EX-99.1 2 a99109302018earningsre.htm
Exhibit 99.1
NeoGenomics Reports 17% Revenue Growth to Record $69 Million
Ft. Myers, Florida - October 30, 2018 - NeoGenomics, Inc. (NASDAQ: NEO), a leading provider of cancer-foc used genetic testing services, today reported its results for the third quarter of 2018.
Third Quart er 2018 Highlights:
• 17% increase in consolidated revenue
• 14% increase in clinical genetic testing volume(1)
• 21% increase in Pharma Services revenue; 7 5% increase in Pharma Services backlog
• Completed $135 mi llion, net equi ty offering
• Annou nced acquis i tion of Genoptix in October for $125 mill ion in cas h a nd 1 million shares of NeoGenomics common stock
Consolidated R evenue s f o r the third quarter of 2018 were $69.1 million, an increase of 17% over the same period in 2017. Clinical genetic test volume(1) increased by 14% year over year. Average revenue per clinical genetic test (“Revenue per Test”) in creased by 3% to $320.
Consolidated gross profit improved by $7.4 million, or 30%, to $32.3 million and consolidated gross margin improved by approximately 468 basis points year-over-year to 47%. Gross margin improvement was primarily driven by productivity gains, cost efficiencies, and the impact of Hu rricanes in the 2017 resu lts. Average cost-of-goods-sold per clinical genetic test ("Cost per Test") decreased by 6%.
Consolidated operating expenses increased by $1.4 million, or 5% from the prior year, primarily due to increases in payroll and payroll related costs as a result of an increase d number of employees as well as increases in professional fees.
Net income in Quarter 3 was $2.0 million compared to net loss of $4.3 million in the prior year’s third quarter.
Adjusted EBITDA(2) was $11.3 million in Quarter 3, a 53% improvement from the prior year. Adjusted Net Income(2) was $4.6 million compared to Adjusted Net L oss of $0.6 million in the prior year.
Cash collections remained strong and the Company successfully completed a $135 million e quity offering d uring the quarter. Days Sales Outstanding (“DSO”) increased by 2 days from the second quarter of 201 8 to 84 days.

Douglas M. VanOort, the Company’s Chairman and CEO, commented, “Third quarter results were outstanding. Clinical and Pharma Services Division s each report ed record revenue. Test volume growth in our Clinical Division remained strong driven by gains in market share, and our reimbursement initiatives began to have some impact. Pharma Services Div ision growth reflects our ability secure larger contracts and more later-stage clinical trials.
We were also pleased to achieve record levels of profitability. Productivity gains and q uality and process improvement initiatives helped drive down the average cost-per-test, and margins improved dramatically. Adjusted EBITDA improved despite our investments in a variety of future growth initiatives.
Looking forward, we are excited about a number of significant new customer wins in both divisions, and about several new strategic opportunities. We are also excited about our recently announced acquisition of Genoptix, and are beginning to plan for the integration activities. Our teams are energized about our increasing ability to provide even better service to all segments of the oncology market, including oncologists, pathologists, hospitals, and the Pharma industry.”
2018 Financial Outlook:
Due to the improved operatin g per formance and an es timated $2.6 million of non-recurring acquisition related t r ansaction exp enses, N eoGenomics is updating its 2018 revenue and earnings guidance (all figures in millions, except per share amounts).

|  | Previous Guidance |  |  |  | Updated Guidance
Consolidated Revenue |  | $260 - $272 |  |  |  | $270 - $272
Net Income Available to Common Stockholders |  | $1.2 - $5.2 |  |  |  | $4.0 - $5.0
Adjusted EBITDA(2) |  | $39 - $43 |  |  |  | $40 - $42
GAAP Diluted EPS |  | $0.01 - $0.06 |  |  |  | $0.04 - $0.05
A djusted Diluted EP S(2) |  | $0.12 - $0.17 |  |  |  | $0.17 - $0.19

