Earnings call transcript Q1 2023

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Operator

Hello and welcome to the Fulgent Genetics Q1 2023 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded.

It’s now my pleasure to turn the call over to Melanie Solomon, Investor Relations. Please go ahead.

Melanie Solomon

Thanks, Kevin. to first welcome results XXXX and call. conference morning the quarter Fulgent financial Good

Investor today concludes Hsieh, of call Chief shortly are Paul call the of the the On Ming this available is website, on Financial company’s release the the company’s Relations on and after www.fulgent.com. financial The replay results Kim, Relations section Chief available Officer Brandon company’s of Officer. will Perthuis, section the be Commercial Investor press call discussing the Chief Officer; Executive A website.

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

with subject available today results cause company’s should Exchange filed uncertainties XXXX that that to listen the forward-looking including ended the the these reports forward-looking no statements. As may for including December remarks factors statements to of differ the future subsequently actual events, including forward-looking statements risk forward-looking more in XX, circumstances and Investor update and statements cause different the review from results changes results which the Please in in Commission, of to actual XX-K statements, events forward-looking contained to to assumes of risks, company’s these any in in company’s are it some be with website. those the the by discussed a the these those statements. statements result, materially discussions future filings today reflect matters year described or may results as on may and obligation any differ what in to is the in discussions from implied the described that Relations the on may or detailed described expectations. any of previously and related company to filed in The Securities should are rely forward-looking actual actual make predictions not Listeners understanding changes management’s forward-looking

they earnings description results contain has per in financial because accounting share prepared including or to these should States measures Management prepared GAAP. but to EBITDA non-GAAP principles earnings or to of prepared the loss useful reconciliation discussions for or GAAP. Management’s financial accordance accordance remarks, not these and press with or or per results believes its including be information, measures. generally most it the the a for loss Please share to various presented the GAAP and may accepted and the company in financial of earnings the loss measures earnings per United income viewed investors a in be calculates income the measures non-GAAP they for more as financial company’s discussing company’s superior not comparable release of financial of quarter adjusted share for substitute see reasons how financial XXXX and with directly loss first or

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

Ming Hsieh

outlook will I thank quarter. Melanie. then morning. review the our Paul And will conclude Then today. quarter. comments financials for and Brandon much, very product you And will updates with start joining your the Thank call Good first the we go-to-market some with from you on take call. and our before

provided from in COVID-XX testing call, cumulative the from revenue with revenue $X million we our earlier $X quarter. revenue are had this first Exceeding bringing We us also results the last XXXX. year COVID-XX in billion since our we to pleased on testing, guidance a in

Frost $XX is XXXX, diagnostic as from by as to segment Sullivan, from segment. billion Beacon see over estimated for momentum testing the other More testing, by grow our testing, is was precision and global and our reproductive pharma prenatal of importantly, that core in outperformed to launch from we it driven revenue This our Beacon & health expectation. Including business expanded billion market $X continuing forecasted to a results was services report XXXX, our well service. recent over strong CAGR. According X%

billion want XXXX, XX% carrier comments in carrier billion. on consolidation U.S., providers is one with XXXX, $X.X runway Inform We by $X.X growth. grow over It to the significant to $X of our with company Over was a the as in screening Diagnostics. to screening, of a make the for space. in I billion top find forecasted now

As pressure our though some it Inform we in revenue, margins. and have significant business Diagnostics bolsters the adds on mentioned, put has capabilities Anatomic Pathology,

integrate margin acquisition. increase with kind implementing As on acquisition, to we focus the and grow continue the to a new to our continue line improved process top

take will is some opportunity potential the of time. we This gain, believe and them. we the we thousands a the expand customers Long-term, value of offering to have to

opportunity cross-selling significant see do market. in the for we However, precision diagnosis

we see the sales to with and our believe business year Given see raising grow the revenue. services service, across account health we we to this direction Anatomic the we of guidance first-quarter moving anticipated core terms expect results, reproductive momentum in our and diagnosis, are momentum We we Pathology. for are pharma this precision as to full-year COVID-XX right year

