NeoGenomics, Inc. (NASDAQ:NEO) Q3 2024 Earnings Call Transcript

NeoGenomics, Inc. (NASDAQ:NEO) Q3 2024 Earnings Call Transcript November 5, 2024

NeoGenomics, Inc. beats earnings expectations. Reported EPS is $0.05, expectations were $0.012.

Operator: Welcome to the NeoGenomics Third Quarter 2024 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. Please note this call is being recorded and an audio replay will be available on the company’s website. I would now hand the call over to Kendra Sweeney, Vice President of Investor Relations. You may begin.

Kendra Sweeney: Thank you, Jenny. Good afternoon, everyone, and welcome to the NeoGenomics third quarter 2024 financial results call. With me today to discuss the results are Chris Smith, Chief Executive Officer; and Jeff Sherman, Chief Financial Officer. Additional members of the management team are available for Q&A, including Warren Stone, Chief Commercial Officer; Melody Harris, Chief Operations Officer and President of Informatics; Andrew Lukowiak, Chief Innovation Officer; Dr. Nate Montgomery, Head of Medical; and Kareem Saad, Head of Strategy and Transformation. This call is being simultaneously webcast. We’ll be referring to a slide presentation that has been posted to the investors tab on our website at ir.neogenomics.com.

Starting on slide two. During this call, we will make forward-looking statements regarding our anticipated future performance. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to our most recent forms 10-K, 10-Q, and 8-K we filed with the SEC to identify important risks and other factors that may cause our actual results to differ materially from the forward-looking statements. The forward-looking statements made during this call speak only as of the original date of the call, and we undertake no obligation to update or revise any of these statements. During this call, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results.

The non-GAAP financial measures are presented should not be considered in an alternative to the financial measures required by GAAP and are unlikely to be comparable to non-GAAP financial measures provided by other companies. Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measures in a table available in a press release we issued this morning. I will now turn the call over to Chris Smith, Chief Executive Officer of NeoGenomics.

Chris Smith: Thanks, Kendra. Good morning, everyone, and thanks for joining us today. On today’s call, we’ll discuss the highlights of our strong third quarter performance and provide an update on the progress made in accelerating profitable, sustainable growth. Before we discuss our financial results, I do want to take a moment and acknowledge the communities in North Carolina and Florida, including our headquarters in the city of Fort Myers, which have shown incredible resilience following the impacts of Hurricane Helene and Milton. I’m especially grateful to our NEO teammates for the continued commitment to our patients, our mission and our vision. It’s a testament to our one NEO culture that our labs throughout the country stepped up and covered an increased workload to ensure there was minimal disruption to patients while our employees in the storm’s path were seeking shelter.

So, thanks to all of our teammates. I believe our people are what makes NEO such a special place to work. On the business side, our position between large reference labs and the niche oncology companies is what sets us apart. Our value proposition stems from our mission to be a comprehensive oncology testing and information partner to providers serving cancer patients in the community setting. Approximately 85% of all cancer patients are traditionally seen in the community setting, and we believe that trend is likely to persist for the foreseeable future given the convenience, cost effectiveness and level of personalization that can be delivered to cancer patients in that setting. We believe NeoGenomics is leading the democratization of precision oncology testing and information and enabling cancer patients in rural America to have access to the same level of care and as a patient has access to an NCI designated cancer center in a large metropolitan setting.

NeoGenomics has and will continue to build the industry leading community oncology translation platform which is where a vast majority of our investment is being directed today. This platform comprises three layers. First, an industry leading customer experience layer with the flexibility and the versatility to deliver a comprehensive oncology solution portfolio with internally developed and externally sourced products across heme and solid tumor indications and that are fit for the community generalists. Second, an increasingly automated production capability where our geographical balanced footprint drives operational efficiencies across all test modalities and delivers best-in-class turnaround times and cost-effective solutions to patients and providers.

And finally, a data interoperability layer that allows us to deliver integrated, seamless and user-friendly clinical reports and associated insights to our customers. Combined, these three building blocks of our community oncology translation platform are what we believe continue to lead to sustainable competitive differentiation for NEO as the leading comprehensive cancer testing and information partner. Now let’s get into the Q3 highlights on the next slide. We continue to execute on our goal to deliver double-digit year-over-year growth. In Q3, total revenues grew 10%. In the clinical business, revenues actually grew 14% as compared to the fourth quarter, I mean — excuse me — the third quarter of last year and was a record quarter in total test volume and revenues.

This was on top of Q3 of 2023 which was our strongest revenue growth quarter last year with 18% growth. To achieve this result, we grew volumes by 9% and revenue per test by 5%. NGS continues to be a key driver for growth, increasing 26% and representing 31% of our total clinical volume and revenue. We are also proud that we’ve improved adjusted EBITDA by $10 million or 305% from prior year, making that five consecutive quarters of positive adjusted EBITDA. We are seeing the benefits of the investments that we made in our commercial business over the last few quarters. Sales optimization efforts with a focus on support team and customer experience are increasing the effectiveness of our salesforce which has enabled us to serve more patients in a single quarter than ever before.

Since our Investor Day last year, our focus has been set on delivering long-term sustainable growth core to achieving this optimization of our commercial business. Our clinical business continues to execute on our commercial strategy to deliver volume growth enhanced by success of our customer connectivity digital strategy and increased AUP, improved mix driven by the strength of NGS. NeoGenomics drove significant organic volume growth in the third quarter across the portfolio as our commercial and our lab ops team continued to execute. We believe all of our modalities grew faster than the overall market based on the review of industry data. Growth is especially robust across NGS with revenue growth of 26% driven by competitive count wins, improved mix and adoption of larger test panels.

As we discussed on our last quarter call, we will continue to invest in our commercial team to drive incremental volumes and capture market share. This is taking hold as we experience our highest quarterly retention rate and had several key hospital wins. To further drive market penetration into community oncology, we are expanding our commercial resources. These new teammates are joining at a very exciting time for NEO as we look to launch new tests in the coming months. In October, we launched NEO AML Express, a rapid AML test to help patients diagnosed with AML begin their treatment up to two times faster than our previous test. AML Express, when combined with our exceptional customer experience, enhances our position as the market leader in heme.

