NEOGENOMICS INC (NEO)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in this Annual Report on Form 10-K. The information contained below includes statements of management’s beliefs, expectations, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the introductory note to this Annual Report under the caption “Forward Looking Statements,” which information is incorporated herein by reference. For discussion and analysis pertaining to 2023 overview and highlights as compared to 2022, please refer to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 20, 2024.

Our Company

NeoGenomics, Inc., a Nevada corporation (the “Company,” or “NeoGenomics”), and its subsidiaries provide a wide range of oncology diagnostic testing and consultative services which includes technical laboratory services and professional interpretation of laboratory test results by licensed physicians who specialize in pathology and oncology. The Company operates a network of cancer-focused testing laboratories in the United States and the United Kingdom.

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2024 Overview and Highlights

•We increased revenue by 11.6% compared to 2023;

•Net cash used in operations improved $9.0 million compared to 2023;

•We increased Adjusted EBITDA $36.1 million to positive $39.6 million compared to 2023; and

•We improved gross margin by 259 basis points while also improving turnaround time.

Company Outlook

Advances in science and technology are driving a proliferation of oncology therapies and associated diagnostic tests. These diagnostic tools and therapies are increasing survival and enhancing quality of life for cancer patients. As a leading global oncology diagnostics company serving biopharmaceutical companies as well as practicing oncologists and pathologists, NeoGenomics facilitates the adoption of these advanced oncology diagnostic tools beyond the academic environment into the community setting. We are continuously enhancing and expanding our test menu to ensure that providers and patients have access to leading edge solutions such as advanced molecular testing and state-of-the art digital pathology. Moreover, our team of MDs and PhDs, along with our highly-trained oncology-focused sales team, provides ongoing education to our clients to ensure that they remain abreast of cutting-edge developments in oncology.

We are a leading provider of oncology-diagnostic services to biopharma companies. We will continue to work with these clients across the drug development continuum—from research and development through clinical trials testing—to commercialization of companion diagnostic tests. We expect to continue to grow our business through (i) expansion of our test offerings (including leading edge NGS tools such as WES, WGS, and others), and (ii) our unique capabilities for developing and commercializing companion diagnostic tests.

We are continuing to develop and broaden our oncology data solutions to leverage our strategic market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We are committed to connecting patients with life-altering therapies and trials. In carrying out these commitments, NeoGenomics aims to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and has invested in leading technologies to help ensure the data we maintain is secured at all times.

We believe lower cost and increased value of testing is extremely important to the healthcare industry and creates a competitive advantage. We will invest in information technology, automation and best practices to continually improve our processes and drive down the cost of testing. We will continue to expand our test menu and expect to remain at the forefront of the ongoing revolution in cancer related genetic and molecular testing to achieve our vision of becoming one of the world’s leading cancer testing and information companies.

We continue to develop our company-wide focus, which includes the following four critical success factors for 2025:

Profitably Grow Our Core Business

•Accelerate volume growth; both through the traditional clinical and NGS modalities;

•Accelerate growth with oncologists in the community; and

•Execute pharmaceutical client strategy and deliver profitable revenue growth.

Accelerate Innovation

•Deliver 3-year product roadmaps;

•Execute successful timely-planned product launch(es); and

•Drive productization and sales excellence for Data Solutions.

Drive Value Creation

•Improve operational efficiency and gross margin;

•Transform Neo’s digital ecosystem; and

•Achieve positive cash flow from operations.

Enhance Our People and Culture

•Enhance our Neo Culture; and

•Expand scientific, medical and product capabilities.

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These critical success factors have been communicated throughout our Company. We have structured departmental goals around these factors and have created employee incentive plans in which every employee will have a meaningful incentive for our success.

Regulatory Environment

The FDA is currently considering changes that may include increased regulation of LDTs by the FDA. In October 2014 the FDA announced its proposed framework and timetable and indicated it would move toward greater oversight of LDTs. The FDA has not finalized the framework they announced in 2014. In 2017 the FDA shifted its approach to oversight of LDTs, indicating that they would work with Congress and stakeholders on a new legislative framework and pathway for all diagnostic testing. In 2018 the FDA began limited enforcement activities on a subset of LDTs known as pharmacogenetic testing (“PGx”). NeoGenomics is a member of the American Clinical Laboratory Association (“ACLA”), which has been in active discussions with the FDA and Congress regarding the FDA oversight of LDT’s. However, recent agency announcements made in the context of the COVID-19 public health emergency have produced a shifting policy landscape and further uncertainty regarding the FDA’s role in regulating LDTs: in August 2020, HHS announced that the FDA would not require premarket review of LDTs absent notice-and-comment rulemaking, but in November 2021, HHS issued a statement withdrawing that prior announcement, indicating a return to FDA’s longstanding approach to the regulation and enforcement discretion toward LDTs. The most recent such proposal, the VALID Act, was introduced in both the House and Senate on June 24, 2021. The VALID Act was expected to be included in the Omnibus bill signed at the end of 2022, but ultimately was not included and that, as such, it remains unclear whether the VALID Act will be passed 2023 or whether FDA will proceed through rulemaking.

On April 29, 2024, the FDA announced a final rule on the regulation of Laboratory Developed Tests (“LDTs”) which amends the FDA's regulations to make explicit that LDT's are devices under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”). The FDA issued a policy to phase out, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs. The FDA is allowing currently marketed tests offered as LDTs (that were first marketed before May 6, 2024) to stay on the market without requiring pre-market review and approval by the FDA. Similarly, the FDA will not require pre-market review and approval by the FDA for tests approved by the New York State Department of Health Clinical Laboratory Evaluation Program.

We closely monitor changes in legislation and take specific actions to identify and estimate the impact of changes in legislation whenever possible as regulatory changes can affect reimbursement for clinical laboratory services. We do not anticipate significant changes to our revenue in 2025 resulting from known changes in legislation or rulemaking.

Reportable Segments

In 2024, we simplified our operational approach, bringing Clinical Services and Advanced Diagnostics under a single segment. This decision was driven by an analysis of our reporting structure, the information available to our Chief Operating Decision Maker (“CODM”), and the strategic decisions being made to manage the business. This decision aims to streamline our operations and enhance our service offerings to our diverse client base, which includes community-based pathology and oncology practices, hospital pathology labs, reference labs, academic centers, and pharmaceutical companies.

Revenue Streams

Our single operating segment now encompasses a comprehensive range of services previously categorized under Clinical Services and Advanced Diagnostics. The revenue streams include:

•Clinical cancer testing;

•Interpretation and consultative services;

•Molecular and NGS testing;

•Comprehensive technical and professional services offering;

•Clinical trials and research;

•Validation laboratory services; and

•Oncology data solutions.

Service Offerings

Our clinical cancer testing services are designed to complement the work of community-based pathologists and oncologists, allowing them to expand their testing capabilities without significant investment in new technology or personnel. We offer

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both technical component (“TC” or “tech-only”) and professional component (“PC”) services, enabling our clients to participate in the diagnostic process. These services are designed to be a natural extension of, and complementary to, the services that clients perform within their own practices.

We believe our relationship as a non-competitive partner to community-based pathology practices, hospital pathology labs, reference labs, and academic centers empowers them to expand their breadth of testing. We believe this enables them to provide a menu of services that could match or exceed the level of service found in any center of excellence around the world. Community-based pathology practices and hospital pathology labs may order certain testing services on a TC basis, allowing them to participate in the diagnostic process by performing the PC interpretation services without having to hire laboratory technologists or purchase sophisticated equipment needed for the TC tests.

We also support our pathology clients with interpretation and consultative services using our own specialized team of pathologists for difficult or complex cases, as well as provide overflow interpretation services when requested. For oncology, dermatology, and other clinician practices that prefer a direct relationship with a laboratory for cancer-related genetic testing services, we typically offer a comprehensive service where we perform both the TC and PC components of tests. Larger clinician practices internalizing pathology interpretation services can benefit from our tech-only service offering, allowing them to participate in this diagnostic process while we handle the more complex molecular testing services.

We are a leading provider of Heme oncology diagnostic testing, which includes molecular and NGS testing, and one of the key providers of solid tumor NGS testing solutions. These tests are interpreted by our team of molecular experts and are often ordered in conjunction with other testing modalities. NGS panels, one of our fastest-growing testing areas, enable clients to receive significant biomarker information from limited samples. These comprehensive panels can allow for faster treatment decisions for patients as compared to a series of single-gene molecular tests being ordered sequentially. Our broad molecular testing menu includes NeoTYPE and Neo Comprehensive panels which target genes relevant to a particular cancer type. Additionally, we have molecular-only and comprehensive NGS-targeted panels which combine DNA and RNA into a single workflow. This approach captures a full spectrum of genomic alterations, including mutations, fusions, copy number variations, and splicing mutations, as well as tumor mutation burden (TMB) and microsatellite instability (MSI) for solid tumors. These tests are complemented by IHC and FISH tests when necessary. This comprehensive molecular test menu allows our clients to obtain most of their molecular oncology testing needs satisfied by our laboratory. This is attractive to our clients as patient samples do not need to be split and then managed across several laboratories. The acquisition of Inivata in June 2021 enhanced our capabilities with oncology liquid biopsy technology including RaDaR® which is designed to detect residual disease and recurrence in plasma samples from patients with solid tumor malignancies. These molecular laboratory and NGS capabilities are expected to drive growth in the coming years.

Our specialized pharmaceutical development services support pharmaceutical firms (“sponsors”) in their drug development programs, from biomarker discovery to commercialization. This includes supporting clinical trials, research, and the development of companion diagnostics. Our team works closely with sponsors to design studies, perform required testing, and provide key analysis and insights. Each trial is supported with rapid turnaround time, dedicated project management, and quality assurance oversight. We also assist with FDA submissions for companion diagnostics and offer Day 1 readiness programs to speed drug commercialization.

These services provide comprehensive support in oncology programs, including biomarker discovery, study design, clinical trial testing, and companion diagnostic development. We aim to help clients discover the right content, refine biomarker strategies, and develop effective pathways for clinical trial testing. Our oncology data solutions, which involve the licensing of de-identified data to pharmaceutical and biotech customers in the form of either retrospective records or prospective deliveries of data, are designed to leverage our unique market position to solve real-world problems, such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. This integration aligns with our broader service offerings to provide seamless, comprehensive support for both clinical and pharmaceutical clients.

Strategic Focus

By streamlining our segments, we aim to provide a seamless and integrated service offering to our clients. This approach allows us to leverage our expertise in oncology and molecular diagnostics to support both clinical and pharmaceutical clients more effectively. Our commitment to connecting patients with life-altering therapies and trials remains a core focus. We have invested in leading technologies to secure data and maintain transparency and choice for patients through our Notice of Privacy Practices.

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Financial Impact

In 2024, the combined segment accounted for 100% of our consolidated revenue, with Clinical Services previously contributing 84% and Advanced Diagnostics contributing 16% in 2023. For further financial information, please refer to Note 16. Segment Information, in our Consolidated Financial Statements included in this Annual Report.

This decision is expected to drive growth and operational efficiencies, positioning us as a leading provider of comprehensive oncology diagnostic services and supporting the development of new therapies in the pharmaceutical industry.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a complete description of our significant accounting policies.

Our critical accounting policies are those where we have made difficult, subjective, or complex judgments in making estimates and/or where these estimates can significantly impact our financial results under different assumptions and conditions. Our critical accounting policies are:

•Goodwill;

•Contingencies; and

•Revenue Recognition and Accounts Receivable.

Goodwill

We evaluate goodwill on an annual basis in the fourth quarter, or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management performs a quantitative goodwill impairment test. The quantitative analysis is performed by comparing the fair value of the reporting unit to its carrying value. If the carrying value is greater than the estimate of fair value, an impairment loss will be recognized for the amount in which the carrying amount exceeds the reporting unit’s fair value. We estimate the fair values of our reporting units using a combination of the income, or discounted cash flows approach and the market approach, which utilizes comparable companies’ data.

On October 1, 2024, we performed a qualitative assessment to determine whether it was more likely than not that the fair values of our reporting units were less than their carrying values. As a result of the qualitative assessment, we determined that it is not more likely than not that the fair value of our reporting units is less than their carrying amounts.

Contingencies

We accrue contingent losses when estimated impacts of various conditions, situations or circumstances involve uncertain outcomes. Contingent losses are recorded based on management judgment along with internal and external advice from legal counsel and/or technical consultants. Estimated losses from contingencies are recorded when both of the following conditions are met: (i) information available before the financial statements are issued (or available to be issued) indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and (ii) the amount of loss can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, that amount shall be accrued. When no amount within the range is a better estimate than any other amount, however, the minimum amount in the range shall be accrued.

Revenue Recognition and Accounts Receivable

Our specialized clinical services are performed based on an online test order or a written test requisition form. The performance obligation is satisfied and revenues are recognized once the clinical services have been performed and the results have been delivered to the ordering physician. Additionally, we enter into contracts to provide pharmaceutical development services and oncology data solutions. Revenue is recorded on a unit-of-service basis based on the number of units completed towards the satisfaction of a performance obligation.

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Services are billed to various payers, including client direct billing, commercial insurance, Medicare and other government payers, and patients. Revenue is recorded for all payers based on the amount expected to be collected, which considers implicit price concessions. Accounts receivable related to clinical services are reported for all payers based on the amount expected to be collected, which also considers implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration we expect to receive based on negotiated discounts, historical collection experience, assumptions in payer mix, and other anticipated adjustments, including anticipated payer denials. Collection of consideration we expect to receive typically occurs within 90 to 120 days of billing for commercial insurance, Medicare and other governmental and self-pay patients and within 60 to 90 days of billing for client payers.

The following table reflects our estimate of the breakdown of net revenue by type of payer for the years ended December 31, 2024, 2023 and 2022:

Results of Operations for the year ended December 31, 2024 as compared with the year ended December 31, 2023

Revenue

The Company has historically reported its activities in two reportable segments, (1) Clinical Services and (2) Advanced Diagnostics. In 2024, we simplified our operational approach, bringing Clinical Services and Advanced Diagnostics under a single segment. The consolidated revenue for the years ended December 31, 2024 and 2023, are as follows (dollars in thousands):

Revenue in 2024 increased $68.9 million, or 11.6%, as compared to 2023. Increases in revenue reflect an increase in test volume, a more favorable test mix, and an increase in average unit price due to strategic reimbursement initiatives partially offset by lower RaDaR® revenue.

