FLGT - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Q2 2019 Fulgent Genetics Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Ms. Nicole Borsje from Investor Relations. Ma'am, please go ahead.

Nicole Borsje

Great. you. Thank welcome Call. Genetics and Financial Quarter the Conference Results to afternoon, Second Fulgent XXXX Good

call is the Kim, On today Chief and Executive Financial Paul Officer; Officer. Ming Hsieh, Chief

available replay. of the company's the concludes. audio fulgentgenetics.com. release access financial discussing will The this replay Please the Investor website, to Investor after be the company's of results visit available An press shortly is company's section website Relations on of its section call audio Relations the call the

Management's answers statements. today's forward-looking assumptions, based and to prepared will statements call views prove current estimates on remarks be questions your to incorrect. management's contain and These forward-looking may on which represent

any described no obligation As statements. actual actual may forward-looking results subject or statements assumes cause are uncertainties in The in may to company any circumstances reflect update a statements in today to from differ the it that result, make expectations. results matters forward-looking those forward-looking the of and discussed to risks, changes changes in to

should today described materially by statements and results, management's forward-looking company's be rely future to predictions what that and listen should of implied future remarks events actual Listeners any the events, as including on may actual in the understanding or different is with forward-looking these not statements.

website. detailed may results forward-looking filings cause with to on XXXX, XX-Q available Please forward-looking company's Securities which the filed of Relations statements, for those to including factors that in company's of more related in these contained quarter previously Investor the Exchange review including first the some statements these differ discussions the and Commission, the the is risk the discussions the of described from

company's not Management contain financial useful accordance or earnings per presented measures share viewed results be prepared accounting GAAP. these generally or financial reasons, The United the discussions and for Management's with accordance substitute superior as they for principles has a because prepared financial in may believes various including in investors of accepted GAAP. they in non-GAAP should remarks, to States it with to be but earnings not prepared measures

Please more and financial measures description a information, its discussing per per see company earnings these reconciliation share, comparable non-GAAP share for most incomes directly XXXX the for quarter of measures. of and to income the company's the how calculates press earnings second GAAP financial the release including results and the financial

now turn over call I'd to that, With the Ming. like to

Ming Hsieh

a today second discusses Thank growth second you, call will and thank for our on Paul Nicole. We and quarter results. margin achieving the you review had sale and should Good quarter for results second to easily achieved found At same volume before revenue. joining we financial and GAAP our the good very from afternoon, profitability highlights us in XXXX detail. to lead I our discuss both and cost equal quarter the quarter. time, which our a the the in test and record results quarterly per equal

tests. test [indiscernible] XX,XXX of Essentially XX% for quarter million. exceeding revenue the $X.X high year-over-year year-over-year record new last at for Billable increased XX,XXX of grew XXX% to far least

we have XXXX all we in now warning, reported strong tests first half of the created With than more the XXXX. of in

Our GAAP $XXX. was

ASP the XXXX. Our to of down compared from quarter X% $XXX first was the

earnings the $X.X quarter from $X.XX in the share approximately XXX second $XXX count discussed and be non-GAAP second quarter. The which basis per X% second it quarter income GAAP XX% was $XXX,XXX points million. on first ASP protest the efficiency by XX% will gross low which margin was offset and sequentially. further of in improvement moment. up in a was to and However, year record last approximately volume was up product cost of was to mix Non-GAAP the of an the compared lower Non-GAAP quarter. was continued income

second from across demand the were and how by we're in volume warning our infrastructure volume quarter million second offerings $X.X was The positive us growth in business in of set customer agreement, our success. ongoing of for in continues to quarter, our up having quarter, of strong technology momentum was quarter. traction demonstrate in research clinical able breadth kind capabilities and core and sequencing in this of was we our growth test our core our Well, our to that reproductive for increasing work. a were test. the saw with The analyzed health majority of level EBITDA the essentially large the base. achieved demonstrated Adjusted with the collaboration future And service investments data tests driven

one strong quarter, from our the the saw in that in and wall. writing meaningful scale, in improved result leverage the margin business, input resulted benefited with which which we are to addition with saw our costs We opportunity from we automation this In per capacity. for pleased test efficiency a

was comp start a $XXX,XXX. low from Our record is of conversation protest with the good

more to with in believe we as serve well compare opportunities, us think We environment. to enable as advantage any this

saw minimum also sales with and overhead warning with incremental We and generally costs. great expense, revenue a operating leverage