We also gained conditional approval in New York State for NEO Comprehensive solid tumor. This approval broadens patient access to our NGS tests, delivering better diagnostics value and cost effectiveness than single gene testing. We are only scratching the surface of potential customers and with more reach and frequency of an expanded commercial organization, we will continue to penetrate both new and existing accounts with our comprehensive menu of oncology testing solutions. Through RCM initiatives, we are continuing to expand commercial coverage and having success in reducing denials to ensure we’re getting paid for the work that we do. The most important factor in growing the commercial business is keeping the patient as our top priority.

We know the difference today can make while waiting for test results, so we put a premium on turnaround time. I am pleased to say that this quarter our lab improved turnaround time by 10% compared to Q3 of 2023 even with significant increase in test volumes. With a focus on customer satisfaction in early 2025, we will launch NEO Helix, an exceptional end-to-end digital experience for our customers. NEO Helix is an intuitive platform that supports physicians and patients from order to results, provides guideline driven decision support and future patient education. Turning to slide eight, let’s talk about innovation. We believe innovation is a turbocharger for growth and as we look to the future of the industry with new technologies and data, utilizing our current resources and executing on the right opportunity positions us well for long-term sustainable growth.

In the last 18 months we brought several new and upgraded products to market to improve patient care. I just mentioned our newly available AML Express test. NEO PanTracer, a liquid biopsy CGP test, launched commercially for pharma in Q3 and will launch commercially in the clinical business in the first half of next year. In the clinical test setting, PanTracer liquid biopsy will be a comprehensive and highly sensitive liquid biopsy tests complementing traditional tissue testing for therapy selection in advanced stage solid tumor patients. To further accelerate our innovation, I’m pleased to share that Andrew Lukowiak has joined NEO as our Chief Innovation officer. With nearly 25 years of experience in the clinical diagnostic industry, Andrew brings a wealth of experience specializing in developing strategic programs and processes to introduce innovative regulated products to the market.

As CIO, Andrew will lead our new Office of Innovation, driving cutting edge R&D while ensuring continuous advancement and integration of new technologies. Finally, we are executing on margin expansion initiatives to deliver sustainable, profitable growth. Through a combination of efforts including automation, staffing efficiencies and technology investments, we drove 355 basis points of gross margin improvement in the quarter. Earlier this year we shared our plans to improve and upgrade our lab information management system. In Q3, we successfully launched the first LIMS module and have accessioned over 350,000 new cases in the quarter through this new system. Additionally, version one of the new test compendium has launched and is now being populated.

The migration to one single LIMS system is a multiyear process and these milestones represent significant progress. From a legal perspective, in September we announced that we had negotiated a settlement relating to the ongoing litigation with Natera in which we agreed to a permanent injunction on Radar 1.0 as we focused our efforts resources on the development of Radar 1.1. Importantly, the carve outs in this preliminary injunction remain in place so there is no disruption to patients already utilizing the technology. Radar 1.1 is now through the feasibility stage and progressing through development and is expected to clear CLIA validation in the first half of 2025. Beyond the litigation pathway, we continue to develop new MRD assays as well as evaluate opportunities for in licensing our strategic partnership arrangements to enhance and bolster our efforts to drive innovation and bring optionality to patients who can benefit from MRD testing.

As we stated in the past, we are committed to being in the MRD market and supporting patients throughout their cancer journey from diagnosis to monitoring. And now let me hand it over to Jeff to go through the financial results.

Jeffrey Sherman: Thanks, Chris. I’ll start with a little more detail on our operating results for the quarter. We delivered a strong overall performance in Q3 with yet another quarter of double-digit revenue growth increasing 10% over the prior year to $168 million. The combination of clinical test volume growth, the ongoing shift to higher value tests, and improvements in revenue per test due to RCM initiatives continue to drive revenue growth. Adjusted gross profit was up 19% to $80 million, and adjusted gross margins improved by $355 basis points to 47.8%. Adjusted EBITDA improved 305% from prior year to positive $13 million, an improvement of $10 million. As Chris said, Q3 was our fifth consecutive quarter of positive adjusted EBITDA.

Clinical services revenue of $146 million was an increase of 14% over prior year. The increase in clinical service revenue reflects a 9% increase in testing volume and an increase in average unit price due to more higher value NGS tests and strategic reimbursement initiatives. Volume growth is especially noteworthy as Q3 has historically been a seasonally weaker quarter impacted by fewer patient provider interactions and general summer travel. As our expanded salesforce penetrates deeper into the community oncology setting, we are seeing increased adoption of NGS testing, which is driving higher volume growth. The strong demand for NGS testing and the insights it provides continue to fuel revenue growth and earnings. Despite the annualization effect of our large panel NEO Comprehensive tumor and myeloid disorder tests which were introduced last year, we still experience double-digit growth in NGS in the face of tough comps.

We delivered the 14th consecutive quarter of improvement in revenue per test, up 5% over prior year to $463. NGS testing and RCM initiatives including improved pricing remain the biggest contributors to these improvements. Earlier this year, we announced the restructuring of our commercial organization bringing pharma services under Warren’s leadership. We noted on our first quarter call that we expected ADX revenue to be in a similar range in Q2 and Q3 of this year to our Q1 performance. Q3 results were in line with our expectations with revenue declining by 10% over prior year to $22 million. The decline was primarily driven by international site closures, restructuring activities and lower Radar 1.0 revenue. However, our prioritization efforts led to adjusted gross profit growth of 6% and expanded adjusted gross margins by 644 basis points over prior year as a result of consolidation of work and standardization of operations.

We expect ADX revenue to begin to accelerate in the fourth quarter. We also see the expansion of our NGS business and success of larger panel tests will be a future driver of our Informatics business as we continue to produce more data and information that pharma research teams are looking for. We are developing a comprehensive plan to further expand the monetization opportunity of our data assets. Looking at our third quarter financial overview on slide 15, adjusted gross profit increased by 19% over prior year as a result of revenue growth and operating leverage, generating higher adjusted gross profit and margins. Regarding operating expenses, sales and marketing expense was $20 million, R&D expense was $8 million and G&A expense was $67 million.

The $5 million increase in G&A over prior year was primarily due to an increase in legal and professional fees including a settlement payment for IP litigation. We ended the third quarter with cash and marketable securities of $388 million, flat with the second quarter Even with increased capital expenditures. Cash flow from operations was positive $9 million, an improvement of $15 million from Q3 of last year as a result of improved operating results. Our May 2025 convertible notes with the principal balance of $201 million are now presented as current liabilities on our balance sheet. Given our strong cash position and liquidity profile, we maintain our plan to use our existing cash and marketable securities to retire to 2025 notes in May.

