FLGT - Earnings call transcript Q1 2020

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Operator

Good afternoon ladies and gentlemen, and welcome to the Q1 2020 Fulgent Genetics Earnings Conference Call. [Operator Instructions] As a reminder this call is being recorded.

I would now like to hand the conference over to your host today, Ms. Nicole Borsje, with Investor Relations. Please go ahead.

Nicole Borsje

thanks. Great, welcome call. Genetics and financial quarter the conference results to afternoon, first Fulgent XXXX Good

call we Brandon the Kim, Officer. On today Chief Officer; Chief Financial Paul Executive Officer; and Perthuis, Commercial have Chief Ming Hsieh,

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

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

uncertainties to and actual in may matters cause from forward-looking that differ changes a statements any As result, risks, discussed circumstances results described in statements. to in those the forward-looking are subject

update these assumes on predictions or may reflect today no to obligation company of described future or to materially Listeners today The not that of understanding expectations. to it different the statements may such the management's the what future as make events, forward-looking statements in listen including in is events with actual should results company's by forward-looking actual any be remarks implied actual and changes forward-looking any rely should statements. results, in

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

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

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

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

Ming Hsieh

Good you quarter call joining Thank afternoon our you, thank first XXXX results. for and our Nicole. to discuss today

highlights Chief outlook from handing our go-to-market Brandon quarter first to strategy. to results in financial I the finally, detail. and updates our over our will will our our Perthuis, before Paul review provide And discuss Commercial on Officer,

has on the our core business, coronavirus we operation. While our proliferation the year, had as start good our on a had of in the testing both of as a terms novel meaningful business, impact global to demands of well

Specifically, this need due recover address took solutions action aimed our market to early large the to company for pandemic. to we decisive testing

pivot to testing briefly on earnings COVID-XX launch focus first last As call, quickly resources the were development our of the and we in discussed quarter. our for to we on solutions

quarter results our increased expectations first, dynamics to XX% to million. on with but the $X.X line first growing XX,XXX. in Billable update I moment, in year-over-year detail for provide was a speak I will test XX% Revenue quick in will a quarter. our for these first year-over-year the

ASP with Our we QX. XXX what in flat essentially was a saw

from QX. XX% While test cost increased per

tests. Adjusted gross rollout This X with mix due decline expenses and along COVID-XX in percentage the to the points sequential first XX% loss margins first test up down in gross margin from points basis approximately in EBITDA last quarter was year and related was XXX the to quarter investment sequentially. was Non-GAAP first both $XXX,XXX of our quarter. approximately

saw of core into minutes I I spend to want we discussing what a few Before COVID-XX, business. the our across get impact

March. As imagine, volume you can we saw in activity slowdown in significant a test beginning

shelter-in-place traditional to and genetic the institute As decreased. we materially for testing non-essentially testing mandates began

January pediatric our February, oncology, During reproductive saw. and we the majority business the of the to continues and health warning drive

before diversify Our March. our across slowdown add customer segments as and base all continue in more to core of customers we saw strength a businesses experiencing

the As to world caused would as how to in world capture drive everyday’s the significant to for revenue. impacted incremental has ways. disruption our I we businesses impacted you has know, in the which like COVID-XX discuss in as business coronavirus plan has the all life, market shares well various our solutions operations, around testing

First, in under California's to shelter-in-place process mandate. City Tempe and samples lab essential precaution. operate continue offering from screening and COVID-XX. as operations products Due health the strict for It to business to standpoint, we're under our qualifies our safety lab

So we any have been able normally to operate disruption. without

to our tests invested required fact, the certification COVID-XX our as the Because in to remotely on resources to COVID end-to-end this our office In expand safety which been and we are appealing employees achieve of investment, crisis, we Outside - largely an basis immediate have during capacity lab is minimum operating customers. for disruption. tests. to handle our able this with lab, into offer coming

continued lab during to the challenging in to our at-home, the our these who clock employees support times. operations around We thankful have are and both

