Interpace Biosciences (IDXG) 21 Oct 202020 Q2 Earnings call transcript

Greetings, and welcome to the Interpace Biosciences Second Quarter Financial and Business Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded and will be available on the Interpace website at www.interpace.com.

During this call, the company will make forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. This includes remarks about the company's financial projections, expectations, plans, beliefs and prospects. could on conference analysis to described call risks uncertainties based date of numerous in are to and the results of and that the statements forward-looking judgment from as and the important differ statements. These materially actual those cause are subject Risk including made public the as the the our risks statement safe Form the XX-K section These statements in in SEC uncertainties periodic in well call conference today's with associated this discussion Factors and April release Form the our filed section on on SEC as harbor XX, of XXXX. Biosciences' October Interpace XX-Q with with forward-looking are filings, the filed forward-looking earnings the XXXX, in XX, described in and statements investors carefully consider these potential or and should risks. read Investors update assumes or events to outcomes reflect Biosciences obligation Interpace no forward-looking do statements to not future these and intend so. does actual to

supplement, we assessing earnings meaningful GAAP in principle and non-GAAP the performance. information to accounting provides be the supplemental accepted non-GAAP to reconciling table company's A included that company's non-GAAP information information believe release, in helpful its provided the addition which We available may is on have is In this generally numbers, the information GAAP the website. or information.

call like to I'd of turn the Jack conference now Stover. Interpace over the to President Biosciences, and CEO

general you and today quarter and and for us With business a I joining thank second on Melissa, all Knechtel, Financial focus our financial Fred and is call Thank our update. progress Officer. on will you, the provide this morning. year-to-date Chief me Fred

call for open will questions. we the that, Following

and Genetics, this dealing acquisition the have I in confident with year Cancer biopharma and successfully our stronger have We emerged some faced future pharma be challenges but the of the and basis that second am not of business services them. revenues from called of quarter the significant record of top now line the the for quarter growth. our only year-to-date, will strength during supported services, pharma our quarter bookings

of am cost continue our pleased volume I pandemic and Consolidation from to business. the increases. as will diagnostic Additionally, benefit us our of with facilities the rebound controls

Importantly, guidelines follow the to employee coronavirus. the minimize employees protect risk measures CDC exposure to relevant and our to continue continue to to we of health take intended the of

Meeting. While was XXXX, business impact from we Diagnostic also of are recovered for we still the as accepted of the peer-reviewed of Society publication study journal, the overall, recovering X, the our this seminal publication that levels. In released pre-COVID a and was pandemic, American respected Cytopathology highly validation ThyraMIR July On Annual announced accepted Cytopathology, and presentation August ThyGeNEXT for in our podium to has online.

future insurers in services. new is Additionally, clinical rates our agreements our thyroid into continued entering reimbursement focused to and progress our improve with principally on assays helping to related our contracts

continuing now quarter for as million second quarter while the proactively rest Our offerings. net compared $X.X service for XXXX and issuing We conditions and our XX-Q would second focus be business now be quarter ourselves further of delay and year. I will in quarter growth to second this our $X.X release. will $X.X our to of filing positioning expansion integrating of processes for range expect changing responding improving by revenues third address to earnings in our million the million to the like future

with billing matters. other the counsel and independent response, the on had employees, company compliance we of certain letters this in employment the Audit investigation Committee and concerning assistance company's X-K from has of whom our August conducted As In employ, advisers. and certain XX, received disclosed of our filed an one left independent matter

October was disclosed XX. the there The no illegal and filed on was that were evidence of move this to has act. and an that XX-Q. forward second of concluded any quarter conclusion allegations file allowed Committee successful substantiated this This investigation Audit X-K Our us not in

to us. behind have We are this glad matter

Now financial I'd the Fred for like turn Fred? to our highlights more call quarter. the in over to to discuss detail

morning, Thank Jack, good and everyone. you,

net from the not which pharma in $XX.X XX.X% same early year-to-date business QX XXXX. did million, was period revenue up XXXX, of Our acquired services the in include