Let’s move on to our revised guidance. Given our strong performance through the first three quarters of the year and our disciplined approach to operating the business, we are in the position to again increase our adjusted EBITDA guide. The previous adjusted EBITDA guide was $33 million to $37 million, up from our initial guidance of $21 million to $24 million. We are further revising our guidance range to $37 million to $40 million, representing growth of over 1000% versus last year and an over 70% improvement from the original guidance at the midpoint. Given our consistent and strong revenue and earnings growth in 2023 and year-to-date in 2024, our plan is to provide an updated long-term revenue growth target when we report full year 2024 results in February of next year.

And with that I’ll hand it back to Chris to wrap up.

Chris Smith: Thanks, Jeff. It’s been a great quarter and I’m proud of our teammates for working so hard to sustain performance that delivers these type of results. We plan to expand our portfolio with the launch of NEO PanTracer, a liquid biopsy, to further strengthen our strong position in the marketplace in the coming months. Our broad menu and customer experience have enabled us to serve more patients than ever in a single quarter. In addition, we continue to gain operating leverage on the business as we execute on our priorities. We’re confident in our approach to the final quarter of 2024. So, now let me hand it back over to Jenny for questions.

Q&A Session

Operator: Thank you very much. We will now be conducting our question-and-answer session. [Operator Instructions] Thank you. Your first question is coming from Andrew Brackman of William Blair. Andrew, your line is live.

Chris Smith: Hey, Andrew.

Andrew Brackman: Hi, guys. Good morning. Thanks for taking the question. I wanted to ask on the profitability evolution here. You’re making some nice strides on expanding margins. I think the incremental margin on revenue growth has been averaging about 60% the last few quarters. So, I guess, how should we be thinking about you balancing continued investment into growth opportunities while also expanding that moving forward? And I want to also point on Q4, it does imply a little bit of a decline in margin. So, I guess, just any thoughts there are appreciated. Thanks.

Chris Smith: Yeah. Thanks, Andrew. I’ll let Jeff take some of the financial. But just strategically, look, I think Melody and the team on the ops, we had a lot of opportunity to expand gross margin. And look, I think through the first couple of years I think it was a big focus on improving turnaround time, while doing that. We are just now beginning to bring things like our new LIM system and automation to play. So, we continue to feel very confident that we can do that. I think it’s about balancing priorities. So, I think we as a leadership team, we look at what the opportunities in the market and we think the market continues to be basically frothy with opportunity where we can provide those services. So, we have to invest in places like new products and sales, but at the same time making sure that we’re driving expansion and gross margins so we can accelerate the bottom line.

So, I think that strategy is working. But maybe Jeff, do you want to give more color to the drop through?

Jeffrey Sherman: Yeah. I think as you pointed out, Andrew, we continue to have very good net revenue conversion to our adjusted EBITDA line and expect that we’re going to have continued favorability as we progress forward. As this year progressed, we did talk about some of the investments we are making and those investments will occur in Q4 as well. The continued salesforce expansion will be a driver in Q4. We’re investing in the liquid biopsy in some of our product development as well. So, I think those will impact some of the Q4 numbers. But overall, I think as you look at our performance year-to-date, we’ve had very good conversion and we continue to see opportunities kind of across destructive with volume opportunities, with pricing, with RCM opportunities driving margin improvement and continuing to get operating leverage on the OpEx line as well.

So, as we look at 2025 and we’ll give guidance in 2025 in February, we still see a lot of opportunities to expand our margins.

Andrew Brackman: Great. I’ll keep it to one. Thanks, guys.

Operator: Thank you very much. Your next question is coming from Tejas Savant of Morgan Stanley. Tejas, your line is live.

Unidentified Analyst: Hi, this is Yuko [ph] on the call for Tejas. Thank you for taking your questions.

Chris Smith: Hi.

Unidentified Analyst: Hello. Several CROs have noted soft demand from loss large pharma customers due to reprioritization of portfolio from the IRA as well as cost realignment initiatives in the post pandemic era. Could you comment on whether you’re seeing any of these dynamics? And then separately, given the pricing pressures noted by few CROs from competition, are you seeing any trickle down effect on your pricing within the Advanced Diagnostics segment?

Chris Smith: Yeah. I’ll take that high level. I’m going to have Warren pick it up, because Warren now leads that business for us. But I think as everybody knows, there’s been some industry dynamics that were causing some compression in industry. I think — and Warren can correct me if I’m wrong, but I think it’s 19 of the 20 top pharma companies, their largest spend is on oncology drugs and R&D. So, I think we feel good going forward. But Warren, do you want to add a little more color to the question?

Warren Stone: Yeah, thanks. Certainly. Thanks, Chris. You’re absolutely right. 19 of the top 20 pharma companies of oncology is their number one focus area from an R&D investment. And with that as a backdrop, it’s a very large and attractive market opportunity. But it is certainly fair to say that like many other peers in this space and CROs, we have sort of seen a slowing of market growth and that is certainly one of the factors that have impacted the performance on the pharma business in 2024. I’d say from our perspective, looking at activity levels and those sorts of things, we feel it’s bottomed out and starting to sort of by no means return to pre-pandemic levels, but we’re starting to see indications that there is an upward swing and we’re looking to sort of capitalize on that in terms of early-stage opportunities.

In terms of the pricing side of things, I cannot say that we — in terms of — how we’re looking to position the services that we bring to the market, I can’t say that we’re seeing increased price sensitivity at this particular point.

Unidentified Analyst: Got it. Thank you for the color. And then, also I know you don’t have multi gene panels for behavioral health, but in light of United’s decision to no longer cover these, how do you think the challenges that some of the private payers have faced recently on spiraling costs weighing on the enthusiasm for genetic testing more broadly, including perhaps using more stringent prior authorization requirements?

Chris Smith: Yeah. I’ll add payer relations reports with the — Jeff, look at the high level for us. We’ve been really pleased with the movement on bio market legislation in the states and I think that’s ultimately going to have a dividend. But Jeff, do you want to add more color because we’re not in that space.