Cost of Revenue and Gross Profit

Cost of revenue includes compensation and benefit costs for performing tests, maintenance and/or depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, delivery and courier costs relating to the transportation of specimens to be tested, amortization for acquired intangible assets, and stock-based compensation.

The consolidated cost of revenue and gross profit metrics for the years ended December 31, 2024 and 2023 are as follows (dollars in thousands):

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(1) Cost of revenue for the twelve months ended December 31, 2024 includes $19.6 million of amortization of acquired intangible assets and $1.4 million of stock-based compensation. Cost of revenue for the twelve months ended December 31, 2023 includes $19.6 million of amortization of acquired intangible assets. There were no stock-based compensation amounts recorded for the year ended December 31, 2023.

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Consolidated cost of revenue increased $23.4 million for the year ended December 31, 2024 when compared to the same period in 2023 primarily due to $15.5 million in higher compensation and benefit costs, an increase in supplies expense of $6.9 million, and an increase in professional fees of $0.9 million, partially offset by a decrease in technology and equipment fees of $0.6 million.

Gross profit margin for 2024 was 43.9% compared to 41.3% in 2023. This 2.6% increase is primarily related to increases in revenue partially offset by higher compensation and benefits costs and supplies expense.

General and Administrative Expenses

General and administrative expenses consist of compensation and benefit costs for our executive, billing, finance, human resources, information technology, and other administrative personnel, as well as stock-based compensation. We also allocate professional services, facilities expense, IT infrastructure costs, depreciation, amortization, and other administrative-related costs to general and administrative expenses.

Consolidated general and administrative expenses for the years ended December 31, 2024 and 2023 are as follows (dollars in thousands):

General and administrative expenses increased $16.6 million in 2024 compared to 2023. This increase was partially due to an increase in legal and other professional fees of $8.3 million, an increase in compensation and benefit costs of $7.2 million, and an increase in depreciation of $1.6 million. These increases in general and administrative expenses for the year ended December 31, 2024 were partially offset by a decrease in amortization of $1.7 million, and a decrease in credit card fees of $1.0 million.

Research and Development Expenses

Research and development expenses relate to costs of developing new proprietary and non-proprietary genetic tests, including compensation and benefit costs, maintenance of laboratory equipment, laboratory supplies (reagents), and outside consultants and experts assisting our research and development team, as well as stock-based compensation. Research and development expenses are presented net of research and development tax and expenditure credits from the UK government, which are recognized over the period necessary to match the reimbursement with the related costs when it is probable that the Company has complied with any conditions attached and will receive the reimbursement.

Consolidated research and development expense for the years ended December 31, 2024 and 2023 are as follows (dollars in thousands):

Research and development expenses increased $3.9 million in 2024 compared to 2023. This increase is primarily due to increases in professional fees, a decrease in research and development tax credits from the UK government and an increase in compensation and benefits costs.

We anticipate research and development expenditures will increase in the future as we continue to invest in development activities for innovation projects and bringing new tests to market.

Sales and Marketing Expenses

Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, marketing and client service personnel, and stock-based compensation.

Consolidated sales and marketing expenses for the years ended December 31, 2024 and 2023, are as follows (dollars in thousands):

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Sales and marketing expenses increased $13.8 million in 2024 compared to 2023. The increase primarily reflects increases in compensation and benefit costs due to increased headcount, an increase in sales commissions, and an increase in travel.

We expect higher commissions expense in the coming quarters as we expand our sales representative force and our sales representatives generate new business. We expect our sales and marketing expenses over the long term to align with changes in revenue and we continue to evaluate the effectiveness of our incentive compensation plans.

Restructuring charges

Consolidated restructuring charges for the years ended December 31, 2024 and 2023 are as follows (dollars in thousands):

Restructuring charges relate to a restructuring program to improve execution and drive efficiency across the organization. Restructuring charges consist of severance and other employee costs, costs for optimizing the Company’s geographic presence, and consulting and other costs.

Restructuring charges decreased $4.4 million in 2024 compared to 2023. Restructuring charges in 2024 consist of $1.5 million in severance and other employee costs, $4.1 million in Facility Footprint Optimization costs, and $1.0 million of consulting and other costs.

Interest Income

Interest income for the years ended December 31, 2024 and 2023 is as follows (dollars in thousands):

Interest income increased $1.5 million in 2024 compared to 2023. Interest income includes interest earned on funds held in our cash equivalent and marketable securities accounts. The increase in interest income in 2024 was due to the higher interest rate environment experienced when compared to the same period in 2023.

For further details regarding our investments in marketable securities, please refer to Note 3. Fair Value Measurements in the accompanying notes to the Consolidated Financial Statements.

Interest Expense

Interest expense for the years ended December 31, 2024 and 2023 is as follows (dollars in thousands):

Interest expense decreased $0.3 million in 2024 compared to 2023. Interest expense for the years ended December 31, 2024 and 2023 primarily reflects the effective interest rate on the 2028 Convertible Notes and the 2025 Convertible Notes which is 0.70% and 1.96%, respectively. Interest on the 2028 Convertible Notes and 2025 Convertible Notes began accruing upon issuance and is payable semi-annually.

For further details regarding the convertible notes please refer to Note 7. Debt in the accompanying notes to the Consolidated Financial Statements.

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Net Loss

The following table provides the net loss for the years ended December 31, 2024 and 2023, along with the computation of basic and diluted net loss per share (in thousands, except per share amounts):

Non-GAAP Measures

Use of Non-GAAP Financial Measures

In order to provide greater transparency regarding our operating performance, the financial results and financial guidance include the use of certain non-GAAP financial measures that involve adjustments to GAAP results. Non-GAAP financial measures exclude certain income and/or expense items that management believes are not directly attributable to our core operating results and/or certain items that are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. Management believes that the presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors by facilitating the analysis of our core test-level operating results across reporting periods and when comparing those same results to those published by our peers. These non-GAAP financial measures may also assist investors in evaluating future prospects. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the business. These non-GAAP financial measures do not replace the presentation of financial information in accordance with U.S. GAAP financial results, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures used by other companies.

Definitions of Non-GAAP Measures

Non-GAAP Adjusted EBITDA

“Adjusted EBITDA” is defined by NeoGenomics as net (loss) income from continuing operations before: (i) interest income, (ii) interest expense, (iii) tax (benefit) or expense, (iv) depreciation and amortization expense, (v) stock-based compensation expense, and, if applicable in a reporting period, (vi) restructuring charges, (vii) intellectual property (“IP”) litigation costs, and (viii) other significant or non-operating (income) or expenses, net.

The following is a reconciliation of GAAP net loss to Non-GAAP EBITDA and Adjusted EBITDA for the years ended December 31, 2024 and 2023 (dollars in thousands):

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(1) For the year ended December 31, 2024, IP litigation costs include legal fees and a settlement payment. For the year ended December 31, 2023, IP litigation costs include legal fees.

(2) For the year ended December 31, 2024, other significant (income) expenses, net, includes CEO transition costs, site closure costs, severance costs, and fees related to non-recurring legal matters. For the year ended December 31, 2023, other significant (income) expenses, net, fees related to a regulatory matter, CEO transition costs and other non-recurring items.

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash generated from operations, public and private sales of debt and equity securities, and bank debt borrowings.

The following table presents a summary of our consolidated cash flows for operating, investing, and financing activities for the years ended December 31, 2024 and 2023, as well as the period ending cash and cash equivalents and working capital (in thousands):

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(1) Defined as current assets less current liabilities.

Cash Flows from Operating Activities

Cash provided by in operating activities during the year ended December 31, 2024, was $7.0 million compared to cash used of $2.0 million in the same period in 2023. This $9.0 million increase was primarily driven by our operating results (net loss adjusted for depreciation, amortization of intangibles, and other non-cash charges) which resulted in $16.1 million of lower cash used by operating activities year-over-year, as well as a $7.1 million decrease in cash used resulting from net changes in operating assets and liabilities. The increase in cash provided by operating activities for the year ended December 31, 2024 compared to the same period in 2023 was primarily driven by an improvement in gross profit of $45.5 million.

Cash Flows from Investing Activities

During the year ended December 31, 2024, cash provided by investing activities was $12.9 million, compared to $76.7 million for the same period in 2023. This change was due to a $6.8 million decrease in purchases of marketable securities and a $58.3 million decrease in the sales and maturities of marketable securities year-over-year. These decreases were partially offset by a $12.3 million increase in purchases of property and equipment year-over-year.

Cash Flows from Financing Activities

During the year ended December 31, 2024, cash provided by financing activities was $4.6 million compared to $4.6 million for the same period in 2023. The cash provided by financing activities during the year ended December 31, 2024 consisted of $4.6 million for the issuance of common stock net of issuance costs.

Liquidity Outlook

As of December 31, 2024, we had $367.0 million in cash and cash equivalents in addition to $19.8 million of marketable securities available to support current operational liquidity needs. We anticipate that the cash on hand, marketable securities, and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business, including amounts required to fund working capital including the convertible senior notes due 2025, capital expenditures, continued research and development efforts, and potential strategic acquisitions and investments.

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Related Party Transactions

Please refer to Note 15. Related Party Transactions, to our Consolidated Financial Statements for a description of our related party transactions.

Capital Expenditures

We forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently anticipate that our capital expenditures for the year ended December 31, 2025, will be in the range of $30 million to $35 million. During the year ended December 31, 2024, we purchased, with cash, approximately $41.1 million of capital equipment, software, and leasehold improvements. We have funded and plan to continue funding these capital expenditures with cash and financing.

Recently Adopted Accounting Guidance

Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements pending adoption.

Effects of Inflation

During the years ended December 31, 2024, 2023 and 2022, inflation did not have a material effect on our business. Widely reported inflation has occurred, however, and may be ongoing for the foreseeable future. Depending on the severity and persistence of these inflationary pressures, we could experience, in the future, a negative impact on our financial results. While we anticipate an increasingly uncertain macroeconomic environment in fiscal year 2025, we will continue to mitigate through targeted pricing and various sourcing strategies. We remain optimistic about our growth opportunities in our key markets in fiscal year 2025.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in this Annual Report on Form 10-K. The information contained below includes statements of management’s beliefs, expectations, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the introductory note to this Annual Report under the caption “Forward Looking Statements,” which information is incorporated herein by reference. For discussion and analysis pertaining to 2022 overview and highlights as compared to 2021, please refer to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 24, 2023.

Our Company

NeoGenomics, Inc., a Nevada corporation (the “Parent,” “Company,” or “NeoGenomics”), and its subsidiaries provide a wide range of oncology diagnostic testing and consultative services which includes technical laboratory services and professional interpretation of laboratory test results by licensed physicians who specialize in pathology and oncology. The Company operates a network of cancer-focused testing laboratories in the United States and the United Kingdom.

2023 Overview and Highlights

•We increased consolidated revenue by 16.1% compared to 2022, including increases in Clinical Services revenue of 18.4% and in Advanced Diagnostics Services revenue of 5.5%;

•Net cash used in operations improved $64.0 million compared to 2022;

•We increased Adjusted EBITDA $51.5 million to positive $3.5 million compared to in 2022; and

•We improved gross margin by 448 basis points while also improving turnaround time.

Company Outlook

Advances in science and technology are driving a proliferation of oncology therapies and associated diagnostic tests. These diagnostic tools and therapies are increasing survival and enhancing quality of life for cancer patients. As a leading global oncology diagnostics company serving biopharmaceutical companies as well as practicing oncologists and pathologists, NeoGenomics facilitates the adoption of these advanced oncology diagnostic tools beyond the academic environment into the community setting. We are continuously enhancing and expanding our test menu to ensure that providers and patients have access to leading edge solutions such as advanced molecular testing and state-of-the art digital pathology. Moreover, our team of MDs and PhDs, along with our highly-trained oncology-focused sales team, provides ongoing education to our clients to ensure that they remain abreast of cutting-edge developments in oncology.

We are a leading provider of oncology-diagnostic services to biopharma companies. We will continue to work with these clients across the drug development continuum—from research and development through clinical trials testing—to commercialization of companion diagnostic tests. We expect to continue to grow our Advanced Diagnostics business through (i) expansion of our test offerings (including leading edge NGS tools such as WES, WGS, and others), and (ii) our unique capabilities for developing and commercializing companion diagnostic tests.

We are continuing to develop and broaden our informatics and data-related tools to leverage our strategic market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We are committed to connecting patients with life-altering therapies and trials. In carrying out these commitments, NeoGenomics aims to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and has invested in leading technologies to help ensure the data we maintain is secured at all times.

We believe lower cost and increased value of testing is extremely important to the healthcare industry and creates a competitive advantage. We will invest in information technology, automation and best practices to continually improve our processes and drive down the cost of testing. We will continue to expand our test menu and expect to remain at the forefront of the ongoing revolution in cancer related genetic and molecular testing to achieve our vision of becoming one of the world’s leading cancer testing and information companies.

We continue to develop our company-wide focus, which includes the following four critical success factors for 2024:

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Profitably Grow Core Business

•Grow volume and NGS mix;

•Drive market penetration;

•Win on oncology; and

•Improve revenue cycle management.

Accelerate Advanced Diagnostics

•Execute Neo Comprehensive 2.0 launch;

•Execute liquid biopsy CGP launch; and

•Improve gross margin.

Drive Value Creation

•Increase productivity and efficiency;

•Improve gross margin;

•Implement LIMS Phase 1; and

•Prioritize quality system enhancements.

Enhance Our People and Culture

•Enhance teammate development and engagement; and

•Grow a customer-oriented and growth mindset.

These critical success factors have been communicated throughout our Company. We have structured departmental goals around these factors and have created employee incentive plans in which every employee will have a meaningful incentive for our success.

Regulatory Environment

The FDA is currently considering changes that may include increased regulation of LDTs by the FDA. In October 2014 the FDA announced its proposed framework and timetable and indicated it would move toward greater oversight of LDTs. The FDA has not finalized the framework they announced in 2014. In 2017 the FDA shifted its approach to oversight of LDTs, indicating that they would work with Congress and stakeholders on a new legislative framework and pathway for all diagnostic testing. In 2018 the FDA began limited enforcement activities on a subset of LDTs known as pharmacogenetic testing (“PGx”). NeoGenomics is a member of the American Clinical Laboratory Association (“ACLA”), which has been in active discussions with the FDA and Congress regarding the FDA oversight of LDT’s. However, recent agency announcements made in the context of the COVID-19 public health emergency have produced a shifting policy landscape and further uncertainty regarding the FDA’s role in regulating LDTs: in August 2020, HHS announced that the FDA would not require premarket review of LDTs absent notice-and-comment rulemaking, but in November 2021, HHS issued a statement withdrawing that prior announcement, indicating a return to FDA’s longstanding approach to the regulation and enforcement discretion toward LDTs. The most recent such proposal, the VALID Act, was introduced in both the House and Senate on June 24, 2021. The VALID Act was expected to be included in the Omnibus bill signed at the end of 2022, but ultimately was not included and that, as such, it remains unclear whether the VALID Act will be passed 2023 or whether FDA will proceed through rulemaking. At this time, we cannot predict what the current administration's impact will be on the oversight and regulation of LDTs or if there will be any changes to current rules and regulations.