patents and and XX to therapeutic includes designed platform which Pharma nano-encapsulation a a both Turning over existing windows drugs. new therapy business, novel for processed pharma developed profile our and Fulgent and improve targeted cancer pharmacokinetics to has technology

candidate, numerous ampullary, Our head shown and results of reduced the FID-XXX, effects. cancers, side has and treatment lead drug neck, including promising with pancreatic, for

meeting June as will we progress from to throughout move a share the We new initiative the forward additional Xth. Oncology to pharma business year. Chicago, at Phase the look Xb We data and the Society on American on-going share Xnd upcoming annual Clinical study of in

the to I’d thank combined momentum quarter. we ahead during business. creating loyalty like and for your with We Now and year employees are our to past shareholders look forward the the our

business our during quarter. will I about Perthuis, to Brandon Brandon? the over the to diagnostics Now results turn Officer, Commercial Chief talk over call our

Brandon Perthuis

had a Thanks Ming. quarter. We solid first

with entire a high [Indiscernible] offering level organization While our was in led health. we are quarter at momentarily I outperformance these by $XX.X and of include quarters again do cover pharma fraction first year-over-year first the sales does any the still COVID-XX quarter will detail it sequentially. a for couple XX% reproductive an ago, COVID-XX increase we not and testing. services was This of some of what testing a seeing across XXX% while million

NGS by which pharma Now additional business Pathology, diagnostics, on giving services. Anatomic our the include and business, color precision three categories;. most into it these breaking clinical is of out

our business, Starting into precision health would fall with reproductive which diagnostics.

the of way reminder, and that which product the in small a to addressed Beacon health X product We genes panels of, from is but products last one a is are as growth detail of if reproductive X for is genes, Screening the today. Expanded the XXX Beacon benefits to call, seeing this on up range features largest not here. marquee offered Carrier suite The our Service. tremendous of We panels all

The digit sequence our Fulgent first percentage detection as on choosing and panels, rates, Clients based comprehensive homology, quarter saw turnaround customizable complicated especially triple and our Beacon. as for Beacon growth our by high in well time. genes are those

of is critical. in areas health, time the clinics, turnaround In especially all fertility but reproductive

longer XX% returning We that require confirmation. they two of and orthogonal are are weeks usually samples, over currently take our for because results within those patient

showing with with beat. So showed We missed again COVID-XX the even triple we’re percentage platform now and the digit our Fulgent power testing, it with growth, laboratory a Beacon. of hasn’t

in increases to screening. national sales addition one a a relationship organic resulting and also our This material to our largest to have greatly already In wins, with into of long-term to partner lab of entered carrier up we relationship amount reach, the this sales. access contracts and laboratories expand is

in ensuring childbearing Coalition, AECS. have and first carrier all to individuals of coalition joined Also age their Carrier AECS partners Expanded to we or a to the is multi-stakeholder dedicated the access quarter, expanded Access screening. Screening

of to of committee, part and coverage work efforts carrier commercial are initial and steering patient screening, payers well with As governmental continued expand as improvement. education as the for client

services, include turnaround tests, for gene While us tests, and cytogenetics, Beacon health choice certainly genetic good make is our reproductive of suite focus, We preimplantation quality, clinicians. of area also single more. services time prenatal and for testing believe aneuploidy, an a our

Other cross-selling sequencing our informed for including includes new we cross-selling areas tests acquired our and to Precision for pediatrics, a revamped clients, our adult of through contracts, clients, diagnostics. tests cancer leveraging Division to next-generation neurogenetic hereditary our Diagnostics oncology focus insurance which our fulgent go-to-market strategy neurology

Switching over XXX% a and to Services had Pharma to sequentially Pharma Services our XXX% growing Division, record year-over-year million. $X.X quarter,

timing While tends of area of the bit depending be business clear. momentum the on the contracts, is a this lumpy, to our

Over several quarters, covering the an research. build our impressive clinical multi-omics translational capabilities to continually and have offering, we product both expanded last