Jeffrey Sherman: I think — yeah, there’s at least 12 or 13 states now that have passed biomarker legislation. And as we’ve said on previous calls, the fact that a state just passed the legislation doesn’t mean it automatically flips a switch for us to get paid. We still have to do the work kind of in the trenches and working with the payers to get work. I think at the end of the day for us, we firmly believe our tests are being used to diagnose and treat patients and we should be paid for them. And sometimes the testing is ahead of some of the guidelines. So, I think overall the biomarker legislation is going to be helpful. We think over time as these larger panel tests become more prevalent, there will be more overall acceptance. And we know from our clinicians and who we interact with that our tests are being used to diagnose and treat patients. And for us, at the end of the day, that’s going to be the driver, we believe, for further reimbursement.

Unidentified Analyst: Thank you very much.

Operator: Thank you. Your next question is coming from Dan Brennan of TD Cowen. Dan, your line is live.

Chris Smith: Hey, Dan.

Unidentified Analyst: Hi, guys. This is Tom on for Dan. Thanks for taking my question here. So, I wanted to focus more on NGS in the quarter. Clearly, still very impressive, up 26%, but a modest deceleration I guess on a two-year stack. I guess, like how do you see the broader market? I mean, clearly you had NEO Comprehensive lapping there. But I guess looking forward from today, how do you feel about the headroom for CGP in the market and your ability to continue to gain share in a kind of more competitive, tighter environment?

Chris Smith: Yeah. Thanks, Tom. Look, I’ll hit it a couple different ways and then maybe have Jeff or Warren or Kareem chime in as well. But look, I think, the market is still has a lot of runway when you look at what the size of the penetration of the market is. And so, we continue to believe that we have big upside there. Now I would say when you looked at our growth compared to other quarters, remember that Q3 last year we had a tough comparable in the sense that that was when we had launched, we had launched products in Q1 and then in Q3. But I would still think we feel very strong and especially because we are still very, very early days in the community oncology setting. We have a strong presence in the community hospital, but it’s those community oncologists.

And that’s where the majority of these large solid tumor panels are coming from. And so, when you look at NGS, we probably have a very high share in heme. We would have a very low share in solid tumor. So, we think that we continue to have a lot of runway. And the other reason we like that is because the majority of those customers that are buying large panels from our competitors are buying something from us. So, we’re already in there. We already have a relationship. And I think what we — which you’re starting to see in this volume growth in this quarter is that our customers don’t want to buy from multiple vendors. So, I think having this comprehensive menu has turned out to be a strength. But I don’t know, Kareem, if You want to mention anything on the market or Warren?

Jeffrey Sherman: I mean, I’ll add a couple. I would say, just a couple of things. So, we are — we’ve noted that we’re continuing to expand the commercial organization to gain better penetration into this market. And so, although, our NGS was a little bit lower this quarter, we’re still up almost 40% for the year in our NGS revenue. So, I’d say robust growth and as Chris said, with some new products being introduced, getting more traction on the solid tumor side and still seeing significant growth on the heme side. So, I think we like where our position is. It’s where we’re investing resources both from an R&D as well as a commercial perspective. And we think there’s a lot of incremental market share to grab.

Warren Stone: Maybe two additional points from my side there, Jeff. I would say, I think an additional element that’s certainly going to fuel our growth from an NGS perspective is the launch of PanTracer liquid in the first half of next year. Obviously, today we don’t have a PanTracer liquid solution and that’s a space which is growing rapidly and still very underpenetrated. Secondly, we also recognize the importance of attributes, so from a product perspective and we’re looking to add a few additional attributes to our NEO Comprehensive. So numerous avenues for us to increase our attractiveness from a portfolio perspective. Couple that with a market which is still attractive and growing as well as the investments in the commercial or organization that Jeff touched on. I think that sort of trifecta places us in a very strong position to continue the sort of growth trajectory that we’ve showcased over the last three quarters this year into 2025 and beyond.

Unidentified Analyst: Right. That’s really helpful. And then just a quick follow up on your base business. I mean, that continues to be impressive from both a volume and pricing standpoint. I guess, were you surprised with the kind of lack of cannibalization you’re seeing in that business? I think the thesis maybe a year or two ago was that market might continue to decelerate as new modalities come to market. I guess, why aren’t we seeing that? And has that changed your view of where the base clinical business of yours can go over the next three years?

Chris Smith: Warren, you want to comment on that?

Warren Stone: Yeah, certainly. I think there is certainly some cannibalization that’s taking place as people move from sort of multi-modality testing solutions that we offer into these larger panels. So that is happening sort of underneath the sort of numbers that you look looking at. And we obviously offsetting that with the growth, and we feel that that will continue to happen over time. But the reality is all of the other modalities, what’s working for us is the commercial strategy. I think the biggest element of the commercial strategy that’s paying dividends, driving the other modality growth, is really the protect side of things. We fundamentally are losing far less business than we had in the past. So any sort of accretive business, new wins that we take on, and we spoke about or referenced a few health system wins, et cetera, that brings on a lot of the sort of base business that you referred to and layers on top of a business which is actually, as I said, we’re losing at a very slow rate compared to historical levels.

So that’s driving the growth that we’re seeing there as well. So, I think it’s a combination of factors. But ultimately the successful and effective execution of the commercial strategy is a big driver here. And we still see numerous additional targets that we are looking at commercially in the rest of this year and in 2025 to continue to bolster the growth of that base business.

Unidentified Analyst: Awesome. Thanks very much.

Operator: Thank you very much. Your next question is coming from David Westenberg of Piper Sandler. David, your line is life.

David Westenberg: Hey, good morning, guys. Thank you for taking the question. So, just in terms of — you now are EBITDA positive for a number of quarters that keeps tracking in the right direction. What are you thinking now about capital deployment? Are tuck-in acquisitions available to you now? And I would say, like the national labs, for example, Quest and Labcorp, are actually seeing an uptake in available outreach programs and whatnot. I know oncology outreach programs are probably not as numerous as others, but are those available to you? And if capital deployment is not a consideration or less of a consideration, would you think about buybacks at this level? Thank you.

Chris Smith: Yeah. I’m going to let Jeff take the thing around the capital deployment and then Kareem’s here. I’ll let him talk a little bit about how we’re thinking about opportunities for growth.

