earlier on in the small biotech, but we are investing a little bit on the larger the larger pharma companies also so based off that I mean, thats why we saw a little bit of a slowdown in Q3 compared to the previous quarter and we do expect it to continue a little bit going into Q4 and early 2024, but we are hearing consolidation, especially when it comes to the programs.

They're focusing on the limited number going into 2024, and I think our broad menu of testing does help us. It does soften soften some of that impact because we're not just focused on a couple of different single modalities and it's a small percentage.

Yes, we talked a lot about the importance of a portfolio effect, I mean, having informatics and pharma radar clinical.

If one of the slows down a little bit in the quarter, even though you see good long term opportunities the others covered and I think thats, what you really saw it here in the quarter.

Got you that's really helpful. Thank you.

Thanks.

The next question is from Mike Matson with Needham Mike. Please proceed.

Hey, Mike Hey, everyone, Hey, this is Joseph on for Mike.

Congrats on the quarter.

Maybe just a couple around radar Chinese.

Yes.

Put this all into one but for breast looking just at the expanded coverage do you think that timeline could be a little bit quicker than.

The other two submissions just given that you've already had dialog with them.

Previous submission.

And then just a reminder, I know you guys said it before but under the.

Under the current reimbursement profile for breast and you guys have.

What percentage of that potential volume for breast cancer patients.

Is there with the current reimbursement.

And then just looking at the other three.

Submissions that you guys announced can you maybe just talk about your confidence on those submissions.

I have enough evidence in.

With those.

You guys.

<unk> necessarily get awarded for colorectal Youre looking at more evidence for that maybe could you put a time lineup.

When you're expecting that submission if it could be by the end of the year.

Okay, there's a lot of quite a bit of loved ones. There. So my bad.

To ask one question.

Yeah.

So so I would say that.

We do expect.

A faster timeline on the breadth of the expanded breadth compared to what we saw with the colorectal as an example, we were able to go out and get the initial breast indication and we believe that we have a relatively good handle as to what is expected by <unk> now.

In terms of the.

A number of <unk> coming from breast cancer patients versus our current submission and we haven't broken it down by type of castle. So far so I think we're going to leave it at that but.

We obviously focus a lot of breast cancer because of our high sensitivity.

The value proposition that you need in breast cancer.

Confidence in the other submission.

I think.

For head and neck and for as long as we've mentioned we have submitted one of the big things that we have with colorectal that we did not have with colorectal that we do with these submissions are obligations that we feel are strong and we are feel will add a lot of value, especially when it comes to patient here. So we've utilized dose as part of our submissions.

And in CRC at this point, we're probably looking at something for CRC in 2024 and not in 2023.

Okay, great. Thanks.

Yes that was everything remember the operator Amy.

Thank you.

So those great ill just do one more quick one that on.

On our radar and it will just be a single question.

I guess just looking into 2024, maybe this time next year in 2024.

You could have.

Radar clinically in multiple different cancers. We've just wondering if you could kind of frame up.

Maybe the gross margin for those I guess, the high bar that low Barb what type of gross margin you could gross margin improvement you can see from these tests as they.

Start to ramp clinically.

Yes, yes, I admired you're trying to get that question, but we obviously havent given guidance for 'twenty four and look it's early days with radar. So I think look I think what we believe it's important to get coverage in a way to get coverage is to make sure you are running the right clinical trials and getting those published so look this is the first time, we've ever talked publicly about how.

The ongoing clinical trials, we have to give color there there's a lot going on with radar. So I think as that starts to come to fruition. We will update you both were not giving any kind of financial guidance around gross margins or anything on radar for next year.

Yeah, Okay sure fair enough well congrats on the great quarter you guys. Thank you.

The next question comes from Tom Stephens with TD Cowen.

Tom Please proceed.

Tayo massive quarter congratulations.

I just had a quick one again just to kind of beat the dead horse on Youll kind of CGP portfolio and kind of just just where youre winning that you talked about operational efficiency you talked about in our more specialty sales force as it is as simple as thoughts on on time and being in front of clinicians or is there something more going on.

Well I think theres a lot of things at play I mean, I think a lot of these fit under our sales optimization strategy and our focus and as you know we started adding field people towards the end of last year and then into this year to start to focus more on community oncologist, because we had been pretty heavy on the pathologist in the hospitals.

I think thats definitely making an impact we were really a non player in solid until we launched the product in March takes the time to get the product moving and look we continue to be the heme leader and we continue to bring new innovations out on the heme side. So I think it's multiple things, but maybe let me give a warranty maybe give even a little more color around it.

I think the multiple things as executive member of things exiting constant not be one of the first things I want to call out is the work we've done operational.

And we spoke about that in the call, but obviously with the importance of.

As the Ngls due to over performance, we give that extra focus and you've done really well the instrument turnaround time.