Aquoia’s the Notably, the Single-Cell launched provider certified Multiplex we recently, and and Gene and Phenotyping single-cell and qualified Spatial we Spatial four new multi-omics. for XXX in-demand Expression a for service Most technologies spatial Platforms. Immunofluorescence Genomics and for became powerful

among portfolio RNA now single-cell sequencing, range proteomics, tumor of Our a spatial pathology other wide and includes, epigenomics, sequencing, exome, whole whole offerings. things, profiling, lipid genome, biology, biopsy,

grow, Our and companies six largest and sales, pharma visibility which our to additional relationships States clients, services top efforts. in the now menu CROs. client include the global as test aim with our we and continue to marketing United with We increase importantly, to deeper we continues broaden list feel driving are headcount, three pharma XX and of for the our of

gene for our last our Lumera NGS, Oncology approval launch announced a state-of-the-art Fulgent XXX a $X,XXX. malignancies, a of The Heme that and profile for coverage rate determination hematological be focus robust a continues MolDx received with to company. quarter We

that received RNA genomics, critical The excited $X,XXX. are sequencing with precision enabling tumor Lumera of our has including XXX profile all highly care. approval We NGS solid MolDx review utilizes to announce to rate sensitive cover NGS tumor of XX a genes, solid a and reimbursement of variants, fusions, genes, to Lumera tumor profile also splice sequencing next-generation today

critical to tumor is our role Both Lumera relates crucial Lumera when turnaround instability. malignancies. solid results field patient NGS to ratio, profile and to assessing in solid mutational central QNS a standout a factors in eligibility Additionally, several laboratory. this NGS play components in clinicians microsatellite a profile burden time use and as deciding tumor immunotherapy it the which care testing choose and are

very To than most industry perhaps on when This solid content results three our weeks. provide important in standard small six weeks, approximately XX% tissue. compared differentiator our to put tissue to at And two is it less approximately current time X%. turnaround actionable the compared the is cell of rate, perspective, QNS QNS to measure tumor ratio our stands neoplastic standard industry or ability current on which of demonstrates to

diagnostic Our development have competitive Lumera the making techniques results space. NGS with led a genomic research space us with a uniquely expertise more our deliver tumor precision availability, profile that solid in coupled to thus in comprehensive actionable extraction can the commercialize tissue and the proprietary less busy option profile

stages believe While the are commercializing we Fulgent taken the up us have long-term still right we oncology, early set in we launching of success. for to and steps

call ended had the We entering we in fourth wind we sails felt the our quarter saying the first that quarter.

we strong think three that business I demonstrated performance across a all with lines.

are enthusiastic we we have steps As core ahead, we opportunities a look confident will business to and are pay that about build strong the we off. business continue see, the to taken we

Kim. the I’ll call over Chief Paul Paul? now our turn to Financial Officer,

Paul Kim

Revenue was Revenue million, first grew totaled QX, our exceeded not million testing $XX million the million totaled guidance. business came which year-over-year. in Thanks, Roughly $XXX $XX and our in which Brandon. guidance XXXX. the million our of of from XXX% of first $XX compared quarter COVID-XX core $X part quarter from to for

gross declining The XX.X%. of which the of is revenues costs QX related higher from was InformDX, XXXX. purchased margin Pathology year-over-year in we to margin Anatomic primarily Gross

However, create X see point sequentially we margin our we gross our businesses the are percentage improvement to pay a efficiencies pleased to over have prior across acquired achieved our quarter, efforts as in off.

fourth to operating down $XX.X Non-GAAP operating from the quarter down XXXX. from operating totaled $XX.X first expenses, the million quarter of expenses in the now $XX.X GAAP total in fourth million, million in expenses XXXX. were million $XX.X of Turning quarter,

a of Non-GAAP operating of efforts primarily than which $X decrease acquisitions. achieve our continue sequentially was in $X.X to we efficiencies pharma to as R&D the was integration margin increased XX recent our offsetting million, increase more G&A in a related XX%, with negative our percentage to points million, business,

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

Turning over excluding and balance $XXX sheet, first settlement. with million to ended the the cash, in cash approximately quarter pending marketable investments we securities, equivalents,

