Neogenomics Inc (NEO) 2008 Q4 法說會逐字稿

Greetings, and welcome to the fourth-quarter and full-year 2008 conference call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Bob Gasparini, President and Chief Scientific Officer. Thank you. Mr. Gasparini, you may begin.

Thank you Melissa. Good morning. I'd like to welcome everyone to the NeoGenomics fourth-quarter and full-year 2008 conference call and introduce you to the NeoGenomics team that is here with me today.

Joining me this morning on this call are Mr. Steve Jones, our acting CFO and Board member; Mr. George O'Leary, Director and Board member; Mr. [Jerry] Dvonch, our Director of Finance and Principal Accounting Officer; and Mr. Fred [Wydig], our Controller.

Before we begin our prepared remarks, I have asked Fred to read the standard language about forward-looking statements. Fred?

Thank you Bob. This conference call may contain forward-looking statements which represent our current expectations and beliefs about our operations, performance, financial condition, and growth opportunities. Any [statement] made on this call that are not statements of historical fact are forward-looking statements, and these statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.

Any forward-looking statement speaks only as of today, and we undertake no obligation to update any such statements to reflect events or circumstances after today.

Thank you Fred. And good morning again, with a special hello to family, friends, investors, colleagues, and others who have joined us this morning.

Q4 of last year continued our trend of double-digit, sequential quarterly growth and greater than 74% year-over-year revenue growth.

As mentioned in this morning's press release, our revenue for Q4 '08 was approximately $5.9 million. On a year-over-year quarterly basis, we grew approximately 56% from the same time period in 2007 and ended the quarter in December with what was at the time a record revenue month.

I say again "at the time" because despite not quite closing the books yet for the month of February, we anticipate another new record revenue month.

Q4 also saw our normalized sales and G&A expenses drop. As discussed in this morning's release, we continue to realize significant economies of scale on the investments we have made in personnel and in infrastructure over the past year.

Steve will talk with you more about these economies of scale and the quarterly and yearly financials. However, in the few moments that I have with you I would like to talk with you about 2008 looking back and our growth plans for 2009 and beyond.

In short, 2008 was a good year for NeoGenomics Laboratories in a lot of ways. No, we were not profitable, but we were darn close to breakeven. As you can infer from our press release, we conservatively decided to clean up everything and anything we could think of that had the potential to overhang on our balance sheet, in order to pave the way for a profitable 2009.

In 2008 we saw a 40% increase in specimen numbers, a 74% increase in topline revenue, while only adding 25 additional team members throughout the entire year.

Our SG&A as a percentage of revenue dropped, and our day sales outstanding, or DSO, decreased from 78 days to 47 days as 2008 unfolded.

Our product lines increased. Our national footprint increased. And we continue to increase our sales team as well as multiple strategic relationships which were developed in 2008 that will start bearing fruit in 2009. We did this without raising or borrowing any money.

We are starting to realize the Neo vision of a state-of-the-art cancer testing laboratory with multiple locations across United States. After this earnings call, at our quarterly, Companywide meeting, I will tell our team that we have now completed phase one of the Company's development. Although it has taken us four years to hit the leverage point of $2 million to $2.5 million a month, we made it. And we made it without raising 10s of millions of dollars and without diluting the thousand -- thousands of Neo shareholders.

And although the stock has not run up yet like other companies in our sector, it will move and it will move in the correct direction.

Giving guidance is something we have learned that is not always in the Company's or our shareholders best interests, so we're not going to do so for 2009. In 2008 the only guidance we gave was that Q4 would come in somewhere between 15% and 20% sequential growth from the previous quarter, and it did.

In 2009 our goals and focus will be on attaining profitability and getting the stock today.

In short, things here are going great, and we are all looking forward to one heck of a 2009, what many of us consider to be a [pivotable] transition year for NeoGenomics Laboratories.

Moving forward, we have a revenue growth plan that we believe is absolutely attainable. At the risk of being accused of giving guidance, hypothetically, if Neo were to continue to grow a 74% a year -- as we have already grown for the last four years -- we would be able to hit the one (technical difficulty) million mark by the end of 2011. If the math sounds far-fetched, Steve will have more detail on how others in our industry have done exactly that same thing once reaching the $2 million to $2.5 million mark in revenue per month operating leverage point.