We closely monitor changes in legislation and take specific actions to identify and estimate the impact of changes in legislation whenever possible as regulatory changes can affect reimbursement for clinical laboratory services. We do not anticipate significant changes to our clinical revenue in 2024 resulting from known changes in legislation or rulemaking.

Reportable Segments

We report our activities in two reportable segments—the Clinical Services Segment and the Advanced Diagnostics Segment. We have presented the financial information reviewed by the Chief Operating Decision Maker including revenues, cost of revenue, and gross margin for each of our reportable segments. Assets are not presented at the segment level as that information is not used by the CODM.

Clinical Services

The clinical cancer testing services we offer to community-based pathologists and oncologists are designed to be a natural extension of, and complementary to, the services that they perform within their own practices. We believe our relationship as

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a non-competitive partner to community-based pathology practices, hospital pathology labs, reference labs, and academic centers can empower them to expand their breadth of testing to provide a menu of services that could match or exceed the level of service found in any center of excellence around the world. Community-based pathology practices and hospital pathology labs may order certain testing services on a technical component only (“TC” or “tech-only”) basis, which allows them to participate in the diagnostic process by performing the professional component (“PC”) interpretation services without having to hire laboratory technologists or purchase the sophisticated equipment needed to perform the technical component of the tests. We also support our pathology clients with interpretation and consultative services using our own specialized team of pathologists for difficult or complex cases and we provide overflow interpretation services when requested by clients.

We are a leading provider of molecular and NGS testing. These tests are interpreted by NeoGenomics’ team of molecular experts and are often ordered in conjunction with other testing modalities. NGS panels are one of our fastest growing testing areas and clients can often receive a significant amount of biomarker information from very limited samples. These comprehensive panels can allow for faster treatment decisions for patients as compared to a series of single-gene molecular tests being ordered sequentially. We have a broad Molecular testing menu and our targeted NeoTYPE panels include genes relevant to a particular cancer type, as well as other complementary tests such as IHC and FISH. In addition, we offer molecular-only NGS targeted and comprehensive panels which combine DNA and RNA into a single work stream in order to report a full spectrum of genomic alterations, including mutations, fusions, copy number variations, and gene expression. This comprehensive menu means that our clients can get most of their oncology testing needs satisfied by our laboratory. This is attractive to our clients as patient samples do not need to be split and then managed across several laboratories. The acquisition of Inivata provided us with oncology liquid biopsy technology capabilities. InVisionFirst®-Lung is a highly sensitive, targeted plasma-based assay for patients with non-small cell lung cancer, and RaDaR® is a liquid biopsy assay designed to detect residual disease and recurrence in plasma samples from patients with solid tumor malignancies. We expect our molecular laboratory and NGS capabilities to be a key growth driver in the coming years.

In addition, we directly serve oncology, dermatology and other clinician practices that prefer to have a direct relationship with a laboratory for cancer-related genetic testing services. We typically serve these types of clients with a comprehensive service offering where we perform both the technical and professional components of the tests ordered. In certain instances, larger clinician practices have begun to internalize pathology interpretation services, and our tech-only service offering allows these larger clinician practices to also participate in the diagnostic process by performing the PC interpretation services on TC testing performed by us. In these instances we will typically provide all of the more complex, molecular testing services.

Advanced Diagnostics

Our Advanced Diagnostics revenue consists of three revenue streams:

•Clinical trials and research;

•Validation laboratory services; and

•Informatics.

Our Advanced Diagnostics segment supports pharmaceutical firms in their drug development programs by supporting various clinical trials and research. This portion of our business often involves working with the pharmaceutical firms (“sponsors”) on study design as well as performing the required testing. Our medical team often advises the sponsor and works closely with them as specimens are received from the enrolled sites. We also work on developing tests that will be used as part of a companion diagnostic to determine patients’ response to a particular drug. As studies unfold, our clinical trials team reports the data and often provides key analysis and insights back to the sponsors.

Our Advanced Diagnostics segment provides comprehensive testing services in support of our pharmaceutical clients’ oncology programs from discovery to commercialization. In biomarker discovery, our aim is to help our customers discover the right content. We help our customers develop a biomarker hypothesis by recommending an optimal platform for molecular screening and backing our discovery tools with the informatics to capture meaningful data. In other pre-clinical and non-clinical work, we can use our platforms to characterize markers of interest. Moving from discovery to development, we seek to help our customers refine their biomarker strategy and, if applicable, develop a companion diagnostic pathway using the optimal technology for large-scale clinical trial testing.

Whether serving as the single contract research organization or partnering with one, our Advanced Diagnostics team provides significant technical expertise, working closely with our customers to support each stage of clinical trial development. Each trial we support comes with rapid turnaround time, dedicated project management and quality assurance oversight. We have experience in supporting submissions to the FDA for companion diagnostics. Our Advanced Diagnostics strategy is focused

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on helping to bring more effective oncology treatments to market through providing world-class laboratory services in oncology to key pharmaceutical companies in the industry.

We believe that we are well positioned to service Advanced Diagnostics sponsors across the full continuum of the drug development process. Our Advanced Diagnostics team can work with these sponsors during the basic research and development phase as compounds come out of translational research departments, as well as work with clients from Phase I, Phase II and Phase III clinical trials as the sponsors work to demonstrate the efficacy of their drugs. The laboratory biomarker tests that are developed during this process may become CDx tests that will be used on patients to determine if they could respond to a certain therapy. We are able to offer these CDx tests to the market immediately after FDA approval as part of our Day 1 readiness program. This ability helps to speed the commercialization of a drug and can enable Advanced Diagnostics sponsors to reach patients through our broad distribution channel in the Clinical Services segment.

We are committed to connecting patients with life-altering therapies and trials. In carrying out these commitments, we aim to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and have invested in leading technologies to ensure the data we maintain is secure at all times. We are continuing to develop and broaden our informatics and data-related tools to leverage our unique market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We also offer testing and informatics tools, such as Trapelo™, to help health care professionals navigate the rapidly evolving field of precision medicine. Trapelo™ is an end-to-end, clinical decision-support platform designed to resolve the complexities of precision oncology – from test ordering to therapy selection to navigating prior authorization.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a complete description of our significant accounting policies.

Our critical accounting policies are those where we have made difficult, subjective, or complex judgments in making estimates and/or where these estimates can significantly impact our financial results under different assumptions and conditions. Our critical accounting policies are:

•Goodwill;

•Contingencies; and

•Revenue Recognition and Accounts Receivable.

Goodwill

We evaluate goodwill on an annual basis in the fourth quarter, or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management performs a quantitative goodwill impairment test. The quantitative analysis is performed by comparing the fair value of the reporting unit to its carrying value. If the carrying value is greater than the estimate of fair value, an impairment loss will be recognized for the amount in which the carrying amount exceeds the reporting unit’s fair value. We estimate the fair values of our reporting units using a combination of the income, or discounted cash flows approach and the market approach, which utilizes comparable companies’ data.

As of June 30, 2022, we performed a qualitative assessment to determine whether it was more likely than not that the fair values of our reporting units were less than their carrying values. Such qualitative factors included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. As a result of the qualitative assessment, we determined that due to changes in executive leadership and the sustained decline in our stock price of $12.15 per share as of March 31, 2022 to $8.15 per share as of June 30, 2022, there were indicators that it was more likely than not that the fair values of the reporting units were less than their carrying values. Accordingly, we performed a quantitative analysis and compared our reporting units’ fair values to their carrying values to determine whether goodwill was impaired. We determined the fair values of our reporting units using a combination of the income approach

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using discounted cash flows and the market approach utilizing comparable companies’ data. The assumptions and estimates, including management’s estimated future revenue growth rates, estimated future margins and discount rates, used in the quantitative analysis were based on management’s best estimate about current and future conditions including projected net revenue from emerging market technologies acquired through the June 2021 acquisition of Inivata. The results of the quantitative analysis showed that the reporting units’ fair values exceeded their carrying values and there was no impairment of the recorded goodwill as of June 30, 2022.

On October 1, 2023, we performed a qualitative assessment to determine whether it was more likely than not that the fair values of our reporting units were less than their carrying values. As a result of the qualitative assessment, we determined that it is not more likely than not that the fair value of our reporting units is less than their carrying amounts.

Contingencies

We accrue contingent losses when estimated impacts of various conditions, situations or circumstances involve uncertain outcomes. Contingent losses are recorded based on management judgment along with internal and external advice from legal counsel and/or technical consultants. Estimated losses from contingencies are recorded when both of the following conditions are met: (i) information available before the financial statements are issued (or available to be issued) indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and (ii) the amount of loss can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, that amount shall be accrued. When no amount within the range is a better estimate than any other amount, however, the minimum amount in the range shall be accrued.

Revenue Recognition and Accounts Receivable

Clinical Services

Revenue is recognized when, or as, performance obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to a customer. For Clinical Services, our specialized diagnostic services are performed based on an online test order or a written test requisition form. The performance obligation is satisfied and revenues are recognized once the diagnostic services have been performed and the results have been delivered to the ordering physician.

These diagnostic services are billed to various payers, including client direct billing, commercial insurance, Medicare and other government payers, and patients. Revenue is recorded for all payers based on the amount expected to be collected, which considers implicit price concessions. Accounts receivable are reported for all Clinical Services payers based on the amount expected to be collected, which also considers implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration we expect to receive based on negotiated discounts, historical collection experience, assumptions in payer mix, and other anticipated adjustments, including anticipated payer denials. Collection of consideration we expect to receive typically occurs within 90 to 120 days of billing for commercial insurance, Medicare and other governmental and self-pay patients and within 60 to 90 days of billing for client payers.

The following table reflects our estimate of the breakdown of net clinical revenue by type of payer for the years ended December 31, 2023, 2022 and 2021:

Results of Operations for the year ended December 31, 2023 as compared with the year ended December 31, 2022

Revenue

The Company has historically reported its activities in two reportable segments; (1) the Clinical Services segment and (2) the Pharma Services segment. In the second quarter of 2023, the Pharma Services segment was rebranded as the Advanced Diagnostics segment. Clinical Services and Advanced Diagnostics net revenue for the years ended December 31, 2023 and 2022, are as follows (dollars in thousands):

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Consolidated revenue in 2023 increased $81.9 million, or 16.1%, as compared to 2022. Clinical Services revenue increased $76.9 million, or 18.4%, to $495.6 million in 2023 as compared to $418.8 million in 2022. Increases in Clinical Services revenue reflects an increase in test volume, a more favorable test mix, and an increase in average unit price due to strategic reimbursement initiatives.

Advanced Diagnostics revenue increased $5.0 million, or 5.5%, to $96.0 million in 2023 as compared to $91.0 million in 2022, primarily driven by increased volume and higher billings across its portfolio.

Cost of Revenue and Gross Profit

Cost of revenue includes compensation and benefit costs for performing tests, maintenance and/or depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, delivery and courier costs relating to the transportation of specimens to be tested, and amortization for acquired intangible assets.

The consolidated cost of revenue and gross profit metrics for the years ended December 31, 2023 and 2022 are as follows (dollars in thousands):

_________________

(1) Clinical Services cost of revenue for the twelve months ended December 31, 2023 and December 31, 2022 include $17.3 million and $17.1 million, respectively, of amortization of acquired intangible assets.

(2) Advanced Diagnostics cost of revenue for both the twelve months ended December 31, 2023 and December 31, 2022 include $2.4 million of amortization of acquired intangible assets.

Consolidated cost of revenue increased for the year ended December 31, 2023 when compared to the same period in 2022 primarily due to higher compensation and benefit costs and an increase in supplies expense partially offset by a decrease in professional fees and shipping costs.

Gross profit margin for 2023 was 41.3% compared to 36.9% in 2022. This 4.4% increase is primarily related to increases in revenue partially offset by higher compensation and benefits costs and supplies expense.

General and Administrative Expenses

General and administrative expenses consist of compensation and benefit costs for our executive, billing, finance, human resources, information technology, and other administrative personnel, as well as stock-based compensation. We also allocate professional services, facilities expense, IT infrastructure costs, depreciation, amortization, and other administrative-related costs to general and administrative expenses.

Consolidated general and administrative expenses for the years ended December 31, 2023 and 2022 are as follows (dollars in thousands):

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General and administrative expenses decreased $0.3 million in 2023 compared to 2022. This decrease was partially due to a decrease in recruiting expenses of $3.4 million, a decrease in loss on disposals of assets of $1.2 million, a decrease in credit card fees of $0.7 million, and a decrease in non-recurring facilities costs of $0.5 million. These decreases in general and administrative expenses for the year ended December 31, 2023 were partially offset by an increase in travel expenses of $1.7 million, an increase in depreciation and amortization expense of $1.2 million, an increase in compensation and benefit costs of $1.0 million, an increase in equipment expenses of $0.9 million, and an increase in professional fees of $0.7 million.

Research and Development Expenses

Research and development expenses relate to costs of developing new proprietary and non-proprietary genetic tests, including compensation and benefit costs, maintenance of laboratory equipment, laboratory supplies (reagents), and outside consultants and experts assisting our research and development team. Research and development expenses are presented net of research and development tax and expenditure credits from the UK government, which are recognized over the period necessary to match the reimbursement with the related costs when it is probable that the Company has complied with any conditions attached and will receive the reimbursement.

Consolidated research and development expense for the years ended December 31, 2023 and 2022 are as follows (dollars in thousands):

Research and development expenses decreased $3.0 million in 2023 compared to 2022. This decrease is primarily due to decreases in compensation and benefits costs and professional fees and an increase in research and development tax credits from the UK government.

We anticipate research and development expenditures will increase in the future as we continue to invest in development activities for innovation projects and bringing new tests to market.

Sales and Marketing Expenses

Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, and marketing and customer service personnel.