XXXX. for outlook our to on moving Now

our raising number This guidance to in the momentum, the not core anticipate and revenue million. Given COVID-XX first outperformance testing. additional the $XXX from we’re core quarter revenue guidance does

we our incremental to for plan improvement and expect and gross as to resources improve throughout is the ahead, acquisitions. longer-term continue to position remainder make implement for recent margins to operating year, forecast the to of Looking our investments margin growth. as efforts efficiencies and integration margin The we be company we the further

For we excluding one-time per year XX% expect a approximately utilizing rate and share million, share for compensation stock-based full XX XXXX, our of tax as count assets, intangible of $X.XX of a a well shareholders, non-GAAP loss amortization any as charges. and

is $XX associated to pharma business, report in our business this said for on not anticipated separately. burn we included Last guidance. to we is million guidance, would quarter which when Revenue in cash this we from EPS business year, we acquired $XX the this and approximately XXXX expect our business be this

have we the open bolstered ahead. business and very see momentum for it joining and we up core acquisitions, can today. portfolio Operator, Thank strengthened our for good our questions. strategic Overall, you you through call

Operator

Instructions] coming [Operator Our Certainly. from Credit Leonard first Suisse. question from Dan is

live. Your line is now

Dan Leonard

Thank you.

had seeing gain? is versus growth, you’re I market the sales a screening. growth on How question carrier much that So of share same-store

Brandon Perthuis

question. this almost well. executed Hey, share entirely We’ve gain. It’s for Thanks Brandon. the is

features Beacon those We’re excelled going Carrier demands areas. relates quality, it to product. time, with high our and as in to market other are of extremely we’ve all turnaround and benefits, Clients’ Screening

new client quarter into and in has So the quarter. second the rate our first carrying tremendous been acquisition

Dan Leonard

some could of from contracts the transition, Brandon, to you legacy InformDX the the on Fulgent Thank billing offering? me you. moving update an And give

Brandon Perthuis

In progress, certainly. Yes, well. going

the them up the terms IDs, think up used our we’ve to etcetera. level, rolling contract, I historically the rolling tax corporate

look want from optimization While a some it of contracts. obviously as we and have of to sort of multiple contract that happens, I hundreds many subsidiaries think we now at standpoint

pretty contracts those labs, optimize our to well. is subsidiaries goal going several and and Our across it’s

progress, to made opportunity continue to to more we sell us we’ve for marketplace. us helped make certain it’s and products has progress The with additional go as and market services, the in just

many to but a So probably are well. long many, talking going go hundreds it bit is of we than a longer we’re taking anticipated, it’s all pretty process, and through, things so contracts

Dan Leonard

going question, how do year? And throughout are anticipate final Thank you. my then you gross trend to margins the

Ming Hsieh

the it’s not of Yes, in our the continued the fast good from the but question. as might expansion and going just infrastructure because year. One that’s operating to we to of and gradually both that’s coming continue a as throughout the we We that invest year, business, primary anticipated in be margins growth two our continued see course for and very automation have throughout and we’re going the throughout revenues points. is the to improving course operations see efficiency the

mentioned, the in but continue. So to improvement, you anticipate momentum that will growth margins, Brandon in to will the we a see, that we that reproductive gradual in see still and improvement we operating continue heavy make market investments operations with particularly because our

Dan Leonard

Okay. Thank you.

Operator

Thank you.

coming Westenberg from Piper Your next David from Sandler. question is

is line live. now Your

David Westenberg

main of I in Any Congrats question And the of to to in start Hi. private a to because from on some kind panels, wins the if players? great or I’m customers ask sense those want carrier companies the have and this terms the that with in business why screening. it’s reimbursement share of little for those. year. guess is Semaphore up that with more, a reason just maybe the the a stricter the bit are of what’s carrier I down moves to panels in I follow I I new maybe insurance been actually Dan’s curious larger larger want existing shutting Thank also is from larger think payouts taking [Ph] for word, those think share about Semaphore market you screening about or wins if lot question. the

Brandon Perthuis

we Yes, benefited exiting certainly. certainly from market. No, the Semaphore

share acquisition. a been the So tremendous, the adoption. client of has that been runway on But new we see growth, from long a I mentioned previous market has for still question which lot and

underserved I relates that it join carrier Access is that to reproductive as screening. still the to Screening we As population clear mean, Carrier Coalition, it’s

So support we American used And of Medical of Genomics. College frequently runway see expanded we growth a settings. screening and continued the Genetics carrier as more the in reproductive for long is have

of We support have the ACOG.

genetic the support have We of counselors. the

that runway this an long a see we So for as evolving has still field growth.

