10-Q 1 neo-20240331.htm 10-Q neo-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 001-35756
NEOGENOMICS, INC.
(Exact name of registrant as specified in its charter)
 
Nevada 74-2897368
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
9490 NeoGenomics Way,Fort Myers, 
Florida 33912
(Address of principal executive offices) (Zip Code)
 
(239) 768-0600
(Registrant’s telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock ($0.001 par value)NEOThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  S No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  S   No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
S
Accelerated filer
Non-accelerated filerSmaller Reporting Company
 Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐   No  S
As of April 26, 2024, the registrant had 127,711,930 shares of Common Stock, par value $0.001 per share outstanding.




TABLE OF CONTENTS




FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intends,” “may,” “plan,” “potential,” “project,” “will,” “would,” and similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements address various matters, including the Company’s strategy, future operations, future financial position, future revenues, changing reimbursement levels from government payers and private insurers, projected costs, prospects and plans, and objectives of management. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on February 20, 2024, and in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.
The forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this report, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.


3


Glossary
Throughout this Quarterly Report on Form 10-Q, we may use certain abbreviations, acronyms and terms which are described below:
ACAThe Patient Protection and Affordable Care Act
ACLAAmerican Clinical Laboratory Association
AKSAnti-Kickback Statute
CAPCollege of American Pathologists
CDxCompanion Diagnostic
CLIAClinical Laboratory Improvement Amendments of 1988
CMSCenters for Medicare and Medicaid Services
CROContract research organizations
DHSDesignated health services
FCAThe federal False Claims Act
FDAU.S. Federal Drug Administration
FISHFluorescence In-Situ Hybridization
GAAPU.S generally accepted accounting principles
GDPRThe European Union’s General Data Protection Regulation
HIPAAThe Health Insurance Portability and Accountability Act of 1996
IHCImmunohistochemistry
LDTLaboratory developed tests
LIMSLaboratory Information Management System
MolDxMolecular Diagnostic Services Program
MRDMinimal residual disease
NGSNext-generation sequencing
OIGThe Office of Inspector General of the Department of Health and Human Services
PCRPolymerase chain reaction
PHIProtected health information
4


PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOGENOMICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
March 31, 2024
December 31, 2023
ASSETS
Current assets
Cash and cash equivalents$331,914 $342,488 
Marketable securities, at fair value52,916 72,715 
Accounts receivable, net140,279 131,227 
Inventories20,320 24,156 
Prepaid assets19,155 17,987 
Other current assets9,312 8,239 
Total current assets573,896 596,812 
Property and equipment (net of accumulated depreciation of $167,584 and $158,211, respectively)
87,865 92,012 
Operating lease right-of-use assets86,578 91,769 
Intangible assets, net364,764 373,128 
Goodwill522,766 522,766 
Other assets4,470 4,742 
Total non-current assets1,066,443 1,084,417 
Total assets$1,640,339 $1,681,229 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$18,336 $20,334 
Accrued compensation34,609 53,161 
Accrued expenses and other liabilities18,134 15,069 
Current portion of operating lease liabilities4,487 5,610 
Contract liabilities1,144 2,130 
Total current liabilities76,710 96,304 
Long-term liabilities
Convertible senior notes, net538,923 538,198 
Operating lease liabilities64,773 67,871 
Deferred income tax liabilities, net23,490 24,285 
Other long-term liabilities13,033 13,034 
Total long-term liabilities640,219 643,388 
     Total liabilities$716,929 $739,692 
Commitments and contingencies (Note 11)
Stockholders’ equity
Common stock, $0.001 par value, (250,000,000 shares authorized; 127,434,786 and 127,369,142 shares issued and outstanding, respectively)
$127 $127 
Additional paid-in capital1,198,729 1,190,139 
Accumulated other comprehensive loss(1,330)(1,674)
Accumulated deficit(274,116)(247,055)
     Total stockholders’ equity$923,410 $941,537 
     Total liabilities and stockholders’ equity$1,640,339 $1,681,229 


See the accompanying notes to the unaudited Consolidated Financial Statements.
5


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)

 Three Months Ended March 31,
 20242023
NET REVENUE  
Clinical Services$134,535 $114,869 
Advanced Diagnostics21,705 22,351 
Total net revenue156,240 137,220 
COST OF REVENUE90,771 82,406 
GROSS PROFIT65,469 54,814 
Operating expenses:
General and administrative65,797 61,549 
Research and development7,620 7,395 
Sales and marketing20,221 16,259 
Restructuring charges2,398 4,684 
Total operating expenses96,036 89,887 
LOSS FROM OPERATIONS(30,567)(35,073)
Interest income(4,834)(3,224)
Interest expense1,685 1,757 
Other expense (income), net263 114 
Loss before taxes(27,681)(33,720)
Income tax benefit(620)(2,925)
NET LOSS$(27,061)$(30,795)
NET LOSS PER SHARE
Basic$(0.21)$(0.25)
Diluted$(0.21)$(0.25)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic126,111 125,026 
Diluted126,111 125,026 

See the accompanying notes to the unaudited Consolidated Financial Statements.
6


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)

Three Months Ended March 31,
20242023
NET LOSS$(27,061)$(30,795)
OTHER COMPREHENSIVE GAIN:
Net unrealized gain on marketable securities, net of tax344 1,065 
   Total other comprehensive gain, net of tax344 1,065 
COMPREHENSIVE LOSS$(26,717)$(29,730)


See the accompanying notes to the unaudited Consolidated Financial Statements.

7


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)

Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Shares Amount
Balance, December 31, 2023127,369,142 $127 $1,190,139 $(1,674)$(247,055)$941,537 
Issuance of common stock for ESPP70,278 — 917 — — 917 
Issuance of restricted stock, net of forfeitures(17,398)— (199)— — (199)
Issuance of common stock for stock options12,764 — 102 — — 102 
Stock issuance fees and expenses— — (4)— — (4)
Stock-based compensation expense— — 7,774 — — 7,774 
Net unrealized gain on marketable securities, net of tax— — — 344 — 344 
Net loss— — — — (27,061)(27,061)
Balance, March 31, 2024127,434,786 $127 $1,198,729 $(1,330)$(274,116)$923,410 


Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Shares Amount
Balance, December 31, 2022126,913,992 $127 $1,160,882 $(3,899)$(159,087)$998,023 
Issuance of common stock for ESPP96,733 — 811 — — 811 
Issuance of restricted stock, net of forfeitures114,738 — (147)— — (147)
Issuance of common stock for stock options75,028 — 751 — — 751 
Stock issuance fees and expenses— — (4)— — (4)
Stock-based compensation expense— — 4,758 — — 4,758 
Net unrealized gain on marketable securities, net of tax— — — 1,065 — 1,065 
Net loss— — — — (30,795)(30,795)
Balance, March 31, 2023127,200,491 $127 $1,167,051 $(2,834)$(189,882)$974,462 

See the accompanying notes to the unaudited Consolidated Financial Statements.

