NeoGenomics (NEO) Q3 2026 earnings review
NeoGenomics raises its profit outlook, but unpaid customer bills rise
NeoGenomics, a cancer-testing laboratory group, grew revenue and profit by charging more per test while overall test volume barely budged. Third-quarter sales rose 11% to $209 million as next-generation genetic sequencing revenue climbed 29%, and chief executive Tony Zook raised the full-year outlook for a third time before handing the role to operating chief Warren Stone in January. By our math, the updated plan leaves fourth-quarter sales growing about 11%.
| Revenue | $209.3M +11.4% from a year ago |
|---|---|
| Average price per clinical test | $530 +11.3% from a year ago |
| EBITDA, excluding one-offs | $18.7M +53% from a year ago |
| Full-year revenue outlook | Raised $4M middle of the range: 11.1% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because advanced genetic testing accelerated against the year's toughest comparison and the company won a third Medicare coverage approval for its RaDaR ST blood test ahead of its year-end schedule. One caution: unpaid customer bills jumped $38 million from last quarter, which pushed operating cash flow to negative $9 million in the quarter by our math.
The question now is whether rising prices per test can keep carrying 11% revenue growth while clinical test volumes grow less than 2% and unpaid bills pile up. Either the new commercial insurer contracts and Medicare approvals turn into collected cash and faster volume in 2027, or price gains slow once existing customers finish upgrading to genetic panels. Fourth-quarter cash collections and test volume will tell.
🐂 Bull Case
Higher Test Prices Carry Revenue and Gross Margin
"As our business continues its shift to higher-value, high-margin testing modalities, we see further opportunity to invest into our commercial teams, community channel strength, and product pipeline," chief executive Tony Zook said. NeoGenomics is deliberately trading away low-price lab work to focus on next-generation sequencing (NGS), its advanced genetic tests for cancer, and backing that push with separate pathology and oncology sales teams.
- Average revenue per clinical test: $530, up 11.3% from a year ago and up from $515 last quarter
- NGS revenue: up 29% from a year ago, accelerating from 26% growth in the first two quarters
- NGS test volume: up 17% from a year ago, compared with 14% growth last quarter
- Gross margin, excluding one-offs: 48.6%, up 3.1 percentage points from a year ago
The numbers back Zook's strategy because NGS growth sped up to 29% even against the year's toughest comparison. That mix shift, alongside new commercial insurer contracts, lifted the average price per test by $54 from a year ago and pushed the GAAP gross margin up 3.4 percentage points to 46.2%.
What to watch: average revenue per clinical test in the fourth quarter. A reading above $530 after the company finishes lapping last year's exit from a low-price contract would show that genetic test upgrades and insurer pricing can carry growth on their own.
Lower Overhead Lifts the Full-Year Profit Plan
NeoGenomics relies on keeping general and administrative overhead—its executive, billing and back-office costs—growing much slower than sales so that higher test margins turn into profit. In the third quarter, the cancer diagnostics company cut those overhead expenses by 4% to $67.1 million while revenue rose 11.4%.
General and administrative spending dropped to 32.1% of revenue, down 5.2 percentage points from 37.2% a year ago, partly because legal fees for patent lawsuits fell by $3.6 million. That restraint paid for a 1.6-point rise in sales and marketing costs to 13.2% of revenue and still lifted EBITDA, excluding one-offs, by 53% to $18.7 million.
What to watch: general and administrative expense as a percentage of revenue in the fourth quarter. A ratio near or below 31% would show that back-office savings are structural rather than just the end of legal bills.
Medicare Covers a Third Cancer Test Use
RaDaR ST is NeoGenomics's blood test for molecular residual disease (MRD), which checks whether tiny traces of cancer remain in a patient after treatment. Because selling the test to doctors depends on insurers paying for it, management had aimed to win two new Medicare coverage approvals before the end of 2026.
The US lab group hit the first part of that goal in the third quarter by securing its third Medicare-covered use for RaDaR ST, covering "immunotherapy treatment response monitoring in late-stage solid tumors". It also signed contracts with several private insurers to "bring NeoGenomics in-network and broaden access to and reimbursement for new tests", which lays the groundwork for 2027 sales.
What to watch: Medicare's decision on the remaining pending RaDaR ST cancer submissions in the fourth quarter. Another approval by year-end would let the sales team promote the blood test across all targeted tumour types in 2027.
🐻 Bear Case
Unpaid Customer Bills Drained Cash in Q3
NeoGenomics highlighted its third-quarter profit growth and its work on scaling a new billing and revenue-cycle platform. However, a jump in unpaid customer bills kept those profits from turning into cash during the quarter.
- Accounts receivable: $213.4 million, up $38.0 million (21.7%) from last quarter and up 37.4% from a year ago
- Operating cash flow: negative $8.9 million in the quarter by our math, down from positive $20.0 million in Q2
- Free cash flow: negative $20.7 million in the quarter by our math, bringing the nine-month cash burn to $22.1 million
This matters because the company is charging 11.3% more per clinical test and signing new commercial insurer contracts, yet cash collections lagged far behind the $209.3 million of revenue it booked. When receivables grow three times faster than sales, either the new billing system is slowing down claims or insurers are taking longer to pay for pricier genetic tests.
What to watch: accounts receivable and operating cash flow in the fourth quarter. Another rise in unpaid bills relative to sales would show that higher test prices are harder to collect in cash.
Test Volume Barely Grows and Pharma Shrinks
Underneath the 11.4% revenue growth, NeoGenomics is processing almost the same number of patient samples as a year ago, and its business serving drugmakers continues to contract. Clinical test volume rose 1.8% from a year ago to 367,279 tests, matching the 1.9% pace in the second quarter.