Jeffrey Sherman: Yeah. So, we finished the quarter with almost $390 million in cash. And we’ve said we’ve got a convertible note coming due next year that we plan to retire with cash. That still gives us a lot of liquidity, and we expect to be producing cash in 2025. So, I think as we think about strategic priorities, we’ve hired Kareem in a corporate development role to take advantage of opportunities. And I would say there are opportunities coming and I’ll let Kareem comment on that. But I think from an overall capital deployment strategy right now, we’ve got plenty of liquidity to run the business and continue to invest in the business. We saw some stepped up capital expenditures this year. We’re expanding our lab in Raleigh and we’ve got some LIMS expenditures this year.

Some of that won’t repeat next year. So, I think we’ll be positioned well with sufficient liquidity to invest. So, I would say our priority will be invest in the business right now. We’ll always look at stock buybacks as option and discuss those with the Board. And then I’ll let Kareem talk about kind of the M&A corporate development side.

Kareem Saad: Yeah, David. So, I think we’ve talked about this before. So, we’ve been proactively looking at opportunities to acquire businesses to give us leverage, geographical reach, grow our overall delivery footprint, especially as it relates to new NGS modalities. So, there’s plenty of opportunities out there. I’d say we’re cherry picking, we’re being selective in terms of opportunities that we can rapidly and efficiently integrate that are complementary to our capabilities and that we could leverage in the community channel, which is really the channel that we shine in. And then, we’re also looking at opportunities to supplement our product portfolio, whether that be in MRD, which we’ve talked about at a high level before, but also in other modalities of testing.

So, today we’re much — we’ve got bigger presence in diagnostic testing modalities in solid tumor, much more in heme, some in therapy selection, but we haven’t really played in the germline space and we’re very slowly, but deliberately getting into the MRD space and now we’re starting to look at these areas. So yeah, I say there are a lot of opportunities and we’re pursuing them and hopefully you’ll hear more of them in the future.

Chris Smith: Yeah. I think one other thing to think about it would be very, very strategic. Especially — look, I would say from — we look at areas where we maybe are underserved from a turnaround time perspective in a lab. So that maybe would be something that you referred to others. But otherwise, it’s really a lot about how do we find some of these strategic partners or in licensed technology to take it through our strong distribution channel. We think we have one of the best commercial organizations, and there’s a lot of innovations out there that don’t have a way to get it to customers. So, it’s still early days in that process. And stay tuned. But I will tell you that we’re very committed to driving both the top line, but also the bottom line.

David Westenberg: Thank you. That was a really long answer. So hopefully this one will be a little bit shorter.

Chris Smith: Sorry about that.

David Westenberg: No, no, I just don’t want to hog. There’s a lot of analysts covering. So, just in terms of a continuation of Andrew’s question, you really have gotten really good operating leverage. And even kind of as you’re lapping these tough comps, you’re still getting the operating leverage here. So, if we think about on a go forward basis, how much of that has just been low hanging fruit in terms of cuts versus going forward? I mean, you are expanding the salesforce. So, I don’t know if there’s necessarily human capital, reduction in human capital. Just kind of where do we think about operating leverage on a go forward basis considering those factors?

Jeffrey Sherman: Yeah. So, I think again focusing on NGS, which is a higher revenue, higher margin business that’s been a driver. So, I wouldn’t look at that as basically taking out costs, but actually adding higher value business. But at the same time, we’ve been getting more efficient as we’ve done that. So even in this quarter where our volume, it was a record volume quarter, we actually saw improved turnaround time. So, I think our operations teams are really executing at a high level to both increase our turnaround time as well as increase throughput. I think automation investments, I think the LIMS system is going to help that over time. So I guess as we think about it, we’re continuing to expand in higher margin tests.

We see overall growth across all modalities faster than the market. We’ve got capacity in our existing labs. We’re expanding our lab in Raleigh and we have pricing and RCM initiatives. So, I think there’s a lot of things that can expand. And then I think on the OpEx side, we’re getting good operating leverage on the OpEx side as well and trying to manage that. So, I think the combination of those still presents a pretty strong Runway for us to expand margins over time.

David Westenberg: Got it. Thank you.

Chris Smith: Thanks, David.

Operator: Thanks very much. Your next question is coming from Mike Matson of Needham & Company. Mike, your line is live.

Chris Smith: Hey, Mike.

Mike Matson: Yeah, thanks. Hey, guys. So, I guess, first, just with regard to the hurricanes, was there any sort of impact to your revenue in the third quarter, or do you expect any sort of impact in the fourth quarter?

Jeffrey Sherman: So, I would say minimal impact in the third quarter. We have seen, particularly in the Florida and the Carolina regions, some slowness in the October time period. And I would say we do expect we’ll recover that, the timing of that will be hard to predict and really like maybe some other medical services. I mean, we do have capacity constraints in some of the oncologists that are seeing patients. Some of them are opening office hours on Saturday, we’ve been told. So, I think there’s probably a little bit of impact rolling into the fourth quarter. We think over time that will kind of probably just even out and play out. It’s just a timing issue.

Mike Matson: Okay. Got it. And then just as far as the newer NGS test, PanTracer and AML Express, can you maybe just talk about the market opportunity or TAM with those?

Chris Smith: Yeah. So, Warren, you want to talk a little bit about both those markets and how things are going and how we see the opportunity?

Warren Stone: Yes, certainly. And as we said earlier, looking to launch this in the first half of 2025. And again, this is a panel that is greater than 500 genes, including TMB and MSI. And we feel confident again that we’re able to offer very competitive turnaround times on this. And I think, as I made some comments earlier, we see this as a very attractive market. Actually, there’s been some recent research that’s come out that’s actually said that TAM is actually larger than what was previously anticipated and also more underpenetrated than in the past. So, this is obviously within the therapy selection part of the cancer continuum. We see this as a very, very significant opportunity to supplement our current solid tumor portfolio and ultimately address one of the larger gaps that we have within our portfolio strategy.

Chris Smith: [Indiscernible].

Warren Stone: Certainly. Yeah. So, we launched AML Express very early in quarter four. Again, this is a product that is targeted towards the diagnostic side of things and within our core sort of hospital setting where we have a very high market share, both in terms of heme, but also just in terms of that as a segment. We’ve seen a lot of very early demand for the product based on the sort of value proposition from a health economic perspective, getting results up to two days earlier and the associated sort of inpatient costs associated with that. So demand is ramping up there very quickly and operationally doing very, very well in terms of the expected turnaround time on that test as well.

Jeffrey Sherman: Yeah. Maybe the way to think about that AML test from a market opportunity is again, it’s hospital based, not in the community oncology. So, it’s patients that are in the hospitals. And that is by nature a smaller market opportunity than the big community oncology. But it’s a place where we’ve always been the market leader and we saw a huge room to be able to expand that with that test.