8


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited) 
 Three Months Ended March 31,
20242023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$(27,061)$(30,795)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation9,905 9,048 
Amortization of intangibles8,362 8,783 
Non-cash stock-based compensation7,774 4,758 
Non-cash operating lease expense2,401 2,330 
Amortization of convertible debt discount678 669 
Amortization of debt issue costs47 46 
Impairment of assets145 923 
Other adjustments(57)(31)
Changes in assets and liabilities, net
Accounts receivable, net(9,052)870 
Inventories3,836 (200)
Prepaid and other assets(1,976)(1,187)
Operating lease liabilities(1,432)(1,722)
Deferred income tax liabilities, net(795)(3,035)
Accrued compensation(18,552)(7,250)
Accounts payable and other liabilities(138)4,101 
Net cash used in operating activities(25,915)(12,692)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities (6,756)
Proceeds from maturities of marketable securities20,110 40,425 
Purchases of property and equipment(5,585)(9,927)
Net cash provided by investing activities14,525 23,742 
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of equipment financing obligations (32)
Issuance of common stock, net816 1,411 
Net cash provided by financing activities816 1,379 
Net change in cash and cash equivalents(10,574)12,429 
Cash and cash equivalents, beginning of period342,488 263,180 
Cash and cash equivalents, end of period$331,914 $275,609 

Supplemental disclosure of cash flow information:
Interest paid$431 $432 
Income taxes paid, net$89 $ 
Supplemental disclosure of non-cash investing and financing information:
Purchases of property and equipment included in accounts payable$831 $1,174 


See the accompanying notes to the unaudited Consolidated Financial Statements.
9

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1. Nature of the Business
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.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim Consolidated Financial Statements are unaudited and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. All intercompany transactions and balances have been eliminated in the accompanying Consolidated Financial Statements.
The accounting policies of the Company are the same as those set forth in Note 2. Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, except for new accounting standards discussed under Recent Accounting Pronouncements.
Unaudited Interim Financial Information
Certain information and footnote disclosures normally included in the Company’s annual audited Consolidated Financial Statements and accompanying notes have been condensed or omitted in these accompanying interim Consolidated Financial Statements and footnotes. Accordingly, the accompanying interim unaudited Consolidated Financial Statements included herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein.
Use of Estimates
The Company prepares its Consolidated Financial Statements in conformity with GAAP. These principles require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the Consolidated Financial Statements. Actual results and outcomes may differ from management’s estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these Consolidated Financial Statements include, but are not limited, to those related to revenues, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets and intangible assets, income taxes and valuation allowances, stock-based compensation, impairment analysis of goodwill, and restructuring reserves. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected on the Consolidated Financial Statements prospectively from the date of the change in estimate.
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 in the Clinical Services segment. Advertising costs are expensed at the time they are incurred and were immaterial for the three months ended March 31, 2024 and 2023.
Restructuring charges
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 further details on the Company’s restructuring activities, please refer to Note 8. Restructuring.
Accounting Pronouncements Pending Adoption
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update requires entities to consistently categorize and provide greater disaggregation of information in the rate reconciliation and to further disaggregate income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning
10

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
after December 15, 2024, with early adoption permitted. ASU 2023-07 may be applied retrospectively or prospectively. The Company is currently evaluating the planned adoption date and the impact of this standard on its annual disclosures.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update requires entities to disclose significant segment expenses by reportable segment if they are regularly provided to the Chief Operating Decision Maker (CODM) and included in each reported measure of segment profit or loss and requires disclosure of other segment items by reportable segment and a description of its composition. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the planned adoption date and the impact of this standard on its annual disclosures.
Note 3. Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy has been established based on three levels of inputs, of which the first two are considered observable and the last unobservable.
Level 1: Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
Level 2: Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily available pricing sources for comparable instruments.
Level 3: Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The Company measures certain financial assets at fair value on a recurring basis, including its marketable securities and certain cash equivalents. The Company considers all securities available-for-sale, including those with maturity dates beyond 12 months, and therefore these securities are classified within current assets on the Consolidated Balance Sheets as they are available to support current operational liquidity needs. The money market accounts are valued based on quoted market prices in active markets and are included in cash and cash equivalents on the Consolidated Balance Sheets. The marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third-party pricing entities, except for U.S. Treasury securities which are valued based on quoted market prices in active markets.
The following tables set forth the amortized cost, gross unrealized gains, gross unrealized losses and fair values of the Company’s marketable securities accounted for as available-for-sale securities as of March 31, 2024 and December 31, 2023.
March 31, 2024
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Financial Assets:
Short-term marketable securities:
     U.S. Treasury securities$7,490 $ $(13)$7,477 
     Agency bonds2,471  (45)2,426 
     Municipal bonds12,658  (518)12,140 
     Asset-backed securities3,119  (5)3,114 
     Corporate bonds28,322  (563)27,759 
Total$54,060 $ $(1,144)$52,916 

11

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
December 31, 2023
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Financial Assets:
Short-term marketable securities:
     U.S. Treasury securities$15,437 $ $(64)$15,373 
     Yankee bonds2,601  (13)2,588 
     Agency bonds6,056  (56)6,000 
     Municipal bonds12,694  (597)12,097 
     Asset-backed securities4,971  (37)4,934 
     Corporate bonds32,442  (719)31,723 
Total$74,201 $ $(1,486)$72,715 

The Company had $1.6 million and $1.7 million of accrued interest receivable at March 31, 2024 and December 31, 2023, respectively, included in other current assets on its Consolidated Balance Sheets related to its marketable securities. There were no realized gains or losses on marketable securities for the three months ended March 31, 2024 and 2023.
The following tables set forth the fair value of available-for-sale marketable securities by contractual maturity at March 31, 2024 and December 31, 2023.
March 31, 2024
(in thousands)One Year or LessOver One Year Through Five YearsOver Five YearsTotal
Financial Assets:
Marketable Securities:
     U.S. Treasury securities$7,477 $ $ $7,477 
     Agency bonds2,426   2,426 
     Municipal bonds6,417 5,723  12,140 
     Asset-backed securities3,114   3,114 
     Corporate bonds22,026 5,733  27,759 
Total$41,460 $11,456 $ $52,916 

December 31, 2023
(in thousands)One Year or LessOver One Year Through Five YearsOver Five YearsTotal
Financial Assets:
Marketable Securities:
     U.S. Treasury securities$15,373 $ $ $15,373 
     Yankee bonds2,588   2,588 
     Agency bonds6,000   6,000 
     Municipal bonds3,528 8,569  12,097 
     Asset-backed securities4,934   4,934 
     Corporate bonds23,062 8,661  31,723 
Total$55,485 $17,230 $ $72,715 

The following tables set forth the Company’s cash equivalents and marketable securities accounted for as available-for-sale securities that were measured at fair value on a recurring basis based on the fair value hierarchy as of March 31, 2024 and December 31, 2023.
12

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2024
(in thousands)Level 1Level 2Level 3Total
Financial Assets:
  Cash equivalents:
     Money market funds$324,772 $ $ $324,772 
Marketable securities:
     U.S. Treasury securities7,477   7,477 
     Agency bonds2,426   2,426 
     Municipal bonds12,140   12,140 
     Asset-backed securities 3,114  3,114 
     Corporate bonds 27,759  27,759 
Total$346,815 $30,873 $ $377,688 