February. we the have From since product begin been in spread standpoint, virus working development on number of initiatives to a different

capacities both been quick are individuals help overall and readily quality in we accessible Our available have tests the to to that alleviate develop the shortage and goal has healthcare market. providers testing to in seen

launched and announced for COVID-XX. tests have two We distinguish

approach is COVID-XX most limited tests market offered this their on Launched for which in time, based the with turnaround today. distinct has targeting common regions RT-PCR the given early in two technology April, most COVID-XX. is tests rapid of our of more One

virus to caused launched also on which combination test the that comprehensive we next the the sequencing detect technology, more used March, based and generation In a the COVID-XX. laboratory method

nature time, test can based about the in of potentially long of of NGS be to While or virus and turnaround the the believe collect institute this to utilized the by used treatment be tests which this vaccines can complexity development learn a data, options. we on results in more research

the event. limited overwhelming has for addition, the In source the which to market test by due reagent to be to need NGS-based is not difficult

addition about COVID-XX In testing Genetic. the talk have Picture healthcare initiative two tests and we genetic have to our launched also momentarily. test on for for working consumer will platform, been Brandon more this we kit providers, at-home through

our and size our the resources and of such in this short And time, to of we're pleased with the required relative launch ability develop given test amount organization.

how our one offer platform genetic market. talked us and in have the to the the about to Over enable flexible years, technology we lot of broadest menus a test

our fact the to Our ability deliver COVID-XX test is technology a differentiated. testament truly is for this to that

discuss we incremental with the testing will And overhead. built Paul of has a more platform financial to a COVID-XX enabled to us solutions pivot have detail. in minimum quickly impact range of wide the offer

But on a quarter $X for high made level, million. expanding developing resulted this we incremental, the in approximately in in COVID-XX investment tests

business return and In across are supplies in we including that our will be to addition our to a still business beneficial see which our will confident the this long term. difficult investment, on strong of which we solve, procurement is

need and truly been Fulgent goes who platform market. the the those for COVID-XX others testing our technology unfortunate, are is to the differentiated circumstances whole believe damaged in have we Well, the the and impacted, to our heart from surrounding has the the response

long-term we on which We rest losing testing. continue hope year. this focus opportunities, testing core to focus need COVID-XX we'll to We'll on ahead will for look up genetic our the continue business solution for of accessible pick as the to that offering without believe products

On to the larger quicker also TPT side, addressable than and our be this FLIMS before will pandemic. we believe be market

Brandon to go-to-market to provide initiative, the an I over call for insight our demand to COVID-XX that, we're With including update our Perthuis the Brandon? like test. seeing on would turn on

Brandon Perthuis

Thanks Ming.

out are would a go COVID-XX, COVID-XX our As by the I emerge Ming before. to been hope organization. minutes from like meeting take of And than who various stronger and few has impacted which to pandemic. we mentioned, business our the to were for uniquely new all test core everyone our to needs we this discuss hearts

During reproductive deliver disease, turnaround ordering our business to negative we the adding impact capabilities laboratory, these for made for more accessible with results to quarter, on and operational time. high By rare core quality to continue clients. testing our fully we oncology, no health our from online customers

Sequencing as company to our a it continues quarter, we as with had biopharma a service reach area growth research strong be organization. for our and contract expand a

services to committed During the this to quality our come we delivering Fulgent. remain expect customers high from have that time, same difficult

COVID-XX, Ming for Turning launched NGS COVID-XX, tests RT-PCR. two and as we to mentioned,

hospital We clinics, systems, have other seen large from health corporations demand and

via testing RT-PCR. preclinical providers, care

of as services clients provide the and of SARS-CoV-X. these relationships our for are next we newly to addition, In organizations seeing expand sequencing likely we genome generation researchers to test, turn are other to future. the these will new sequencing is Fulgent, formed in interest Many

Operationally, have week. an are we added fully processing and our of days our has additional shift tests per laboratory a are testing, This and at seven for now day. capacity now operational COVID-XX we increased thousands

for but clients. feedback continue see from outstanding to to continue We our receive more our a significant services, need perhaps we importantly,

than on averaged success. has turnaround our has hours, tests less critical Our XX to COVID-XX which time been

and and been results. with portal by reporting differentiate local accessible we to to have that custom has pleased makes received lab them detected, feedback detected, seven some built we two Healthcare it extremely of with providers five taking taking overall state platforms days as with as also as service. or are healthcare providers have not results, This COVID-XX indeterminate the The this As across makes variety our deliver easy three organizations. new necessary portal for to labs portal to results to in many long between a helped mandated days. for