since XXX% services. Second second and approximately services in clinical having services net been X resulted diverse pharma revenue performance clinical In business, revenue quarter pharma the which early procedures second volume stemming $X.X COVID-XX experienced XX% through of down however, previously until revenue remained in second pandemic. related from of starting revenue quarterly by split revenue XXXX quarter impacted was revenues. XXXX, third the XXXX. of testing was clinical services net net total services XX% and clinical quarter nonessential quarter of reduction million, and demonstrating service the was severely lower-than-expected the to in Typically, believe the acquired pharma represented services. Please services from Pharma of our mid-March our the thus the from our quarter Pharma less of note XX% million as was net has a affected. XXXX that $X.X second quarter such was pharma not XX% our from the we in quarter, noted, services steady second of benefit XXXX. Overall, in as streams

volume rate a and is Pharma by levels. recovering impacted steadily pre-COVID in second slowdown testing business business services quarter, clinical clinical was the our of and increasing the than business. with September services levels activity in recovering pre-COVID the pandemic slower total than is April was Our at the the higher middle since to in low

lower the XX% is the as pharma than profit margin quarter in principally resulting locations being lower-margin as and to gross volume was in excess services was running of which gross is duplicate well the of now through operating second that XX% margin to and revenue XXXX. process from gross capacity due $X.X million XXXX, expected are $X.X margin quarter the Year-over-year in combined compared labs. million driven XXXX addition gross of the profit gross by Second decline

and Second spending $X.X million in $X.X second quarter the lower through XXXX million $X.X million operating reduced than the expenses. nonessential of March Beginning and was $X.X quarter, well in as quarter as certain quarter lower lab $X.X XXXX. discretionary expense million fourth we XXXX the million, of than and costs in second

We costs. to mid-April. excluded year also services reduced which million the year-to-date salaried employee prior compared XX% million wages by expense XX% was as in pharma period, Operating the operating starting to in $XX.X $XX.X

Second which addition was quarter adjusted pharma XXXX. services $XXX,XXX second of $X.X EBITDA, quarter million, included of the the negative lower than losses, XXXX

to quarter XXXX net remained QX despite cost second us quarter XXXX second versus neutral lower lower adjusted Importantly, EBITDA driving revenue. largely XXXX, due

testing Human capital of XXXX, Health COVID-XX antibody usage. In operating $X.X we the by a grant compared million to related million driven for virus used a working $X.X XXXX, improvement, reimbursement. primarily the cash activities received for and We period of as and Services of Department billing first XXXX future cash advance the to comparable million a $X.X $XXX,XXX million of and from lower from in X months $X.X Medicare

second During the losses. its second in quarter, expenses qualified we recorded the quarter HHS entirety business and grant toward

operations, for and from and our our with a work of and discussed, Carolina state-of-the-art As building customers finishing provide transitioning including the processes. pharma North products, transferring remainder robust validation services well our North XXXX in Carolina. services to Rutherford, laboratories and costs personnel, optimize our to of of more New Jersey The platform Morrisville, lab our facility reduce are facility Morrisville, activities, out operating previously of transaction underway we to critical consolidating is

XX-Q, revolving borrow million under $X.X loan of line we And the balance and As was terms SVB. balance of outstanding million are we are with required under of of revolving while borrowings of line the of is filing $XX.X received do default June with funds a our XX, additional the this credit. with not under borrowings and company this XXXX, Due have of we has from the in agreement, to our the waiver to compliant default ability in cash SVB the currently credit previously agreement. the now repay delay to

listing are compliance minimum $X.X We not equity NASDAQ's in stockholders' currently with requirement. million

million stock As in preferred in approximately we XXXX financing and you recall, XXXX. may $XX raised

However, in stockholders' deficiency purposes financing trigger permanent the thus for funds due determined and to agreement, not be the to with NASDAQ. those minimum currently certain terms equity are accounting

options meet as the soon $X.X possible. million minimum currently listing requirement stockholders' to exploring as are We

turn back over With call the turn to over for to me call back for that, let before Jack? the the we Jack operator Q&A. his statements closing

Thanks, Fred.