Please also refer to the tables reconciling forecasted Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA to their closest GAAP equivalents in the section of this report entitled “Reconciliation of Non-GAAP Financial Guidance to Corresponding GAAP Measures.”
The Company reserves the right to adjust this guidance at any time based on the ongoing execution of its business plan. Current and prospective investors are encouraged to perform their own due diligence before buying or selling any of the Company’s securities, and are reminded that the foregoing estimates should not be construed as a guarantee of future performance.
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(1) Clinical genetic tests exclude tests performed for Pharma Services customers and tests performed by P athLogic.
(2) NeoGenomics has provided adjusted financial information that has not been prepared in accordance with GAAP, including Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted EPS. Each of these measures is defined in the section of this report entitled “Use of Non-GAAP Financial Measures,” and the basis for using these measures is explained in the section entitled “Basis for Non-GAAP Adjustments.” See also the tables reconciling such measures to their closest GAAP equivalent.
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Conference Call
The Company has scheduled a web-cast and conference call to discuss their third quarter results on Tuesday, October 30, 2018 at 8:30 AM EDT. Interested investors should dial (877) 407-8035 (domestic) and (201) 689-8035 (international) at least five minutes prior to the call. A replay of the conference call will be available until 8:30 AM on November 6, 2018, and can be accessed by dialing (877) 481-4010 (domestic) and (919) 882-2331 (international). The playback conference ID Number is 3 7546. The web-cast may be accessed under the Investor Relations section of our website at www.neogenomics.com or http://www.investorcalendar.com/event/3 7546. An archive of the web-cast will be available until 08:30 AM on January 30, 201 9.
About NeoGenomics, Inc.
NeoGenomics, Inc. specializes in cancer genetics testing and information services. The Company provides one of the most comprehensive oncology-focused testing menus in the world for physicians to help them diagnose and treat cancer. The Company’s Pharma Services division serves pharmaceutical clients in clinical trials and drug development.
Headquartered in Fort Myers, FL, NeoGenomics operates CAP and CLIA certified laboratories in Aliso Viejo and Fresno, California; Tampa and Fort Myers, Florida; Houston, Texas; Nashville, Tennessee and Rolle, Switzerland. NeoGenomics serves the needs of pathologists, oncologists, academic centers, hospital systems, pharmaceutical firms, integrated service delivery networks, and managed care organizations throughout the United States, and p harmaceutical firms in Europe. For additional information about NeoGenomics, visit http://neogenomics.com/.
Forward Looking Statements
Certain information contained in this press release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995, including the information set forth in the “Full-Year 2018 Financial Outlook”. These forward looking statements involve a number of risks and uncertainties that could cause actual future results to differ materially from those anticipated in the forward-looking statements as the result of the Company’s ability to continue gaining new customers, offer new types of tes ts, integrate its acquisition of the Genoptix business and otherwise implement its business plan, as well as additional factors discussed under the heading “Risk Factors” and elsewhere in the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2018. As a result, this press release should be read in conjunction with the Company's periodic filings with the SEC. In addition, it is the Company’s practice to make information about the Company available by posting copies of its Company Overview Presentation from time to time on the Investor Relations section of its website at http://ir.neogenomics.com/.
Forward-looking statements represent the Company’s estimates only as of the date such statements are made (unless another date is indicated) and should not be relied upon as representing the Company’s estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if its estimates change.
For further information, please contact:
NeoGenomics, Inc.
William Bonello
Chief Strategy and Corporate Development Officer
Director, Investor Relations
(239)690-4238 (w) (239)284-4314 (m)
bill.bonello@neogenomics.com
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NeoGenomics, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

ASSETS |  | September 30, 2018 |  | December 31, 2017 (Restated)
Cash and cash equivalents |  | $ | 118,440 |  | $ | 12,821
Accounts receivable |  | 62,694 |  | 60,427
Inventory |  | 6,829 |  | 7,474
Other current assets |  | 6,307 |  | 5,153
Total current assets |  | 194,270 |  | 85,875
Property and equipment (net of accumulated depreciation of $49,492 and $40,530, respectively) |  | 41,004 |  | 36,504
Intangible assets, net |  | 69,909 |  | 74,165
Goodwill |  | 147,019 |  | 147,019
Other assets |  | 2,937 |  | 891
TOTAL ASSETS |  | $ | 455,139 |  | $ | 344,454
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY |  |  |  |
Accounts payable and other current liabilities |  | $ | 33,163 |  | $ | 27,482
Short-term portion of capital leases and senior debt |  | 13,892 |  | 8,989
Total current liabilities |  | 47,055 |  | 36,471
Long-term portion of capital leases and senior debt |  | 96,427 |  | 96,435
Long-term pharma contract liability |  | 1,199 |  | 283
Deferred income tax liability, net |  | 6,899 |  | 6,688
Total long-term liabilities |  | 104,525 |  | 103,406
TOTAL LIABILITIES |  | 151,580 |  | 139,877
Series A Redeemable Convertible Preferred Stock |  | — |  | 32,615
Stockholders' Equity |  | 303,559 |  | 171,962
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY |  | $ | 455,139 |  | $ | 344,454