December 31, 2023
(in thousands)Level 1Level 2Level 3Total
Financial Assets:
  Cash equivalents:
     Money market funds$334,762 $ $ $334,762 
Marketable securities:
     U.S. Treasury securities15,373   15,373 
     Yankee bonds2,588   2,588 
     Agency bonds6,000   6,000 
     Municipal bonds12,097   12,097 
     Asset-backed securities 4,934  4,934 
     Corporate bonds 31,723  31,723 
Total$370,820 $36,657 $ $407,477 

There were no transfers of financial assets or liabilities into or out of Level 1, Level 2, or Level 3 for the three months ended March 31, 2024 and 2023.
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
The carrying value of cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and other liabilities, and other current assets and liabilities, are considered reasonable estimates of their respective fair values at March 31, 2024 and December 31, 2023 due to their short-term nature.
The Company also measures certain non-financial assets at fair value on a nonrecurring basis, primarily intangible assets, goodwill, and long-lived assets in connection with periodic evaluations for potential impairment. The Company estimates the fair value of these assets using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements.
Note 4. Goodwill and Intangible Assets
The following table summarizes the carrying amounts of goodwill by segment at March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Clinical Services$458,782 $458,782 
Advanced Diagnostics63,984 63,984 
Total$522,766 $522,766 
13

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Intangible assets consisted of the following (in thousands):
  March 31, 2024
 Amortization
Period (years)
CostAccumulated
Amortization
Net
Customer Relationships
7 - 15
$143,101 $68,007 $75,094 
Developed Technology
10 - 15
310,226 59,768 250,458 
Marketing Assets4549 411 138 
Trademarks1531,473 5,846 25,627 
Trade Name2.52,584 2,584  
Trademark - Indefinite lived13,447 — 13,447 
Total $501,380 $136,616 $364,764 
 
  December 31, 2023
 Amortization
Period (years)
CostAccumulated
Amortization
Net
Customer Relationships
7 - 15
$143,101 $65,534 $77,567 
Developed Technology
10 - 15
310,226 54,438 255,788 
Marketing Assets4549 376 173 
Trademarks1531,473 5,321 26,152 
Trade Name2.52,584 2,583 1 
Trademark - Indefinite lived13,447 — 13,447 
Total$501,380 $128,252 $373,128 
The Company records amortization expense within cost of revenue and general and administrative expense on the Consolidated Statement of Operations. The following table summarizes the amortization expense for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
Amortization of intangibles included in cost of revenue$4,910 $4,853 
Amortization of intangibles included in general and administrative expenses3,452 3,930 
Total amortization of intangibles$8,362 $8,783 
The estimated amortization expense related to amortizable intangible assets for each of the following periods as of March 31, 2024 is as follows (in thousands):
 
Remainder of 2024$25,085 
202533,343 
202633,308 
202732,758 
202832,758 
Thereafter194,065 
Total$351,317 
 
Note 5. Debt
2028 Convertible Senior Notes
On January 11, 2021, the Company completed the sale of $345.0 million of Convertible Senior Notes with a stated interest rate of 0.25% and a maturity date of January 15, 2028 (the “2028 Convertible Notes”), unless earlier converted, redeemed, or repurchased.
The last reported sales price of the Company’s common stock was not greater than or equal to 130.0% of the conversion price of the 2028 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended December 31, 2023. Based on the terms of the 2028 Convertible Notes, the holders could not have converted all or a portion of their 2028 Convertible Notes in the first quarter of 2024. The last reported sales price of the Company’s common stock was not greater
14

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
than or equal to 130.0% of the conversion price of the 2028 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended March 31, 2024. Based on the terms of the 2028 Convertible Notes, the holders cannot convert all or a portion of their 2028 Convertible Notes in the second quarter of 2024. The value of the 2028 Convertible Notes, if-converted, does not exceed the principal amount based on a closing stock price of $15.72 on March 28, 2024.
The interest expense recognized on the 2028 Convertible Notes includes $0.2 million, $0.4 million and $8,500 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2024. The interest expense recognized on the 2028 Convertible Notes includes $0.2 million, $0.4 million and $8,500 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2023. The effective interest rate on the 2028 Convertible Notes is 0.70%, which includes the interest on the 2028 Convertible Notes and amortization of the debt discount and debt issuance costs. The 2028 Convertible Notes bear interest at a rate of 0.25% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2021.
At March 31, 2024, the estimated fair value (Level 2) of the 0.25% Convertible Senior Notes due 2028 was $275.1 million. At December 31, 2023, the estimated fair value (Level 2) of the 0.25% Convertible Senior Notes due 2028 was $262.4 million.
2025 Convertible Senior Notes
On May 4, 2020, the Company completed the sale of $201.3 million of Convertible Senior Notes with a stated interest rate of 1.25% and a maturity date of May 1, 2025 (the “2025 Convertible Notes”), unless earlier converted, redeemed, or repurchased.
The last reported sales price of the Company’s common stock was not greater than or equal to 130.0% of the conversion price of the 2025 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended December 31, 2023. Based on the terms of the 2025 Convertible Notes, the holders could not have converted all or a portion of their 2025 Convertible Notes in the first quarter of 2024. The last reported sales price of the Company’s common stock was not greater than or equal to 130.0% of the conversion price of the 2025 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended March 31, 2024. Based on the terms of the 2025 Convertible Notes, the holders cannot convert all or a portion of their 2025 Convertible Notes in the second quarter of 2024. The value of the 2025 Convertible Notes, if-converted, does not exceed the principal amount based on a closing stock price of $15.72 on March 28, 2024.
The interest expense recognized on the 2025 Convertible Notes includes $0.6 million, $0.3 million and $38,000 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2024. The interest expense recognized on the 2025 Convertible Notes includes $0.6 million, $0.3 million and $37,600 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended March 31, 2023. The effective interest rate on the 2025 Convertible Notes is 1.96%, which includes the interest on the 2025 Convertible Notes and amortization of the debt discount and debt issuance costs. The 2025 Convertible Notes bear interest at a rate of 1.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, which began on November 1, 2020.
At March 31, 2024, the estimated fair value (Level 2) of the 1.25% Convertible Senior Notes due 2025 was $195.5 million. At December 31, 2023, the estimated fair value (Level 2) of the 1.25% Convertible Senior Notes due 2025 was $197.3 million.