Here at Neo you can expect us to continue investing in growth initiatives that we believe will add both short-term and long-term shareholder value. As mentioned in our release this morning, for the rest of this year we will be focused on expanding our sales and marketing focus as well as our infrastructure to keep pace.

We finished 2007 with seven sales reps. We finished 2008 with 17. And we expect to finish 2009 with between 27 and 30. Since January 1st of this year, we have already hired four new sales team members, and we expect to hire an additional three to four at the beginning of each of the remaining three quarters in 2009.

For those of you that have been with us the last four years as we grew steadily but slowly, I thank you for your patience and support in being with us in completing phase one of Neo's growth. As we now enter phase two, you can expect that the next four years will be more of a rocket ride than the steady journey that we have experienced together to date.

I thank you for your attention so far this morning, and it gives me great pleasure to turn the call over to Mr. Steve Jones and Mr. Jerry Dvonch to review our financials for the quarter and for fiscal-year 2008. Steve?

Thanks Bob. I will start by reviewing some of our financial and operating metrics.

During the fourth quarter we reported total revenue of approximately $5.9 million, a 56% increase from Q4 '07. On a sequential basis revenue grew 17.2% from Q3 '08. During the quarter we saw a nice reversal of the effects of the seasonality we experienced in Q3.

Average revenue per acquisition grew 13.2% on a year-over-year basis from Q4 '07 to approximately $820. On a sequential basis average revenue per requisition increased 2.4% from Q3 '08.

We continue to be very pleased with the evolution of our test mix. Flow cytometry as a percent of our total revenue was approximately 24% for the quarter, up from 12.2% in Q4 '07. As we have discussed, flow has the highest average revenue per test and is our most profitable product offering.

These increases in flow as a percent of revenue came largely at the expense of FISH as a percentage of revenue. This does not mean we have shifted the emphasis of our business. It just means that we have a better balanced mix. FISH still continues to be almost 50% of our mix.

The average number of tests per requisition in Q4 '08 increased slightly to 1.31 from 1.27 in Q4 '07. Average revenue per test in Q4 was $624, a 4% sequential increase from Q3 '08. However, if you exclude the CRO from this calculation, average revenue per test in Q4 was flat relative to Q3.

Basically we had one lower-priced CRO contract in Q3 that negatively impacted the average revenue per test for the CRO and thus the Company in Q3, and that contract was more or less out of the mix in Q4, so the overall average snapped back.

If you were to normalize for this, there has been no applicable change in our average revenue per test in our core lab business.

As discussed in the press release, gross profit increased 65.8% to approximately $3.1 million in Q4 '08 from $1.9 million in Q4 '07.

Gross margin increased by 310 basis points, up 3.1% to 53.1% in Q4 '08. We estimate that gross margins were impacted by approximately 2 percentage points as a result of the Avid price increases for the bladder cancer FISH probes that we discussed in our last call.

SG&A expenses for the quarter were approximately $3.8 million for Q4 '08, an 11% increase from the $3.5 million reported in Q4 '07. However, in looking at this you need to remember that we reported approximately $700,000 of one-time charges in Q4 '07 related to the U.S. Labs litigation settlement and the registration penalties, and we took $518,000 of one-time charges in Q4 '08 for the various write-offs we discussed in our press release.

We actually are not calling the increase in bad debt reserves that we took in Q4 -- although they were substantially increased from Q3 -- as one-timers because you can't really look at it that way.

Anyway, but after normalizing for these various one-time charges, our SG&A grew by approximately 20% year-over-year. However, as a percentage revenue, normalized SG&A -- which again includes the extra bad debt but excludes the Q4 '08 write-offs -- fell to 56% from 72%.

The reduction of our SG&A expenses as a percent of our revenue continues to be the biggest driver in the increase in operating leverage in our business. As Bob discussed in the press release, you need to get to about $2 million to $2.5 million of monthly revenue in our niche of the business to derive any real operating leverage.

The practical impact of this is that once your G&A costs on a monthly basis are largely covered, if you have a 50% to 55% gross margin as we do, you can reinvest $0.30 to $0.35 of each and every incremental revenue dollar into increased sales and marketing initiatives and still drop some profit to the bottom line.

Indeed, this year we expect to the double our sales and marketing budget to begin to really drive the top line, and we believe we can do this in a way that will still result in profitability for the Company.