Consolidated sales and marketing expenses for the years ended December 31, 2023 and 2022, are as follows (dollars in thousands):

Sales and marketing expenses increased $3.5 million in 2023 compared to 2022. The increase primarily reflects increases in compensation and benefit costs due to increased headcount, an increase in sales commissions, and an increase in travel expenses partially offset by a decrease in professional fees.

We expect higher commissions expense in the coming quarters as our sales representatives generate new business in our business segments. We expect our sales and marketing expenses over the long term to align with changes in revenue and we continue to evaluate the effectiveness of our incentive compensation plans.

Restructuring charges

Consolidated restructuring charges for the years ended December 31, 2023 and 2022 are as follows (dollars in thousands):

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Restructuring charges relate to a restructuring program to improve execution and drive efficiency across the organization. Restructuring charges consist of severance and other employee costs, costs for optimizing the Company’s geographic presence, and consulting and other costs.

Restructuring charges increased $6.6 million in 2023 compared to 2022. The increase is primarily due to restructuring activities commencing in the fourth quarter of 2022. Restructuring charges in 2023 consist of $5.6 million in severance and other employee costs, $3.4 million loss on the impairment of facilities and assets, and $2.1 million of consulting and other costs.

In the third quarter of 2023, in response to new incremental information including ongoing negotiations with counterparties, we revised our original restructuring plan cost and timing of approved projects. As a result, we anticipate incurring further restructuring charges extending into 2024. Restructuring activities are ongoing and we expect to incur additional restructuring charges of approximately $6.3 million. We expect these charges will ultimately result in enhanced operational efficiencies as we continue to optimize our geographic presence.

Interest Income

Interest income for the years ended December 31, 2023 and 2022 is as follows (dollars in thousands):

Interest income increased $10.8 million in 2023 compared to 2022. Interest income includes interest earned on funds held in our cash equivalent and marketable securities accounts. The increase in interest income in 2023 was due to the higher interest rate environment experienced when compared to the same period in 2022.

For further details regarding our investments in marketable securities, please refer to Note 3. Fair Value Measurements in the accompanying notes to the Consolidated Financial Statements.

Interest Expense

Interest expense for the years ended December 31, 2023 and 2022 is as follows (dollars in thousands):

Interest expense decreased $0.7 million in 2023 compared to 2022. Interest expense for the years ended December 31, 2023 and 2022 primarily reflects the effective interest rate on the 2028 Convertible Notes and the 2025 Convertible Notes which is 0.70% and 1.96%, respectively. Interest on the 2028 Convertible Notes and 2025 Convertible Notes began accruing upon issuance and is payable semi-annually.

For further details regarding the convertible notes please refer to Note 7. Debt in the accompanying notes to the Consolidated Financial Statements.

Net Loss

The following table provides the net loss for the years ended December 31, 2023 and 2022, along with the computation of basic and diluted net loss per share (in thousands, except per share amounts):

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Non-GAAP Measures

Use of Non-GAAP Financial Measures

In order to provide greater transparency regarding our operating performance, the financial results and financial guidance include the use of certain non-GAAP financial measures that involve adjustments to GAAP results. Non-GAAP financial measures exclude certain income and/or expense items that management believes are not directly attributable to our core operating results and/or certain items that are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. Management believes that the presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors by facilitating the analysis of our core test-level operating results across reporting periods and when comparing those same results to those published by our peers. These non-GAAP financial measures may also assist investors in evaluating future prospects. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the business. These non-GAAP financial measures do not replace the presentation of financial information in accordance with U.S. GAAP financial results, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures used by other companies.

Definitions of Non-GAAP Measures

Non-GAAP Adjusted EBITDA

“Adjusted EBITDA” is defined by NeoGenomics as net (loss) income from continuing operations before: (i) interest income and expense, (ii) tax (benefit) or expense, (iii) depreciation and amortization expense, (iv) non-cash stock-based compensation expense, and, if applicable in a reporting period, (v) acquisition and integration related expenses, (vi) CEO transition costs, (vii) restructuring costs, and (viii) other significant or non-operating expenses, net.

The following is a reconciliation of GAAP net loss to Non-GAAP EBITDA and Adjusted EBITDA for the years ended December 31, 2023 and 2022 (dollars in thousands):

_________________

(3) For the year ended December 31, 2023, other significant (income) expenses, net, includes fees related to a regulatory matter and other non-recurring items. For the year ended December 31, 2022, other significant (income) expenses, net, includes fees related to a regulatory matter, moving costs, a gain on the sale of a building and other non-recurring items.

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash generated from operations, public and private sales of debt and equity securities, and bank debt borrowings.

The following table presents a summary of our consolidated cash flows for operating, investing, and financing activities for the years ended December 31, 2023 and 2022, as well as the period ending cash and cash equivalents and working capital (in thousands):

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_________________

(4) Defined as current assets less current liabilities.

Cash Flows from Operating Activities

Cash used in operating activities during the year ended December 31, 2023, was $2.0 million compared to $66.0 million in the same period in 2022. This $64.0 million decrease was primarily driven by our operating results (net loss adjusted for depreciation, amortization of intangibles, and other non-cash charges) which resulted in $57.8 million of lower cash used by operating activities year-over-year, as well as a $6.2 million decrease in cash used resulting from net changes in operating assets and liabilities. The decrease in cash used by operating activities for the year ended December 31, 2023 compared to the same period in 2022 was primarily driven by an improvement in gross profit of $56.7 million.

Cash Flows from Investing Activities

During the year ended December 31, 2023, cash provided by investing activities was $76.7 million, compared to $0.5 million of cash used in investing activities for the same period in 2022. This change was due to a $90.8 million decrease in purchases of marketable securities and a $2.1 million decrease in purchases of property and equipment. These decreases were offset by a $4.7 million decrease in the sales and maturities of marketable securities year-over-year and a $12.1 million decrease in proceeds from assets held for sale which did not occur in 2022.

Cash Flows from Financing Activities

During the year ended December 31, 2023, cash provided by financing activities was $4.6 million compared to $11.8 million for the same period in 2022. The cash provided by financing activities during the year ended December 31, 2023 consisted of $4.6 million for the issuance of common stock net of issuance costs offset by $0.1 million used for the repayment of equipment financing obligations. The primary reason for the decrease in cash provided by financing activities year-over-year was a $8.0 million decrease in cash provided by the issuance of common stock, net due to the timing of stock option exercises for certain former executives.

Liquidity Outlook

As of December 31, 2023, we had $342.5 million in cash and cash equivalents in addition to $72.7 million of marketable securities available to support current operational liquidity needs. We anticipate that the cash on hand, marketable securities, and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business (including amounts required to fund working capital and capital expenditures, continued research, and development efforts) and potential strategic acquisitions and investments.

Related Party Transactions

Please refer to Note 16. Related Party Transactions, to our Consolidated Financial Statements for a description of our related party transactions.

Capital Expenditures

We forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently anticipate that our capital expenditures for the year ended December 31, 2024, will be in the range of $35 million to $40 million. During the

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year ended December 31, 2023, we purchased, with cash, approximately $28.7 million of capital equipment, software, and leasehold improvements. We have funded and plan to continue funding these capital expenditures with cash and financing.

Recently Adopted Accounting Guidance

Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements pending adoption.

Effects of Inflation

During the years ended December 31, 2023, 2022 and 2021, inflation did not have a material effect on our business. Widely reported inflation has occurred, however, and may be ongoing for the foreseeable future. Depending on the severity and persistence of these inflationary pressures, we could experience, in the future, a negative impact on our financial results. While we anticipate an increasingly uncertain macroeconomic environment in fiscal year 2024, we will continue to mitigate through targeted pricing and various sourcing strategies. We remain optimistic about our growth opportunities in our key markets in fiscal year 2024.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in this Annual Report on Form 10-K. The information contained below includes statements of management’s beliefs, expectations, hopes, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the introductory note to this Annual Report under the caption “Forward Looking Statements,” which information is incorporated herein by reference. For discussion and analysis pertaining to 2021 overview and highlights as compared to 2020, please refer to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022.

Our Company

NeoGenomics is a high-complexity clinical laboratory that specializes in cancer genetics diagnostic testing and pharma services. Our testing services include cytogenetics, FISH, flow cytometry, IHC, molecular testing and morphologic analysis. We operate CAP accredited and CLIA certified laboratories for full-service sample processing in Fort Myers, Florida; Aliso Viejo and San Diego, California; Research Triangle Park, North Carolina; and Houston, Texas; and CAP accredited full-service, sample-processing laboratories in Rolle, Switzerland; Singapore and China. CAP accreditation is pending in

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Cambridge, United Kingdom. NeoGenomics also has several, small, non-processing laboratory locations across the United States for providing analysis services. NeoGenomics serves the needs of pathologists, oncologists, academic centers, hospital systems, pharmaceutical firms, integrated service delivery networks, and managed care organizations throughout the United States and pharmaceutical firms in Europe and Asia.

2022 Overview and Highlights

•We increased consolidated revenue by 5.2% compared to 2021, including increases in Clinical Services revenue of 3.6% and in Pharma Services revenue of 13.5%;

•Revenue growth over prior year accelerated each quarter in 2022;

•Reported sequential revenue, gross margin and adjusted EBITDA growth in each of the four quarters of 2022;

•Strengthened our executive leadership team by welcoming Chris Smith, Chief Executive Officer; Jeff Sherman, Chief Financial Officer; Warren Stone, President, Clinical Services; Vishal Sikri, President, Pharma Services and President and Chief Commercial Officer, Inivata; and Melody Harris, President, Enterprise Operations;

•Developed our vision of “OneNeo” to better integrate the Company, align our core capabilities and enhance communication; and

•Initiated a restructuring effort to take significant costs out of the business in 2023.

Company Outlook

Advances in science and technology are driving a proliferation of oncology therapies and associated diagnostic tests. These diagnostic tools and therapies are increasing survival and enhancing quality-of-life for cancer patients. As a leading global oncology diagnostics company serving biopharmaceutical companies as well as practicing oncologists and pathologists, NeoGenomics facilitates the adoption of these advanced oncology diagnostic tools beyond the academic environment into the community setting. We are continuously enhancing and expanding our test menu to ensure that providers and patients have access to leading edge solutions such as advanced molecular testing and state-of-the art digital pathology. Moreover, our team of MDs and PhDs, along with our highly-trained oncology-focused sales team, provides ongoing education to our clients to ensure that they remain abreast of cutting-edge developments in oncology.

We are a leading provider of oncology-diagnostic services to biopharma companies. We will continue to work with these clients across the drug development continuum—from research and development through clinical trials testing—to commercialization of companion diagnostic tests. We expect to continue to grow our Pharma Services business through (i) global expansion in both Europe and Asia, (ii) expansion of our test offerings (including leading edge NGS tools such as WES, WGS, RaDaR), and (iii) our unique capabilities for developing and commercializing companion diagnostic tests.

We are continuing to develop and broaden our informatics and data-related tools to leverage our strategic market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We are committed to connecting patients with life altering therapies and trials. In carrying out these commitments, NeoGenomics aims to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and has invested in leading technologies to help ensure the data we maintain is secured at all times.

We believe lower cost and increased value of testing is extremely important to the healthcare industry and creates a competitive advantage. We will invest in information technology, automation and best practices to continually improve our processes and drive down the cost of testing. We will continue to expand our test menu and expect to remain at the forefront of the ongoing revolution in cancer related genetic and molecular testing to achieve our vision of becoming one of the world’s leading cancer testing and information companies.

We continue to develop our company-wide focus, which includes the following four critical success factors for 2023:

Profitably Grow Core Business

•Grow volume and NGS mix;

•Improve turnaround time;

•Win on service;

•Expand and optimize commercial optimization; and

•Improve product offering.

Accelerate Advanced Diagnostics

•Execute clinical RaDaR™ (MRD) launch;

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•Launch Neo Comprehensive, new NGS offering;

•Continue to improve Pharma growth and profitability; and

•Focus on enterprise data strategy.

Improve Profitability

•Increase productivity and efficiency;

•Manage general and administrative spend;

•Focused investments; and

•Prioritize revenue cycle management.

These critical success factors have been communicated throughout our Company. We have structured departmental goals around these factors and have created employee incentive plans in which every employee will have a meaningful incentive for our success.

Regulatory Environment

The FDA is currently considering changes that may include increased regulation of LDTs by the FDA. In October 2014 the FDA announced its proposed framework and timetable and indicated it would move toward greater oversight of LDTs. The FDA has not finalized the framework they announced in 2014. In 2017 the FDA shifted its approach to oversight of LDTs, indicating that they would work with Congress and stakeholders on a new legislative framework and pathway for all diagnostic testing. In 2018 the FDA began limited enforcement activities on a subset of LDTs known as pharmacogenetic testing (“PGx”). NeoGenomics is a member of the American Clinical Laboratory Association (“ACLA”), which has been in active discussions with the FDA and Congress regarding FDA oversight of LDT’s. However, recent agency announcements made in the context of the COVID-19 public health emergency have produced a shifting policy landscape and further uncertainty regarding FDA’s role in regulating LDTs: in August 2020, HHS announced that FDA would not require premarket review of LDTs absent notice-and-comment rulemaking, but in November 2021, HHS issued a statement withdrawing that prior announcement, indicating a return to FDA’s longstanding approach to the regulation and enforcement discretion toward LDTs. The most recent such proposal, the VALID Act, was introduced in both the House and Senate on June 24, 2021. The VALID Act was expected to be included in the Omnibus bill signed at the end of 2022, but ultimately was not included and that, as such, it remains unclear whether the VALID Act will be passed 2023 or whether FDA will proceed through rulemaking. At this time, we cannot predict what the current administration impact will be on the oversight and regulation of LDTs or if there will be any additional changes to current rules and regulations.

We closely monitor changes in legislation and take specific actions to identify and estimate the impact of changes in legislation whenever possible as regulatory changes can affect reimbursement for clinical laboratory services. We do not anticipate significant changes to our clinical revenue in 2023 resulting from known changes in legislation or rulemaking.

Reportable Segments

We report our activities in two reportable segments—the Clinical Services Segment and the Pharma Services Segment. We have presented the financial information reviewed by the Chief Operating Decision Maker including revenues, cost of revenue, and gross margin for each of our reportable segments. Assets are not presented at the segment level as that information is not used by the CODM.