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NeoGenomics, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)

|  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
|  | 2018 |  | 2017 (Restated) |  | 2018 |  | 2017 (Restated)
Net Revenue: |  |  |  |  |  |  |  |
Clinical testing |  | $ | 59,449 |  | $ | 51,187 |  | $ | 175,960 |  | $ | 159,642
Pharma Services |  | 9,647 |  | 7,950 |  | 24,306 |  | 19,188
Total Revenue |  | 69,096 |  | 59,137 |  | 200,266 |  | 178,830
COST OF REVENUE |  | 36,775 |  | 34,242 |  | 110,111 |  | 103,634
GROSS PROFIT |  | 32,321 |  | 24,895 |  | 90,155 |  | 75,196
Operating expenses: |  |  |  |  |  |  |  |
General and administrative |  | 21,055 |  | 18,268 |  | 59,106 |  | 53,717
Research and development |  | 446 |  | 1,270 |  | 2,475 |  | 3,080
Sales and marketing |  | 6,900 |  | 6,363 |  | 21,355 |  | 18,142
Loss on sale/impairment |  | — |  | 1,058 |  | — |  | 1,058
Total operating expenses |  | 28,401 |  | 26,959 |  | 82,936 |  | 75,997
Income (Loss) From Operations |  | 3,920 |  | (2,064) |  | 7,219 |  | (801)
Interest expense, net |  | 1,873 |  | 1,398 |  | 4,766 |  | 4,173
Other (income) expense |  | (30) |  | — |  | 31 |  | —
Income (loss) before taxes |  | 2,077 |  | (3,462) |  | 2,422 |  | (4,974)
Income tax expense (benefit) |  | 54 |  | 802 |  | 135 |  | (30)
Net Income (Loss) |  | 2,023 |  | (4,264) |  | 2,287 |  | (4,944)
Deemed dividends on preferred stock |  | — |  | 912 |  | 1,950 |  | 2,734
Amortization of preferred stock beneficial conversion feature |  | — |  | 1,739 |  | 3,677 |  | 5,122
Gain on redemption of preferred stock |  | — |  | — |  | (9,075) |  | —
Net Income (Loss) Attributable to Common Stockholders |  | $ | 2,023 |  | $ | (6,915) |  | $ | 5,735 |  | $ | (12,800)
Income (Loss) per Common Share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.02 |  | $ | (0.09) |  | $ | 0.07 |  | $ | (0.16)
Diluted |  | $ | 0.02 |  | $ | (0.09) |  | $ | 0.06 |  | $ | (0.16)
Weighted Average Shares Used in Computation of Earnings per Common Share: |  |  |  |  |  |  |  |
Basic |  | 87,253 |  | 79,617 |  | 87,381 |  | 79,208
Diluted |  | 90,899 |  | 79,617 |  | 89,925 |  | 79,208

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NeoGenomics, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