Mike Matson: Okay. Great. Thank you.

Jeffrey Sherman: Thanks.

Operator: Thank you very much. Your next question is coming from Matt Hewitt of Craig-Hallum Capital Group. Matt, your line is live.

Chris Smith: Hey, Matt.

Matthew Hewitt: Good morning and congratulations on the good quarter. And I’m not sure if you’re going to have this number, but you commented that you’ve launched or upgraded 13 tests over the last 18 months. How much has that contributed to your growth during that period? And how should we think about new launches, particularly the ones you’ve commented on impacting your growth for next year?

Chris Smith: Yeah. I think so — look, I would say in that timeframe there was probably three to four major products that were launched. And then I would say some were some single genes or just kind of line extension. So maybe think about it that way. Look, we were not competing in the solid tumor market. And so, one of our big plays last year was to get into that market. And I would say that’s helping our NGS growth. Obviously, because we’ve been in heme, been the market leader for a long time. A larger percentage of that growth is coming out of heme because we still only have a couple points of market share in the solid tumor market. So while it’s helping with the growth, I wouldn’t say it’s being driven by the growth. You want to talk more about some of the additional products and the impact that they’ve made.

Jeffrey Sherman: Yeah. So, we haven’t broken out like individual products and some of these products are upgrades to existing products. But clearly, they have helped in terms of both market receptiveness and on our pricing front. We’ve said the NGS growth continues to be a driver of our AUP overall and still probably driving roughly 60% or more of the increase in AUP. So, I think some of it is just becoming coming from a higher mix as we move more into those higher end tests are certainly driving revenue, but we still see the market opportunity as being significant there.

Chris Smith: Yeah. We talk a lot about the solid tumor, but one of the big products we launched was the largest myeloid panel. And that was a big growth driver for us. And it kind of goes under the radar, I think, because the whole industry is thinking solid, solid, solid, and I think they’ve undervalued heme. And if you look at the market dynamics of heme, heme is generally growing 10%. So that market is still a great growth market. But I think the whole industry has been very enamored with solid. So, we probably get caught in that sometime talking more about solid than the heme.

Matthew Hewitt: That’s really helpful. Thank you. And then you commented that, that you’re adding to your commercial team. Could you give us a headcount, maybe exiting Q3 and your anticipated adds before the end of the year?

Chris Smith: Yes. So, we talked about in the last quarter that we thought we would add commercially 30 to 40 people between the Q2 earnings results and the end of the year. I would say that we’re aggressively pursuing all that. Some good reps, we’d love if you’d forward them to our HR department. But our goal is — our big sales meeting is late January, and so our goal is to try to have those people in place when we go to our sales meeting and train on some of these new products. So we’re kind of in the middle of that.

Matthew Hewitt: Got it. Thank you very much.

Operator: Thank you. Your next question is coming from Matthew Sykes of Goldman Sachs. Matthew, your line is live.

Chris Smith: Hey, Matt.

Prashant Kota: Hey, guys. Congrats on the quarter. This is Prashant Kota for Matt. Can you talk about the pacing or timeline of R&D spend left in the development of the new radar? And can you also help quantify the amount of R&D spend needed to fully develop this new product?

Chris Smith: Yeah. I’ll give an overview, and then Jeff can talk to the numbers. So, look, I think one of the things that we did quickly and we talked about this on a call earlier, is because we were moving quicker on Radar 1.1, we went through and obviously did the settlement. And so, a lot of that cost has been absorbed into this year’s financials. And as you probably heard in the call, we’ll get through CLIA validation, we believe, in the first half. So, I think that gets us a product on the market. Look, I think the next step is really Radar 2.0, and that’s where they’re spending a lot of time. But remember, a lot of the R&D costs on some of the big products that we worked on, whether it was liquid, PanTracer or the solid tumors last year, those fall off and as we move it.

And to be fair, Andrew, I think, has been on Board for about six weeks. So I think giving Andrew time to be able to come in as we go through the AOP process and be able to work with his team and look at what’s in the pipeline and how we allocate resources. But we definitely know that we need to invest more in R&D because it’s a turbocharger. But I do think it’s looking for what those market opportunities are. One is we want to continue to be the leader in hemes. So, we’re going to spend a lot of time there. But it’s also to fill gaps like MRD or solid. You want to talk–?

Jeffrey Sherman: Yeah. I think I would just add, I wouldn’t expect the incremental spend to change much from our base level today that we’ve been experiencing. As Chris said, things will fall off and some new things will go on. I think the incremental spend from there will be where Andrew is going to help us direct those incremental dollars. And again, we’ve talked about having opportunities from a M&A perspective, corporate development perspective, but we also see opportunities from an internal R&D perspective. And we just want to align those investments with our strategy where we see the most opportunity. And I think that’s where the focus is going to be for Andrew over the next several quarters.

Chris Smith: And it really is balanced. I mean, we’ve said this to the market many times. We believe you grow revenue fast, you grow gross margins faster and you grow profits fastest. So, it’s not that we’re going to pivot and go into a money losing situation from a product. So, we as a leadership team work together and identify what are the best opportunities where we’re going to get the best return on our investment. So commercial has been one, but I think as we learn more about what are opportunities with R&D and PD, we’ll look at also shifting resources into those areas.

Jeffrey Sherman: Yeah. And I think finally, I would just say look, our clinical revenue growth has continued to be very strong. Over 15% on a year-to-date basis. We’ve talked about ADX and that leveling out in Q2 and Q3 and starting to reaccelerate. So, we do see going into next year we expect to see growth there and I think that’s going to be help to drive the overall revenue growth rate.

Prashant Kota: Got it. Thank you. And just any color following up on that on how incremental of a step up in top line growth longer term will including the new radar provider. Previously mentioned…

Chris Smith: Yeah. So, we’re going to come out and give their long range guidance in February when we do year-end results.

Prashant Kota: Got it. Thank you.

Chris Smith: So, stay tuned.

Operator: Thank you very much. Your next question is coming from Mark Massaro of BTIG. Mark, your line is live.

Chris Smith: Hey, Mark.

Mark Massaro: Hey, Chris. How’s it going? Good to hear from you guys.

Chris Smith: Going good.