Clinical Services

The clinical cancer testing services we offer to community-based pathologists and oncologists are designed to be a natural extension of, and complementary to, the services that they perform within their own practices. We believe our relationship as a non-competitive partner to community-based pathology practices, hospital pathology labs, reference labs, and academic centers can empower them to expand their breadth of testing to provide a menu of services that could match or exceed the level of service found in any center of excellence around the world. Community-based pathology practices and hospital pathology labs may order certain testing services on a technical component only (“TC” or “tech-only”) basis, which allows them to participate in the diagnostic process by performing the professional component (“PC”) interpretation services without having to hire laboratory technologists or purchase the sophisticated equipment needed to perform the technical component of the tests. We also support our pathology clients with interpretation and consultative services using our own specialized team of pathologists for difficult or complex cases and we provide overflow interpretation services when requested by clients.

We are a leading provider of Molecular and NGS testing. These tests are interpreted by NeoGenomics’ team of Molecular experts and are often ordered in conjunction with other testing modalities. NGS panels are one of our fastest growing testing areas and clients can often receive a significant amount of biomarker information from very limited samples. These

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comprehensive panels can allow for faster treatment decisions for patients as compared to a series of single-gene molecular tests being ordered sequentially. We have a broad Molecular testing menu and our targeted NeoTYPE panels include genes relevant to a particular cancer type, as well as other complementary tests such as IHC and FISH. In addition, we offer molecular-only NGS targeted and comprehensive panels which combine DNA and RNA into a single work stream in order to report a full spectrum of genomic alterations, including mutations, fusions, copy number variations, and gene expression. This comprehensive menu means that our clients can get most of their oncology testing needs satisfied by our laboratory. This is attractive to our clients as patient samples do not need to be split and then managed across several laboratories. The acquisition of Inivata provided us with oncology Liquid Biopsy technology capabilities. InVisionFirst®-Lung is a highly sensitive, targeted plasma-based assay for patients with non-small cell lung cancer, and RaDaR® is an industry-leading liquid biopsy assay designed to detect residual disease and recurrence in plasma samples from patients with solid tumor malignancies. We expect our Molecular laboratory and NGS capabilities to be a key growth driver in the coming years.

In addition, we directly serve oncology, dermatology and other clinician practices that prefer to have a direct relationship with a laboratory for cancer-related genetic testing services. We typically serve these types of clients with a comprehensive service offering where we perform both the technical and professional components of the tests ordered. In certain instances, larger clinician practices have begun to internalize pathology interpretation services, and our tech-only service offering allows these larger clinician practices to also participate in the diagnostic process by performing the PC interpretation services on TC testing performed by us. In these instances we will typically provide all of the more complex, molecular testing services.

Pharma Services

Our Pharma Services revenue consists of three revenue streams:

•Clinical trials and research;

•Validation laboratory services; and

•Informatics.

Our Pharma Services segment supports pharmaceutical firms in their drug development programs by supporting various clinical trials and research. This portion of our business often involves working with the pharmaceutical firms (“sponsors”) on study design as well as performing the required testing. Our medical team often advises the sponsor and works closely with them as specimens are received from the enrolled sites. We also work on developing tests that will be used as part of a companion diagnostic to determine patients’ response to a particular drug. As studies unfold, our clinical trials team reports the data and often provides key analysis and insights back to the sponsors.

Our Pharma Services segment provides comprehensive testing services in support of our pharmaceutical clients’ oncology programs from discovery to commercialization. In biomarker discovery, our aim is to help our customers discover the right content. We help our customers develop a biomarker hypothesis by recommending an optimal platform for molecular screening and backing our discovery tools with the informatics to capture meaningful data. In other pre-clinical and non-clinical work, we can use our platforms to characterize markers of interest. Moving from discovery to development, we seek to help our customers refine their biomarker strategy and, if applicable, develop a companion diagnostic pathway using the optimal technology for large-scale clinical trial testing.

Whether serving as the single contract research organization or partnering with one, our Pharma Services team provides significant technical expertise, working closely with our customers to support each stage of clinical trial development. Each trial we support comes with rapid turnaround time, dedicated project management and quality assurance oversight. We have experience in supporting submissions to the Federal Drug Administration (“FDA”) for companion diagnostics. Our Pharma Services strategy is focused on helping to bring more effective oncology treatments to market through providing world-class laboratory services in oncology to key pharmaceutical companies in the industry.

We believe that we are well positioned to service Pharma sponsors across the full continuum of the drug development process. Our Pharma Services team can work with these sponsors during the basic research and development phase as compounds come out of translational research departments, as well as work with clients from Phase I, Phase II and Phase III clinical trials as the sponsors work to demonstrate the efficacy of their drugs. The laboratory biomarker tests that are developed during this process may become companion diagnostic (“CDx”) tests, that will be used on patients to determine if they could respond to a certain therapy. We are able to offer these CDx tests to the market immediately after FDA approval as part of our Day 1 readiness program. This ability helps to speed the commercialization of a drug and can enable Pharma sponsors to reach patients through our broad distribution channel in the Clinical Services segment.

We are committed to connecting patients with life-altering therapies and trials. In carrying out these commitments, we aim to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy

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Practices, and have invested in leading technologies to ensure the data we maintain is secure at all times. We are continuing to develop and broaden our informatics and data-related tools to leverage our unique market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We also offer testing and informatics tools, such as Trapelo™, to help health care professionals navigate the rapidly evolving field of precision medicine. Trapelo™ is an end-to-end, clinical decision-support platform designed to resolve the complexities of precision oncology – from test ordering to therapy selection to navigating prior authorization.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a complete description of our significant accounting policies.

Our critical accounting policies are those where we have made difficult, subjective, or complex judgments in making estimates and/or where these estimates can significantly impact our financial results under different assumptions and conditions. Our critical accounting policies are:

•Business Combinations;

•Accounts Receivable;

•Recoverability and Impairment of Long-Lived Assets;

•Goodwill;

•Contingencies;

•Stock-based Compensation;

•Revenue Recognition; and

•Deferred Taxes.

Business Combinations

Results of operations and cash flows of acquired companies are included in our operating results from the date of acquisition. We allocate the purchase price of acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill. Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses.

Accounts Receivable

Accounts receivable are reported for all Clinical Services payers based on the amount expected to be collected, which considers implicit price concessions.

For Pharma Services, we negotiate billing schedules and payment terms on a contract-by-contract basis, which often includes payments based on certain milestones being achieved. Receivables are generally reported over time based on the number of units completed, which aligns with the progress towards fulfilling its obligations under the contract.

Recoverability and Impairment of Long-Lived Assets

We review the recoverability of our long-lived assets (including definite-lived intangible assets) if events or changes in circumstances indicate the assets may be impaired. Evaluation of possible impairment is based on our ability to recover the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations. If the expected undiscounted pretax cash flows are less than the carrying amount of such asset, an impairment loss is recognized for the difference between the estimated fair value to the carrying amount of the asset.

Goodwill

We evaluate goodwill on an annual basis in the fourth quarter, or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying

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amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management performs a quantitative goodwill impairment test. The quantitative analysis is performed by comparing the fair value of the reporting unit to its carrying value. If the carrying value is greater than the estimate of fair value, an impairment loss will be recognized for the amount in which the carrying amount exceeds the reporting unit’s fair value. We estimate the fair values of our reporting units using a combination of the income, or discounted cash flows approach and the market approach, which utilizes comparable companies’ data.

As of June 30, 2022 we performed a qualitative assessment to determine whether it was more likely than not that the fair values of our reporting units were less than their carrying values. Such qualitative factors included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. As a result of the qualitative assessment, we determined that due to changes in executive leadership and the sustained decline in our stock price of $12.15 per share as of March 31, 2022 to $8.15 per share as of June 30, 2022, there were indicators that it was more likely than not that the fair values of the reporting units were less than their carrying values. Accordingly, we performed a quantitative analysis and compared our reporting units’ fair values to their carrying values to determine whether goodwill was impaired. We determined the fair values of our reporting units using a combination of the income approach using discounted cash flows and the market approach utilizing comparable companies’ data. The assumptions and estimates, including management’s estimated future revenue growth rates, estimated future margins and discount rates, used in the quantitative analysis were based on management’s best estimate about current and future conditions including projected net revenue from emerging market technologies acquired through the June 2021 acquisition of Inivata. The results of the quantitative analysis showed that the reporting units’ fair values exceeded their carrying values and there was no impairment of the recorded goodwill as of June 30, 2022. However, to the extent we continue to experience declines in our stock price or experience other indicators, such as industry and market considerations or declines in financial performance, that the fair values of our reporting units are less than their carrying values, there could be a risk of goodwill impairment of our reporting units in future periods.

Contingencies

We accrue contingent losses when estimated impacts of various conditions, situations or circumstances involve uncertain outcomes. Contingent losses are recorded based on management judgment along with internal and external advice from legal counsel and/or technical consultants. Estimated losses from contingencies are recorded when both of the following conditions are met: (i) information available before the financial statements are issued (or available to be issued) indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and (ii) the amount of loss can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, that amount shall be accrued. When no amount within the range is a better estimate than any other amount, however, the minimum amount in the range shall be accrued.

Stock-based Compensation

We recognize compensation costs for all share-based payment awards made to employees, non-employee contracted physicians and directors based upon the awards’ initial grant-date fair value. Prior to 2021, we estimated the fair value of stock options using a trinomial lattice model. On January 1, 2021, we began applying the Black-Scholes option valuation model on a prospective basis to new awards. Stock compensation is recognized on a straight-line basis over the awards’ requisite service periods. The periodic expense is adjusted for actual forfeitures.

Revenue Recognition

Clinical Services Revenue

Our specialized diagnostic services are performed based on an online test order or a written test requisition form. The performance obligation is satisfied and revenues are recognized once the diagnostic services have been performed and the results have been delivered to the ordering physician. These diagnostic services are billed to various payers, including client direct billing, commercial insurance, Medicare and other government payers, and patients. Revenue is recorded for all payers based on the amount expected to be collected, which considers implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration we expect to receive based on negotiated discounts, historical collection experience and other anticipated adjustments, including anticipated payer denials. Collection of consideration we expect to receive typically occurs within 90 to 120 days of billing for commercial insurance, Medicare and other governmental and self-pay patients and within 60 to 90 days of billing for client payers.

The following table reflects our estimate of the breakdown of net clinical revenue by type of payer for the years ended December 31, 2022, 2021 and 2020:

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Pharma Services Revenue

Our Pharma Services segment generally enters into contracts with pharmaceutical and biotech customers as well as other contract research organizations (“CROs”) to provide research and clinical trial services. Such services also include validation studies and assay development. We record revenue on a unit-of-service basis based on the number of units completed towards the satisfaction of a performance obligation. Certain contracts include upfront fees or billing milestones that are recognized over time, which aligns with the progress of fulfilling our obligations under the contract.

Additional offerings within the Pharma Services portfolio includes Informatics, which involves the licensing of de-identified data to pharmaceutical and biotech customers in the form of either retrospective records or prospective deliveries of data. Informatics revenue is recognized at a point in time upon delivery of retrospective data or over time for prospective data feeds. We negotiate billing schedules and payment terms on a contract-by-contract basis, and contract terms generally provide for payments based on a unit-of-service arrangement.

Amounts collected in advance of services being provided are deferred as contract liabilities on the Consolidated Balance Sheets. The associated revenue is recognized and the contract liability is reduced as the contracted services are subsequently performed. Contract assets are established for revenue recognized but not yet billed. These contract assets are reduced once the customer is invoiced and a corresponding receivable is recorded. Additionally, Pharma Services incurs sales commissions in the process of obtaining contracts with customers. Sales commissions that are payable upon contract award are recognized as assets and amortized over the expected life of the customer relationship. For offerings with primarily short-term contracts, such as Informatics, we apply the practical expedient which allows costs to obtain a contract to be expensed when incurred, if the amortization period of the assets that would otherwise have been recognized is one year or less. Contract assets and capitalized commissions are included in other current assets and other assets on the Consolidated Balance Sheets.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. All contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract.

Deferred Taxes

Our accounting for deferred tax consequences represents our best estimate of future events that can be appropriately reflected in accounting estimates. The factors included in the analysis are historical and projected future taxable income including evolving business practices of our industry. Changes in existing tax laws, regulations, rates and future operating results may impact the amount of deferred tax liabilities and deferred tax assets over time.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets.

As of December 31, 2022 and 2021, we determined sufficient positive evidence did not exist to conclude it is more likely than not that net operating losses generated by our operations in the U.S., Switzerland, Singapore, and China would be able to be utilized in future periods and has therefore established a valuation allowance against the deferred tax assets generated by such losses.

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Results of Operations for the year ended December 31, 2022 as compared with the year ended December 31, 2021

The following table presents the condensed Consolidated Statements of Operations as a percentage of revenue for the years ended December 31, 2022 and 2021:

_________________

(1) Cost of revenue for the year ended December 31, 2022, includes $19.4 million of amortization of acquired Inivata developed technology intangible assets. Cost of revenue for the year ended December 31, 2021, includes $10.4 million of amortization of acquired Inivata developed technology intangible assets and write-offs of $5.3 million for COVID-19 PCR testing inventory.

Revenue

Clinical Services and Pharma Services net revenue for the years ended December 31, 2022 and 2021, are as follows (dollars in thousands):

Consolidated revenue in 2022 increased $25.4 million, or 5.2%, as compared to 2021. Clinical Services revenue increased $14.6 million, or 3.6%, to $418.8 million in 2022 as compared to $404.2 million in 2021. Increases in Clinical Services revenue reflects an increase in average unit price due to strategic reimbursement initiatives and a more favorable test mix.

Due to the broad roll-out of the COVID-19 vaccine and a sharp decline in the demand for COVID-19 PCR testing, we made the decision at the end of the first quarter 2021 to exit from COVID-19 PCR testing which was included in Clinical Services segment revenue. The Clinical Services segment’s continued focus is its broad and innovative testing menu as well as any future new product offerings. COVID-19 PCR testing revenue for the year ended December 31, 2021 was $1.6 million. There was no such revenue for the year ended December 31, 2022.

Pharma Services revenue increased $10.8 million, or 13.5%, to $91.0 million in 2022 as compared to $80.2 million in 2021, primarily driven by increased volume and higher billings across its portfolio, including RaDaR™ testing.

Cost of Revenue and Gross Profit

Cost of revenue includes payroll and payroll related costs for performing tests, maintenance and/or depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, delivery and courier costs relating to the transportation of specimens to be tested, and amortization for acquired Inivata developed technology intangible assets.