COVID-XX relationship One across of notable COVID-XX locations chronic to the who be is at care a solution XXXX example network This to seen more specialty new screen customer of is solutions a leveraging from care. need testing for other testing nationwide our than patients, customer with it's clinics our clinics. stemming

platform ease Our and won are rapid business our primary we over against. the this the others competed reasons turnaround time of we

our focused likely continues patients making for Moving forward, available we the be demand and to to our for on need associated as some elevated to reopening of country team readily expect commercial to the time. continued test period is with COVID-XX see testing be

used at-home authorization submitted emergency for the COVID-XX addition serving with test to FDA we and Fulgent. our In to COVID-XX Picture recently hospitals by our clinics an cast,

would who screen results major we an These within believe as matter reminder, COVID portal. will to consumer role offered It of play be online Genetics individuals, can this initiated our at-home days. back virus. through XXXX. As a be We a receive Genetic website. test Picture Individuals fighting our in will eligible is through kits platform, a our Picture which test in launched available

which that Many resources or price patients include PPE Conducting this the conserves schedule their and most to of test costs will according to for COVID-XX able the would insurance, service component. to the be fee the for at-home collection otherwise a tests on throughput of telehealth CMS require and these shipping should The reimburse the new clinicians patient. high time valuable health perform will testing. test for follow bidirectional

in we the our intend are consumers is for significant to dedicate go-to-market know but of stages service early We available. letting this strategy this to test resources

the cannot the more communicate response, moment, at-home as will offer update into Given around this uncertainty of the FDA appropriate. impact we any but notable test we insight at much

up, the company as be we across to process COVID-XX we the Though forward as also has our back look to began been a to lifted. considerable, slowly business non-COVID-XX the country lock-down related picking made

to turn the Paul? an the now provide on call performance first details as Paul our on our in over update provide outlook. financial as well I'll to the quarter,

Paul Kim

you, Thank Brandon.

increase of compared quarter XX% an quarter of First first XXXX. the $X.X revenues to totaled million,

during the of in Our The year-over-year most representing significant revenue U.S. first XX% the remains quarter, business of the XX% revenues the U.S. from grew driver quarter. our momentum.

our indicated, to of not have comprised continued did revenue. more business who and customer than diversify during a we this Ming As XX% quarter single

although, to of Billable our at and of see we year. quarter. very volume was amount COV-XX, did growing unrelated this last test of last XX% from in in a quarter the come this XX,XXX organically business start The QX volume vast core week of over the totaled some to

to Subsequent the XX, COVID has March volume been tremendous.

was and GAAP on $XXX, of excluding the quarter XXX,XXX. in Cost quarter. ASP basis, compensation $XXX test first the for the was with fourth per flat XXX, equity a quarter essentially based Our

sequentially. There gross non-GAAP basis X declined and primary points reasons in XXX improved quarter. cost margin year-over-year Our XX%, approximately per lower but points two to test gross the increase margin percentage approximately were this for

tests. mix demand costs supplies the First, higher lab the related of capabilities, for COV-XX And including specifically offerings. was to procuring to of tests, also kits of the the related reagents increased address COV-XX personal the the second our costs expansion to and the and was,

to turning Now operating expenses.

amounted we of $X million made our COGS approximately indicated, including all costs Ming significant for in of development the which As tests total to COV-XX, areas investments across in business.

result, to were as expenses size sequentially non-GAAP percentage As operating COGS. revenues, somewhat negative a well out cost we across and SG&A distributed saw margin and our proportioned a sales points a These with approximately as to XX incremental declined of marketing, R&D XX%. R&D,

the business immediately, we've we ROI see from believe investments Our the GAAP and quarter. $X.X term. operating extremely test Non-GAAP million up $X.X quarter. to in were in million are our million our strong the that we'll in from quarter $X.X investments million from offerings a the made first up We for fourth totaled last these operating believe expenses expenses longer $X.X almost COVID-XX beneficial

for the first for equity-based $XXX,XXX compensation or compared of was On the EBITDA average $XX.X and million first based quarter non-GAAP was Adjusted quarter XXXX. per weighted basis in common loss share to outstanding. on expense shares $XXX,XXX quarter a the $XXX,XXX excluding loss $X.XX

sheet, very quarter securities first with position. cash remain cash with $XX.X comfortable million ended we our over and in to the the turning marketable debt. liquidity Now, current and no with We balance

in flow $X.X quarter million. the cash press indicated from in our we operations of generated As release,

that with COVID-XX. prudent Now to market, we volatility XX it previously testing for in moving our uncertainty including provided. withdraw our We volumes as coupled demand slowdown business is the the in we're for feel year the given the on broader full to with associated core the outlook outlook, test seeing