15

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 6. Stock-Based Compensation
The Company recorded stock-based compensation on the Consolidated Statement of Operations for the three months ended March 31, 2024 and 2023 as follows (in thousands):
Three Months Ended March 31,
20242023
Cost of revenue$395 $ 
General and administrative6,663 4,758 
Research and development171  
Sales and marketing545  
Total stock-based compensation$7,774 $4,758 
Stock Options
A summary of the stock option activity under the Company’s plans for the three months ended March 31, 2024 is as follows:
 
Number of
Shares
Weighted Average Exercise Price
Outstanding at December 31, 20234,381,099 $15.87 
Granted634,134 $16.39 
Exercised(12,764)$7.97 
Forfeited(30,382)$19.79 
Outstanding at March 31, 20244,972,087 $19.97 
Exercisable at March 31, 20241,241,392 $19.97 
The fair value of each stock option award granted during the three months ended March 31, 2024 was estimated as of the grant date using a Black-Scholes model with the following assumptions:
 Three Months Ended
March 31, 2024
Expected term (in years)
5.5 - 6.5
Risk-free interest rate (%)
3.8% - 4.2%
Expected volatility (%)
55.6% - 62.8%
Dividend yield (%)
Weighted average grant date fair value per share$9.77
As of March 31, 2024, there was approximately $15.8 million of unrecognized stock-based compensation expense related to stock options that will be recognized over a weighted-average period of approximately 1.7 years.
Restricted Stock Awards
A summary of the restricted stock activity under the Company’s plans for the three months ended March 31, 2024 is as follows:
Number of Restricted
Shares
Weighted Average Grant Date Fair Value
Nonvested at December 31, 20231,961,919 $13.83 
Granted378,996 $16.40 
Vested(47,338)$11.89 
Forfeited(9,008)$13.85 
Nonvested at March 31, 20242,284,569 $14.29 
As of March 31, 2024, there was approximately $17.9 million of unrecognized stock-based compensation expense related to restricted stock that will be recognized over a weighted-average period of approximately 1.8 years.    
Performance-Based Restricted Stock Units
In the first quarter of 2024, the Company granted 179,333 PSUs subject to a performance condition and 179,333 PSUs subject to a market condition with an aggregate grant date fair value of approximately $3.0 million and $3.4 million, respectively. The
16

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
number of shares awarded will be subject to adjustment based on the achievement of the applicable performance targets. If the performance targets are achieved, the awards will vest at the end of the three-year requisite service period so long as the employee remains employed with the Company through the applicable vesting dates. For PSUs subject to a performance condition, compensation cost is recognized straight-line over the requisite service period if the achievement of the performance condition is probable. As of March 31, 2024, the Company has determined it is probable that the performance condition will be met. For PSUs subject to a market condition, compensation cost is recognized straight-line over the requisite service period, regardless of when, if ever, the market condition is satisfied.
A summary of the PSU activity under the Company’s plans for the three months ended March 31, 2024 is as follows:

Number of Stock UnitsWeighted Average Grant Date Fair Value
Nonvested at December 31, 2023305,105 $21.83 
Granted358,666 $17.64 
Vested $ 
Forfeited $ 
Nonvested at March 31, 2024663,771 $19.56 
The fair value of each PSU granted subject to a market condition during the three months ended March 31, 2024 was estimated as of the grant date using a Monte Carlo simulation with the following assumptions:
Three Months Ended
March 31, 2024
Expected term (in years)3.0
Risk-free interest rate (%)4.5%
Expected volatility (%)72.2%
Dividend yield (%)
Weighted average grant date fair value per share$18.82
As of March 31, 2024, there was approximately $10.8 million of unrecognized stock-based compensation expense related to nonvested PSUs that will be recognized over a weighted-average period of approximately 2.6 years.

Note 7. Revenue Recognition
The Company’s two reportable segments for which it recognizes revenue are (1) Clinical Services and (2) Advanced Diagnostics. The Clinical Services segment provides various clinical testing services to community-based pathology practices, oncology practices, hospital pathology labs, reference labs, and academic centers with reimbursement from various payers including client direct billing, commercial insurance, Medicare and other government payers, and patients. The Advanced Diagnostics segment supports pharmaceutical firms in their drug development programs by providing testing services and data analytics for clinical trials and research.
Clinical Services Revenue
The Company’s specialized diagnostic services are performed based on a written test requisition form or an electronic equivalent. 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 the Company expects to receive based on negotiated discounts, historical collection experience, and other anticipated adjustments, including anticipated payer denials.
Advanced Diagnostics Revenue
The Company’s Advanced Diagnostics segment generally enters into contracts with pharmaceutical and biotech customers as well as other CROs to provide research and clinical trial services. Such services also include validation studies and assay development. The Company records revenue on a unit-of-service basis based on the number of units completed towards the satisfaction of a performance obligation. In addition, certain contracts include upfront fees and the revenue for those contracts is recognized over time as services are performed.
17

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Additional offerings within the Advanced Diagnostics 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. The Company negotiates 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, Advanced Diagnostics 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 contract term. The amortization of commission expense is based on the weighted average contract duration for all commissionable awards in the respective business in which the commission expense is paid, which approximates the period over which goods and services are transferred to the customer. For offerings with primarily short-term contracts, such as Informatics, the Company applies 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 customers, either immediately or according to advance notice terms specified within the contracts. All contracts require payment of fees to the Company 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.
The following table summarizes the values of contract assets, capitalized commissions and contract liabilities (in thousands):
March 31, 2024December 31, 2023
Current contract assets (1)
$236 $37 
Long-term contract assets (2)
  
Total contract assets$236 $37 
Current capitalized commissions (1)
$810 $935 
Long-term capitalized commissions (2)
98 53 
Total capitalized commissions$908 $988 
Current contract liabilities$1,144 $2,130 
Long-term contract liabilities (3)
  
Total contract liabilities$1,144 $2,130 

(1) Recorded within other current assets on the Consolidated Balance Sheets.
(2) Recorded within other assets on the Consolidated Balance Sheets.
(3) Recorded within other long-term liabilities on the Consolidated Balance Sheets.
Revenue recognized related to contract liability balances outstanding at the beginning of the period was $1.1 million and $1.8 million for the three months ended March 31, 2024 and 2023, respectively. Amortization of capitalized commissions was $0.3 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.
Disaggregation of Revenue
The Company considered various factors for both its Clinical Services and Advanced Diagnostics segments in determining appropriate levels of homogeneous data for its disaggregation of revenue; including the nature, amount, timing, and uncertainty of revenue and cash flows. Clinical Services categories align with the types of customers due to similarities of billing method, level of reimbursement, and timing of cash receipts. Unbilled amounts are accrued and allocated to payer categories based on historical experience. In future periods actual billings by payer category may differ from accrued amounts. Advanced Diagnostics relate to contracts with large pharmaceutical and biotech customers as well as other CROs. Because the nature, timing, and uncertainty of revenue and cash flows are similar and primarily driven by individual contract terms, Advanced Diagnostics revenue is not further disaggregated.
18

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table details the disaggregation of revenue for both the Clinical Services and Advanced Diagnostics segments (in thousands):
Three Months Ended March 31,
20242023
Clinical Services:
    Client direct billing$90,483 $76,823 
    Commercial Insurance23,604 21,355 
    Medicare and Medicaid20,369 16,587 
    Self-Pay79 104 
Total Clinical Services $134,535 $114,869 
Advanced Diagnostics21,705 22,351 
Total Revenue$156,240 $137,220 

Note 8. Restructuring
In 2022, the Company embarked on a restructuring program to improve execution and drive efficiency across the organization. This program is a framework for identifying, prioritizing and executing operational improvements. Restructuring charges incurred consist of severance and other employee costs, costs for optimizing the Company’s geographic presence (“Facility Footprint Optimization”), and consulting and other costs.
The following table summarizes the changes in the Company’s accrued restructuring balance (in thousands):

Severance and Other Employee CostsFacility Footprint OptimizationConsulting and Other CostsTotal
Balance as of December 31, 2023$687 $1,389 $537 $2,613 
Restructuring charges incurred697 964 747 2,408 
Impairment of facility related assets (10) (10)
Cash payments and other adjustments (1)
(771)(1,796)(1,125)(3,692)
Balance as of March 31, 2024$613 $547 $159 $1,319 
Current liabilities$1,319 
Long-term liabilities 
$1,319 
(1) Other adjustments include non-cash asset charges related to Facility Footprint Optimization costs.
The Company continued this restructuring program in 2024 and expects to incur additional restructuring charges of approximately $3.8 million. The Company estimates these additional restructuring charges to be comprised of approximately $1.1 million in severance and other employee costs, $2.5 million of Facility Footprint Optimization costs, and $0.2 million of consulting and other costs.