The consolidated cost of revenue and gross profit metrics for the years ended December 31, 2022 and 2021 are as follows (dollars in thousands):

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_________________

(2) Clinical Services cost of revenue in 2022 includes $17.1 million of amortization of acquired Inivata developed technology intangible assets. Clinical Services cost of revenue in 2021 includes $9.2 million of amortization of acquired Inivata developed technology intangible assets and write-offs of $5.3 million for COVID-19 PCR testing inventory.

(3) Pharma Services cost of revenue in 2022 includes $2.4 million of amortization of acquired Inivata developed technology intangible assets. Pharma Services cost of revenue in 2021 includes $1.2 million of amortization of acquired Inivata developed technology intangible assets.

Consolidated cost of revenue increased for the year ended December 31, 2022 when compared to the same period in 2021 primarily due to higher payroll and payroll-related costs and the amortization of acquired Inivata developed technology intangible assets. The cost of revenue for the year ended December 31, 2021 included write-offs of $5.3 million for inventory due to the exit from COVID-19 PCR testing. There were no such inventory write-offs for the year ended December 31, 2022.

Gross profit margin for 2022 was 36.9% compared to 38.6% in 2021. This 1.7% decrease is primarily due to the amortization of acquired Inivata developed technology intangibles and higher payroll and payroll-related costs.

General and Administrative Expenses

General and administrative expenses consist of payroll and payroll related costs for our executive, billing, finance, human resources, information technology, and other administrative personnel, as well as stock-based compensation. We also allocate professional services, facilities expense, IT infrastructure costs, depreciation, amortization, and other administrative-related costs to general and administrative expenses.

Consolidated general and administrative expenses for the years ended December 31, 2022 and 2021 are as follows (dollars in thousands):

General and administrative expenses increased $22.0 million in 2022 compared to 2021. This increase was partially due to general and administrative expenses of $9.1 million for the Inivata and Trapelo Health subsidiaries which were acquired in the second quarter of 2021 and a net increase in non-cash stock-based compensation expenses of $2.2 million, which included incremental stock-based compensation for the acceleration of stock option and restricted stock awards upon the departure of certain of our officers. Excluding the increase in general and administrative expenses for the Inivata and Trapelo Health subsidiaries, general and administrative expenses also increased by $8.2 million of payroll and payroll-related costs, $5.4 million of investments in technology, $3.6 million of severance costs primarily related to executive departures, $3.9 million of professional fees, $2.2 million of relocation costs for our new Chief Executive Officer, $2.1 million of depreciation, $1.7 million of insurance expenses, $1.6 million of net loss on disposal of assets, and $1.2 million of facilities costs. These increases in general and administrative expenses for the year ended December 31, 2022 were partially offset by a decrease when compared to the same period in 2021 of $11.1 million of loss contingency for a regulatory matter and $11.3 million of acquisition transaction costs related to the acquisitions of Inivata and Trapelo that occurred in the second quarter of 2021.

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Research and Development Expenses

Research and development expenses relate to costs of developing new proprietary and non-proprietary genetic tests, including payroll and payroll related costs, maintenance of laboratory equipment, laboratory supplies (reagents), and outside consultants and experts assisting our research and development team.

Consolidated research and development expense for the years ended December 31, 2022 and 2021 are as follows (dollars in thousands):

Research and development expenses increased $8.5 million in 2022 compared to 2021. This increase primarily reflects an increase in research and development expenses for the Inivata subsidiary which was acquired in June of 2021.

We anticipate research and development expenditures will significantly increase in the future as we continue to invest in development costs for strategic innovation projects and bringing new tests to market.

Sales and Marketing Expenses

Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, and marketing and customer service personnel.

Consolidated sales and marketing expenses for the years ended December 31, 2022 and 2021, are as follows (dollars in thousands):

Sales and marketing expenses increased $4.7 million in 2022 compared to 2021. The increase primarily reflects an increase in payroll and payroll-related costs due to the expansion of our precision medicine sales team.

We expect higher commissions expense in the coming quarters as our sales representatives generate new business in our business segments. We expect our sales and marketing expenses over the long term to align with changes in revenue and we continue to evaluate the effectiveness of our incentive compensation plans.

Restructuring charges

Consolidated restructuring charges for the years ended December 31, 2022 and 2021 are as follows (dollars in thousands):

_________________

(4) NM - Not meaningful

Restructuring charges relate to a restructuring program to improve execution and drive efficiency across the organization. Restructuring charges consist of severance and other employee costs, costs for optimizing the Company’s geographic presence, and consulting and other costs.

For the year ended December 31, 2022, we recorded $4.5 million of restructuring charges. The charges were comprised of $1.0 million in severance and other employee costs, $0.7 million loss on the impairment of facilities and assets, and $2.8 million of consulting and other costs. There were no such amounts recorded for the year ended December 31, 2021.

Interest Expense, Net

Interest expense, net, for the years ended December 31, 2022 and 2021 is as follows (dollars in thousands):

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Interest expense, net, decreased $3.6 million in 2022 compared to 2021. Interest expense for the years ended December 31, 2022 and 2021 primarily reflects the effective interest rate on the 2028 Convertible Notes and the 2025 Convertible Notes which is 0.70% and 1.96%, respectively. Interest on the 2028 Convertible Notes and 2025 Convertible Notes began accruing upon issuance and is payable semi-annually. Interest expense also includes amortization related to our fixed income investments. Interest expense was partially offset for the years ended December 31, 2022 and 2021 by interest income on funds held in our cash equivalent and marketable securities accounts.

For further details regarding the convertible notes and our investments in marketable securities, please refer to Note 9. Debt, and Note 4. Fair Value Measurements, respectively, in the accompanying notes to the Consolidated Financial Statements.

Gain on Investment In and Loan Receivable From Non-Consolidated Affiliate, Net

Gain on investment in and loan receivable from non-consolidated affiliate, net, for the years ended December 31, 2022 and 2021 is as follows (dollars in thousands):

_________________

(5) NM - Not meaningful

We recorded a gain on investment in and loan receivable from non-consolidated affiliate, net, in the accompanying notes to the Consolidated Statements of Operations of $109.3 million in 2021 for the excess of the acquisition-date fair value of the previously-held equity interest, Purchase Option, and Line of Credit over their carrying values. There was no such amount recorded on the Consolidated Statements of Operations in 2022. For further details regarding the previously-held equity investment, purchase option in Inivata and the related gain, please refer to Note 3. Acquisitions and Note 8. Investment in Non-Consolidated Affiliate, in the accompanying notes to the Consolidated Financial Statements.

Net Loss

The following table provides the net loss for the years ended December 31, 2022 and 2021, along with the computation of basic and diluted net loss per share (in thousands, except per share amounts):

Non-GAAP Measures

Use of Non-GAAP Financial Measures

In order to provide greater transparency regarding our operating performance, the financial results and financial guidance include the use of certain non-GAAP financial measures that involve adjustments to GAAP results. Non-GAAP financial measures exclude certain income and/or expense items that management believes are not directly attributable to our core operating results and/or certain items that are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. Management believes that the presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors by facilitating the analysis of our core test-level operating results across reporting periods and when comparing those same results to those published by our peers. These non-GAAP financial measures may also assist investors in evaluating future prospects. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the business. These non-GAAP financial measures do not replace the presentation of financial information in accordance with U.S. GAAP financial results, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures used by other companies.

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Definitions of Non-GAAP Measures

Non-GAAP Adjusted EBITDA

“Adjusted EBITDA” is defined by NeoGenomics as net (loss) income from continuing operations before: (i) interest expense, net, (ii) tax (benefit) or expense, (iii) depreciation and amortization expense, (iv) non-cash stock-based compensation expense, and, if applicable in a reporting period, (v) acquisition and integration related expenses, (vi) write-off of COVID-19 PCR testing inventory and equipment, (vii) CEO transition costs, (viii) new headquarters moving expenses, (ix) gain on investment in and loan receivable from non-consolidated affiliate, net, (x) loss contingency for regulatory matter, (xi) restructuring charges, and (xii) other significant or non-operating (income) or expenses, net.

The following is a reconciliation of GAAP net loss to Non-GAAP EBITDA and Adjusted EBITDA for the years ended December 31, 2022 and 2021 (dollars in thousands):

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(6) For the year ended December 31, 2022, other significant (income) expenses, net, includes fees related to a regulatory matter, moving costs, a gain on the sale of a building and other non-recurring items. For the year ended December 31, 2021, other significant (income) expenses, net, includes strategic deal costs, moving costs, and other non-recurring items.

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash generated from operations, public and private sales of debt and equity securities, and bank debt borrowings.

The following table presents a summary of our consolidated cash flows for operating, investing, and financing activities for the years ended December 31, 2022 and 2021, as well as the period ending cash and cash equivalents and working capital (in thousands):

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_________________

(7) Defined as current assets less current liabilities.

Cash Flows from Operating Activities

Cash used in operating activities during the year ended December 31, 2022, was $66.0 million compared to $26.7 million in the same period in 2021. This $39.3 million increase was primarily driven by our operating results (net loss adjusted for depreciation, amortization of intangibles, and other non-cash charges) which resulted in $12.2 million of higher cash used by operating activities year-over-year, as well as a $27.1 million increase in cash used resulting from net changes in operating assets and liabilities. The increase in cash used by operating activities for the year ended December 31, 2022 compared to the same period in 2021 reflects cash used to fund the operating activities of our Inivata subsidiary which was acquired in June of 2021, an increase in higher payroll and payroll-related costs to support our strategic growth initiatives, as well as the timing of cash receipts and cash payments in the ordinary course of business which can cause operating cash flow to fluctuate from period to period.

Cash Flows from Investing Activities

During the year ended December 31, 2022, cash provided by investing activities was $0.5 million, compared to $632.4 million of cash used in investing activities for the same period in 2021. This change was primarily due to a $419.4 million decrease in net cash used in business acquisitions, a $99.2 million decrease in purchases of marketable securities, a $33.3 million decrease in purchases of property and equipment, a $15.0 million decrease in loan receivable from non-consolidated affiliate, a $53.9 million increase in sales and maturities of marketable securities year-over-year, and a $12.1 million increase in proceeds from assets held for sale.

Cash Flows from Financing Activities

During the year ended December 31, 2022, cash provided by financing activities was $11.8 million compared to $725.3 million for the same period in 2021. The cash provided by financing activities during the year ended December 31, 2022 consisted of $12.6 million for the issuance of common stock net of issuance costs offset by $0.8 million used for the repayment of equipment financing obligations. The primary reason for the decrease in cash provided by financing activities year-over-year was that there were no convertible debt or equity offerings for the year ended December 31, 2022. Comparatively, the year ended December 31, 2021 had convertible debt net proceeds of $334.4 million and equity offering net proceeds of $408.1 million, partially offset by $29.3 million of premiums paid for capped call confirmations.

Liquidity Outlook

As of December 31, 2022, we had $263.2 million in cash and cash equivalents in addition to $174.8 million of marketable securities available to support current operational liquidity needs. We anticipate that the cash on hand, marketable securities, and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business (including amounts required to fund working capital and capital expenditures, continued research, and development efforts) and potential strategic acquisitions and investments.

Related Party Transactions

Please refer to Note 19. Related Party Transactions, to our Consolidated Financial Statements for a description of our related party transactions.

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Contractual Obligations

The following table summarizes our significant contractual obligations as of December 31, 2022 (in thousands):

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(8) Amounts represent required principal debt payments on our 2025 Convertible Notes and 2028 Convertible Notes. Please refer to Note 9. Debt, to our Consolidated Financial Statements for a full description of the terms of our indebtedness and the related debt service requirements.

Capital Expenditures

During the year ended December 31, 2022, capital expenditures were $30.9 million. We forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently anticipate that our capital expenditures for the year ended December 31, 2023, will be in the range of $30.0 million to $40.0 million. We have funded and plan to continue funding these capital expenditures with cash and financing.

Recently Adopted Accounting Guidance

Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements pending adoption.

Effects of Inflation

During the years ended December 31, 2022, 2021 and 2020, inflation did not have a material effect on our business. Widely reported inflation has occurred, however, and may be ongoing for the foreseeable future. Depending on the severity and persistence of these inflationary pressures, we could experience, in the future, a negative impact on our financial results. While we anticipate an increasingly uncertain macroeconomic environment in fiscal year 2023, we will continue to mitigate through targeted pricing and various sourcing strategies. We remain optimistic about our growth opportunities in our key markets in fiscal year 2023.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the Notes thereto included in this Annual Report on Form 10-K. The information contained below includes statements of management’s beliefs, expectations, hopes, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the introductory note to this Annual Report under the caption “Forward Looking Statements,” which information is incorporated herein by reference. For discussion and analysis pertaining to 2020 overview and highlights as compared to 2019, please refer to the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021.

Our Company

NeoGenomics is a high-complexity clinical laboratory that specializes in cancer genetics diagnostic testing and pharma services. Our testing services include cytogenetics, FISH, flow cytometry, IHC, anatomic pathology and molecular genetic testing. We operate CLIA-certified laboratories in Fort Myers and Tampa, Florida; Aliso Viejo, Carlsbad and San Diego, California; Research Triangle Park, North Carolina; Houston, Texas; Atlanta, Georgia; Nashville, Tennessee; and Phoenix, Arizona and CAP accredited laboratories in Cambridge, United Kingdom; Rolle, Switzerland; and Singapore. NeoGenomics

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serves the needs of pathologists, oncologists, academic centers, hospital systems, pharmaceutical firms, integrated service delivery networks, and managed care organizations throughout the United States and pharmaceutical firms in Europe and Asia.

2021 Overview and Highlights

•We increased consolidated revenue by 9.0% compared to 2020, including increases in Clinical Services revenue of 5.7% and in Pharma Services revenue of 29.1%;

•Pharma Services backlog increased to approximately $267 million;

•Financial position strengthened with $743 million net convertible note and equity offerings;

•We acquired Trapelo;

•We acquired Inivata;

•With the Inivata acquisition, we added liquid biopsy platform technology, including MRD testing capabilities, to our comprehensive portfolio of oncology testing solutions; and

•Transitioned the majority of our testing in Fort Myers to our new headquarters and laboratory facility, providing significant additional capacity for future growth.

Company Outlook

Advances in science and technology are driving a proliferation of oncology therapies and associated diagnostic tests. These diagnostic tools and therapies are increasing survival and enhancing quality-of-life for cancer patients. As a leading global oncology diagnostics company serving biopharmaceutical companies as well as practicing oncologists and pathologists, NeoGenomics facilitates the adoption of these advanced oncology diagnostic tools beyond the academic environment into the community setting. We are continuously enhancing and expanding our test menu to ensure that providers and patients have access to leading edge solutions such as advanced molecular testing and state-of-the art digital pathology. Moreover, our team of MDs and PhDs, along with our highly-trained oncology-focused sales team, provides ongoing education to our clients to ensure that they remain abreast of cutting-edge developments in oncology.