Added resources in the field and the second factor here that is really contributing to the success and then third the execution of the sales strategy I spoke about earlier, coupled with new product that we brought to market not only the CGP panel that we brought to market.

In March of this year, but most of the new heat near comprehensive that we launched.

Earlier in quarter three those other contributed a number of factors and consequent debt.

The compounding one item that's driving the performance.

Wonderful, yes, so I guess I'll start with the two parts of that I guess just on the back of that going into next year should we expect new kinds of growth rates going into 'twenty four within the MBS portfolio given the number of launches in the sequence you've had this year and then just the second one would be emulated is kind of how.

Have you guys thought about well outlined kind of the net gross margin benefit you get from this lens.

So internally, we have I mean, I think as Lindsay was a huge project and give you an idea even the planning of it took us several months to really get to a place where we felt good about it we carved it out of the business, so and given a dedicated resources to ensure that.

We're able to get the focus and the execution, but when you've done.

Five acquisitions over the time in history of the company and running on multiple multiple limb systems. The inefficiency from a gross margin perspective significant as.

As you know when you put one of these and as like doing an ERP project. It takes time, so youre not going to see this start.

Starting January one right. We believe we will get some positive impact starting in each one of 24, but it really is an ongoing that we think we will see.

Four have taken it to say we're over two year period, we will see continued impact on that and then anything just on the Ags growth look we continue to expect Ngls are going to grow next year, but we'll give more color on that as we give our guidance going into next year.

Wonderful congrats on the quarter I will get back in the queue.

Yes.

Once again, if you have a question or comment please indicate so by pressing star one up next we have Matthew <unk> with Goldman Sachs. Matthew. Please proceed.

Hey, Matt.

Hey, guys. This is carter on for Matt.

Congrats on the quarter and thanks for taking the question.

So do you could you clarify on the additional breast MRV submission I know, it's been talked about but is that for triple negative breast cancer.

Sean go ahead.

Hey, Matt Yes, it is for triple negative breast cancer.

Got it okay. Thank you and then.

How much market share do you see radar capturing over the longer term.

Given the competitive landscape.

Well look I think the way to think about.

Lot of Jan.

All in rate of the market. The analysts have been writing this $20 billion market and less than one or 2% penetrated. So there's a lot a lot of runway I mean, obviously there is a company in front of US there is multiple companies coming out but.

I would not say that we will publicly disclosing what the share is I would say look what we're seeing is our sensitivity is significant and we're seeing that really makes a difference.

And disease cancer States, where sensitivity matters places like breast lung et cetera. So I think it's just too early to try to speculate how the share will wake up and look big big market with lots of opportunity.

Got it and just lastly, any color on the sales force expansion.

Yes, so we continue to expand our sales force in the latter part of Q3 and into Q4, a lot of the work we're doing in food transparency really culminates into its been a redeployment that we're kicking off very early in 2024 that will position us to continue that <unk>.

Some that we've experienced in 2023, thus far.

Got it thanks guys.

The next question comes from Mason Torrico from Stephens. Please proceed.

Hey, guys. This is Jacob on for Mason. Thanks for taking the question congrats on a strong print. So I appreciate all the color on the Ngls growth.

Lots been covered there, but maybe just taking a little bit deeper in there could you talk about how the growth trended during the quarter and NGL across heme versus solid tumor.

So we.

Build all our Ngls kind of together so we don't break out what team are solid. So I think we've been pretty open publicly that we were really a non player in solid two we launched our our new our new panel in March, but we don't disclose which how much his team or how much of it and we don't really talk about inter quarter.

It's either so we preferred just talk product in quarterly increments.

Okay. Yeah. Thanks, Thanks for that.

So it's really for competitive reasons, it's not that we don't want to give any color, but look as we look at the highly competitive place and I think we're really pleased with where things are going and we just from a competitive perspective don't disclose that.

Yes that makes sense so on that new touchy launched neo comprehensive it's been out there in the market for a little bit now could you maybe talk about how adoption trended and maybe more specifically do you think you are converting docs away from competing offerings.

I've been on the market for a little bit or do you think the majority of the growth that growth is just coming from broader market expansion.

Yes, it's a combination of both.

In many cases that we can cite with being conversions that we've managed to accomplish.

And.

In other cases, we have go to market expansion because of the growth in the market that we remained key benefiting from so it's a combination of both.

And again I reiterate with bank debt investments from our sales teams are is really what's helping you I don't think thats up a lot and don't one of the things that has always been a strength of neo has been the community said, so think about the community oncologists and a lot of them. There is a lot of our competitors who are living primarily in university or research institutions, and so our ability to continue to be.

Penetrate the community oncologists as a key factor to our growth I mean, a lots and lots and lots of treatments going on in the community.