Note 9. Income Taxes
At the end of each interim period, management estimates the annual effective tax rate based on forecasted pre-tax results of the Company’s global operations and applies such rate to its ordinary quarterly earnings to calculate income tax expense related to ordinary income. The tax effects of items significant, unusual and infrequent in nature are discretely calculated and recognized in the period during which they occur. These discrete items often relate to changes in tax laws, excess tax benefits/deficiencies related to share-based compensation or adjustments to previously reported tax expense/benefits.
Management assesses the recoverability of its deferred tax assets as of the end of each quarter, weighing available positive and negative evidence, and is required to establish and maintain a valuation allowance for these assets if it is more likely than not that some or all of the deferred income tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to
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NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
support a conclusion that a valuation allowance is not needed. A cumulative loss in recent years, commonly defined as a three-year cumulative loss position, is a significant piece of negative evidence that is difficult to overcome.
As of March 31, 2024, the Company’s U.S. operations are in a three-year cumulative loss position. Management determined that sufficient objectively verifiable positive evidence does not exist to overcome the negative evidence of the Company’s U.S. cumulative loss position. Accordingly, the Company’s estimated annual effective tax rate applied to the Company’s pre-tax loss for the three months ended March 31, 2024, includes the unfavorable impact of a partial valuation allowance against the majority of the Company’s forecasted U.S. net operating loss and tax credit carryforwards.
As of March 31, 2024, the Company’s U.K. operations are in a three-year cumulative loss position. The reversal of U.K. deferred tax liabilities will provide a source of realization to support a portion of the U.K. deferred tax assets, and therefore a partial valuation has been established for those deferred tax assets. Accordingly, the Company’s estimated annual effective tax rate applied to the Company’s pre-tax loss for the three months ended March 31, 2024 includes the favorable impact of recognizing a component of the U.K. benefit.

Full valuation allowances have been established for loss jurisdictions (Switzerland, Singapore, and China), which are thus not included in the computation of the estimated annual effective tax rate for 2024.

Note 10. Net Loss Per Share
The Company presents both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes potential dilution and is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options were exercised, stock awards vested and if the 2028 Convertible Notes and 2025 Convertible Notes were converted. The potential dilution from stock awards is accounted for using the treasury stock method based on the average market value of the Company’s common stock. The potential dilution from conversion of the 2028 Convertible Notes and 2025 Convertible Notes is accounted for using the if-converted method, which requires that all of the shares of the Company’s common stock issuable upon conversion of the 2028 Convertible Notes and the 2025 Convertible Notes will be included in the calculation of diluted EPS assuming conversion of the 2028 Convertible Notes and the 2025 Convertible Notes at the beginning of the reporting period (or at time of issuance, if later).
The following table shows the calculations (in thousands, except net loss per share amounts):
Three Months Ended March 31,
20242023
NET LOSS$(27,061)$(30,795)
Basic weighted average shares outstanding126,111 125,026 
Diluted weighted average shares outstanding126,111 125,026 
Basic net loss per share$(0.21)$(0.25)
Diluted net loss per share$(0.21)$(0.25)


The following potentially dilutive shares were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive (in thousands):
Three Months Ended March 31,
20242023
Stock options557 13 
Restricted stock awards1,031 942 
2025 Convertible Notes5,538 5,538 
2028 Convertible Notes5,215 5,215 

In addition, 663,771 shares of PSU awards are excluded from the computation of diluted EPS for the three months ended March 31, 2024 as the contingency had not been satisfied.

20

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
In connection with the 2028 Convertible Notes offering, on January 11, 2021, the Company entered into separate, privately negotiated convertible note hedge transactions (collectively, the “Capped Call Transactions”) with option counterparties pursuant to capped call confirmations at a cost of approximately $29.3 million. The potential effect of the Capped Call Transactions was excluded from the calculation of diluted net loss per share in the three months ended March 31, 2024 as the Company’s closing stock price of $15.72 on March 28, 2024 did not exceed the conversion price of $85.75 per share. The Capped Call Transactions are not reflected in diluted net loss per share as they are anti-dilutive.

Note 11. Commitments and Contingencies
Legal Proceedings
On January 20, 2021, Natera, Inc. filed a patent infringement complaint against the Company’s subsidiary Inivata Limited and its subsidiary Inivata, Inc. in U.S. District Court for the district of Delaware, alleging Inivata’s InVisionFirst®-Lung cancer diagnostic test of infringing two patents. Natera then filed a second patent infringement complaint on December 20, 2022 against Inivata Limited and Inivata, Inc. alleging that RaDaR® minimal residual disease test infringes one patent. The case is in discovery and the jury trial has been scheduled for October 6, 2025. On March 6, 2024, the parties stipulated to stay both Delaware cases until the North Carolina litigation is resolved. On March 7, 2024, the district court judge in Delaware ordered the cases stayed.
On July 28, 2023, Natera filed a complaint in the Middle District of North Carolina alleging NeoGenomics' RaDaR test infringes on two patents. On July 31, 2023, Natera moved for a preliminary injunction. On December 27, 2023, the district court issued a preliminary injunction against RaDaR®. Natera posted a $10 million bond with the court on January 12, 2024. The court's initial determination was that Natera, Inc. demonstrated a likelihood that products using RaDaR® technology infringe one Natera, Inc. patent. The order specifically allows patients already using RaDaR® to continue their use. In addition, the order explicitly allows research projects and studies that are in progress, as well as clinical trials that are in progress or have been approved, to continue. On December 28, 2023, NeoGenomics appealed the preliminary injunction to the Federal Circuit. The appeal was docketed at the Federal Circuit on January 4, 2024. On February 5, 2024, NeoGenomics filed an Emergency Motion to Stay the Preliminary Injunction pending Appeal and a Motion to Expedite the appeal. The Federal Circuit granted expedited briefing of the appeal and heard oral arguments on March 29, 2024. A decision on the appeal has not yet been issued. The Company intends to vigorously pursue its appeal of the preliminary injunction. The infringement case is in discovery and the jury trial has been scheduled for March 10, 2025. The Company has filed two inter partes review petitions before the Patent Trial and Appeal Board (“PTAB”) in the United States Patent and Trademark Office seeking a determination that the two patents asserted against in the North Carolina action are unpatentable in view of prior art. The PTAB has not yet determined whether to institute trial in either of the inter partes review cases. The Company believes that it has good and substantial defenses to the claims alleged in these suits, but there is no guarantee that the Company will prevail. At the time of filing the outcome of these matters is not estimable or probable.
On December 16, 2022, a purported shareholder class action captioned Daniel Goldenberg v. NeoGenomics, Inc., Douglas VanOort, Mark Mallon, Kathryn McKenzie, and William Bonello was filed in the United States District Court for the Southern District of New York, naming the Company and certain of the Company’s current and former officers as defendants. This lawsuit was filed by a stockholder who claims to be suing on behalf of anyone who purchased or otherwise acquired the Company’s securities between February 27, 2020 and April 26, 2022. The lawsuit alleges that material misrepresentations and/or omissions of material fact were made in the Company’s public disclosures in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The alleged improper disclosures relate to statements regarding the Company’s menu of tests, business operations and compliance with health care laws and regulations. The plaintiff seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees and expert fees. On April 27, 2023, a shareholder of the Company filed a shareholder derivative action on behalf of the Company captioned Puskarich v. VanOort, et al. in Clark County Nevada, naming certain of the Company’s current and former officers and directors as defendants. The allegations are substantially similar to the allegations asserted in the Goldenberg action. Substantially similar shareholder derivative actions were subsequently filed in Lee County, Florida and in the United States District Court for the Southern District of New York, captioned Wong v. VanOort, et al. and Mellema v. VanOort, et al., respectively. The Company believes that it has valid defenses to the claims alleged in the lawsuits, but there is no guarantee that the Company will prevail. At the time of filing the outcome of these matters are not estimable or probable.
Regulatory Matter
With the assistance of outside counsel, the Company voluntarily conducted an internal investigation that focused on the compliance of certain consulting and service agreements with federal healthcare laws and regulations, including those relating to fraud, waste and abuse. Based on this internal investigation, the Company voluntarily notified the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) of the Company’s internal investigation in November 2021. The Company’s interactions with regulatory authorities and the Company’s related review of this matter are ongoing. The
21

