Thank you, Doug.
As Doug mentioned, our second quarter revenues were 102 million, a 50% increase from last year.
We are very pleased with our team's execution.
Clinical Services revenue increased 49% to $89 million driven by the Genoptix acquisition and continued market share gains. Clinical volume increased 34%, while revenue per test increased 12% year-over-year to $355.
Revenue per test decreased $13, or about 3%, sequentially.
While a good portion of this decline is attributable to test mix, which will vary from quarter to quarter, we did incur greater than anticipated revenue volatility from the finalization of managed care contract negotiations necessary to include Genoptix in our contracts.
Importantly, we feel confident that these negotiations are behind us and we expect revenue per test to be flat to up slightly in the third quarter.
Pharma Services revenue increased 55% to almost $13 million, which is a new high water mark for the division and was ahead of our internal projections.
For the first half of 2019, Pharma Services revenue is up over 50% compared with last year.
We booked $20 million of new business in the second quarter and increased our backlog quarter-over-quarter to $106 million, despite reporting strong Q2 revenue performance that converted a significant chunk of backlog to revenue.
Importantly, cancellations normalized from an unusually high level in Q1, and we saw broad-based growth across nearly every test modality.
Combined gross profit increased by $18 million to $49 million, up 60%, from the prior year. This increase represents a 54% contribution on the $34 million of revenue growth. Gross margin improved just over 300 basis points year-over-year to 48.1%. This annual improvement was driven by the impact of volume growth, higher average revenue per test, productivity gains, and cost efficiencies.
As expected, gross margin declined modestly sequentially as we continued to add employees to accommodate growth in our Clinical Division. Notably, our Pharma Services gross margin was outstanding, reaching 50% for the first time ever. The Pharma services business is beginning to reach the scale at which they are expected to be more in line with company gross margins.
Our average cost-of-goods-sold per clinical test also known as our “Cost per Test” decreased 6% year-over-year on a pro-forma basis to $185 reflecting our increasing scale and focus on efficiency. Cost per Test increased 2% sequentially, reflecting the impact of additional employees hired during the quarter to support our rapid growth.
General & Administrative expenses increased 41% year-over-year to $30 million due to the addition of Genoptix. G&A expense decreased by $3 million sequentially due to lower transaction related expenses, decreased professional fees and acquisition synergies.
Sales and Marketing costs increased 60% year-over-year to $12 million, driven by the acquisition of Genoptix and the expanded size of our sales team. Research & Development costs increased by more than 100% year-over-year, driven by continued investments in new test development, including our FDA initiatives.
Second quarter GAAP net income was $2 million compared to a net loss of $380,000 in the second quarter of 2018.
We believe that in order to compare the net income related to the true operations of the company on a more consistent basis across periods, its appropriate to adjust GAAP net income or loss available to common shareholders to exclude certain non-cash items and, if applicable, one-time costs. We refer to this measure as, adjusted net income and on a per share basis, adjusted diluted earnings per share, and we have included a table with how these are calculated in our earnings release.
Adjusted EBITDA increased 49% year-over-year to a record $15 million for the quarter. Adjusted net income was $7.2 million compared to $4.5 million in the prior year. Adjusted diluted EPS was $0.07 versus $0.05 in the second quarter of 2018.
We exited Q2 with $167 million in cash and $110 million in debt. DSO remained healthy at 81 days.
While DSO was up three days sequentially, this increase is timing related and we saw substantial cash inflows in the first few days of July.
Before I discuss updated 2019 guidance, I want to take some time to address our Q2 operating cash flow.
During the quarter, we saw a $5 million use of cash, which as many of you know is unusual for our business. This is partially attributed to a final $7 million cash payment to HDC, as we no longer use any of their technology, but another big piece is the $7 million sequential increase in accounts receivable that led to the timing-related uptick in DSO I just discussed with the remainder due to normal fluctuations in working capital.
We continue to believe our adjusted EBITDA serves as a good proxy for the underlying profitability of our business and expect operating cash flow to improve in future quarters.
We are updating our full-year 2019 revenue and earnings guidance. We now expect consolidated revenue to be in the range of $388 million to $402 million versus our previous guidance of $384 million to $400 million. We now expect Adjusted EBITDA to be in the range of $54 million to $58 million versus our previous guidance of $52 million to $56 million. The increase in guidance reflects better than expected second quarter results.
Finally, I’d like to briefly comment on the proposed Physician Fee Schedule released last night.
As a reminder, we generate less than 12% of our revenue from Medicare payments billed under the Physician Fee Schedule.
Based on our preliminary analysis, we believe that the net impact to NeoGenomics will be neutral in 2020, with modest reductions in IHC and Flow offset by modest increases in FISH.
I will now turn the call back over to Doug to provide some additional commentary on our key 2019 initiatives and opportunities.