You can see a similar trend happening with some of the other laboratory competitors in our niche. GenOptics went from $24 million in revenue and $3.8 million in losses in 2006 to $59.3 million in revenue and substantial profits in 2007. And just last week they announced $116 million in revenue in 2008.

[Bosworth] Laboratories, which is not yet public but filed an S-1 last year, went from $30.3 million in revenue and a breakeven business in 2005 to $58.4 million in revenue and substantial profitability in 2006.

While we're not giving any guidance out for 2009, we believe we have now finally arrived at the same point in the growth curve as these other two laboratories.

As Bob mentioned, we currently have 17 territory business managers or sales representatives, up from 13 on our last call, and three regional sales managers that are also heavily involved in the daily selling process. We're just now finalizing the hiring of two more territory business sales managers.

We expect to continue to grow rapidly the number of sales reps and expect, as Bob mentioned, to have between 27 and 30 reps and regional managers by the end of 2009. We believe this will allow us to derive robust growth in revenue despite the current economic environment.

Unfortunately for all of us, cancer is immune to economic cycles, and with the aging of the baby boomer population, new diagnoses of cancer are expected to continue to increase rapidly. Remember that cancer is primarily a disease of the elderly, and the first baby boomers started turning 60s a few years ago in.

If you were to just average out the baby boomer birth rates between 1946 and 1964 -- and set aside premature deaths for a minute -- the data indicates that on average approximately eight baby boomers will be turning 60 every minute of every year for the next 15 years in the United States. That 10,000 people a day.

Then when you consider that approximately one in four senior citizens is diagnosed with some form of cancer, you can begin to get a sense of the market opportunity we are addressing.

Indeed, these are profound statistics that are going to have huge implications for the U.S. health-care system. We have worked very hard to position NeoGenomics to be able to gain an outside share of this growing cancer market, and we are looking forward to beginning phase two of our corporate evolution.

Net interest expense in the fourth quarter increased to approximately $99,000 from $33,000 in Q4 '07. This increase was because we paid off $1.7 million of indebtedness in June of '07 and we had no bank debt during the entire fourth quarter '07.

Net loss for the quarter decreased to by approximately $600,000 to a loss of $994,000, or $0.03 a share, from a loss of $1.596 million, or $0.05 a share, in Q4 '07.

If you were to adjust our Q4 net loss for the $518,000 of one-time write-offs and the extra $415,000 of bad debt expense we reported in our press release, our loss would have only been approximately $60,000.

Depreciation and amortization the fourth quarter was $228,000, and EBITDA was negative $667,000. However, if you were to further adjust our EBITDA for the $518,000 of one-time charges -- excluding the extra bad debt write-off and the $49,000 of noncash charges related to stock-based compensation and warrant amortization -- our adjusted EBITDA, quote/unquote, for the quarter would have been approximately negative $100,000 dollars.

We finished Q4 with 119 full-time equivalent employees and contract doctors, up from 95 at 12/31/07 and 109 in 9/30/08.

Our collections continued on a torrid pace during Q4, and I'm delighted to report that accounts receivable balance expressed in terms of days sales outstanding, or DSO, dropped to 45 days at 12/31/08, which I believe is now the best in the industry. To put this in perspective, our DSO was almost half from the 79 -- 78, 79 days it was at the end of 2007.

Indeed, we grew revenue by 74% in 2008, but our accounts receivable balance -- after netting out our allowance for bad debt -- actually fell by 10% for the year. That's unheard of. I would like to publicly acknowledge our outstanding billing and collections team for this remarkable achievement. Great job, ladies.

Moving forward, it would be unrealistic to expect that we can continue to keep our DSOs at this level, and expect this figure will normalize out into the 50 to 55 day range.

Net loss for the quarter decreased by approximately $600,000 to a loss of $994,000, or $0.03 a share, as I discussed.

And I wanted to just talk briefly about our liquidity before I turn the call back over to Bob here.

In terms of our liquidity, we had $486,000 of cash on hand on 12/31, about $900,000 available to us on our credit facility with CapitalSource and approximately $500,000 to $600,000 available to us on our CapEx line, and then another $8 million available to us under our stock purchase agreement with Fusion Capital, which we described on our last call.

We -- it's important for everybody to understand that when we get cash collections in every day, they get swept and they actually go to pay off our debt balance every single day, and then we just re-draw we need on a weekly basis. So while we typically operate with about $500,000 of cash, which might seem low to some folks, it's actually just fine for us. It's the amount we need to operate our business. And our debt balance does change on a daily basis. So you shouldn't read too much into our cash amounts on our balance sheet.