|  | Nine Months Ended September 30, |  |
CASH FLOWS FROM OPERATING ACTIVITIES |  | 2018 |  | 2017 (Restated)
Net income (loss) |  | $ | 2,287 |  | $ | (4,944)
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |
Depreciation |  | 11,477 |  | 11,739
Amortization of intangibles |  | 4,255 |  | 5,201
Amortization of debt issue costs |  | 392 |  | 330
Loss on disposal of assets |  | 278 |  | —
Loss on sale of Path Logic |  | — |  | 1,058
Stock based compensation |  | 5,148 |  | 5,812
Changes in assets and liabilities, net |  | 5,496 |  | (6,918)
NET CASH PROVIDED BY OPERATING ACTIVITIES |  | 29,333 |  | 12,278
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |
Purchases of property and equipment |  | (11,091) |  | (10,167)
NET CASH USED IN INVESTING ACTIVITIES |  | (11,091) |  | (10,167)
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |
(Repayment) advances on revolving credit facility, net |  | (20,000) |  | 2,496
Redemption of preferred stock |  | (50,096) |  | —
Repayment of capital lease obligations, loans |  | (4,774) |  | (4,126)
Repayment of term loan and revolving credit facility |  | (8,587) |  | (2,816)
Proceeds from term loan |  | 30,000 |  | —
Payments of debt issue costs |  | (576) |  | —
Issuance of common stock |  | 141,595 |  | 2,218
Payments of equity issue costs |  | (150) |  | (197)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES |  | 87,412 |  | (2,425)
Effects of foreign exchange rate changes on cash and cash equivalents |  | (35) |  | —
NET CHANGE IN CASH AND CASH EQUIVALENTS |  | 105,619 |  | (314)
CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD |  | 12,821 |  | 12,525
CASH AND CASH EQUIVALENTS, END OF PERIOD |  | $ | 118,440 |  | $ | 12,211
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |  |  |  |
Interest paid |  | $ | 4,722 |  | $ | 3,879
Income taxes paid, net of refunds |  | (76) |  | 272
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING INFORMATION: |  |  |  |
Equipment acquired under capital lease/loan obligations |  | $ | 7,569 |  | $ | 3,240

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Use of Non-GAAP Financial Measures
The Company's financial results and financial guidance are provided in accordance with accounting principles generally accepted in the United States of America (GAAP) and using certain non-GAAP financial measures. Management believes that presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors and facilitates the analysis of the Company's core operating results and comparison of core operating results across reporting periods. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the Company's business. Management believes that these non-GAAP financial measures enable investors to evaluate our operating results and future prospects in the same manner as management. The non-GAAP financial measures do not replace the presentation of GAAP financial results and should only be used as a supplement to, and not as a substitute for, the Company's financial results presented in accordance with GAAP. There are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation, and do not therefore present the full measure of the Company's recorded costs against its net revenue. In addition, the Company's definition of the non-GAAP financial measures below may differ from non-GAAP measures used by other companies.
Definitions of Non-GAAP Measures
Non-GAAP Adjusted EBITDA
"Adjusted EBITDA" is defined by NeoGenomics as net income from continuing operations before: (i) interest expense, (ii) tax expense, (iii) depreciation and amortization expense, non-cash stock-based compensation expense, and if applicable in a reporting period, acquisition-related transaction expenses, (vi) non-cash impairments of intangible assets, (vii) debt financing costs, (viii) and other significant non-recurring or non-operating (income) or expenses.
Non-GAAP Adjusted Net Income
"Adjusted Net Income" is defined by NeoGenomics as net income available to common shareholders from continuing operations plus: (i) non-cash amortization of customer lists and other intangible assets, (ii) non-cash stock-based compensation expense, (iii) non-cash deemed dividends on preferred stock, (iv) non-cash amortization of preferred stock beneficial conversion feature, and if applicable in a reporting period, (v) acquisition related transaction expenses, (vi) non-cash impairments of intangible assets, (vii) debt financing costs, (viii) and other significant non-recurring or non-operating (income) or expenses.
Non-GAAP Adjusted Diluted EPS