We are a leading provider of oncology-diagnostic services to biopharma companies. We will continue to work with these clients across the drug development continuum—from research and development through clinical trials testing—to commercialization of companion diagnostic tests. We expect to continue to grow our Pharma Services business through (i) global expansion in both Europe and Asia, (ii) expansion of our test offerings (including leading edge NGS tools), and (iii) our unique capabilities for developing and commercializing companion diagnostic tests.

We are continuing to develop and broaden our informatics and data-related tools to leverage our strategic market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We are committed to connecting patients with life altering therapies and trials. In carrying out these commitments, NeoGenomics aims to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and has invested in leading technologies to help ensure the data we maintain is secured at all times.

We believe lower cost and increased value of testing is extremely important to the healthcare industry and creates a competitive advantage. We will invest in information technology, automation and best practices to continually improve our processes and drive down the cost of testing. We will continue to expand our test menu and expect to remain at the forefront of the ongoing revolution in cancer related genetic and molecular testing to achieve our vision of becoming one of the world’s leading cancer testing and information companies.

We continue to develop our company-wide focus, which includes the following three critical success factors for 2022:

Growth through Innovation

•Successfully launch new test offerings and secure reimbursement;

•Expand development of new cancer treatments; and

•Accelerate precision medicine in the community.

Excellence In Service and Performance

•Achieve turnaround time targets;

•Grow consolidated revenue and profitability; and

•Design next-generation LIMS platform.

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Purpose Driven Culture

•Drive an engaged and committed workforce; and

•Foster inclusive and effective leadership by expanding our culture of inclusion and developing our future leaders.

These critical success factors have been communicated throughout our Company. We have structured departmental goals around these factors and have created employee incentive plans in which every employee will have a meaningful incentive for our success.

Regulatory Environment

The FDA is currently considering changes which may include increased regulation of LDTs by the FDA. In October 2014 the FDA announced its proposed framework and timetable and indicated it would move toward greater oversight of LDTs. The FDA has not finalized the framework they announced in 2014. In 2017 the FDA shifted its approach to oversight of LDTs, indicating that they would work with Congress and stakeholders on a new legislative framework and pathway for all diagnostic testing. In 2018 the FDA began limited enforcement activities on a subset of LDTs known as pharmacogenetic testing (“PGx”). NeoGenomics is a member of the American Clinical Laboratory Association (“ACLA”), which has been in active discussions with the FDA and Congress regarding FDA oversight of LDT’s. However, recent agency announcements made in the context of the COVID-19 public health emergency have produced a shifting policy landscape and further uncertainty regarding FDA’s role in regulating LDTs: in August 2020, HHS announced that FDA would not require premarket review of LDTs absent notice-and-comment rulemaking, but in November 2021, HHS issued a statement withdrawing that prior announcement, indicating a return to FDA’s longstanding approach to the regulation and enforcement discretion toward LDTs. At this time, we cannot predict what the current administration impact will be on the oversight and regulation of LDTs or if there will be any additional changes to current rules and regulations.

We closely monitor changes in legislation and take specific actions to identify and estimate the impact of changes in legislation whenever possible as regulatory changes can affect reimbursement for clinical laboratory services. We do not anticipate significant changes to our clinical revenue in 2022 resulting from known changes in legislation.

Reportable Segments

We report our activities in two reportable segments—the Clinical Services Segment and the Pharma Services Segment. We have presented the financial information reviewed by the Chief Operating Decision Maker including revenues, cost of revenue, and gross margin for each of our reportable segments. Assets are not presented at the segment level as that information is not used by the CODM.

Clinical Services

The clinical cancer testing services we offer to community-based pathologists are designed to be a natural extension of, and complementary to, the services that they perform within their own practices. We believe our relationships as a non-competitive partner to community-based pathology practices, to hospital pathology labs, and to academic centers empower them to expand their breadth of testing and provide a menu of services to match or exceed the level of service found in any center of excellence around the world. Community-based pathology practices and hospital pathology labs may order certain testing services on a tech-only basis, which allows them to participate in the diagnostic process by performing the PC interpretation services without having to hire laboratory technologists or purchase the sophisticated equipment needed to perform the technical component of the tests. We also support our pathology clients with interpretation and consultative services using our own specialized team of pathologists for difficult or complex cases and provide overflow interpretation services when requested by clients.

We are a leading provider of Molecular and NGS testing. These tests are interpreted by NeoGenomics’ team of Molecular experts and are often ordered in conjunction with other testing modalities. NGS panels are one of our fastest growing testing areas and clients can often receive a significant amount of biomarker information from very limited samples. These comprehensive panels can allow for faster treatment decisions for patients as compared to a series of single-gene molecular tests being ordered sequentially. We believe that we have one of the broadest Molecular menus in the industry and our targeted NeoTYPE panels include genes relevant to a particular cancer type, as well as other complementary tests, such as immunohistochemistry and FISH. This comprehensive menu means that NeoGenomics can be a “one-stop shop” for our clients who can get all of their oncology testing needs satisfied by our laboratory. This is attractive to our clients as patient samples do not need to be split and then managed across several laboratories. We expect our Molecular laboratory and NGS capabilities to be a key growth driver in the coming years.

In addition we directly serve oncology, dermatology, and other clinician practices that prefer to have a direct relationship with a laboratory for cancer-related genetic testing services. We typically serve these types of clients with a comprehensive

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service offering where we perform both the technical and professional components of the tests ordered. In certain instances, larger clinician practices have begun to internalize pathology interpretation services and our tech-only service offering allows these larger clinician practices to also participate in the diagnostic process by performing the PC interpretation services on TC testing performed by us. In these instances, we will typically provide all of the more complex, molecular testing services.

Pharma Services

Our Pharma Services revenue consists of three revenue streams:

•Clinical trials and research;

•Validation laboratory services; and

•Informatics.

Our Pharma Services segment supports pharmaceutical firms in their drug development programs by supporting various clinical trials and research. This portion of our business often involves working with the sponsors on study design as well as performing the required testing. Our medical team often advises the sponsor and works closely with them as specimens are received from the enrolled sites. We also work on developing tests that will be used as part of a companion diagnostic to determine patients’ responses to a particular drug. As studies unfold our clinical trials team reports the data and often provides key analysis and insights back to the sponsors.

Our Pharma Services segment provides comprehensive testing services in support of our pharmaceutical clients’ oncology programs from discovery to commercialization. In biomarker discovery our aim is to help our clients discover the right content. We help our clients develop a biomarker hypothesis by recommending an optimal platform for molecular screening and backing our discovery tools with the informatics to capture meaningful data. In other pre-clinical and non-clinical work we can use our platforms to characterize markers of interest. Moving from discovery to development, we seek to help our clients refine their biomarker strategy and, if applicable, to develop a companion diagnostic pathway using the optimal technology for large-scale clinical trial testing.

Whether serving as the single contract research organization or partnering with one, our Pharma Services team provides significant technical expertise, working closely with our clients to support each stage of clinical trial development. Each trial we support comes with rapid turnaround time, dedicated project management, and quality assurance oversight. We have experience in supporting submissions to the FDA for companion diagnostics. Our Pharma Services strategy is focused on helping bring more effective oncology treatments to market through providing world-class laboratory services in oncology to key pharmaceutical companies in the industry.

We believe we are well positioned to service Pharma sponsors across the full continuum of the drug development process. Our Pharma Services team can work with them during the basic research and development phase as compounds come out of translational research departments as well as work with clients from Phase I clinical trials through Phases II and III as the sponsors work to prove the efficacy of their drugs. The laboratory biomarker tests that are developed during this process may become CDx tests that will be used on patients to determine if they could respond to a certain therapy. We are able to offer these CDx tests to the market immediately after FDA approval as part of our Day 1 readiness program. This ability helps to speed the commercialization of a drug and can enable Pharma sponsors to reach patients through our broad distribution channel in the Clinical Services segment.

We are continuing to develop and broaden our informatics and data-related tools to leverage our strategic market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We are committed to connecting patients with life altering therapies and trials. In carrying out these commitments, we aim to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and have invested in leading technologies to seek to ensure the data we maintain is secured at all times.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a complete description of our significant accounting policies.

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Our critical accounting policies are those where we have made difficult, subjective, or complex judgments in making estimates and/or where these estimates can significantly impact our financial results under different assumptions and conditions. Our critical accounting policies are:

•Business Combinations;

•Accounts Receivable;

•Recoverability and Impairment of Long-Lived Assets;

•Contingencies;

•Stock-based Compensation;

•Revenue Recognition; and

•Deferred Taxes.

Business Combinations

Results of operations and cash flows of acquired companies are included in our operating results from the date of acquisition. We allocate the purchase price of acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. Any excess purchase price over the estimated fair value assigned to the net tangible and identifiable intangible assets acquired and liabilities assumed is recorded to goodwill. Transaction costs associated with acquisitions are expensed as incurred in general and administrative expenses.

Accounts Receivable

Accounts receivable are reported for all Clinical Services payers based on the amount expected to be collected, which considers implicit price concessions.

For Pharma Services, we negotiate billing schedules and payment terms on a contract-by-contract basis, which often includes payments based on certain milestones being achieved. Receivables are generally reported over time based on the number of units completed, which aligns with the progress towards fulfilling its obligations under the contract.

Days Sales Outstanding (“DSO”) increased to 82 days at December 31, 2021 from 78 days at December 31, 2020 due to timing of cash receipts.

Recoverability and Impairment of Long-Lived Assets

We review the recoverability of its long-lived assets (including definite-lived intangible assets) if events or changes in circumstances indicate the assets may be impaired. Evaluation of possible impairment is based on our ability to recover the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations. If the expected undiscounted pretax cash flows are less than the carrying amount of such asset, an impairment loss is recognized for the difference between the estimated fair value to the carrying amount of the asset.

Contingencies

We accrue contingent losses when estimated impacts of various conditions, situations or circumstances involve uncertain outcomes. Contingent losses are recorded based on management judgment along with internal and external advice from legal counsel and/or technical consultants. Estimated losses from contingencies are recorded when both of the following conditions are met: (i) information available before the financial statements are issued (or available to be issued) indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and (ii) the amount of loss can be reasonably estimated. If some amount within a range of loss appears at the time to be a better estimate than any other amount within the range, that amount shall be accrued. When no amount within the range is a better estimate than any other amount, however, the minimum amount in the range shall be accrued.

Stock-based Compensation

We recognize compensation costs for all share-based payment awards made to employees, non-employee contracted physicians and directors based upon the awards’ initial grant-date fair value. Prior to 2021, we estimated the fair value of stock options using a trinomial lattice model. On January 1, 2021, we began applying the Black-Scholes option valuation model on a prospective basis to new awards. Stock compensation is recognized on a straight-line basis over the awards’ requisite service periods. The periodic expense is adjusted for actual forfeitures.

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Revenue Recognition

Clinical Services Revenue

Our specialized diagnostic services are performed based on an online test order or a written test requisition form. The performance obligation is satisfied and revenues are recognized once the diagnostic services have been performed and the results have been delivered to the ordering physician. These diagnostic services are billed to various payers, including client direct billing, commercial insurance, Medicare and other government payers, and patients. Revenue is recorded for all payers based on the amount expected to be collected, which considers implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration we expect to receive based on negotiated discounts, historical collection experience and other anticipated adjustments, including anticipated payer denials. Collection of consideration we expect to receive typically occurs within 30 to 60 days of billing for commercial insurance, Medicare and other governmental and self-pay patients and within 60 to 90 days of billing for client payers.

The following table reflects our estimate of the breakdown of net clinical revenue by type of payer for the years ended December 31, 2021, 2020, and 2019:

Pharma Services Revenue

All of our Pharma Services revenue is billed directly to clients, or the pharmaceutical sponsor. Our Pharma Services segment generally enters into contracts with pharmaceutical and biotech customers as well as other CROs to provide research and clinical trial services ranging in duration from one month to several years. We record revenue on a unit-of-service basis based on number of units completed and the total expected contract value. The total expected contract value is estimated based on historical experience of total contracted units compared to realized units as well as known factors on a specific contract-by-contract basis. Certain contracts include upfront fees, final settlement amounts or billing milestones that may not align with the completion of performance obligations. The value of these upfront fees or final settlement amounts is usually recognized over time based on the number of units completed, which aligns with our progress towards fulfilling our obligations under the contract. We also enter into other contracts, such as validation studies, for which the sole deliverable is a final report that is sent to sponsors at the completion of contracted activities. For these contracts, revenue is recognized at a point in time upon delivery of the final report to the sponsor. Any contracts that contain multiple performance obligations and include both units-of-service and point in time deliverables are accounted for as separate performance obligations and revenue is recognized as previously disclosed. We negotiate billing schedules and payment terms on a contract-by-contract basis. While the contract terms generally provide for payments based on a unit-of-service arrangement, the billing schedules, payment terms and related cash payments may not align with the performance of services and, as such, may not correspond to revenue recognized in any given period.

Amounts collected in advance of services being provided are deferred as contract liabilities on the balance sheet. The associated revenue is recognized and the contract liability is reduced as the contracted services are subsequently performed. Contract assets are established for revenue that has been recognized but not yet billed. These contract assets are reduced once the customer is invoiced and a corresponding account receivable is recorded. Additionally, certain costs to obtain contracts, primarily for sales commissions, are capitalized when incurred and are amortized over the term of the contract. Amounts capitalized for contracts with an initial contract term of twelve months or less are classified as current assets and all others are classified as non-current assets.

Most contracts are terminable by the customer, either immediately or according to advance notice terms specified within the contracts. All contracts require payment of fees for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract.

Deferred Taxes

Our accounting for deferred tax consequences represents our best estimate of future events that can be appropriately reflected in accounting estimates. The factors included in the analysis are historical and projected future taxable income including evolving business practices of our industry. Changes in existing tax laws, regulations, rates and future operating results may impact the amount of deferred tax liabilities and deferred tax assets over time.

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Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets.

As of December 31, 2021 and 2020, we determined that sufficient positive evidence did not exist to conclude that it is more likely than not that net operating losses generated by our operations in the U.S., Switzerland, Singapore, and China would be able to be utilized in future periods and has therefore established a valuation allowance against the deferred tax assets generated by such losses.