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Company has a reserve of $11.2 million in other long-term liabilities as of March 31, 2024 and December 31, 2023 on the Consolidated Balance Sheets for potential damages and liabilities primarily associated with the federal healthcare program revenue received by the Company in connection with the agreements at issue that were identified during the course of this internal investigation. This reserve reflects management’s best estimate of the minimum probable loss associated with this matter. As a result of the internal investigation and ongoing interactions with regulatory authorities, the Company may accrue additional reserves for any related potential damages and liabilities arising out of this matter. The Company was notified on June 30, 2022, that the Department of Justice (“DOJ”) will be participating in the investigation of this matter. At this time, the Company is unable to predict the duration, scope, result or related costs associated with any further investigation, including by the OIG, DOJ, or any other governmental authority, or what penalties or remedial actions they may seek. Accordingly, at this time, the Company is unable to estimate a range of possible loss in excess of the amount reserved. Any determination that the Company’s operations or activities are not in compliance with existing laws or regulations, however, could result in the imposition of civil or criminal fines, penalties, disgorgement, restitution, equitable relief, exclusion from participation in federal healthcare programs or other losses or conduct restrictions, which could be material to the Company’s financial results or business operations.

Note 12. Related Party Transactions
The Company has Advanced Diagnostics contracts with HOOKIPA Pharma, Inc., an entity with whom a director of the Company, Michael A. Kelly, was a director until April 2023. In connection with these contracts, the Company recognized $0.2 million of revenue in the Consolidated Statements of Operations for the three months ended March 31, 2023.

Note 13. Segment Information
The Company recognizes revenue under two reportable segments, (1) Clinical Services and (2) Advanced Diagnostics. The Clinical Services segment provides various clinical testing services to community-based pathology and oncology practices, hospital pathology labs, and academic centers with reimbursement from various payers including client direct billing, commercial insurance, Medicare and other government payers, and self-pay patients. The Advanced Diagnostics segment supports pharmaceutical firms’ drug development programs by assisting with various clinical trials and research as well as providing informatics related services often supporting pharmaceutical commercialization efforts.
The financial information reviewed by the Chief Operating Decision Maker (“CODM”) includes revenues, cost of revenue, and gross profit for both reportable segments. Assets are not presented at the segment level as that information is not used by the CODM.
The following table summarizes segment information for the three months ended March 31, 2024, and 2023 (in thousands):

Three Months Ended March 31,
20242023
Net revenues:
Clinical Services$134,535 $114,869 
Advanced Diagnostics21,705 22,351 
Total revenue156,240 137,220 
Cost of revenue:
Clinical Services(1)
76,844 67,292 
Advanced Diagnostics(2)
13,927 15,114 
Total cost of revenue90,771 82,406 
Gross Profit:
Clinical Services57,691 47,577 
Advanced Diagnostics7,778 7,237 
Total gross profit65,469 54,814 
(1) Clinical Services cost of revenue for both the three months ended March 31, 2024 and 2023 includes $4.3 million of amortization of acquired intangible assets. Clinical Services cost of revenue for the three months ended March 31, 2024 also
22

NEOGENOMICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
includes $0.3 million of non-cash stock-based compensation. There were no such amounts recorded for the three months ended March 31, 2023.
(2) Advanced Diagnostics cost of revenue for both the three months ended March 31, 2024 and 2023 includes $0.6 million of amortization of acquired intangible assets. Advanced Diagnostics cost of revenue for the three months ended March 31, 2024 also includes $0.1 million of non-cash stock-based compensation. There were no such amounts recorded for the three months ended March 31, 2023.
23