"Adjusted Diluted EPS" is defined by NeoGenomics as Adjusted Net Income divided by Adjusted Diluted Shares outstanding. Adjusted Diluted Shares outstanding is the sum of Diluted shares outstanding and the weighted average number of common shares that would be outstanding if the preferred stock were converted into common stock on the original issue date based on the number of days such common shares would have been outstanding in the reporting period. In addition, if GAAP Net Income is negative and Adjusted Net Income is positive, Adjusted Diluted Shares will also include any options or warrants that would be outstanding as dilutive instruments using the treasury stock method.
Basis for Non-GAAP Adjustments
NeoGenomics' basis for excluding certain expenses (income) from GAAP financial measures, are outlined below:
Amortization of intangible assets - The intangible assets that give rise to this amortization expense relate to acquisitions, and the amounts allocated to such intangible assets and the terms of amortization vary by acquisition and type of asset. NeoGenomics excludes these items to provide a consistent basis for comparing operating results across reporting periods, pre- and post-acquisition.
Deemed dividends on preferred stock - GAAP accounting for the unique structure of the Series A Redeemable Preferred Stock require s the Company to assume that such preferred stock w ould be outstanding for its entire ten-year term. In addition, GAAP requires that the escalating preferred dividend rate over time be accelerated for accounting purposes and amortized on a straight-line basis over the ten-year life of the instrument, irrespective of the minimal contractual requirements for "paid in kind" stock dividends in the early years. Since such implied dividends were not paid in cash, and since the Company believe d that such preferred stock would have bee n redeemed within the first three years it was outstanding, before any significant dividends accrued under the contractual terms, the Company believe d these non-cash expenses were not meaningful in evaluating the operating
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performance of the Company and it would have been misleading to not adjust for such expenses across reporting periods.
Amortization of preferred stock beneficial conversion feature - This non-cash expense is also a direct result of the complex GAAP accounting requirements for our Series A Redeemable Preferred Stock. The Company believes this expense is not meaningful in evaluating the operating performance of the Company, distorts comparisons across reporting periods, and that it would be misleading to not adjust for such expenses across reporting periods.
Loss on sale of business – The impact of disposals of assets or businesses have been excluded as these losses represent infrequent transactions that impact the comparability between operating periods. We believe the adjustment of these losses supplements the GAAP information by providing a measure that may be used to assess the sustainability of our operating performance.
Non-cash, stock-based compensation expenses - Because many of the company's full-time physicians reside in California, state regulations against the corporate practice of medicine require us to retain their professional service corporations rather than hire them as employees. Prior to ASU 2018-07, which we adopted in the second quarter of 2018, GAAP provided that variable stock- based compensation treatment be applied for non-employee service providers. This variable accounting treatment can cause significant fluctuations in quarterly expense based on changes in the Company's stock price from one quarter to the next and result in large positive or negative impacts to total operating expenses. Without adjusting for these non-cash expenses, the Company believe d it would have been been difficult to compare financial results from core operations across reporting periods on a consistent basis.
Moving expenses - These expenses include costs associated with the move of our Houston, Texas facility in 2018 and the move of our Irvine, California facility in 2017 as well as restoring these facilities back to their original condition at the end of the lease terms. We are adjusting for these costs in Adjusted EBITDA as the moves were related to the Clarient acquisition and will not be annually recurring. Without adjusting for these expenses, the Company believes it would be difficult to compare financial results from operations across reporting periods on a consistent basis.
Reconciliation of GAAP Net Income to Non-GAAP EBITDA and Adjusted EBITDA
(Unaudited, in thousands)

| Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
| 2018 |  | 2017 (Restated) |  | 2018 |  | 2017 (Restated)
Net Income (Loss) (GAAP) | $ | 2,023 |  | $ | (4,264) |  | $ | 2,287 |  | $ | (4,944)
Adjustments to Net Income (Loss): |  |  |  |  |  |  |
Interest expense, net | 1,873 |  | 1,398 |  | 4,766 |  | 4,173
Income tax expense (benefit) | 54 |  | 802 |  | 135 |  | (30)
Amortization of intangibles | 1,421 |  | 1,751 |  | 4,255 |  | 5,201
Depreciation | 4,034 |  | 3,833 |  | 11,477 |  | 11,739
EBITDA | 9,405 |  | 3,520 |  | 22,920 |  | 16,139
Further Adjustments to EBITDA: |  |  |  |  |  |  |
Facility moving expenses/other | 670 |  | 5 |  | 2,486 |  | 620
Loss on sale of business | — |  | 1,058 |  | — |  | 1,058
Non-cash, stock-based compensation | 1,191 |  | 2,760 |  | 5,148 |  | 5,812
Adjusted EBITDA (non-GAAP) | $ | 11,266 |  | $ | 7,343 |  | $ | 30,554 |  | $ | 23,629

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Reconciliation of GAAP Net Income Available to Common Stockholders to Non- GAAP Adjusted Net Income and GAAP Earnings per Share to Non-GAAP Adjusted Earnings per Share
(Unaudited, in thousands except per share amounts)

| Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
| 2018 |  | 2017 (Restated) |  | 2018 |  | 2017 (Restated)
Net Income (Loss) attributable to common stockholders (GAAP) | $ | 2,023 |  | $ | (6,915) |  | $ | 5,735 |  | $ | (12,800)
Adjustments to Net Income (loss) net of tax: |  |  |  |  |  |  |
Amortization of intangibles | 1,123 |  | 1,156 |  | 3,362 |  | 3,433
Deemed dividends on preferred stock | — |  | 912 |  | 10,198 |  | 2,734
Amortization of preferred stock beneficial conversion feature | — |  | 1,739 |  | (13,646) |  | 5,122
Loss on sale of business | — |  | 698 |  | — |  | 698
Non-cash stock-based compensation expenses | 941 |  | 1,822 |  | 4,068 |  | 3,837
Facility moving expenses/other | 530 |  | 3 |  | 1,964 |  | 409
Adjusted Net Income (non-GAAP) | $ | 4,617 |  | $ | (585) |  | $ | 11,681 |  | $ | 3,433
Net income (loss) per common share (GAAP) |  |  |  |  |  |  |
Diluted EPS | $ | 0.02 |  | $ | (0.09) |  | $ | 0.06 |  | $ | (0.16)
Adjustments to diluted income (loss) per share: |  |  |  |  |  |  |
Amortization of intangibles | 0.01 |  | 0.01 |  | 0.04 |  | 0.04
Deemed dividends on preferred stock | — |  | 0.01 |  | 0.11 |  | 0.03
Amortization of preferred stock beneficial conversion feature | — |  | 0.02 |  | (0.15) |  | 0.06
Loss on sale of business | — |  | 0.01 |  | — |  | 0.01
Non-cash stock based compensation expenses | 0.01 |  | 0.02 |  | 0.05 |  | 0.05
Facility moving expenses/other | 0.01 |  | — |  | 0.02 |  | 0.01
Rounding and impact of including preferred shares and stock options in Adj. Diluted Shares in net loss periods (3) | — |  | 0.01 |  | — |  | —
Adjusted Diluted EPS (non-GAAP) | $ | 0.05 |  | $ | (0.01) |  | $ | 0.13 |  | $ | 0.04
Weighted average shares used in computation of adjusted diluted earnings per share: |  |  |  |  |  |  |
Diluted Common Shares (GAAP) | 90,899 |  | 79,617 |  | 89,925 |  | 79,208
Options and restricted stock not included in GAAP Diluted Shares (using treasury stock method) | 28 |  | 2,267 |  | 69 |  | 1,530
Weighted Avg. Preferred Shares (as converted) | — |  | 6,600 |  | — |  | 6,600
Adjusted Diluted Shares outstanding (non-GAAP) | 90,927 |  | 88,484 |  | 89,994 |  | 87,338

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(3) This adjustment is for rounding and in those periods in which there is a net loss attributable to common shareholders, will also compensate for the effects of including the Series A Preferred Shares on an as-converted basis and the treasury stock impact of outstanding stock options in the Adjusted Diluted Shares outstanding, both of which are not included in GAAP Diluted Shares outstanding.
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Reconciliation of Non-GAAP Financial Guidance to Corresponding GAAP Measures
GAAP n et income available to common stockholders in 2018 will be impacted by certain charges, including: (i) expenses related to variable stock-based compensation, (ii) approximately $4.5 million of expense related to the amortization of customer lists and other intangibles, (iii) approximately $3.5 million net gain related to preferred stock, comprised of a $9.1 million gain on redemption of preferred stock, offset by $5.6 million in deemed preferred stock dividends and amortization of the beneficial conversion feature, (iv) approximately $2.0 million in costs related to the Houston expansion, and (v) approximately $2.6 million in acquisition related transaction expenses and non-recurring charges. These c harges have been included in GAAP net income available to common shareholders and GAAP net income per share; however, they have been removed from Adjusted Net Income and Adjusted Diluted Net Income per Share.
The following table reconciles our 2018 outlook for Net Income and EPS to the corresponding non-GAAP measures of Adjusted Net Income, Adjusted EBITDA and Adjusted Diluted EPS:

