FLGT - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen and welcome to the Fourth Quarter 2017 Fulgent Genetics Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I'd now like to introduce your host for today’s conference Ms. Nicole Borsje, Investor Relations.

You may begin.

Nicole Borsje

Great. Thanks. to call. Genetics welcome financial quarter and conference results afternoon the fourth Fulgent XXXX Good

call is company's available will the the fulgentgenetics.com. Kim, its On An today call results shortly Investor Chief and Executive financial of the Financial after Paul Relations Officer audio section the Officer. company's available replay be The is press of discussing Ming release in Hsieh, website, Chief replay. call website visit prepared the section to views These statements. Investor answers management's access current your remarks Management's may company's based assumptions, incorrect. represent estimates to call audio Please and prove concludes. will today's of the forward-looking Relations on to which statements and on the be forward-looking questions contain this

to the matters to per Relations may prepared forward-looking to accordance website. company's reasons, presented events, of the Management's is future assumes Exchange may measurements including and States viewed of results principles Please share a not in in results, to the financial update described discussions any accounting prepared Please for are rely the results today of company's these information, differ for earnings in circumstances XX-Q predictions loss the should in various available see per discussing prepared to they over to because forward-looking I discussed earnings in to accordance including as of these release XXXX changes more earnings filed in filings should the XXXX company contained today in detailed quarter the calculates future these of for on or review of but those of the GAAP. including with should the statements Securities Listeners with from Commission, which reconciliation from measurements earnings statements different discussions the forward-looking to press forward-looking forward-looking in including on to that, differ the the United for factors risks, the share, results and understanding superior remarks, GAAP company Investor the the no how accepted generally the it that with substitute the third measures financial GAAP. actual Ming. fourth non-GAAP for some Management financial any may comparable not in With previously risk with in its non-GAAP would and financial cause statements. and be forward-looking of share may and be statements. related events company's financial they quarter results description these forward-looking the the statements may in make be per discussions changes expectations. or measures. by result, they including to investors turn these cause implied the results as to reflect as like subject not that or financial any or of most useful believe has materially contain a and company's the actual remarks what loss described directly call more The statements, those is that management's company's obligation As actual listen statements and actual to uncertainties a described

Ming Hsieh

ongoing on discuss of for quarter joining some discuss Paul quarter us Thank results. including today in I you, our fourth results then through detail. Nicole. business updates and Good afternoon. our our to on will financial XXXX And updates call in thank go initiatives you the the will our

X,XXX. the Revenue quarter million last fourth quarter. million Test results the year-over-year in year. brief fourth a compared quarter provide to of Let the to financial overview in me in our $X.X totaled $X.X grew first X%

in million. $X,XXX was was X% $X.X per was quarter in $X operation in was ASP million. Non-GAAP flow $X.X non-GAAP was $X.XX the used third the loss fourth $X,XXX down share loss GAAP quarter. million the the from and loss and Our cash

the expectations, came we our we in in with below our the growth quarter pleased fourth revenue are in ascensions. slightly have While seen

timing at are able including in of XX% carrier that the built newly received most seems to in meaningful not Looking on driven on more on these compared XXX of quarter warning revenue details these ASC market. large get through in of screen XXXX. into to we strong increase recognize Because revenue test discussion fourth third recognition a Paul prenatal will ascensions, insurance, we A from by orders we saw which interest our impact part was our test of carrier the on initial were a quarter. tests introduced the approximately growth financials. screen

in the are the the by impact does in Given growth test fourth tests warning are also test strong fully we was this these as reported cost dynamics, revenue margins the loss the quarter increase fourth Non-GAAP also that as in processed. a quarter represent we saw quarter. not should carrier this recognized warning

[labX] in also for XXXX gross margin. impacts in the in through invest was fourth which quarter gross the Non-GAAP in and down from the volume continue operations hiring anticipated We to previous XX% margin XX% equipments precision quarter. of