XX-Q Let say, November. quarter me we look to our on filing third in a basis forward timely

range we Additionally, net let of $X.X revenue be me third the pleased We're $X.X the with in to very million million. repeat that rebound. will expect quarter

the me to turn back call Now Q&A. Melissa for over let

Instructions] the Cohen Jeffrey first with from question of [Operator comes line Ladenburg Thalmann. Our

would balance the QX? off you Could commentary year sticking into you we're into particularly perhaps? a expect And further number Jack like for might versus and of QX margins, and questions. so look on to with you this rebound Fred, Do -- estimating? going what provide forward what next overall that any year few the

kind a kind in. me then chime Let of of ask Fred global look, more give and I'll to

obviously that a of the looking have and facilities things a we duplicate view we combination from at, on that couple you're what somewhat that a Jeff, So of consolidating. point margin is are of pharma is especially, side

North transition middle down With We're next our accelerated Carolina, right be now, of of actually some the there the will the I of it COVID we of to in things transition. that impact week. and employees, and moving

single Rutherford facility a of time have of big view, But frame of facilities, a The an everything there will operational will first year, for out our big instead cost on a as margins by get quarter. have that is by can us has and well. our that the to transitioned. multiple You mostly with on overhead end the potential fixed facility we imagine point right from virtually impact impact the of

also upon have increase with we price that one. Number had remember that And you the if based impact, number and will, that's in a sometime price Novitas, price increases. X you we near an likely ThyraMIR. will is indicated, with on we've future. margin have And may So communication

as fingers have well. crossed that we our So on

profit is profit seen. see diagnostic I the that think be what historically pharma gross you've longer will the approaching we'll term gross that

And fixed to of driven insight volume I diagnostic profit addition our our that, finish the input their some into Pittsburgh, operating much seeing is to in tell, lower think give planning really which our gross of base. I can gross in facility, more transition. being November, costs. margins In focus are some we'll investors facility you as want the XXXX, help typically budget a our begin in and we to until process cost across nice we in continuing on improvements too reduce we for be profit don't but with

looks it a can beginning So same? will mentioned? today what Got far you you And transitioning like footprint North the the relative as coming to more little then what that online and in far Carolina give us XXXX, being as and like bit it. the color of as Rutherford as look Pittsburgh

when Maybe terms you size? talk Yes. relative in about of footprint

Yes. Facilities and yes. footprint,

Yes.

interesting. So it's

feet. I'd believe then And range. is Morrisville, like targeted Carolina around facilities I XX,XXX Rutherford right is square a foot than XX,XXX, little Our are, less XX,XXX the greater than say, a in XX,XXX. square XX,XXX. Pittsburgh XX,XXX North is little or that

what that that business business. individual platforms it separate business effectively, Cancer diagnostic utilize best and So facilities what a business we've doing had pharma is a benefit a X the which and we're pharma had understand lines. X with the of to into effectively one to or we consolidating is location. Perhaps that They basically companies, Genetics done way pharma series

acquired is consolidate to of same only acquired lines reason cost -- these since than is business doing running principal the in New the they the imagine, you both we were in better to fact pharma in facilities we all business, duplicate as that sure. Jersey, the doing in the so the for Carolina facilities, of North business but And mention that, can not

to And COVID the year QX? you kind finally, like the into a what the of talk of back Okay. flipping commentary on the And if in from XXXX, any of business any the more. couple then do QX. you throughput you year? And about for half in then could on of back historic expect half looked Any testing and mix from the

Yes.

and that our the did running, it we have funding, of up really is and operational. help testing and serology We with

We added have to a not PCR component yet. that

do times, and very was feared. to we still to testing that had than or to provide important, take cetera. initially, capabilities back look sitting that being a of also what's I'd maybe COVID business, our has evaluating that, turnaround our thought say business able recovered is, it and greater at we originally with relates but in we're have our the marketplace it We and happening but et And testing as opportunities as lots thought we

And so and effective, we're that volume in mode all to efficient way. in with catching a processing bit as it an relates catch-up the of up

on And QX -- kind asked? I COVID significantly held So that the don't that, back we've side, see or question either revenue you of on was QX. On the other in affecting Jeff. what

On between business and the balance sites mix? the the of X

Yes.