| For the Year Ended December 31, 2018 |  |
| Low Range |  | High Range
Net income attributable to common stockholders (GAAP) | $ | 4,000 |  | $ | 5,000
Amortization of intangibles | 4,500 |  | 4,500
Non-cash, stock-based compensation (4) | 6,000 |  | 7,000
Acquisition related transaction expenses | 2,600 |  | 2,600
Facility moving expenses | 2,000 |  | 2,000
Preferred stock dividends and amortization of BCF | (3,500) |  | (3,500)
Adjusted Net Income (non-GAAP) | $ | 15,600 |  | $ | 17,600
Interest and taxes | 7,900 |  | 7,900
Depreciation | 16,500 |  | 16,500
Adjusted EBITDA (non-GAAP) | $ | 40,000 |  | $ | 42,000
Net income per common share (GAAP) |  |  |
Diluted EPS | $ | 0.04 |  | $ | 0.05
Adjustments to diluted loss per share: |  |  |
Amortization of intangibles | 0.05 |  | 0.05
Non-cash, stock based compensation expenses | 0.07 |  | 0.08
Acquisition related transaction expenses | 0.03 |  | 0.03
Facility moving expenses | 0.02 |  | 0.02
Preferred stock dividends and amortization of BCF | (0.04) |  | (0.04)
Adjusted Diluted EPS (non-GAAP) | $ | 0.17 |  | $ | 0.19
Weighted average assumed shares outstanding in 2018: |  |  |
Diluted Common Shares (GAAP) | 85,600 |  | 85,600
Options and restricted stock not included in diluted shares | 2,600 |  | 2,600
Series A Preferred Stock outstanding | 3,300 |  | 3,300
Adjusted diluted shares outstanding (non-GAAP) | 91,500 |  | 91,500

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(4) Forecasts of non-cash, stock-based compensation expense assume consistency in the Company's stock price in 2018 and no further stock-based awards requiring variable accounting in accordance with ASU 2018-07.
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Supplemental Information
Pharma Revenue, Cost of Revenue and Gross Margin

| Three Months Ended September 30, |  |  |  |  |  | Nine Months Ended September 30, |  |  |  |
Pharma Operations: | 2018 |  | 2017 (Restated) |  | % Change |  | 2018 |  | 2017 (Restated) |  | % Change
Pharma Revenue | $ | 9,647 |  | $ | 7,950 |  | 21.4 | % |  | $ | 24,306 |  | $ | 19,188 |  | 26.7 | %
Cost of Revenue | $ | 5,266 |  | $ | 4,092 |  | 28.7 | % |  | $ | 15,525 |  | $ | 11,780 |  | 31.8 | %
Gross Margin | $ | 4,381 |  | $ | 3,858 |  | 13.6 | % |  | $ | 8,781 |  | $ | 7,408 |  | 18.5 | %

Supplemental Information
Clinical Genetic(5) Requisitions Received, Tests Performed, Revenue and Cost of Revenue (Unaudited, in thousands, except test and requisition data)

| Three Months Ended September 30, |  |  |  |  |  | Nine Months Ended September 30, |  |  |  |
Clinical Genetic Operations: | 2018 |  | 2017 (Restated) |  | % Change |  | 2018 |  | 2017 (Restated) |  | % Change
Requisitions received (cases) | 108,467 |  | 98,031 |  | 10.6 | % |  | 323,682 |  | 291,806 |  | 10.9 | %
Number of tests performed | 185,738 |  | 163,289 |  | 13.7 | % |  | 551,721 |  | 482,476 |  | 14.4 | %
Average number of tests/requisition | 1.71 |  | 1.67 |  | 2.8 | % |  | 1.70 |  | 1.65 |  | 3.1 | %
Total clinical genetic testing revenue | $ | 59,449 |  | $ | 50,740 |  | 17.2 | % |  | $ | 175,960 |  | $ | 156,127 |  | 12.7 | %
Average revenue/requisition | $ | 548 |  | $ | 518 |  | 5.9 | % |  | $ | 544 |  | $ | 535 |  | 1.6 | %
Average revenue/test | $ | 320 |  | $ | 311 |  | 3.0 | % |  | $ | 319 |  | $ | 324 |  | (1.4) | %
Cost of revenue | $ | 31,509 |  | $ | 29,652 |  | 6.3 | % |  | $ | 94,586 |  | $ | 87,889 |  | 7.6 | %
Average cost/requisition | $ | 290 |  | $ | 302 |  | (4.0) | % |  | $ | 292 |  | $ | 301 |  | (3.0) | %
Average cost/test | $ | 170 |  | $ | 181 |  | (6.3) | % |  | $ | 171 |  | $ | 182 |  | (5.9) | %