China. encouraged force businesses in the challenges reorganization were with at some sales back year and we transitional Looking for our overall,

the We standpoint. we four have as made this at in areas of remain focus ahead. for the We operational progress year. our are remained in look forward optimistic we developments confident position about year this We in

First, to our capabilities. leverage the advantage and technology our test expanding menu

carrier in screening to we test seen menu. our We and to expand area are pleased with from demands invest haven’t the are continuing test initial our we

close and to to the somatic combine provide from and cancer launch analysis somatic-based both which will germline are the our results test a we test tissue. Specifically, and an normal tumor

and somatic help XXXX. will second in test revenue We the drive of volume expect the half the test the

have our and increased increase to solely to Further, the anticipate. lab that streamline we equivalent expanded Second, last improving continuous expanded operations we quarter purely with work our now we we have efficiency. dedicated handle discussed volume operations. how automation in We and lab invest and footage have we operations in to lab square

after Third organization sales the and going seeing through in ongoing of execution is execution, changes improvement of stability different the our we number areas. in are sales sales

First, addressing our traction the are need sequencing gaining agreement for service with to companies. from of agreement, pharma this customers we large particularly several

Second, companies with for other we’re carrier extending partnership screening test. our

sales international increasing and to in stability seeing see opportunity and agreements. getting remain organization U.S. we’ll the sign strong team we implement Third, by with are our our and ahead. growth are encouraged are seeing sales are Overall, we quarter purchasing outside discussions traction several we and with Group the Fourth, our pleased recently of closer organization in we with

to in As of additional sales recognized initiative the partnership, expand that We we our out has in menu - future. we this accelerate continue it previous that build to taken test our our some have quarters. some we sign discussed expect time us build reach, broaden to and

provide like XXXX. on performance their you Paul investors thank provide hoping a in of and meaningful year to will are details of We in progress remain the our ahead. making for in over sales our of quarter. initiatives areas confident turn our financial We in to He We want a capability the these to team. to deliver advantage of our support. on to I outlook would now number Paul? fourth details and number the technology our

Paul Kim

of compared Fourth the of quarter a Thanks totaled million quarter Ming. revenue XX% to fourth decrease $X.X XXXX.

from cannot discussed, revenue briefly screening the quarter saw on of much little strong was our test We the very volume tests fourth growth revenue we from as we recognize fourth these reimbursed. in carrier Ming we due in are until screening in saw As test. but quarter ascensions to this our carrier

pronouncement all record going before insurance. accrual insurance these XXX revenue will carrier method revenues on we January This recognize will allow we and However, the us under the collectability new we on from collect revenue of test starting X. through ASC to will tests estimate an

fourth we quarter. have Looking XXX of had of hundreds thousands in revenue accounted of recognized sales. revenue if the these an already cost for additional new under dollars benefited standard, incremental also that during our margin would of The included gross the ASC cost quarter, would accounting change estimate at have our were in we tests as QX we the

a prior the to Our for financial there XXX insurance under billings XXXX. versus to ASC and were is change our XXX result material fourth of a as XXXX of quarters the minimal three first

collections continue monitor than Revenue to XX% XXXX required compares our This fourth will revenue to necessary. China. pronouncement under in in last represented total JV in fourth as as the samples revenue in our regularly from the Asia X% and of and of these quarter from revenue be We the fourth less the Also through our XX% are are to decline new making adjustments quarter Asia quarter. quarter. going

compared XX% revenues X,XXX year which the in Europe grew business QX and X% quarter. to of the our Excluding Tests third an increase from QX. stable were than the revenue from and an QX and in more recorded Asia, increase over last and remained of quarter X% U.S. fourth strong of in in were

in from Our $X,XXX $X,XXX the down quarter. was third ASP

product in test. declined lower as test clinical in for ASPs a ASP Our particular genetic the our quarter mix sequencing service of which in result a more carry