in opportunities pretty to be I the revenue back the So diagnostics I of did back we steady. both of business And XX% of quarter's the dramatically was pharma, expect going down to XXXX. into the think pre-COVID levels, more recovering historical XX% going Net with is stated second at pharma mix our forward, diagnostics, business was change diagnostics the and good growth range revenue. than that now pharma and mix

in future. change So to don't that expect the mix dramatically

question comes line next from with of Our Ben Global. Haynor Alliance the

hoping get new $X agreements, from. kind and those Are of clients? trying sense programs pharma million existing of where new a just from. clients? to clients? coming of to phased for are they -- those kind are the Are expansion me, Are those sense get to within First existing for transitions clinical a those new materializing services where of in Just

team at while were that had may we said what integration we you commercial was beefing track breakdown, our specific look is the that the but process, going new I clients. can you carefully, very and call we through new business you earlier, some of basically pharma, you or logos When I we Ben, in growth were from what development group. give our can't that up which that remember I coming definitely tell

pharma and And that at we're impact size average or for seeing near is increasing, capacity the we're at least full so seeing of exciting we're that. What's term, the especially we're we're now, interesting and that of seeing the more contracts doing over period growth all way, initiated the And and whole well. by the for we're business. contracts of bodes later-stage a the well And more work future I of as time. seeing think longer that

control is exactly that, on base we over the we of ways, some basis, less a to have say So potential contracts in do. growth but the I'd month-to-month larger pharma revenue and what these wanted

Okay.

you're So in move assets ones, on anything do do but seeing clinical certain them. fail, ones probably with future, -- anything obviously, you those along, not the to not specifically there's the if stay that

important might Yes. I'd all, as that of and it's you component. say first track if carefully, imagine, we you -- that an very

whatever us problems might trial. those going may But case not has So move be, in and And -- be that we issues. trial involved we is a forward. to important we're the that's or or that know the to backlog fails pull-through because the why bookings and so

get so And our the for bookings terms year. we we need backlog know pretty to to tracking have what target good and of to in to target and quarter mechanism the revenue a

Go Okay. ahead.

Sorry.

we've over drop out, drop relatively but also so in. or We'll company. have have year been And things since at things balanced, least we'll they've owned last the the

well Okay. going Great. like pretty is sounds there. Yes. I it everything along mean,

we're And especially and Carolina. listen, an what do capabilities base customer immuno-oncology. in, it's the to base. is in issues. customizing business transition a side, while a diagnostic if assays exciting out doing The similar basically, think every what facilities, side limb on North we're building you We're client we system still hey, with of be on day. we're to pharma personnel kind And our in do, consolidate in the Yes. space different we of And that as we is

sense. a makes That Sure. of lot

there? So color then capacity be to can there? for you loan SVB to agreement, needs on the happen provide what the reinstated Any

to I'll Fred weigh kind and I'll well. Yes. of comment, as ask in

at upon line the It so based balance that was we yes, time. cash with it SVB, credit. the a of So had was

it it really of liquid line, So an was by receivable incremental assets. secured but our kind basically was

amount that now, the able in able as and So expand basically looking really which to not to pharma in was loan, the loan, $X replace to right -- meaning date we not are, but the are as compliance a receivable there goal we loan ratio. are is sitting to quick loan business to that included been services, not as the million, only quick that as But the our on have we're we not of the borrowing been ratio meet of we under relates had meet. we're to soon we're the it default And we base. because to about here, has borrowing

Got it.

it. And we base, which borrowing assets into just borrowing -- with updated waiver to take and the but the add the working pharma covenants our look that's And that hopefully at of quick the be AR, and the out to get positive. some obviously, we'll is -- still ratio, amended we just also services joinder signed financial SVB with point, compliance guaranteed. a with not agreement but the And helps the at reinstate

but were may investigation, investigation, And billing diagnostic sure it we and we're the not a clinical assays so, basically that notified have be problem. to related the business. our waiting totally make we -- Ben, clear, certain we to And when or in to basically stopped didn't of

So delayed to we that able for, guess, I had investigation months only have recently bill been assays those completing. maybe while the basically was X we

and Believe I say, pieces, and there's we're incentivized to back falling motivated running. are really into that get up place. would So that me,

that delays are And not be worried billing, those than that the to do collectibility? on you Or will historical? delayed you different then affect expect

Yes, not no, at all.

arrangement, the -- under our months we under have basically bill. be to to We contractual XX -- have able

to a problem it anything cautious And might it. bill reversal. didn't not was months we we view, a -- there it point we able from knew be had a was a bill of to So or where -- more to be want XX

any And risk all. we so have we at don't think

for a is quick. time couple lot X, X timing of And Medicare. weeks. for from of the pretty the a perspective, It's turnaround weeks, billings are And a Medicare

Sure.