As warning. have discussed a invested in business handling of to infrastructure we talent years have capable last the in our scalable technology, and create higher meaningfully the in few we past,

achieve generic opportunity, to an pleased more are operationally a ability Now efficient to a and we're capturing and learn results. foreseen growing. next-generation market manner that text we without this having is with our reduce for large sequencing these the to to The in quarter demand inquiry

this our and market We positioned capture approach. technology are differentiated to share uniquely with

attending institutions our customized tests our needs. our are ability flexibility and sequencing and with when collaboration better agreements technology that of wide because to to that -- more to meets announce unique our a patients their range The care have patients. of leverage are offering, informed able of organizations continued we individual outing that partners And of the demonstrated you capabilities and for deliver extra

a The related initiative G. foundation the we that for looking was a to help partner to launch a eligible Foundation. Parkinson will of agreement with individuals genetic This Parkinson provide them Another a was partnership example genetic test we testing announced. clinically have that for the nationwide with relevant with to

select a After samples process, We'll offer partner then customer overall each solution organization. the patients into analyzing the competitive DNA best the and a storing because the product Trojans, the and the we become processing, value with for for foundation sequencing, in initiative.

the individual development addition to and supporting we use In were new in data disease. got to we new treatments able the Foundation, test, to Parkinson that research assist of for the

seeing number ongoing organizations that reach institutions We dialogue this opportunity. are scope diverse with collaboration. pleased the are potential finding geographical with future other and of are for And and we large a with we

we We the that a testament continue and of of will our this number of are partnership technology seeing momentum offer our effective opportunities solution. and pure to is work to our drive accountability type believe flexible increase ability business. partners to To capabilities of

third of this half year. also collaboration our this our health the sequencing additional of market have new We second research a and programs as part business exclusive care revenue words the we the made this the and with they reproductive with of agreements Moreover, from in later institution see the and in that of biopharma introducing year. collaboration offerings several have intuitive to expect to

U.S. This healthy to excited New cheap authorized have that highlights New we in Department recent approval the open in a and to discuss. State York. approval are and process is from to standards and to institutions and our set we zip technology. the were pleased for in either testament received Last announce for the York. approach rigorous more by New state up of York with our that we coding out one to have that and presence a partners due of A have week, expand states. an opportunities collaborations NGS We additional we very They've our Health

to pleased in release a which welcome Marsh Linda press board our of directors, we to Finally, this month. we're announced

great joining to excited analyst in are knowledge Her healthcare to in will the to industry, relations, We our We in working have ahead. years person with bring forward Linda and expertise board. Linda us. insights the look government

we we position look the and had and our start strong as comfortable of in market a year the very In XXXX opportunity. feel to we ahead, rest summary,

solid fill we strong a to these wanting profitability growth have expect and up. to We test of in ahead. quarter pipeline very And continue the

to now will our performance financial also Paul? in the outlook He second Paul on update year to the for on an like quarter. details provide our turn the over financial would call XXXX. to I provide full

Paul Kim

Ming. Thanks,

and $X.X revenue million quarter to totaled the by increased XX% second of Second quarter compared XXXX.

XX,XXX of year While the over last first second XX% of in over up in momentum. continued year total year growing from increasing our of international quarter XXX% Revenues the has quarter, the to the new revenue over U.S. represented of XXXX. second business business be tests quarter remains growth driver and our in in first stable, from grew record U.S. first Revenue the year QX the reached XXX% U.S. quarter Billable from XX% accelerating XXXX. high of quarter, a from significant quarter. in a the from the of year XXX% second XX% our

price majority in the a of selling revenue quarter. average from represented down was first Our business the quarter non-pediatric $XXX, as the

we of due to at ASP on quarter pace the mix a speed GAAP low proportionately scaled. costs compensation our and have with a for tests excluding these -- product and greater as continued the basis per was decrease While has declined equity-based greater $XXX record a at associated Cost test $XXX to $XXX,XXX.