Mark Massaro: Yeah. So, I just wanted to start with the NEO PanTracer. I do agree with Warren that the therapy selection market is underpenetrated. I think there are some people that wrongly think it’s saturated and the growth curve is done. I disagree with that. But I would be interested to hear. Yeah, I would be interested to hear how you think you plan to compete on sensitivity and limit of detection. I know that is one of the core metrics. Should we expect any papers just to show perhaps a comparison on the data? And then, I also want to ask how quickly do you think you can turn on payer coverage for PanTracer LBX both from CMS and commercial? And I’m curious if you think it can contribute to your 2025 revenue. Thank you.

Chris Smith: Warren, you want to start and then maybe we’ll have Nate and Andrew kind of chime in on what we’re doing as far as sensitivity of the test and trials, and then look at what it does.

Warren Stone: Totally agree. Yeah, yeah. So Mark, again, our kind of view on this market is, it’s a very large market, actually believe it to be more than 700,000 patients in the US and some of those patients a year. And some of those patients get more than one test and only partially penetrated less than 15% or so is some of the data that we have available. So, we see it as very attractive just to put that out there. In terms of studies, I’ll leave that to Andrew. But we absolutely believe this is going to contribute to our revenue in 2025. We’re expecting to be able to launch this with a CMS reimbursement in the first half of 2025, after which we will go down and selectively knock off third-party payers which is going to be critical to the success of PanTracer Liquid through certain studies that we’re intending to run straight validation. So maybe that’s a good junction for me to hand this across to Andrew to talk about studies and sensitivity, et cetera.

Andrew Lukowiak: Yeah. No, I appreciate it, Warren. And Mark, good to reconnect. Hey, so I think the way I would look at it is, these type of diagnostics kind of warrant some type of publication record to go right along with the launch. I’m pleased to say we have a couple of those clinical studies already kind of in the queue for kind of orthogonal comparison, which I think is a strong way to get us out of the gate. That’s probably a 2025 conversation coming up. So I think, with that I think we’re well poised to move forward. I don’t know if Nate wants to have any more commentary on it.

Chris Smith: Maybe on the sensitivity. Nate?

Nate Montgomery: Yeah. I think what I would say on the sensitivity is until the validation is entirely wrapped up, would probably be cautious about sharing publicly about the lower limit of the sensitivity. But we certainly expect the test to be competitive in the marketplace. And the only other piece that I would add is around the payer piece. I think we’ve had a lot of success with other products in terms of going through the Moldex pathway. And so, we feel optimistic about the path forward there too.

Chris Smith: Yeah. Thanks, Nate for that and I agree. The one other thing is don’t — you know we have probably 150 to 200 payer contracts. I mean, I think because of our broad portfolio, we have relationships with a lot of these third-party payers for a long time. So, I think it’s very different than some companies that don’t have any type of relationship and they’re bringing a product out. So, I think we’ll be able to move that as well. So.

Mark Massaro: Excellent. Then, real quick as a follow up. Advanced Diagnostics has been under pressure for the last few quarters or so. Can you maybe just walk us through what you believe to be the key elements of potentially staging a recovery in ’25? I understand you’ll be going up against probably easier comps, but just walk us through what you think the key levers there are.

Chris Smith: Yeah. I’m going to give the high level and I’m going to have Warren get a little more specific. But remember, I mean, that was a business that was losing money or some certain aspects of that business. And so, look, we made a very conscious decision to change the way that we went to market. So, we kind of foreshadowed that the business would relatively be flat. But if you look at the gross margin expansion that the team has done, it’s significant. So, I think we’re on very solid footing. And then I think handing that business over to Warren to create a new commercial strategy is starting to take root. But Warren, you want to give just a real quick high level of how you’re thinking about that.

Warren Stone: Yeah, certainly. Thanks, Chris. Mark, I think one of the key aspects is, obviously, and I said this earlier, is what happens from a larger market perspective. We think this is sort of bottomed out and starting to. We see increased activity levels coming from particularly big pharma, but also some of the smaller pharma and biotech as well, which is an encouraging sign. So, there is a market dynamic here as well, which is, obviously, largely out of our control, but I think strategically totally within our sort of remittance and we will at our sales meeting next year, which, and Chris already highlighted the fact that end of January we are launching our new sort of go to market strategy for our pharma team. With that, we’ve got a new business model that we’re launching as well, which ultimately will allow for increased focus and targeting into where our sweet spot is from a capability technology point of view, but also from that profitability aspect that we’re looking at.

So that’s key. And we’re actually adjusting the deployment of our sales resources against this new business model as well. So that all rolls out officially kind of hits the road at the of January. And the work that we’re doing right now sort of leading up to that, around building a robust pipeline of both opportunities, but also what we call statements of work sort of bookings that we have within the business is also a key factor for us in terms of driving growth in 2025. I think for me in the longer term this is a very attractive space for NeoGenomics. It is a long sales cycle business. So, I just want to maybe temper expectations just in terms of how quickly we can turn this around. But within this sort of longer range plan, I see this as a major contributor to our success.

Chris Smith: I think we’re going to move on here because we’ve only got a few minutes left. So, let’s go on please.

Operator: Okay. Thank you very much. The next question is coming from Mason Carrico of Stephens, Incorporated. Mason, your line of live.

Chris Smith: Hey, Mason.

Mason Carrico: Hey, guys. I’ll ask my two up front here, if that’s all right. Could you talk about the ordering patterns that you’ve seen from docs who start ordering the larger solid tumor panels from you guys? Are they typically one-off orders? Do they tend to move most of their volumes over once they start ordering? Just trying to get a sense for how volumes may shift once the liquid panel launches. And then second, do you think that having the liquid assay could end up driving more NEO Comprehensive volume? Just given how having both of those products available may be valuable to clinicians, given how they can reflex to the other if necessary.

Chris Smith: So, Mason, you’ve been in our go to market strategy for that product meeting. That is totally. We absolutely think it will help solid tumor business. So, the answer is yes on the first one. Listen, on the second one, just real quick, if you’ve seen one territory and you’ve seen one hospital, you’ve seen one. So, I would say that look, we are — I would say that our focus has been very much on accounts where we had relationships that maybe we’re using other people. But part of our strategy is, look, in this business, especially with the community oncologist, you have to become sticky. And historically, community oncologists will move quickly. So, we actually measure our reps in the quantities based on account. When we think within that account has stuck and we don’t share that publicly.