Meanwhile, non-clinical revenue from pharmaceutical clients fell about 9% from a year ago to roughly $14.6 million by our math, as clinical revenue of $195 million made up 93% of the company total. That means the entire growth story still rests on charging more per clinical test while waiting for drugmaker orders to turn into revenue.
What to watch: clinical test volume growth in the fourth quarter, once the company moves past the peak comparison of an exited low-price contract. Volume growth staying below 3% would confirm that underlying patient sample demand is stall-speed.
GAAP Operating Losses and Convertible Dilution Persist
Even at record revenue and a record $530 average price per clinical test, NeoGenomics still loses money on a GAAP basis and carries a growing count of dilutive shares from its convertible debt. The third-quarter GAAP operating loss was $7.9 million, and the net loss was $7.5 million.
While that operating loss narrowed by $12.0 million from a year ago by our math after stripping out last year's $7.1 million impairment charge, the full-year outlook still implies an $8.6 million GAAP net loss in the fourth quarter. In addition, the share count used to calculate per-share profit excluding one-offs jumped 15.8% from a year ago to 155.2 million because 26.6 million shares from convertible notes and stock awards are now counted as dilutive.
What to watch: the diluted share count in the fourth-quarter reconciliation table. The full-year table assumes 129.5 million shares, so another quarterly count above 150 million would show that convertible note dilution is holding back per-share profit.
Risks this quarter didn't answer
Four standing concerns from prior quarters received no quantitative update in the third-quarter earnings release.
- RaDaR ST and liquid-biopsy revenue: the release did not disclose dollar sales or the share of orders arriving alongside other tests; the conference call or annual filing is the next check.
- Promotion spending on new blood tests: management previously held back marketing spend on RaDaR ST to protect margins while awaiting Medicare decisions; the call will show whether the new approval changes that.
- Lab information system (LIMS) savings: the release noted ongoing IT and NovaSeq X sequencing machine upgrades, but gave no dollar savings figure for merging eight legacy lab systems.
- Remaining 2028 convertible debt and regulatory tail: $69 million of 2028 notes remain after the June refinancing, and government pricing rules and appealed lawsuits await updates in the quarterly 10-Q filing.
👓 Other Themes
Operating Chief Warren Stone Will Become Chief Executive
NeoGenomics announced that president and chief operating officer Warren Stone will become chief executive and join the board on January 4, 2027. Current chief executive Tony Zook, who has led the company for seven quarters, will become executive chairman. The third quarter included $1.1 million of executive severance and retention costs tied to leadership transitions.
💲 Other KPIs
Sales and marketing spending rose 26.6% from a year ago, speeding up from 13.3% growth in the second quarter. As a share of revenue, it reached 13.2% against 11.6% a year ago as NeoGenomics hired sales representatives for its separate pathology and oncology commercial teams.
By our math, purchases of property and equipment rose to $11.8 million in the third quarter (5.6% of revenue), up from $8.2 million in the second quarter and $5.0 million in the first. That brings nine-month capital spending to $25.0 million as the lab group installs NovaSeq X gene sequencers and upgrades IT systems.
Cash and equivalents fell by $6.3 million from the second quarter and by $20.3 million since the start of the year, ending at $139.3 million. The company carries $374.7 million of convertible senior notes on its balance sheet after refinancing most of its 2028 notes into 2032 notes in June.
🔮 Guidance
Raised. The middle of the full-year range moved up $4 million to $808 million, or 11.1% growth for the year. By our math, that leaves $210.4 million of revenue for the fourth quarter, or 10.7% growth from a year ago against 11.4% in Q3. It is the third raise this year: +$3M in Q1, +$4M in Q2, and +$4M in Q3.
Raised. The full-year target moved up $3 million from the middle of the prior range to about $60 million, or 38% growth from 2025. By our math, that leaves $17.9 million for the fourth quarter—up 33.5% from a year ago, with an 8.5% margin compared with 8.9% in the third quarter.
Raised. Management narrowed the expected full-year GAAP net loss by $7 million at the middle of the range to $31 million, a 71% improvement from the $108 million loss in 2025. By our math, that leaves a fourth-quarter GAAP net loss of $8.6 million, slightly wider than the $7.5 million loss in Q3.
Raised. In the reconciliation tables, the company lifted its full-year per-share profit outlook by 3 cents at the middle of the range to $0.215. By our math, after earning $0.13 in the first nine months, that implies 8 to 9 cents in the fourth quarter, up from 7 cents in Q3.
❓ Key Questions
Why did unpaid customer bills jump $38 million in Q3?
Accounts receivable rose 21.7% from the second quarter to $213.4 million, driving operating cash flow to negative $8.9 million by our math. Investors need to know whether the new billing system caused temporary delays or if insurers are contesting higher test prices.
How much revenue did RaDaR ST bring in this quarter?
Management secured a third Medicare approval for the RaDaR ST blood test, but the release gave no dollar revenue or order attachment rates. Without dollar figures, readers cannot tell how fast Medicare approvals turn into sales.
Why does the full-year outlook use 129.5 million diluted shares?
The third-quarter profit calculation excluding one-offs added 26.6 million dilutive shares from convertible notes and options to reach 155.2 million, yet the full-year outlook table assumes 129.5 million shares with zero dilution.
When will pharmaceutical orders stop shrinking non-clinical sales?
Management called drugmaker bookings a record last quarter, but non-clinical revenue still fell about 9% from a year ago in the third quarter by our math. The timeline for returning this division to growth in 2027 remains open.