However, relates flat quarter. expect compared be quarter, second down the as we the it to slightly revenues to first to with

weakness sales variables evaluating taking when including balance few seeing a guidance, from we’re account tests COVID-XX our traditional with how of in could overall generate we are our currently QX, our genetic we're revenue the into much guidance including market. the There testings for

our already it month COVID-XX a healthy very demand been since for has have seen we about While only our launch. test offerings,

on to see said, maintaining these we usually addition, In is as launch and our our expand we're core the we gross to positive ramping from what is departments our tests in a We're which keep margins To all should volume, Having been the these up ASP. overwhelming than causing tests since that offerings, April. of the reception all exponentially, our employees pricing hiring drag volume lower test on with throughout enormous tests, our company. further also scale. have

for to while we In contribution too some, gauge it unprecedented to opportunity very these solutions for of And is to The early the unlike made given our short position is year to revenue us dynamics. testing offer provide was Overall, a be. as anything not planned. and start have would year uncertain we what revenue able guidance full in the look we're the XXXX history to promising be COVID-XX the these incremental have could times. for

platform positioned and with well technology structure grow capital differentiated our us and have our strong sustain testing, business that business. combined our genetic and We discipline our feel to approach to

as also address stronger screening be believe We on an our that organization can larger now of top markets capabilities that testing. genetic will we

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

Operator

[Operator Please Erin ahead. Wright Instructions] line Suisse. Our go of comes first with from question the Credit

Erin Wright

particularly you trying any of of and recovery non-COVID think to at helping COVID the for guess. of of about the the magnitude into the think to speak over sort trajectory we of some nature I Can core offset and Obviously, volume about Thanks. March how business the April? March to or that you course testing I'm that sort the the seeing, dynamics of is that and of were magnitude the end business? should

Paul Kim

Paul. Erin, this is

including lot the I I than environment ours would has traditional from to seen think a that's XX%. XX%, rather the XX% that for drop-off have a say, laboratory people side, business say the that traditional testing, scenario of on testing, businesses, some genetic of for to anywhere from down like been is the that to XX% lighter COVID-XX related

Erin Wright

of think Okay, dynamics can that's volume back the about coming test seeing? should helpful. given the like realistically that quickly some And how back, we you're volume the how mix of some come

Paul Kim

that do address want Brandon, you one? Sure. to

Brandon Perthuis

great Yes, sure. question. Erin, Brandon here, it's a

us answer the begin to reopen. orders country think be it's I certainly these lifted. some to seeing for seeing mean difficult that. I we're stay-at-home of We're

there be So will we of expect to a patients backlog that need testing. to access

drop-off testing. be the didn't in have mean that It So volume patients patients to less doesn't just means to these needs access tested.

have. this not need other of it's were we fastly we backlog physicians, back and products patients for these digestion care can that, emergency critical But it to still services and how their country we get that there and obviously, their the to depends hospitals a surgeries, types on. certainly, as as to during think hard will tested of that The And reopen up. the expect be on So time this timing of as moves time open than predict. we clinics people bit on the access will

Erin Wright

And great. big you? Okay, you clinics, the can good expand that and/or for that relationship how Thanks. that can win for sounds care then does on to is you? it span like the specialty sort a speak entire relationship, how win And you of offering

Paul Kim

to that you one? address do Brandon, want

Brandon Perthuis

comes other to of things won has COVID-XX when service, our again. relationship company. expand make provides. test. but was for lot based Currently, Brandon a a into our the services It absolutely a business Fulgent win difference significant this Erin, exclusive time, sure. competitive. is think portal, turnaround the It testing Yes to it our on I it to We that was the our potential

Erin Wright

flat revenue include does improvement sort of to Thanks. or the offering currently well Does said you the slightly in And you're down. testing be market? that or it seeing and the dynamics COVID second trends assume and both great. continuation you're of your across one seeing testing capabilities any the as as more, Okay, to a core just quarter

Paul Kim

is So Paul. Erin, this

the one short a of the is also but of want Because to guiding we're any about few answer - I we this number. quarter. are So yes prudent be includes to companies speaking immediate that kind about both, that actually think

I where our isn't mentioned. very in part that Brandon business, come the there testing backlog to genetic actually feel we has QX trying for about good a might and think gauge of standing difficulty the as us is in,

related demand related is I think COV-XX. volumes terms - seeing and it of to what it's in nor we're and our to optimism

just we've I period it's of think short a time that had.

As launched we we test second April other March the one on indicated, towards one half of X. the

So been launched. for have a about the RT-PCR little a it's really month, tests we less a since than month

And that been just four growing overwhelming. the growth we've it's And been the three had has to and reception within weeks exponentially.

to to short try within the and period assess even guidance, talking if prudent trajectories volatility and second we're have be that the of of that kind any what quarter. trying into COVID the time the project offering would the It's we difficult tests. been about So,

Operator

line your Mah And Sandler. Piper Please with of from is go next ahead. Steven the question

Steven Mah

for going an I I'm on were Erin to just call to you ask volume, backlog coronavirus get question trying potential without QX, am and follow-on then the So what But and guys have? on thanks questions. the impact. you to rate One the of taking coronavirus estimate sort on run tracking questions.