Got it and then if I can just squeeze in one final one here on your commercial sales team you talked about how you are continuing to expand in Q3 and Q4, but thank you.

So you mentioned that you really didn't materially plan on materially scaling that team in 2024 is that still the plan or have your thoughts changed there.

Yes, I think.

Most of the investments that we are going to do from a commercial expansion to sneak them are happening at the very back end of this year and then some of it may roll into Q1, but it's all part of a larger plan for trade main floor.

And as resources to really focus in terms of <unk>.

Customer facing but also putting a may see in the back office to ensure better enablement. Because this is where are we going to drive that productivity improvements of the sales team, which is going to allow us to sort of.

Or do more with the existing team that we have so that's going to help to negate the need for further investment certainly in 2024 that we will re evaluate that later probably this time next year in terms of what we wanted to do for 2025.

Alright that makes sense thanks, guys.

Thank you.

The next question comes from Puneet <unk> with Leerink partners. Please proceed.

Hi, guys.

Yes, Chris Thanks for taking the question so.

Maybe at a high level.

And I apologize if this was covered but I wanted to get your view on the revenue cycle management has been a big focus obviously youre seeing improvement here in.

That is remarkable so maybe can you talk about where you are in that revenue cycle management transformation process how far.

Done and sort of what's left to go maybe just talk about that.

At high level, a few quick yes.

Yes beneath I know, it's a busy day with the markets closed we did cover some of it early but we are.

Happy to jump back into it look I think one thing we talked a lot about is our mix and by Ngls being 2025% of the clinical revenue lots of runway and so obviously higher asp's et cetera, but what Jeff did kind of dive into a little bit more where the other levers do you want to talk about it I mean, we did talk about revenue cycle is a multiyear strategy as we can.

And have looked at it but do you want to give yes, I would say we're still in the early phases of capitalizing on the opportunity in revenue cycle.

I said earlier on the call was roughly about 60% plus of our improvement in revenue per test was driven by <unk> mix and the balance was pricing.

Revenue cycle improvements and some mix in our other testing volume, but it but as we think about what we're expecting to get paid and what we are getting paid we still see room to improve there and it's not a one quarter or two quarter process I think its a multi quarter process, we want to use technology more efficiently.

To make sure we're being efficient making sure we're getting prior authorization is making sure that where you have a medical necessity covered medical records covered so theres a lot of different drivers and frankly varies by payer where the opportunity exists, but I think we have a good good handle on where we're not being paid and have plans in place to <unk>.

Those back and you want to talk a little bit about contracting with what we have with 200 payer contracts, but how you thought the managed care runway. Yes. So managed care was another area just pricing and we also have a pricing lever, which is from our direct client Bill where we can do pricing announced about 65% of our clinical revenue and the remaining third is managed care.

<unk> and we've added resources to really go after in a more coordinated sophisticated way pricing improvements in our on our managed care side of the business. So it's multifaceted and Thats why we think we have.

We still have room to run over the next couple of years in this area.

Got it Super that's.

Thanks for all the insights there.

And then one more on.

Labor inflation was.

But if a concern early on and then the cost of goods was a was a concern continues to be a concern for some of the labs, but just maybe just talk to us a we're all about labor cost and inflation that you that you are seeing.

And if do you see.

The layoffs, among the biotechs and some of the diagnostics companies out there potentially giving you an opportunity and the hiring landscape.

To address some of those concerns in the market. Thank you well look I definitely think when some companies who've gotten out over their skis and they do some type of.

Changed from a financial perspective, we definitely look for great teammates I mean, I think our people are our greatest asset. So I think anytime we can add there I think the other thing that's really helped US is we're pretty diverse in where we are I mean, we have wet lab in Houston, and Orange County in Fort Myers, and Raleigh, and so I think that we feel incredibly good about the.

Our labor pools in those markets and our ability to attract and keep great talent. So we have not seen a big impact.

I will say that our view is that we want to make sure that we hire the best and we pay them fairly but I wouldn't say that we've had a big impact the one thing and again. This came out in my pre remarks is that we really neo didn't really spend a lot of time around purchasing and procurement and we spent as you can imagine.

Millions of millions of millions of dollars and so one thing that has changed over the last six months to bring in a chief procurement officer, and our ability to put some systems in place that we think allows us to do a much better job.

Managing the purchasing side of the business.

Got it Okay Super I think all the radar questions are covered so im good. Thank you alright.

Alright, thanks, so much.

Okay. We have reached the end of the question and answer session I will now turn the call over to management for any closing remarks.

Okay. So for the folks that are still on look we really appreciate you taking the time it was a busy day in our sector in the market. So thanks for hanging in there with us and learn a little bit about what would happen in the Q to Q.

Q3, and look we will look forward to coming back to you with the Q4 results sometime after the first year until then take care.

Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.