$XXX dynamics Our quarter and our per screening of test revenue test compensation the around in equity-based due of recognition. basis to a Average was processing test $XXX XXX,XXX. the on excluding cost increased GAAP cost per carrier and advanced

processed cost timing in the of reminder, quarter all costs per include revenue were the a in the tests of regardless that of recognition. As lab test

of came As to the down XX% gross a in margin COGS, non-GAAP result quarter. increased our fourth

to efficiencies to average despite an technology industry volumes as insurance cost margin believe overall. us our up or scale. our as will in our declines varies margins our ramp long-term productivity gross we will in and per pricing fluctuate continue may the and operating and and test the on We in automation lower see expect collect continue volumes, differentiated we give lab. Our our see advantage with test Over claims business time to we still mix improve

our remain quarter. a million decrease personnel million focused were of timing in initiatives. will and believe in menu. from the Turning quarter up sales in future. $X.X expanding the and was capabilities and to in and in our investments help last research investments expense this test on QX technology invest We our made expenses, last R&D from while drive $X.X On to platform we marketing continue area side, managing is operating growth result million growth $X.X of in On was throughout made expenses we sales for development, marketing down expenses. XXXX This in balancing million $X.X quarter. and investments marketing our in

expenses expense, non-GAAP was end Lastly XXX,XXX $X on QX for the in $X.X share $X.X third XXX,XXX G&A compensation $XX.X for the million, equity-based quarter. Adjusted compared in On million at based loss non-GAAP non-GAAP fourth loss and and a EBITDA fourth a quarter excluding loss the quarter common million expenses of last non-GAAP for of totaled $X.XX was operating a quarter were per GAAP the the year. basis to of shares and million tax million the was or XX%. quarter The outstanding. of rate $X.X

million. year $XX.X of to and income XXX,XXX $X.X was million For million to revenue total to loss compared Adjusted X.X% XXXX EBITDA non-GAAP the year. an was XXXX full grew in compared XXX,XXX $X.X last

sheet, and This cash remain balance cash no per our marketable in growth the quarter cash to of debt. equivalents with ended our We we share. to equivalents position. comfortable and to our support with $XX.X and with well-capitalized we're million $X.XX fourth securities test equates Turning cash,

are which saw levels some initial faced year and Now are being for we year visibility. number below as ahead of we We on business. in the said pleased mentioned working our moving confident traction, sustainability ongoing with investments unforeseen seeing in have which challenges That in the and we're our we we mixed this to made the a opportunities of have stability, outlook, expectations. resulted Ming we’re growth the initial of

XXXX. bio carrier, development. for in growth half growth our year. XX we pharma business. hire improvement we in ahead invest expect capabilities on first and for As expectations, XXXX moving cancer, institutional research remain results nominal deeper losses to and the domestic somatic This in we employees XXXX XXXX as our came tempers be growth opportunities this million. we believe in first anticipate Overall XXXX forward. that continuing and to the the will as germline in can gross technology hospital which translates uptick. XXXX towards sales, This finish can service. in the into we best below and XX% sequencing for operating approach and going margins, for we of at expectations year revenue guidance opportunities to estimate questions. focused up both in continue executing such of a on open we sales breakeven anticipate assumes and slight joining increase get on our full we’re setting our very hand. from out the It in international tempering as the is into in our many we revenue an and the On we the technology anticipate and of drive to we call. expenses, least growth see our and operations our year from our for half Based capitalize uptick XXXX On in initial approximately With again you Thank for Operator that it at on you believe nominal minimum

Operator

with Quirk Piper first instructions] [Operator Bill from Our Jaffray. question comes

now is line Your open.