operational in the higher-touch corporate our The which with better efficiency, the increasingly of productivity, seen We from volume, use margin technology are our pleased tax lower points task improvements has and benefited and our we've probe. including year-over-year. proprietary gross Non-GAAP a generated points, XXX meaningful improved cost gross and leverage basis from a sequentially margin. XX percentage we've improvement per in average resulted has

quarterly gross we remain exceeding normal per quarters. should volume with the quarter. expect while plus that we the coming that in this reach And expect our volumes new We strong XX,XXX margin test

committed for operating Now expenses to while turning remain future investing expenses, to we growth. managing in

improvement points XX resulted operating in outperformance percentage positive over first XX.X% in the that of operating sequentially. was top-line Non-GAAP margin quarter in X and an this XX than Our seen points QX, years. percentage we've year-over-year more margin

and continue in a slightly in up fluctuation saw the $X.X was $X.X $X.X GAAP scale. in million that in the quarter. million the figure million first near basis We expense from to what in QX quarter. quarterly was will we we Flat the see expense as quarter. term was in Sales R&D in marketing first

to and and R$D comprehensive invest offering. of to speed artificial our next powered learning We areas chemistry engineered intelligence continue machine all analytics for of from development to by service the in product

our quarter over ability in to maintaining demonstrate have that model that leverage demonstrates still the be this proving time. results Our aggressive R&D investments in while we business a

$X.X Lastly, first $X.X from million up in operating operating million from $X.X the from $X.X expenses expense was Non-GAAP D&A $X.X total were the quarter. second quarter. million in in Total expenses quarter. quarter last the GAAP million million million $X.X up totaled in up first

very For building model the demonstrate quick increasing discipline long the been of we've had shows line in term off. we've testament to our the momentum only strong top on A to while our marginally able paying finally expenses. is business sustainability and

tax share effective $XX,XXX quarter at But was benefit The year. XXXX. Adjusted tax on rate of X%. And XX quarter $X.X earlier million second income EBITDA or second a positive quarter for expense, the on a equity-based valuation the and end compared was million due allowance this $X.X weighted zero $X.XX in of excluding the average per was quarter compensation to the the of second million for full basis common non-GAAP was outstanding. shares recorded rate to a the non-GAAP

flow balance in on was the provided sheet. second offering activities generated by We to approximately strong cash Cash a strong turning the result. $XXX,XXX. Now quarter

cash we each intention marketable second quarter the securities $X.XX generate We to that equates cash, equivalents cash with reporting period. debt. million and cash securities with during cash, operations equivalents per This profitability, $XX.X in and ended marketable our Now it's share. to and reach no from

to Now moving on outlook.

expect our we Ming discussed, of volumes the through build end to test momentum the seen year. across we've As strong business and

guidance. the to our at of Given network the revenues year raising and pipelines growing be revenue our half now well outperformance, we year-over-year quarter, the least confidence represents year we're a the $XX second we growth XX%. the full the partnerships, organic full have of which for in for We as second demonstrated expect year million, our as of in approximately

on focused while for inputting growth. remain also We inducting leverage

year. is are ability year. been ahead sustainable we forward margin we're approach this this environment. growing we've with profitability. fluctuations positive for results the We're Fulgent. term the gap in sustainable new confident generated, our pleased remain momentum seeing the market We the half demonstrated quarter net term our operational end second see income in and that profitability about in and continuing The in technology long we the of While we a operating that the validate for and look the opportunities demonstrate We may to excited the of the differentiation to and to on and and competitive momentum

Thank call. can you it you again for questions. our now open Operator, up joining for

Operator

this Thank be number instructing] and remove gentleman, to answered you. please at if tone press your one key. key a there's time, Ladies pound on yourself queue, the question wish you If please the to [Operator press have star, a then or question from touch the you telephone.

first question is from Suisse. Erin The from Credit [ph]

is line Your open.

Unidentified Analyst

factors is of your contributor the Great, terms this progression? any of sort you the sort of inflection new of that or there partnerships or here? in do that longer Thanks. think it timing thanks. think key thinking we quarter, you drove point acceleration of that of terms of were volume should hit in were you Can collaborations sizeable meaningful, notable, quarterly Or be in there about factors some the were that

Paul Kim

the Erin, thank you for question.

will collaborations, We us which month contributed partners more our reach partners [indiscernible]. to for the have who continue new and join than several significant revenue our this to and continue the we expand quarter, for