Paul Kim

even vast the than if achieved know, majority, in composition so I of you virtually. take the at million the use word quarter, we majority a $X.X first vast Yes, the more that might look the you

and off in came from the go it then lower. - January drop February. in December, saw We orders of back the revenues we to and March that half starting happen precipitated Our received

lower, more went essentially of leveled a then, And it you month giving during bit April. after out it little the information

Steven Mah

Okay, that's helpful.

helpful. So okay, that’s

and testing? rate of Maybe right version I on the guys on is you know bit you your are yes moving meet substantial what give adoption that can little RT-PCR side, the to demand. split have And Okay, And us now. also, is said the between for guys capacity hiring NGS to you pretty this coronavirus version? that COVID-XX a color

Ming Hsieh

the Ming. part probably part. then address Brandon second let the address Steve, this is I'll and first

the know, process terms looking that and from to we're up kits to the the expand lab shortages reagent X,XXX really to of on of to depends day probably currently able at This quarter. capacity, we the collection as XX,XXX per equipment. of the market. In there's a to in you Currently may demand up terms lot are forward end of

of those XX,XXX adding in day we've as operations the kick They So to in and related we're the to shifted them but we day. seen kind some balancing, now per to capacity genetic convert of run running And the that sure we’re gradually, that business have CO-XX also of traditional the and do are demands liking adding our we personnel's. we capability shift per for demands the the are the to of have make in some some RT-PCR NGS. three the business up

pharmas. much, NGS the research to - than In virus. more this and much deeper dealing a costs - forward is terms about the slower RT-PCR much They is of with in more. benefit terms very we is and know of really lot it have it’s institutions it looking are also speed But and from

I the some But - capacity positives XX the for a terms we we almost of to is or tests inconclusive. think - it's those in see see all for for of about terms ratio we test. comparison, X in a

understand better We give a and also have you muted. how does or us confirmation, to virus something this for cover Brandon develop want NGS to method the lot more?

Brandon Perthuis

the question. turnaround mostly The vast we're is majority good Sure there. Ming, clinical RT-PCR the because Steven the I job you time. for thanks of think testing a did doing of

hours. it’s Ming three two believe this NGS to delivered this than to around fight be need or we And within mentioned days. As virus difficult test adequately faster turn XX

testing RT-PCR clinical the research. sequence from to our organizations seeing want but doing of requests we demands They is are majority and the So genome.

chain any to NGS necessary. we but NGS for Again, disruption, would test should be as tests able as as test. the have absolutely NGS well. any we issues a reflect some ever be see clinical requests do could we So or The bit just little slower, supply our it's used a

Steven Mah

Right. follow-up question. Maybe a

is that yes, should the the institution, service version tracking. yes more vaccines, therapies, research is testing business? as revenue yes we for of that a in put as biopharma looks it So to academic them NGS use the Is revenue going mutation identification, or consider labs, or like more a academic - sequencing be a strain

Paul Kim

be the in genetic NGS test revenue. will we testing an At label NGS still test, would just our NGS testing. as It for test it like

Steven Mah

Okay, Yes a the then for that think point COVID-XX test home as of should gets my got care not it. and question, final device at-home that about actually sampling just testing. - you we device, It's sent right? a back to

Paul Kim

want to Brandon, that? do take

Brandon Perthuis

Steven an is Yes, collection. at-home It that’s correct.

do So we so simple CDC would some to mid-turbinate is patient's collection has The mail now can care the nasal to authorized swab the that administer. easy the patients self more home. themselves

be the in hours. mail approximate and laboratory then processing our have XX to within tests will back patient's home, at and collected results So would Fulgent put at the the Fulgent. would kit happen They

Ming Hsieh

test the evaluating the also point, we Steven test, technologies, which IgG/IgM considered as as self for several well are last cirrhotic the test. at-home different Brandon's add virus is one, To test,

Operator

at time. And we further questions no have this

Paul Kim

you. Nicole, to back

Nicole Borsje

us Great, any additional thanks for if reach you free joining Thanks. And today. questions. everyone feel the have on out call to

Ming Hsieh

Thank you.

Operator

conference have today's your concludes wonderful this call. gentlemen, a Thank participation and day. for you Ladies and

You may all disconnect.

Fulgent Genetics (FLGT) 4 May 202020 Q1 Earnings call transcript