_____________________
(5) Clinical genetic tests exclude tests performed for Pharma Services customers and tests performed by PathLogic.
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Supplemental Informa t i on
Quar terly Impact of ASU 606 Adoption
(in thousands)

| As Previously Reported |  |  |  |  |  |  |  |
| Q1 2017 |  | Q2 2017 |  | Q3 2017 |  | Q4 2017 |  | Total 2017
Net Revenue |  |  |  |  |  |  |  |  |
Clinical Testing | $ | 56,690 |  | $ | 59,791 |  | $ | 56,186 |  | $ | 59,079 |  | $ | 231,748
Pharma Services | 4,986 |  | 6,299 |  | 6,866 |  | 8,713 |  | 26,863
Total Revenue | 61,676 |  | 66,090 |  | 63,052 |  | 67,792 |  | 258,611
Gross Profit | 27,196 |  | 31,178 |  | 28,810 |  | 33,132 |  | 120,316
Total operating expenses | 27,311 |  | 29,864 |  | 32,172 |  | 28,645 |  | 117,992
Income (Loss) from Operations | (115) |  | 1,314 |  | (3,362) |  | 4,487 |  | 2,324
Interest expense | $ | 1,364 |  | $ | 1,411 |  | $ | 1,398 |  | $ | 1,368 |  | $ | 5,540
Other expense | — |  | — |  | — |  | 265 |  | 265
Income tax (benefit) expense | (825) |  | (54) |  | 340 |  | (2,096) |  | (2,635)
Net Income (Loss) | $ | (654) |  | $ | (43) |  | $ | (5,100) |  | $ | 4,950 |  | $ | (846)
| Adjustments due to adoption of accounting standard |  |  |  |  |  |  |  |
| Q1 2017 |  | Q2 2017 |  | Q3 2017 |  | Q4 2017 |  | Total 2017
Net Revenue |  |  |  |  |  |  |  |  |
Clinical Testing | $ | (3,783) |  | $ | (4,244) |  | $ | (4,999) |  | $ | (5,623) |  | $ | (18,651)
Pharma Services | (465) |  | 418 |  | 1,084 |  | (747) |  | 291
Total Revenue | (4,248) |  | (3,826) |  | (3,915) |  | (6,370) |  | (18,360)
Gross Profit (Loss) | (4,248) |  | (3,826) |  | (3,915) |  | (6,370) |  | (18,359)
Total operating expenses | (3,783) |  | (4,353) |  | (5,213) |  | (5,588) |  | (18,937)
Income (Loss) from Operations | (465) |  | 527 |  | 1,298 |  | (782) |  | 578
Interest expense | — |  | — |  | — |  | — |  | —
Other expense | — |  | — |  | — |  | 253 |  | 253
Income tax (benefit) expense | 46 |  | 1 |  | 462 |  | (128) |  | 381
Net Income (Loss) | $ | (511) |  | $ | 526 |  | $ | 836 |  | $ | (401) |  | $ | 450
| As Restated |  |  |  |  |  |  |  |
| Q1 2017 |  | Q2 2017 |  | Q3 2017 |  | Q4 2017 |  | Total 2017
Net Revenue |  |  |  |  |  |  |  |  |
Clinical Testing | $ | 52,907 |  | $ | 55,547 |  | $ | 51,187 |  | $ | 53,456 |  | $ | 213,097
Pharma Services | 4,521 |  | 6,717 |  | 7,950 |  | 7,966 |  | 27,154
Total Revenue | 57,428 |  | 62,264 |  | 59,137 |  | 61,422 |  | 240,251
Gross Profit | 22,948 |  | 27,352 |  | 24,895 |  | 26,762 |  | 101,957
Total operating expenses | 23,528 |  | 25,511 |  | 26,959 |  | 23,057 |  | 99,055
Income (Loss) from Operations | (580) |  | 1,841 |  | (2,064) |  | 3,705 |  | 2,902
Interest expense | 1,364 |  | 1,411 |  | 1,398 |  | 1,368 |  | 5,540
Other expense | — |  | — |  | — |  | (12) |  | (12)
Income tax (benefit) expense | (779) |  | (53) |  | 802 |  | (2,224) |  | (2,254)
Net Income (Loss) | $ | (1,165) |  | $ | 483 |  | $ | (4,264) |  | $ | 4,549 |  | $ | (396)

12