Bill Quirk

is comment the that math implies In and that here? to first five outside the quarter. your volumes sequential quarter Where five am doing weeks the are call I'm a volumes if first guess made over a that XQ volumes. the third on wrong basis first question of up were I on actually XQ in XX% you volume weeks math over correctly ratable guys relatively going I assuming that down is So the

Paul Kim

with your So are approximately XX% quarter. in correct fourth up you ascensions but up was statement initial the volume were

in insurance the Bill. was test based And go screening launch revenue for However, increase we record that ascensions of our to in recognition you test were had the revenues record remember, to the our revenue that in fourth able the cash. the quarter not on as growth the until largely we carrier we're through actually Henceforth volumes we collect able not on. on

Bill Quirk

third delivered right Paul, of should the So increase side assume we in but of that correct so math off to quarter, the X,XXX should is here tests were over be just there's little think only X,XXX - the that XX% about this? we way a about those

Paul Kim

we through the were amount the insurance was if and that it collected the cash the in went had included X,XXX delivered from yes X,XXX billings. X,XXX, in that we the increase small insurance

Bill Quirk

another collectability? said we the including way X,XXX test screen the in you're So had carrier within not no

Paul Kim

We a very of small relates amount actually test that And of it part as question screening gross good a margin. also to carrier X,XXX. very had because that’s

the gross processed almost quarter margins put to were was reasons it, the our is way so Another low at in because to say lab why tests. fourth X,XXX

Bill Quirk

right all it got Okay, that...

Paul Kim

of Because record timing cost the have to sales revenue of regardless we of recognition.

Bill Quirk

that process the just the guess clear But so I’m I so Paul, quarter. lab in almost X,XXX tests

associated You sort where revenue results X,XXX? delivered there some of was with

Paul Kim

correct. That’s

Bill Quirk

the your And then XXX just you was about dollars ASC I had at of you think in in juxtaposed would thinking least higher fact hundred XX million revenue. comment about and comment several have your guidance with

million something have So at closer that annualizing which would your XX. you to $X.X gets about put at to least revenue

not expecting I So traction guess XXXX? assume that that in reading should you’re payers much private with to into we have

Paul Kim

that make hasn’t and say very for fun guidance because myself feel year want we XXXX, we missing sure in it Ming and guidance other don't have to we been XXXX is initial The with. that to comfortable like anyway we to at very look that way a

Operator

Our Wright next comes Suisse. question Credit with from Erin

line now is Your open.

Unidentified Analyst

actually Hi Erin this Thanks taking Hong on today. our is for for question.

I outlook because you of of on in amount you that that underlying of and just wanted the laid you you sort sort by sort of even expand know could what hoping visibility. mentioned of sort you sales guys comment? fair was the of Regarding mixed out. dynamic of meant outlook of conservatism levels that on that better I sort

Paul Kim

been to pronouncement, weigh had have going we here Bill increased and were to volume in. of good that So, the a is brought and Bill this mentioned when point into increased from for with. amount I, what new disclosed the if that at higher feel revenue looking would topline we’ve to Ming We was had amount the under we And QX in results taken guidance gross but is standard we we've be both I'll outlook and quarter. then well the an we QX third account the and the initial part take margins had under normalized new comfortable an revenues that that I’ll XXXX, filed been up weeks XX-K in that the coming in Ming that what have revenue that as the question volume want have and the first actually the very out our

be would had under you test that happen sits, the and in somatic that GPO if the quarter a our or in going is it and take gets have and pretty if the the into talk of initial have So might better $XX XXXX translate business. about that initiatives launch intact can guidance. in the like that we’re that XXXX that We we we And in you will we about to we base hospital account reimbursement us whether not that the be $X which our and positioning close be largely additional we business going that within market $X can anticipate Ming or things saying on certainly essentially the that out initiatives into where to side is incorporated be it’s to grow doing up then alone the million itself flat million fourth million.

traction growth that we GPO weigh the very, guidance Ming somatic I’ll well our looks In our addition we we very have in test. the things Beacon the where don’t as venue side, the the test to in reimbursement the as essentially which with that we anticipated sit side, see that is on on let that, but expanding promising get and in continued carrier certainly the on

Ming Hsieh

make do to to forecasted to we can adding deliver. that what only we need comfortable what the we Yes, Paul's to sure point,

- but when as initial recognize starting providing the as with and that not hopefully see attraction some in the side side on well have collect and the the how to the how GPO money, do are be to generated the but launched many as we growth also opportunities premise half expect will do GPO somatic we test such will be area. this see we be of include opportunities we in test the we the revenue market from released the that We We we’re adding the would the in in the working year, second test. do test do forecast the

Operator

Instructions] [Operator Andrew with Raymond Our question James. next comes from Cooper

is line now Your open.