At this point, I would like to close down our formal remarks and open it up for questions.

Incidentally, and if you are listening to this conference call via webcast only and would like to submit a question, please feel free to e-mail us at IR@NeoGenomics.org during the Q&A session, and we will address you questions at the end of this if your subject matter hasn't already been addressed by our call-in listeners.

Operator, you may now open up the call for questions.

(OPERATOR INSTRUCTIONS). Boris Peaker, Rodman & Renshaw.

Congratulations on the excellent quarter.

Just have a question regarding the days sales outstanding. Could you help me understand what is fundamentally different about this new billing system you installed versus what you had before?

I would probably give 75% of the credit for that statistic to the billing team and not the billing system. We replaced the entire billing team in the fall of '07 and brought on a real professional management person who has brought on a lot of professional people under her, and they have done a great job of just working the old accounts receivable.

In the old system that we replaced in March, we didn't get good data in a timely basis, and there were just a lot of problems. It wasn't a system that was designed for a laboratory per se, and we wound up having to customize a lot of it.

In the new system we put in, it's significantly more flexible and so the number of instances where we have a correct, first-time attempt at getting reimbursement went up dramatically. I would say we've probably had a 90% to 95% success rate on the first-time with the new system as opposed to the old system, which was probably -- I'm going to guesstimate here somewhere in the 75% arrange. So that made a big difference.

But really the bulk of the credit has to go to the team. They've just done an outstanding job.

That's very impressive. And as a follow-up to that, in terms of if we look at some of your tests like flow cytometry which are relatively large and profitable for you guys versus some of the smaller ones, does the accounts payable or days sale outstanding on those particular vary by test, or is it kind of average out regarding what kind of test?

As it turns out, where the receivables shakeout is much more closely aligned with who the payor is. We have three primary payor types. Medicare -- which is about 50% of our payor mix -- is terrific. If you do it right, you typically get paid within three weeks, sometimes four weeks.

The private pay insurance, the managed care and insurance, is probably about 30% of our payor mix, and that's just all over the map. For the insurance companies that we are in-network on, we typically would get paid within 30 days. For the stuff that we are out-of-network on, it can take three -- I've even seen six months or more.

And then the rest, the other 20% is what I would call the client bill. Client bill is mostly other hospitals that have to bill Medicare and their insurance companies on a -- what's known as a DRG basis, so we actually give them a, quote/unquote, wholesale price and they bill it to the end party payor. The client bill stuff is generally pretty good, but we always have a few stragglers on that one as well.

I see. And for the last question is, how has the productivity per salesperson changed over the last year? And where do you expect it to be in terms of -- in that sense?

Well you know, you've got to remember that last year we had a lot of new salespeople joining us. We finished '07 was seven people. We finished '08 with 18 -- I'm sorry -- 17 people. And so the first three to four months of any sales rep's cycle with us is not very productive. And given that we more than doubled the sales force last year, the productivity numbers for last year probably aren't going to be indicative for this year.

We would expect on average that a mature sales rep would generate at least $10,000 to $12,000 of new revenue per month. Indeed, we have reps who generate $30,000; $40,000; and $50,000 of new revenue per month. But across the board, on average, we think that $10,000 to $12,000 per month is probably not a bad number to use.

I see. And how long does it take to get up to kind of a -- to ramp up from start when you hire a new rep?

I would say it's generally three to four months on average. We have a lot of folks that we hire from other firms that have pre-existing relationships and they hit the ground running in a month. Nobody is that productive in month one, but by months two, those kinds are. Some of the folks that we're newly training into the industry typically take four months. And so I'd say I think it probably averages out of three or four months.

All right. Thank you very much.

Howard Halpern, Taglich Brothers.

I'm actually pinch hitting for Juan today. He's out.

I have a couple questions about I guess -- what is your current geographic coverage? And how do you expect that to grow to 2009?

The last time I looked at this was a few months ago. We were taking specimens out of 30 states I believe it was. When you think about growing a sales force, you typically grow that geographically. Right now we are at 17 territory business managers which have distinct territories, and we'd like to take that up to 27 to 30. Some of those will be fill-in in states where we cover existing, but a lot of that will be in new states we'll be opening up.