Results of Operations for the year ended December 31, 2021 as compared with the year ended December 31, 2020

The following table presents the condensed Consolidated Statements of Operations as a percentage of revenue for the years ended December 31, 2021 and 2020:

(1) Cost of revenue for the year ended December 31, 2021, includes $10.4 million of amortization of acquired Inivata developed technology intangible assets and write-offs of $5.3 million for COVID-19 PCR testing inventory.

Revenue

Clinical Services and Pharma Services net revenue for the years ended December 31, 2021 and 2020, are as follows (dollars in thousands):

Consolidated revenue in 2021 increased $39.9 million, or 9.0%, as compared to 2020. Clinical Services revenue increased $21.8 million, or 5.7%, to $404.2 million in 2021 as compared to $382.3 million in 2020. Decreases in Clinical Services revenue in 2021 due to the exit of COVID-19 PCR testing were offset by increases in Clinical Services non-COVID-19 PCR test volumes.

Due to the broad roll-out of the COVID-19 vaccine and a sharp decline in the demand for COVID-19 PCR testing, we made the decision at the end of the first quarter 2021 to exit from COVID-19 PCR testing which was included in Clinical Services segment revenue. The Clinical Services segment’s continued focus is its broad and innovative testing menu as well as any future new product offerings. COVID-19 PCR testing revenue was $1.6 million in 2021 compared to $27.8 million in 2020.

Pharma Services revenue increased $18.0 million, or 29.1%, to $80.2 million in 2021 as compared to $62.1 million in 2020, primarily driven by an increase in revenue related to research studies and informatics. In addition our backlog of signed contracts has continued to grow 27.8% to approximately $267 million as of December 31, 2021, from $209 million as of

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December 31, 2020. We define backlog as the stated amount of signed contracts less dormant contracts with no activity for twelve months, contingencies and cancellations.

Cost of Revenue and Gross Profit

Cost of revenue includes payroll and payroll related costs for performing tests, maintenance and/or depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, delivery and courier costs relating to the transportation of specimens to be tested, and amortization for acquired Inivata developed technology intangible assets.

The consolidated cost of revenue and gross profit metrics for the years ended December 31, 2021 and 2020 are as follows (dollars in thousands):

(2) Clinical Services cost of revenue in 2021 includes $9.2 million of amortization of acquired Inivata developed technology intangible assets and write-offs of $5.3 million for COVID-19 PCR testing inventory.

(3) Pharma Services cost of revenue in 2021 includes $1.2 million of amortization of acquired Inivata developed technology intangible assets.

The consolidated cost of revenue increase in 2021 when compared to 2020 is due to the amortization of acquired Inivata developed technology intangibles, the write-off of COVID-19 PCR testing inventory due to the termination of COVID-19 PCR testing, and higher payroll and payroll-related costs.

Gross profit margin for 2021 was 38.6% compared to 41.8% in 2020. This 3.2% decrease is primarily due to the amortization of acquired Inivata developed technology intangibles and the fixed nature of many of our laboratory costs.

General and Administrative Expenses

General and administrative expenses consist of payroll and payroll related costs for our executive, billing, finance, human resources, information technology, and other administrative personnel, as well as stock-based compensation. We also allocate professional services, facilities expense, IT infrastructure costs, depreciation, amortization, and other administrative-related costs to general and administrative expenses.

Consolidated general and administrative expenses for the years ended December 31, 2021 and 2020 are as follows (dollars in thousands):

General and administrative expenses increased $77.6 million in 2021 compared to 2020. The increase reflects acquisition and integration costs related to the acquisitions of Inivata and Trapelo, an increase in payroll and payroll-related costs due to increases in personnel to support our near and long-term growth, higher non-cash stock-based compensation expenses, an increase in professional fees, and a loss contingency for the regulatory matter.

We expect our general and administrative expenses to increase in total but decrease as a percentage of revenue as we add employee and compensation expenses and continue to expand our physical and technological infrastructure to support our anticipated growth.

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Research and Development Expenses

Research and development expenses relate to costs of developing new proprietary and non-proprietary genetic tests, including payroll and payroll related costs, maintenance of laboratory equipment, laboratory supplies (reagents), and outside consultants and experts assisting our research and development team.

Consolidated research and development expense for the years ended December 31, 2021 and 2020 are as follows (dollars in thousands):

Research and development expenses increased $13.6 million in 2021 compared to 2020. The increase is driven by additional focus and commitment to new test development and FDA initiatives.

We anticipate research and development expenditures will significantly increase in the future as we continue to invest in development costs for innovation projects and bringing new tests to market.

Sales and Marketing Expenses

Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, and marketing and customer service personnel.

Consolidated sales and marketing expenses for the years ended December 31, 2021 and 2020, are as follows (dollars in thousands):

Sales and marketing expenses increased $14.7 million in 2021 compared to 2020. The increase primarily reflects higher commissions due to our increase in consolidated revenue, the expansion of our sales team, increased sales travel expenses due to the easing of COVID-19 pandemic related sales travel restrictions, and increased investment in marketing.

We expect higher commissions expense in the coming years as our sales representatives continue generating new business in both of our business segments. We expect our sales and marketing expenses over the long term to align with changes in revenue.

Interest Expense, Net

Interest expense, net, decreased $1.9 million in 2021 compared to 2020. This reduction in interest expense primarily results from the termination of the higher interest rate term loan replaced by the lower interest rate convertible debt in May 2020. Interest expense for the year ended December 31, 2021 reflects the effective interest rate on the 2028 Convertible Notes and the 2025 Convertible Notes which is 0.70% and 1.96%, respectively. Interest on the 2028 Convertible Notes and 2025 Convertible Notes began accruing upon issuance and is payable semi-annually. For further details regarding the convertible notes, please refer to Note 9. Debt, in the accompanying notes to the Consolidated Financial Statements.

Other Expense (Income), Net

Other expense (income), net, was expense of $0.5 million in 2021 compared to income of $7.9 million in 2020. This $8.4 million decrease was primarily due to grant income related to the CARES Act Public Health and Social Service Emergency Fund for the year ended December 31, 2020. Please refer to Note 2. Summary of Significant Accounting Policies for further details regarding the grant income.

Gain on Investment in and Loan Receivable from Non-Consolidated Affiliate, Net

We recorded a gain on investment in and loan receivable from non-consolidated affiliate, net, in the accompanying notes to the Consolidated Statements of Operations of $109.3 million in 2021 for the excess of the acquisition-date fair value of the previously-held equity interest, Purchase Option, and Line of Credit over their carrying values. For the year ended December 31, 2020, we reported a net unrealized gain of $4.0 million due to a remeasurement of our investment in Inivata. For further details regarding the previously-held equity investment, purchase option in Inivata and the related gain, please refer to Note 3. Acquisitions and Note 8. Investment in Non-Consolidated Affiliate, in the accompanying notes to the Consolidated Financial Statements.

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Net (Loss) Income

The following table provides the net (loss) income for the years ended December 31, 2021 and 2020, along with the computation of basic and diluted net (loss) income per share (in thousands, except per share amounts):

Non-GAAP Measures

Use of Non-GAAP Financial Measures

In order to provide greater transparency regarding our operating performance, the financial results and financial guidance in this press release refer to certain non-GAAP financial measures that involve adjustments to GAAP results. Non-GAAP financial measures exclude certain income and/or expense items that management believes are not directly attributable to the Company’s core operating results and/or certain items that are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. Management believes that the presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors by facilitating the analysis of the Company’s core, test-level operating results across reporting periods and when comparing those same results to those published by our peers. These non-GAAP financial measures may also assist investors in evaluating future prospects. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the business. These non-GAAP financial measures do not replace the presentation of financial information in accordance with U.S. GAAP financial results, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures provided by other companies.

Definitions of Non-GAAP Measures

Non-GAAP Adjusted EBITDA

“Adjusted EBITDA” is defined by NeoGenomics as net (loss) income from continuing operations before: (i) interest expense, (ii) tax (benefit) or expense, (iii) depreciation and amortization expense, (iv) non-cash stock-based compensation expense, and, if applicable in a reporting period, (v) acquisition and integration related expenses, (vi) write-off of COVID-19 PCR testing inventory and equipment, (vii) new headquarters moving expenses, (viii) gain on investment in and loan receivable from non-consolidated affiliate, net, (x) loss contingency for regulatory matter, (xi) loss on extinguishment of debt, and (xii) other significant or non-operating (income) or expenses, net.

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The following is a reconciliation of GAAP net (loss) income to Non-GAAP EBITDA and Adjusted EBITDA for the years ended December 31, 2021 and 2020 (dollars in thousands):

(4) Other significant expenses (income), net, includes strategic deal costs, CEO transition costs, amounts received related to the CARES Act, cash flow hedge termination fees, debt retirement fees, and certain non-recurring items.

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash generated from operations, public and private sales of debt and equity securities, and bank debt borrowings.

The following table presents a summary of our consolidated cash flows for operating, investing, and financing activities for the years ended December 31, 2021 and 2020, as well as the period ending cash and cash equivalents and working capital (in thousands):

(5) Defined as current assets less current liabilities.

Cash Flows from Operating Activities

Cash used in operating activities during the year ended December 31, 2021, was $26.7 million. The net loss of $8.3 million includes $15.7 million of acquisition and integration costs as well as non-cash charges resulting from $53.4 million depreciation and amortization, $22.5 million of stock-based compensation, $8.7 million of operating lease expense, $2.7 million of debt amortization, $6.1 million of write-offs of COVID-19 PCR testing inventory and equipment related to the exit from COVID-19 PCR testing, and $2.2 million of other non-cash items. These charges were offset by $109.3 million of realized net gain on investment in and loan receivable from non-consolidated affiliate. Operating assets had cash outflows of $9.8 million resulting from a $4.7 million increase in accounts receivable, net, and a $6.7 million increase of prepaids and

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other asset, offset by a $1.6 million decrease in inventory. Operating liabilities generated cash inflows of $5.2 million from a $12.3 million increase in accrued compensation and other accruals offset by a $7.1 million decrease in accounts payable.

Cash Flows from Investing Activities

During the year ended December 31, 2021, cash used in investing activities was $632.4 million, an increase of approximately $472.9 million compared to the same period in 2020. This was due to $419.4 million of net cash used for the acquisitions of Inivata and Trapelo as well as net investments in marketable securities of $133.8 million, $64.1 million of cash used for capital expenditures and the disbursement of a $15.0 million loan receivable from non-consolidated affiliate.

Cash Flows from Financing Activities

During the year ended December 31, 2021, cash provided by financing activities was $725.3 million compared to $235.6 million for the same period in 2020. Cash provided by financing activities during the year ended December 31, 2021, consisted $408.1 million of net proceeds from equity offerings, convertible debt proceeds of $334.4 million net of issuance costs, and $15.1 million for the issuance of common stock net of issuance costs. This activity was partially offset by the use of cash in amounts of $29.3 million for premiums paid for capped call confirmations and $3.0 million for the net repayment of equipment financing obligations.

Liquidity Outlook

As of December 31, 2021, we had $316.8 million in cash and cash equivalents in addition to $198.6 million of marketable securities available to support current operational liquidity needs. We anticipate that the cash on hand, marketable securities, and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business (including amounts required to fund working capital and capital expenditures, continued research, and development efforts) and potential strategic acquisitions and investments.

On January 6, 2021, we entered into an underwriting agreement relating to the issuance and sale of 4,081,632 shares of our common stock (the “2021 Common Stock Offering”), $0.001 par value per share. The price to the public in this offering was $49.00 per share and we agreed to sell the shares to the underwriters at the public offering price, less underwriting discounts and commission of $2.45 per share. Under the terms of the underwriting agreement, we also granted the underwriters a 30‑day option to purchase up to 612,244 additional shares of common stock at the public offering price, less underwriting discounts and commissions. On January 6, 2021, the underwriters exercised their option in full and purchased all 612,244 shares. The net proceeds from the 2021 Common Stock Offering and full exercise of the underwriters’ option were approximately $218.3 million, net of underwriting commissions of approximately $11.7 million.

On January 11, 2021, we completed the sale of $345.0 million of the 2028 Convertible Notes, including the full exercise of the underwriters’ option to purchase an additional $45.0 million aggregate principal amount of the 2028 Convertible Notes (the “2028 Over-allotment Option”) on the same terms and conditions, solely to cover over-allotments with respect to the 2028 Convertible Notes offering. The total net proceeds from the issuance of the 2028 Convertible Notes and the total exercise of the 2028 Over-allotment Option was approximately $334.4 million, which includes approximately $10.6 million of discounts, commissions and offering expenses. For further details regarding the 2028 Convertible Notes, please refer to Note 9. Debt, in the accompanying notes to the Consolidated Financial Statements.

We used $29.3 million of the net proceeds from the offerings to enter into capped call transactions. We intend to use the remaining net proceeds from the offerings for general corporate purposes and/or to acquire or invest in complementary businesses and technologies.

On June 18, 2021, we completed a private placement (“Private Placement”) to certain accredited investors of an aggregate of 4,444,445 shares of our common stock at a price of $45.00 per share. The net proceeds from the Private Placement were approximately $189.9 million, after deducting fees to the placement agents and other offering expenses of approximately $10.1 million. We used the net proceeds from the Private Placement for the acquisition of Inivata.

Related Party Transactions

Please refer to Note 18. Related Party Transactions, to our Consolidated Financial Statements for a description of our related party transactions.

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Contractual Obligations

The following table summarizes our significant contractual obligations as of December 31, 2021 (in thousands):

(6) Amounts represent required principal debt payments on our 2025 Convertible Notes and 2028 Convertible Notes. Please refer to Note 9. Debt, to our Consolidated Financial Statements for a full description of the terms of our indebtedness and the related debt service requirements.

Capital Expenditures

We forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently anticipate that our capital expenditures for the year ended December 31, 2022, will be in the range of $25.0 million to $35.0 million. We have funded and plan to continue funding these capital expenditures with cash and financing.

Recently Adopted Accounting Guidance

Please refer to Note 2. Summary of Significant Accounting Policies, to our Consolidated Financial Statements for a discussion of recently adopted accounting pronouncements and accounting pronouncements pending adoption.

Effects of Inflation

During the years ended December 31, 2021, 2020 and 2019, inflation did not have a material effect on our business. Widely reported inflation has occurred, however, and may be ongoing for the foreseeable future. Depending on the severity and persistence of these inflationary pressures, we could see, in the future, a negative impact on our financial results.