services return better. reads to for you helpful. prior Jeff on consolidation pharma margin it principally and with to prior That's that levels, reading? And think not that Okay. to was in Once due you consolidation kind the that me fair a has then in say decline of occurred, to the the margins facilities. but the touched Is -- gross a expect lastly I associated that lower bit this, me, if of little release, to

higher and costs through would get costs through say, time higher the of in Yes. combination we margins higher of then assets variable volume, out over I and specifically expect the of finalization we the it. come to at improve. the some the levels, we lease that transition can still accrete we to the as really have before margins But go the of seeing start revenue,

comes the Yi [Operator Instructions] question line Wainwright. from Our H.C. Chen with next of

cases Jack, question the most diagnostic my pre-COVID weeks? third you now, new when in see is, business COVID expect diagnostics to rebound And first recent returned again? or -- the in the quarter that business impact you early fall/winter do season, we an did has has additional in occur the said levels, as if on

Those are good questions. Yes.

the really then QX QX. and way it into very It the quickly diagnostic mid-March, very orderly QX, of so and more been right, in a through in rebound was has business, of terms V. off dropped through in In rebounding a

to March, side. Yi, time the diagnostic will, drop-off, as certainly the is what was on we April if saying the were that not related precipitous pharma the was On side, frame COVID it as in you

checkmark. instead business frame bigger dropped of a as them and pharma say think Rutherford but the in there seeing that we've of stable, the It and we on And to we're and the companies again, what et the presents around it but trials, I beginning of for QX the North recovery recovery what some Carolina, from up in the seeing we're specific as is April down is, was pharma on, seen et V the trials mind, time of transition matter certain too, but on trying the QX decline a that. clearly rebound, off, a is to were with end North shut I'd track ramp that Carolina deal going relatively still it a of build-out, more challenges slower. the sort side. Keep of And we're cetera. cetera, beginning after As was of with fact,

Yes, Yi. if just I add, could

diagnostics volume been really weeks the over coming levels or has business the pre-COVID back the So X last so. in for

right. That's

Yes.

versus seeing improve. to any to any hard tell we'll going basis, to but But quarter we're If It you It's improve. And react guess, COVID quarter, far what and it right? accordingly. day-by-day drop-off quarter is on look lower seeing the impact, as little at going. it's be first to right things continuing volume. in third as third anticipated anybody's we a are not where measure And now, continues a we're bit

Go Got ahead. it.

us that a hotspots know with they down and and point of deploy And question that the I'd other with customers affect a I with behind to go don't environment. those hotspots -- had on we customers. deal biggest shut COVID. laboratory around I COVID, you're situation individual seeing say certainly what risk new always only our mostly to your of all operate the get into associated in I don't how And can customers think they think So were where know completely this in that, that future clients see to now next but managing certainly to that's other our before country, us, I and can but did view, with will from we customers it. resources the happening -- what's

So we're well cautious about that, pretty but it we've licked. I got think

the line you current time longer-term on this as is, are the pharma what second realize contracts? average contracts million? extend the you such you it. to comment to mentioned that how time And frame revenues, Got question services. $X what for signing My longer do you the contracts Can the -- seeing expect is

Yes.

the go average, X-year there's far about -- X of deliver in contracts but of study. as years, it's a X the a on that adding And years. X, can or we're typically, revenue some some mix as So month studies newer study that

years, that the current revenue backlog period gradual right signed. contracts longer contribution from going mix the being more contracts time. we to revenue that's have a extend that in But weighted to of So of contributing change over and be of stream X the now a the the will the

So improve next it we'll term, get the so, the increasing at think, near through or on be see but how out. add contracts more an and year And will revenue that the rate, a would we more steady. as we base should plays I

Okay. Got requirement is, plan do it. to My how last compliant be the soon listing question with NASDAQ again? you

Yes.

So not know, not notified by to regaining file at XX a yesterday, as what our we're it's compliance. least file days typically, of in to we whatever compliance. of plan NASDAQ, that XX have that actually happens been we're give given. period in And you plan you Yi, plan as they for certainly to is time, our And

you imagine, knew the we of because file the not second did going when to quarter, As be we in delay in we compliance. might were filing

a been for we've big possible, this have a obviously, priority for working while well. on as So as quite it's soon but us as and plan a hope to

would gentlemen, like thank that for on last and today. joining Interpace call behalf Ladies with you I the being to Biosciences our question, of

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