NEOGENOMICS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



NeoGenomics, Inc., a Nevada corporation (referred to individually as the “Company” or collectively with its subsidiaries as “NeoGenomics,” “we,” “us,” or “our,” in this Quarterly Report) is the registrant for SEC reporting purposes. Our common stock is listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “NEO”.
Introduction
The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the notes thereto included herein. The information contained below includes statements of the Company’s or 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 Quarterly Report on Form 10-Q under the caption “Forward-Looking Statements,” which information is incorporated herein by reference.
Overview
We operate a network of cancer-focused testing laboratories in the United States and the United Kingdom. Our mission is to save lives by improving patient care. Our vision is to become the world’s leader in cancer testing, information, and decision support by providing uncompromising quality, exceptional service, and innovative solutions.
As of March 31, 2024, we operated College of American Pathologists (“CAP”) accredited and Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified laboratories in Fort Myers, Florida; Aliso Viejo and San Diego, California; Research Triangle Park, North Carolina; and Houston, Texas; and a CAP accredited full-service, sample-processing laboratory in Cambridge, United Kingdom. We also have several, small, non-processing laboratory locations across the United States for providing analysis services. We currently offer the following types of testing services:
Cytogenetics (“karyotype analysis”) – the study of normal and abnormal chromosomes and their relationship to disease. Cytogenetics involves analyzing the chromosome structure to identify changes from patterns seen in normal chromosomes. Cytogenetic studies are often performed to provide diagnostic, prognostic and occasionally predictive information for patients with hematological malignancies.
Fluorescence In-Situ Hybridization (“FISH”) – a molecular cytogenetic technique that focuses on detecting and localizing the presence or absence of specific DNA sequences and genes on chromosomes. The technique uses fluorescent probes that bind to only those parts of the chromosome with which they show a high degree of sequence similarity. Fluorescence microscopy is used to visualize the fluorescent probes bound to the chromosomes. FISH can be used to help identify numerous types of gene alterations, including amplifications, deletions, and translocations.
Flow cytometry – a technique utilized to measure the characteristics of cell populations. Typically performed on liquid samples such as peripheral blood and bone marrow aspirate, it may also be performed on solid tissue samples such as lymph nodes following additional processing steps. Cells are labeled with selective fluorescent antibodies and analyzed as they flow in a fluid stream through a beam of light. The properties measured in these antibodies include the relative size, relative granularity or internal complexity, and relative fluorescence intensity. These fluorescent antibodies bind to specific cellular antigens and are used to identify abnormal and/or malignant cell populations. Flow cytometry is typically utilized in diagnosing a wide variety of hematopoietic and lymphoid neoplasms. Flow cytometry is also used to monitor patients during the course of therapy to identify extremely low levels of residual malignant cells, known as minimal residual disease (“MRD”) monitoring.
Immunohistochemistry (“IHC”) and Digital Imaging – the process of localizing cellular proteins in tissue sections and relies on the principle of antigen-antibody binding. IHC is widely used in the diagnosis of abnormal cells such as those found in cancer. Specific surface membrane, cytoplasmic, or nuclear markers may be identified. IHC is also widely used to understand the distribution and localization of differentially expressed proteins. Digital imaging allows clients to visualize scanned slides and also perform quantitative analysis for certain stains. Scanned slides are received online in real time and can be previewed often a full day before the glass slides can be shipped back to clients.
Molecular testing – a rapidly growing field which includes a broad range of laboratory techniques utilized in cancer testing. Most molecular techniques rely on the analysis of DNA and/or RNA, as well as the structure and function of genes at the molecular level. Common molecular testing technologies include: DNA fragment length analysis; polymerase chain reaction (“PCR”) analysis; reverse transcriptase polymerase chain reaction (“RT-PCR”) analysis, real-time (or quantitative) polymerase chain reaction (“qPCR”) analysis; bi-directional Sanger sequencing analysis; and next-generation sequencing (“NGS”) analysis.
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NEOGENOMICS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Morphologic analysis – the process of analyzing cells under the microscope by a pathologist, usually for the purpose of diagnosis. Morphologic analysis may be performed on a wide variety of samples, such as peripheral blood, bone marrow, lymph nodes, and other sites such as lung, breast, etc. The services provided at NeoGenomics may include primary diagnosis, in which a sample is received for processing and our pathologists provide the initial diagnosis; or may include secondary consultations, in which slides and/or tissue blocks are received from an outside institution for second opinion. In the latter setting, the expert pathologists at NeoGenomics assist our client pathologists on their most difficult and complex cases.
Clinical Services Segment
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 believe we are a leading provider of Heme Molecular and NGS testing and one of the key providers of solid tumor NGS testing solutions. 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. These tests are complemented by IHC and FISH tests, as necessary. 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 splicing mutations, as well as tumor mutation burden (TMB) and microsatellite instability (MSI) for solid tumor cases. 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 of 2021 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 Segment
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’ 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 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
25

NEOGENOMICS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 Federal Drug Administration (“FDA”) for companion diagnostics. Our Advanced Diagnostics 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 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 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 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 secure the data we maintain. 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.
2024 Focus Areas:
We are committed to sustainable growth while transforming cancer care for patients and providers. Our focus for 2024 is to sustain a purpose driven culture that maintains excellence in service and performance while growing through innovation. We expect the following initiatives to allow us to continue on our path to become one of the world’s leading cancer testing and information companies:
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 Comprehensive Genetic Profiling (“CGP”) launch; and
Improve gross margin.
Drive Value Creation
Increase productivity and efficiency;
Improve gross margin;
Implement Laboratory Information Management System (“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.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Competitive Strengths
In addition to the competitive strengths discussed below, we believe that our superior testing technologies and instrumentation, laboratory information system, client education programs and domestic and international presence also differentiate NeoGenomics from its competitors.
Turnaround Times
We consistently focus on improving turnaround times for test results to our clients nationwide in the Clinical Services segment. By providing information to our clients in a timely manner, physicians can begin treating their patients as soon as possible. Timeliness of results by our Clinical Services segment is a driver of additional testing requests by referring physicians. Turnaround times allow for the performance of other adjunctive tests within an acceptable diagnosis window in order to augment or confirm results and more fully inform treatment options. Additionally, we believe that our rapid turnaround time on testing and our project milestones are key factors in our Advanced Diagnostics segment.
Innovative Service Offerings
We believe we currently have one of the most extensive menus of tech-only FISH services in the United States as well as extensive and advanced tech-only flow cytometry and IHC testing services. These types of testing services allow the professional interpretation component of a test to be performed and billed separately by our physician clients. Our tech-only services are designed to give pathologists the option to choose, on a case by case basis, whether they want to order only the technical component of testing so they can perform the professional interpretation, or order “global” services and receive a comprehensive test report which includes a NeoGenomics pathologist’s interpretation of the test results. Our clients appreciate the flexibility to access NeoGenomics’ medical staff for difficult or complex cases or when they are otherwise unavailable to perform professional interpretations.
We offer a comprehensive suite of technical and professional interpretation services to meet the needs of clients who are not credentialed and/or trained in interpreting various testing modalities and who require NeoGenomics' pathology specialists to interpret their testing results. In our global service offerings, our lab performs the technical component of testing and our MDs and PhDs provide the professional component of testing by interpreting the results of those tests. Our professional staff is also available for post-test consultative services. Clients using our global service offering rely on the expertise of our medical team to give them the answers they need in a timely manner to help inform their diagnoses and treatment decisions.
Our Molecular and NGS Clinical Services segment test menus provide clients with the ability to order single gene molecular tests, targeted NeoTYPE panels that include the relevant actionable genes for a particular cancer type, as well as comprehensive NGS panels. Our Advanced Diagnostics segment offers a full range of sequencing testing including whole exome and whole genome sequencing.
National Direct Sales Force
Our direct sales force has been trained extensively in cancer genetic testing and consultative selling skills to service the needs of clients. Our sales team for the Clinical Services segment is organized into nine regions in the United States – Northeast, Northwest, Mid-Atlantic, South, Southeast, North Central, West, Great Lakes, and South Central. Our sales team is focused on value-based care solutions and end-to-end client experience as a growth driver. Our Advanced Diagnostics segment has a dedicated team of business development specialists who are experienced in working with sponsors and helping them with the testing needs of their research and development projects as well as Phase I, II and III studies. These sales representatives utilize our custom Customer Relationship Management System (“CRM”) to manage their territories, and we have integrated the key customer care functionality within our LIMS into the CRM so that our sales representatives can stay informed of emerging issues and opportunities within their regions. Our in-house customer care team is aligned with our field sales team to serve the needs of our clients by utilizing the same LIMS and CRM. Our field teams can see in real time when a client calls the laboratory, the reason for the call and the resolution, and determine if face-to-face interaction is needed for follow-up. Our sales force educates clients on new test offerings and their proper utilization, and our representatives are often seen as trusted advisors by our clients.
Seasonality
The majority of our clinical testing volume is dependent on patients being treated by hematology/oncology professionals and other healthcare providers. The volume of our testing services generally declines modestly during the summer vacation season, year-end holiday periods and other major holidays, particularly when those holidays fall during the middle of the week. In addition, the volume of our testing tends to decline due to extreme adverse weather conditions, such as excessively hot or cold spells, heavy snow, hurricanes or tornadoes in certain regions, consequently reducing revenues and cash flows in any affected period.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In our Advanced Diagnostics segment, we enter into both short-term and long-term contracts, ranging from one month to several years. While the volume of this testing is not as directly affected by seasonality as described above, the testing volume does vary based on the terms of the contract. Our volumes are often based on how quickly sponsors can get patient enrollees for their trials and seasonality can impact how quickly patients are enrolled. Many of our long-term contracts contain specific performance obligations where the testing is performed on a specific schedule. In addition, this results in backlog that can be significant and highly dependent on pharmaceutical clinical trial enrollment.
Laboratory Developed Tests
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. The Company is currently assessing how these regulatory changes may affect our operations.
Results of Operations for the Three Months Ended March 31, 2024 as Compared to the Three Months Ended March 31, 2023
Consolidated Statements of Operations as a percentage of net revenue for the periods presented are as follows:
 Three Months Ended March 31,
 20242023
Net revenue100.0 %100.0 %
Cost of revenue(1)
58.1 %60.1 %
Gross profit41.9 %39.9 %
Operating expenses:
General and administrative42.1 %44.9 %
Research and development4.9 %5.4 %
Sales and marketing12.9 %11.8 %
Restructuring charges1.5 %3.4 %
Total operating expenses61.4 %65.5 %
Loss from operations(19.5)%(25.6)%
Interest income(3.1)%(2.3)%
Interest expense1.1 %1.2 %
Other expense (income), net0.2 %0.1 %
Loss before taxes(17.7)%(24.6)%
Income tax benefit(0.4)%(2.2)%
Net loss(17.3)%(22.4)%
 (1) Cost of revenue for both the three months ended March 31, 2024 and 2023 includes $4.9 million of amortization of acquired intangible assets. Cost of revenue for the three months ended March 31, 2024 also includes $0.4 million of non-cash stock-based compensation. There were no such amounts recorded for the three months ended March 31, 2023.
Clinical Services and Advanced Diagnostics net revenues for the periods presented are as follows:
 Three Months Ended March 31,
($ in thousands)20242023$ Change% Change
Net revenue:
Clinical Services$134,535 $114,869 $19,666 17.1 %
Advanced Diagnostics21,705 22,351 (646)(2.9)%
Total revenue$156,240 $137,220 $19,020 13.9 %