I don't -- I haven't looked at the data in a way that maps the territories onto states, but if I had to just guess off the top of my head, I would say we'll probably be in another six to eight states by the end of the year.

And are there any plans to build any kind of laboratory in the Northeastern part of the country?

The short answer to that is maybe. We have been looking at the Northeast in quite some time -- for quite some time now and have looked at a number of different ways to play, whether we build a lab or whether we purchase another company.

You probably read between the lines there that we wrote off a bunch of transaction expenses in the fourth quarter. We were very close to buying another laboratory up in the New England area, and at the end of the day we got spooked by the amount of debt we would have had to assume to do that and weren't altogether sure that we could scale the top line the way that we would have wanted to with that particular candidate.

So we took a step back, and I think we're all thankful that we did, because given this economic downturn, having a lot of debt is not something anybody wants to have at this day and age.

So we continue to look at a number of different possibilities. We believe net income is incredibly important. The last thing we're going to do is to build a lab for a lab's sake. When we have the volumes in the Northeast -- and we are rapidly approaching the point where we're going to have the volumes coming out of the Northeast Florida -- where it makes a lot of sense, if we have already bought a lab, we will build one in the Northeast.

I suspect that that situation will resolve itself by the end of this year -- one way or another.

And I guess another question would be, what are the benefits that you've seen so far with your agreement with Response Genetics?

Hi Howard; this is Bob. Let me see if I can answer that. We've seen it in two different foci or two different areas.

One, it has allowed us to increase our product offerings. And so we have something additional and something that's been very important to us in terms of growing this Company, and that is, offering something that has some protection of intellectual property. And so we can offer something in cooperation with -- and in combination with -- Response Genetics that none of the other laboratories -- including LabCorp and Quest and Genzyme, any of the billion dollar companies -- can do. They can try to do something similar to that, but they can't do it exactly based on the IP portfolio and patents that Response has.

The other thing is that it has quite simply opened doors to us that were not open to us previously. Being able to go to a clinician's office, a hemoc -- or a hematology/oncology -- office with something that does indeed differentiate us from the pack has proven to be very helpful. And what we've been doing actually is [quantitating] in terms of the increase in revenue that we're starting to realize based on response, the product offering being able to get us into a oncology office that we had previously not been able to get into.

So again, opening new doors and offering something that's unique and proprietary are probably the two largest benefits of the relationship that we established with Response Genetics out of L.A.

And one final question, and this is -- I guess it's more broad -- would be -- and I know it's early in the process, but what have you seen so far of the potential positives and/or challenges from the health-care reforming issues that seem to be floating around in Washington?

I think we generally view it as something that we won't be impacted negatively by, and we are cautiously optimistic that we will be impacted quite favorably by it.

When you look at genetic testing in general, these tests are 98%, 99% accurate on a bad day. The average accuracy rate for a traditional clinical lab test is probably closer to 80%. It is well-documented that the cost of treating cancer goes down substantially if you can diagnose it early.

And what we've found is that these tests have evolved, as Bob has spoken about publicly many times, from being diagnostic in nature to prognostic in nature and more and more being predicted in nature. In other words, the tests we're running will predict the outcome or a course of treatment for a patent. And that allows you to use a much finer granular approach to the treatment regimen -- if you are a doctor.

For instance, we have tests that will tell a doctor that a patient definitively has chronic myelogenous leukemia, which turns out not to be too responsive to chemotherapy but very responsive to Gleevak, which is a drug taken orally. Gleevak costs about one-fifth the amount of chemotherapy on a six-week regimen and actually extends the patients life by about two years on average and has far fewer side effects.

And so that's the wave that we're getting into in genetic testing, and I expect that that wave will accelerate. And there's just -- anybody looking at this with a rational approach will see that more of these tests is better than less of these, and so we expect to be a beneficiary.

Now having said all that, we don't have any specific evidence of any one program or another program that will help us, but I will say that the Centers for [Medicaid & Medicare] Services did increase the laboratory portion of the reimbursement for our flow and our FISH test again this year, and they did it last year as well. So they are clearly trying to emphasize this as well.

Howard, this is Bob. I would like to add one more thing to that, and that is we do get some insight into where some of the programs that are governed by CMS -- the Centers for Medicare & Medicaid Services -- are going. They publish on a yearly basis a list called the MUEs, or the Medically Unnecessary Edits, and its a list that identifies laboratory tests that potentially are being over utilized across the United States by different kinds of groups and is one that is a concern.