Andrew Cooper

smaller in to when kind know initially the it of was I get positive a one was has Asia a curious now just relative first be become went changed down you opportunity us and quick it expectations maybe if that color Just of helpful. revenue on to of exciting of of JV, number, Thanks. announced look as wanted and at and we that path, back on percent smaller it thought kind kind when what could give so you some really there will

Ming Hsieh

you the thank questions. for Andrew,

about it we and our JV trying under revenue side One are the As be talk area the to from several capabilities the from we the build is will different and China in come investment areas. China our royalty side. China, payment in China the

expect do year we half of royalty from second the payment JV. some So this

of several inside XXXX is that’s any RFP to that guidance. the become new providing in and why China when we see materialized We part only up operation service China. which China the and does not we will we hope and set do also inside conduct built inquiries it to our enquiries somewhat from pharmaceutical China in response included see of of China of In capabilities both not the are have response to in some outside addition, our response to the companies outside but that operations also the the we some our

Operator

question Wainwright. with from next Our Chen Yi H.C. comes

Your line is open. now

Yi Chen

years. what that think from two us, grows do your you sourced and area will revenue Could drive most to total of percentage revenue tell next future expect China, of in and do you revenue in the in China the which currently the percentage are geographic also you grow

Paul Kim

couldn't hear first question. part Yi, I your of the

what currently question from which area? Your of part was, our comes revenue

Yi Chen

China.

Paul Kim

okay. From China,

Yi Chen

Yes.

Paul Kim

you larger and third second XX% China a the was a little straight revenues was color fourth our of the revenues our approximately quarter just X%. XXXX historically portion the revenues. In in China is China to to less revenues. of from than quarter So XX% give of

Yi Chen

grow And do revenue from the expect to future? China you in the

Ming Hsieh

Yes, certified credited Yi the and lab up in we and as China. being set we lab mentioned which has

start half revenues. of We the expect revenue the of and royalty this those those in will remember revenue from through we'll collect year second percentage

province, In and Fujo terms operation sales our headquarter but Shanghai. will office lab reset up in Fujian our in be the

Yi Chen

Asia, revenue main will think do is outside forward? that you growth drive going area continuously the So to the U.S.

Ming Hsieh

the currently The in year XX% U.S., last revenue overseas. - terms XX% of from

Yi Chen

forward? is So main you revenue driver do the going think that Asia

Paul Kim

little bit of No, historic.

revenues, the So larger for our take China, portion at look X%. about a the of was it part if our you fourth your a of revenues quarter, first it question was in

half If China. overall straight you from outside at a that's from the coming look business for U.S. a XXXX take the our over rest and little including U.S.

If outside fourth approximately at a from has look XX% dropped off. China’s of XX%, the take quarter, and revenues that's because, you U.S. revenues U.S. from amount the the was

of the certainly terms from prospects XXXX, a color and based the made assumptions China guidance lot Ming guidance, that that. other put around revenues our In we're all not we now from because on into counting whole for

gain our wherever business, a so The in at initially the be with our end revenues will XXXX of that $XX of XX% States. about end our should XX% least somatic coming under but U.S., take look we're traction, up the the believe put another say are the level you guided. we at that in guidance what to we to way better be the so we it the getting traction from test base the we than the within is somatic XXXX we million up GPOs should largely or tests United If also that reimbursement should the United States side and the so traction anticipating or

Operator

a conclude Everyone This now participation day. the you further may in no and thank questions. you showing conference. I'm for great program does have time, disconnect. this today's your Ladies At and gentlemen,

Fulgent Genetics (FLGT) 28 Feb 182017 Q4 Earnings call transcript