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NEOGENOMICS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenue
Consolidated revenues increased $19.0 million, or 13.9%, year-over-year.
Clinical Services revenue for the three months ended March 31, 2024 increased $19.7 million when compared to the same period in 2023. The increase 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 for the three months ended March 31, 2024 decreased $0.6 million compared to the same period in 2023 primarily due to macro clinical trial trends in the pharmaceutical industry and the prioritization of projects that will have a long-term profitable impact on the business.
Cost of Revenue and Gross Profit
Cost of revenue includes compensation and benefit costs, including stock-based compensation, for performing tests, maintenance and/or depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, delivery and courier costs relating to the transportation of specimens to be tested, and amortization for acquired intangible assets.
The consolidated cost of revenue and gross profit metrics for the periods presented are as follows:
 Three Months Ended March 31,
($ in thousands)20242023% Change
Cost of revenue:
Clinical Services(2)
$76,844 $67,292 14.2 %
Advanced Diagnostics(3)
13,927 15,114 (7.9)%
Total cost of revenue$90,771 $82,406 10.2 %
Cost of revenue as a % of revenue58.1 %60.1 %
Gross profit:
Clinical Services$57,691 $47,577 21.3 %
Advanced Diagnostics7,778 7,237 7.5 %
Total gross profit$65,469 $54,814 19.4 %
Gross profit margin41.9 %39.9 %
(2) Clinical Services cost of revenue for both the three months ended March 31, 2024 and 2023 includes $4.3 million of amortization of acquired intangible assets. Clinical Services cost of revenue for the three months ended March 31, 2024 also includes $0.3 million of non-cash stock-based compensation. There were no such amounts recorded for the three months ended March 31, 2023.
(3) Advanced Diagnostics cost of revenue for both the three months ended March 31, 2024 and 2023 includes $0.6 million of amortization of acquired intangible assets. Advanced Diagnostics cost of revenue for the three months ended March 31, 2024 also includes $0.1 million of non-cash stock-based compensation. There were no such amounts recorded for the three months ended March 31, 2023.
Consolidated cost of revenue increased 10.2% for the three months ended March 31, 2024 when compared to the same period in 2023 primarily due to higher compensation and benefit costs, an increase in supplies expense, an increase in technology fees, and an increase in depreciation expense. These increases were partially offset by a decrease in shipping fees.
Gross profit margin for the three months ended March 31, 2024 was 41.9% compared to 39.9% in the same period in 2023. The increase of 2.0% for the three months ended March 31, 2024 was primarily related to the increase in revenue offset by higher compensation and benefit costs and an increase in 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 expenses, IT infrastructure costs, depreciation, amortization and other administrative-related costs to general and administrative expenses.
Consolidated general and administrative expenses for the periods presented are as follows:
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NEOGENOMICS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 Three Months Ended March 31,
($ in thousands)20242023$ Change% Change
General and administrative$65,797 $61,549 $4,248 6.9 %
As a % of revenue42.1 %44.9 %
General and administrative expenses increased $4.2 million for the three months ended March 31, 2024, when compared to the same period in 2023. This increase was partially due to a $4.2 million increase in legal and professional fees, and a $1.8 million increase in compensation and benefit costs. These increases were partially offset by a decrease of $1.1 million in technology and equipment costs, and a $0.5 million decrease in credit card fees.
Research and Development Expenses
Research and development expenses relate to costs of developing new proprietary and non-proprietary genetic tests, including compensation and benefit costs, including stock-based compensation, maintenance of laboratory equipment, laboratory supplies (reagents), and outside consultants and experts assisting our research and development team.
Consolidated research and development expenses for the periods presented are as follows:
 Three Months Ended March 31,
($ in thousands)20242023$ Change% Change
Research and development$7,620 $7,395 $225 3.0 %
As a % of revenue4.9 %5.4 %

Research and development expenses increased $0.2 million for the three months ended March 31, 2024 when compared to the same period in 2023 primarily due to a $0.3 million increase in compensation and benefit costs, and a $0.3 million increase in technology and equipment costs partially offset by a $0.4 million decrease in professional fees.
We anticipate research and development expenditures will increase in the future as we continue to invest in development activities for innovation projects and bringing new tests to market.
Sales and Marketing Expenses
Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, and marketing and customer service personnel.
Consolidated sales and marketing expenses for the periods presented are as follows:
 Three Months Ended March 31,
($ in thousands)20242023$ Change% Change
Sales and marketing$