And if you look at the MUE list, which has literally maybe -- in broad brush strokes -- 500 to 1,000 different laboratory codes, you can see that there are very few if any of the tests or codes that we do here in genetics technology. And so I think that's a different way to look at what might be coming down the pike.

Again, these things are just published. It doesn't mean that they have been acted on yet, and we haven't seen CMS start to clamp down per se, but it gives us a little bit of insight into what some of the concerns might be of the federal government through the CMS arm.

So we're pretty comfortable that, as Steve said, with reimbursements for the genetic tests that we do actually going up over the last two, three, four years with regard to at least the technical component. The professional components, i.e., the interpretive components, have held pretty much the same, and they are what they are.

But as technology gets better and as the questions evolve and as our answers get more sophisticated in the way we answer them and in the how we answer them, then the reimbursement for that component has gone up. And then the absence of genetic testing, if you will, or cancer testing -- with a few exceptions on the MUEs -- is also encouraging that it would be pretty good for the next few or many years.

Thank you very much.

(OPERATOR INSTRUCTIONS). Joe Franklin, private investor.

Easy questions. Could you tell me about Power 3?

Sure.

Yes, we can. It may be not so easy.

I want to be careful here in that I do not speak for the management Power 3 in any way, shape, or form. The statements we made are our own best estimates and judgments and based on what our Board of Directors have given us guidance on.

But essentially, we have been in discussions with Power 3 for four or five months now to restructure our agreement and get it into something that is a little bit more meaningful to us. We have a particular interest in just the breast cancer biomarkers.

We believe that Power 3's technology is interesting. We continue to believe that there is enough sort of anecdotal data and early statistical data to suggest that they really do have something.

I think like many micro cap companies, Power 3 has run into a funding grist mill that is probably unlike anything anybody has seen in a long time, and it has been particularly challenged their abilities to raise funds.

Despite our three or four months of dialogue about restructuring our agreement and exchanging our convertible debenture into something that would be more closely akin to an ownership interest in part of the intellectual property around the breast cancer markers, we have failed to come to a conclusion on that. I believe that part of that is just that there's not a lot of management down there at Power 3 who can respond to these kinds of requests and that they've got plenty of other challenges on their own.

But given the very direct nature of their February 19 8-K filing in which they stated they needed to raise $3 million to $5 million to continue to execute on their business plan over the next 12 months, our Board in consultation with our auditors determined that it was -- unless we could restructure our agreement -- it was more likely than not that we would be able to -- that we would be unable to realize any value on that investment.

Having said that, we remain open about working with Power 3 and would like to find a way to do that that meets everybody's interest. We do believe as a matter of principle and course here that the Board of Directors of Power 3 have probably already gotten to the place where their fiduciary duties need to shift to those of the creditors, and we are one of the larger creditors of Power 3.

So we are looking forward to hearing from Power 3 and its Board about what they want to do with our note, which becomes due in April. So far, we have not heard anything about their plan for us. They are technically in a event of default situation with us, which gives us certain rights. We have been approached by at least one other creditor in the past about forming a creditors' committee.

We don't know what's going to happen there. We're not necessarily desirous of assuming a leadership role in what the resolution is there. We are very open-minded about working with them to try to help them through their issues, but our Board has decided that it is not an our best interest to put any more cash into Power 3 at this point in time.

So that's kind of a long-winded answer. I would tell you that we reserved it. We think about it as reserving -- taking a charge to reserve for a potential loss.

We haven't written it off mentally in our heads or scientifically in our hearts. We think that there's some interesting technology there, but we don't want to be in a situation where something bad happens this year that we have to have a impact on in one of our quarters when everything else is going so well here. I'm going to just leave it at that.

Okay. The market this morning is showing heavily traded -- NeoGenomics is heavily traded, but the stock has gone down. Even with relatively strong numbers from year end, how does this get presented to make this turn around and come up to $1.25 or to $1.30 to a share?

Well, I guess the first thing I would say is, "heavily traded" is a relative term. It is -- 71,000 shares have traded so far, which is much more heavily traded than (multiple speakers) for us. But it's only $50,000 worth of stock trading hands.