Ming Hsieh

had know, for area you last as those in offering of the the months, reproductive do in service a and we product or it have the of market whether Erin, well cancer expansion the is the we we bad the health. made XX course significant that It's capabilities. that very over

to partnerships new take had these sales time. The is accept that thing forming and is second what collaborations they long-term what the organization

inflection and The what's that we made offering, that's those service very we test, it the environment, price, quality a We we've all believe our because test, is result thing the of calibration made the operations. turnaround Whether of available competitive pricing need causing time, point. in other the done this of things competitive. the the the be we the

attraction As collaboration second based be even we achieved the we raising what us that believe year. that sustainability, to the with more We confident far be year confident going first the an as have the for in half feel pipelines is of we successful outlook this that of for about on to our the we see, agreements, than year. half the

Unidentified Analyst

the on I much effort that, of really that's mentioned clearly seen ASP of volume, and was you I front the This than just in Okay, test terms dynamics but curious should that decline you've the were some continue seen thinking or that to clearly the mix, kind in going forward perspective, here in how on. with leverage and building versus that? the the helpful want I'm the should think there ASP? from proactive ask how of of some about did lower ASP was a we expecting, of but what leverage a we be the little bit you've we but were

Ming Hsieh

our to proactive declines market change in Erin, thank think you the act ASP worries the question. about the from is for Everybody industry. the with in I as end struggle the the this tough ASP, response

Regardless, share the competitors lowered of of we've product our reduction lowered also our losing caused cost that will have the haven't success seen partners, not reduced more we But and cost lowered of and our and end, [indiscernible]. so our they're money. cost. some From our time our efficiency the turnaround they're been some we with loyal increased made light will You volume quality. the we our our amplify that competitive. We are our cost

in use we the cost overall more respond make cost and technology, process. in side, to from I for. continue take is intelligence reduction, we our our after in a services terms the provide think entire looking some and of marketed we invest automation of will artificial partner to for look if industry net If continue

this So we could to exceed market contribute and anybody.

Unidentified Analyst

Okay, thank that's you. helpful,

Operator

question is next Bill from [ph]. Your

open. line Your is

Unidentified Analyst

that With Great, with some an customers of with is respect as thanks store compared volume, new of sales what and way there break the in good afternoon. driving A example? ISPs questions. out existing to as terms couple of volumes, the lower to any same did

Paul Kim

is Bill, in all of every overall, the research fund workflow. and a of tests. track But probably so comes in tests almost what designed that our they clinical, collaboration cut are much in mixed are We combination coming test you our pretty our our that of sample, are as know, terms tests tests together. inflexible, couldn't

Unidentified Analyst

see. I

asking question then customers? a the point any to customers would good growth Okay, way volume maybe the from about is be, new existing there talk or

Ming Hsieh

increase. quarter tests, For provides strong in that's that quarter, of [ph]. that quarters the some this tests, most terms the but they But this majority screening tests of see if last comprised quarter, recall area we of you are reproductive the the our few of the

Unidentified Analyst

I'm I see. sequential fourth that for at I the the decline raise one venture. the guess the momentum nice volumes? guidance the you're revenue, in why slight have see million that separately, perhaps implies would respect $XX update China your on like the so third we guide with Paul, you quarter latest really to end guess Ming, curious seeing scenario an that and And I from a and in given lower the

Paul Kim

cautious in Based you're the decrease the doesn't got year grow business answer if surely you're get overall that we $XX forward. for $XX years of that the and estimates first so said the sales. being don't that commenting and to the half during we $XX we will expect in the missed on million, at million, but want to certainly think million internal reason we certainly of because that's anticipate think than what very we to that is what we greater to guiding going guidance that to no, of the couple to $XX and company, don't we of million close is in equate the that But we do on have the least why be the our see, $XX continue we quarters sequential this happen. going will business each million, I we Bill, that's if of revenue past are year. we And is

Unidentified Analyst

Ming, with on China respect thank just latest Understood, the the to question venture. you.

Ming Hsieh

Yes, thank Bill. you

a venture, operations. couple threw been as For China financial we for the This the narrowed China has results, period. rebuild our in for loss year from seen

last a and in We XX forward China in year's new our China Or in continue revenue know, we're you venture was growth as to seeing looking arise years sales may of however, year. and but this $X.X in million, institutions to The increase will in clinical a this business their growth. major start this and year GP China significant year Last expecting that a a was in grow. year market. single, we're opportunities tests the was

Unidentified Analyst

Okay, much, guys. got very it. Thank you

Operator

Ladies day. I am time. your this wonderful gentleman, and no at thank let's showing have conference, further conclude a you today's for and questions participation

all may You disconnect.

Fulgent Genetics (FLGT) 5 Aug 192019 Q2 Earnings call transcript