But I would say one of the metrics that we’re using is that level. And I think what you see is if we do a really good job as a company managing that customer, it ends up being much more sticky as opposed to ordering one from us, one from somebody else, one from somebody else. So, it’s about the way that we use digital outbound with our field organization and also with that customer.

Mason Carrico: Got it. Thanks.

Chris Smith: Thanks.

Operator: Thank you very much. Your next question is coming from Michael Reiskin [ph] of Bank of America. Michael, your line is live.

Chris Smith: Hey, Michael.

John Kim: Hello, good morning. This is John Kim for Michael.

Chris Smith: Hey, John.

John Kim: Hi. So, I think in the past you’ve talked about NGS reaching perhaps 50% of the clinical revenues. Is there clear timeline for that as we stand where we are from the 31%? And then you mentioned the Informatics piece. I’ll ask my second question as well here. Has there been any initial uptake or feedback there in terms of the licensing, the data to the pharmas? Thank you.

Chris Smith: Yeah. So, look, I would say on the licensing data, it’s still early days, kind of with the solid, with the solid tumor. Do you have anything else you want to add on that? And I’m sorry, tell me again your first one.

John Kim: So NGS is about clinical revenue.

Chris Smith: I am sorry. Clinical revenue. So today we’re at 30%, 31%. I think when — we were asked a question really on a call that said, could this go to 50%. If you look at the market, NGS is growing 15% to 20% of the other modalities are growing anywhere from probably 2% to 4%. So, the whole moving that way. So it’s hard to predict what percent of our business would eventually that get to. But you can’t forget that one of our leading things is this comprehensive test. So, yes, NGS will get significantly bigger, but I think it’s one of these things that’s going to be a long time to do that because we keep growing both sides of our business. So, we haven’t said that we think it will be 50%, but I will tell you, we have a lot of room to run when you look at worth 30% and majority of the people we compete with, it’s like 80% of their revenue.

John Kim: Noted. All right. Thank you.

Operator: Thank you very much. And your next question is coming from Andrew Cooper of Raymond James. Andrew, your line is live.

Chris Smith: Hey, Andrew.

Andrew Cooper: Hey, guys. Thanks for the question. Good morning. Lots already been asked, so maybe just one. Could you dive in a little bit deeper on the NEO Helix? I think you said in terms of the new rollout to the customer facing and patient facing technologies and I think you mentioned including clinical decision support there. So is that integrating Trapelo or how do we think about kind of some of those pieces that you’ve acquired over the years and potentially any ability to monetize those products.

Chris Smith: So, we’re super excited about it. I’m going to let Melody kind of give you kind of some high level as well as Warren on that.

Melody Harris: Hi, Andrew. Yep. So, the main push for NEO Helix this year is really integrating all of our digital customer experience into a single platform. While it is capable of hosting clinical decision support, and we will be using some of the pieces of Trapelo on it. That’s not our initial push on it. Our initial push is really around that seamless customer experience. And then another important part that we’ve heard from our customers is making sure that it’s mobile enabled. So, this will be the first time that NEO is able to go to a full mobile experience with our customer portal. And Warren, I don’t know if you want to add some additional commercial pieces around that.

Warren Stone: Yeah. I think, Melody, you summed up, the Helix is fantastic. I think maybe just the rollout, the first target is to the community oncology segments. Again, an area where we’ve really tailored the needs of this NEO Helix solution towards. And that’ll be the first segment and then we will roll it out to our hospital-based segment thereafter and during the rollout starts in 2025.

Andrew Cooper: And if I can sneak in just one more quickly. There was sizable deal announced in the space last night. Just curious, kind of your thoughts, and as you do look out at that M&A landscape, how you would have thought about that potential deal and what it does to maybe change the competitive landscape, if at all.

Chris Smith: Yeah. Look, I think every company has their own strategy and has to go and execute on their own strategy. I mean, I think that because of our breadth of menu to where we are today and our distribution system, we look at opportunities and we see what’s going to be the payback and how quickly it’ll have an impact on the business. So, look, again, if it’s the right thing for them, then applaud Tempest doing that. But at the end of the day, we’re out there. We probably see most of the stuff that others see, and we make decisions that we think are going to be best for our shareholders long-term.

Andrew Cooper: Great. I’ll stop there. Thank you.

Operator: Thank you very much. And your last question is coming from Puneet Souda of Leerink Partners. Puneet, your line was live.

Chris Smith: Hey, Puneet. Thanks for being patient, man.

Puneet Souda: Yeah. No worries, Chris. Just given the time, I’ll combine my question. For the AUP increase, you continue to see benefit from on the NGS side for several quarters now, is it safe to assume the AUP that we’re seeing in the quarter here, at least as a baseline for 2025? And then on the clinical side, and on the commercial peer [ph] pressure questions that a competitor had recently. Just wondering, can you provide us how much of the mix is clinical — of the clinical revenues for you is commercial versus Medicare versus the traditional hospital contract that you had. Thank you.

Jeffrey Sherman: Yeah. So, on the mix side, we do put that in our Qs. So, in Q3, about 58% of the revenues coming from direct client bill, about 15% commercial and about 13% governmental. So still about two-thirds direct line bill. And I think that has been pretty consistent over time.

Chris Smith: So, I’d say our exposure on the commercial, when it’s 15% is lower than a lot of our competitors. You want to take us to other questions?

Puneet Souda: Yep. That’s helpful. And then on the NGS side, the AUP for 2025.

Jeffrey Sherman: Yeah. I think we expect the AUP to continue to grow over time, particularly as that NGF component of the business continues to grow. And so, I think it’s reasonable we’ll continue to see growth there over time. And we are still having success with overall pricing increases and with RCM initiatives. So, I think it’s reasonable to assume, we’ll continue to see that grow over time, but we’ll talk more about kind of pacing of that as we begin the next year.

Puneet Souda: Okay. All right. Okay. Thanks, guys.

Chris Smith: Thanks, Puneet.

Operator: Thank you very much. Well, that’s the end of our question-and-answer session. I’ll now hand back over to Chris for any closing comments.

End of Q&A:

Chris Smith: Yeah. Thanks, everybody. We really appreciate you taking the time. Really great questions. And look, it was nice to have the leadership team here to give you kind of more color and deeper insights into the answers. We’ll look forward to following up with you guys all soon and see you out in the market. Take care.

Operator: Thank you very much. This does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.