We continue to get a lot of interest from institutional investors. As we have stated many times, Bob and I have both been sort of schooled in the philosophy that there's two ways to do IR. One is to tell everybody a lot of stuff that you're going to do and pray you do it. And the other is to give people a feel for what you're trying to do, and then do it and point at the results after you've done it. We are much, much closer to the second iteration of that in an our focus and our strategy.

We have tried hard not to hype this stock. We believe it is significantly undervalued. I think we trade at something like six times consensus '09. Even if you were to cut the consensus '09 in half, we would only be trading at 12 times consensus '09, and we are growing at 75% the year. So clearly the valuation metrics of where we are trading don't make sense at all by any rational measure.

You know what, I can point to about 300 or 400 other companies that are in a similar situation, and so I'm not sure that where we are trading is a reflection of something we're doing as much as it is just a reflection of -- people are very skittish about buying anything in the open market right now.

We feel great about where we are right now in 2009 and what we're going to do this year. We feel great that we can operate our business profitably. We don't believe we need to raise any more money, and we think that we've got a lot of opportunity in front of us.

So I would tell you, the way we think about it as a Management team is, the stock price will eventually sort itself out. We can't get too focused on where it is on a day-to-day or week-to-week basis. We just need to put our head down and take care of our customers every day. That's really where our focus is.

Last question. You're going to hire X amount of sales reps, which is going to obviously -- these people have to be paid. And is this -- are they being paid salary plus commission, or are they commission based?

Is salary plus commission. The base salaries of a typical sales rep can range anywhere from $40,000; $45,000 up to close to $100,000 defending on the level of seniority. We would like for all of our salespeople to make as much money as they can. We have what we think is a very good, very generous commission plan. It's heavily weighted toward our more profitable products.

But to put it into context for you, we expect to double our sales and marketing budget this year and still drop some money to the bottom line.

If they perform, they win.

Yes. As it turns out, when you are growing a sales force rapidly the way we did last year, it takes a while to get critical mass and to get management systems worked out and figure out who the guys are that are going to stay -- the guys and gals that are going to stay versus the ones that are just trying it out.

We went through some of that, and everybody growing a sales force goes through some of that. I would say, in the fourth quarter things began to settle down and we really began to get a pretty good, tight handle on what they can do, and we are now doing more of what works and less of what doesn't. And I would tell you I think we've got the process and the formulas pretty well figured out. You know, you don't start hiring salespeople the way we are unless you've got the process and formulas pretty well worked out and --

You've got a great DSO, and your EBITDA is going to grow. It looks like you've got things well in hand. Nicely done.

Thank you very much.

Thanks, Joe.

Thanks for your time. Yep.

There are no further questions at this time. I would like to turn the floor back over to Mr. Bob Gasparini for closing comments.

I do -- I'm looking on my e-mail here, and I see that we did get one question that's come in that hasn't probably been adequately addressed yet. Basically they want to know what we are doing about our IR initiatives, what are we planning.

I guess I can report that we have just recently engaged the investor relations group to help us set up and go through a much more determined and deliberate series of non-deal road shows with institutional investors. We've been very happy with our PR/IR firm that we've been using -- Hawk Associates -- over the years. We haven't really begun to do much in the way of outreach to the institutional investor community. And we really need to start doing that. We've got a good enough story to do that, and so we have taken steps to engage the investor relations group out of New York to do that, and we expect to start doing at least one non-deal road show a quarter moving forward.

And generally we think it's time for us to get much more into doing more and more of these conferences as well. I guess let me leave it at that.

Let me just scan here to see if we had any more other questions that have come in. I think that's it. So Bob, I will turn it back over to you.

Okay. Thanks, Steve.

But before we sign off, I would like to take a moment to once again recognize all of the NeoGenomics team members around the U.S. for their dedication and commitment to building a world-class, cancer testing program. Many of you may not realize that at the end of 2008 we were close to 120 team members strong.

One of the more gratifying aspects of the position I have here at Neo is to be able to work with and interact with professionals whose philosophy for our cancer patients truly is -- when time matters and patient results count.

On behalf of all of us here at NeoGenomics Laboratories, I would like to thank you for your time in joining us this morning on this Q4 and full-year 2008 earnings all. For those of you that are listening in that are investors or thinking about investing in Neo, I would like to thank you for your confidence in us as we continue to drive shareholder value in 2009.

We will look forward to talking with you again at our Q1 '09 earnings release, which should be around the end of April or the beginning of May. Thank you, and good-bye.

Does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.