As we’re it relates with reimbursement, to what from pretty what seeing, satisfied we’re seeing. we’re

I importantly structure, cost think most is controlling the right.

the cost pre-COVID, had were the structures structure. we said pretty We in one So proud cost always industry. Beacon, of translates of our That we to lowest right. often

much including we can. We is goal of as we have in-house, our our anything. We as So all orthogonal don’t as automate process use much can, confirmations. outsource Informatics to as to the samples

we our the in terms seeing here it’s only of structure. cost the incredibly cost right it’s healthy. with continue policies. structure to think with think as reimbursement, So could payers And important expand And to we’re control we coverage from what work now we and to it improve

David Westenberg

unfortunately, have helpful. more I see right Thank questions my just computer now. you. of crashed can’t very I just list because, All one and my

you there a services? services that? strength you in the in I new business. Can movement of powering about that’s the some what’s that? I is strength think lot high-demand pushing different I really your pharma said pharma offering that’s that’s mean, this this tests oncology driving So mean, to talk on going of

Brandon Perthuis

biopharma. it product of Well, was a it most maybe full single sort it genes, it pharma Probably services as to of panels it’s and as there but mostly and genomes, first the Fulgent, offering. out comprehensive when we offerings relates product of one Whether a just NGS. multi-omic services for Today, right? launched a providing was for or focus exomes was pharma division NGS, gene,

tests to RNA know, pharma biology, grown this point. we’re total So It’s tremendously. providing don’t services proteomics, how honestly, sequencing, I whether at spatial many even it’s

of drive to So allow all bid of both as new platforms customers. as deeper well relationships on those sort us existing with contracts

David Westenberg

you. Thank

Brandon Perthuis

Thank you.

Operator

Thank you.

from Raymond Cooper James. from is Next Andrew question today coming

line now is live. Your

Andrew Cooper

COVID. everybody. I in above that just Hey, I want to want just to of the think core didn’t I Thanks I XXX or in is you first, said make for COVID. XQ include beyond? the million part Is COVID prior purely XXX, and XXX is couple anything questions. and no that COVID the guide. know sure raise, check a one Maybe numbers on of the any incremental

Ming Hsieh

question. Yes. that Thank for you

XXX the core. So is pure

Andrew Cooper

Okay.

Ming Hsieh

gave of because all all and as we’re are what last translating those those the and eight XXX And breakout think or We of coming a of areas, company upon we of momentum strength we both initially within approximately the eight said like the we pharma two core give is weeks from at time services it each, and areas diagnostics XXX But founded businesses. the ago, precision much on nine over million see all well guidance and but businesses, that Pathology. pure our of in to laid across is our the about for when we strength the little core bit kinds precision to color and that adding year. the the of the XX diagnostics, evenly very, initially out nine of Anatomic million. services. that guidance Anatomic the We core XXX. out was across that we from be revenues be at three would be see weeks capabilities Pathology very into or We would as up split would XXX.X virtually pharma momentum short, said approximately about the

Andrew Cooper

transition be precision little about progress little and at down to Is guidance about number right one slightly diagnostics AP I’m bit one XQ Okay, last XQ core that a pharma very Maybe assuming just way why XX. The a from little not that there’s is on bit. just great. I lumpy. a before sequential bit quick more XQ? growing, are think can but the to on

Ming Hsieh

growth reproductive rise take it. past has we provided only we’re to raising. reading also be only got business I year. we it. out like the and you we’d step health much see we’re that the since we going communicate year And bit question The of might guidance plenty think mean, the in associated plays the of in little that two think that to back, months is if the raising where I how and strength think operating and is what particular the potentially our a talked Brandon first have you the be opportunities of before I too to This weeks. it’s been quarter where has that’s into only with going the fiscal ending about and the happened And we margins. a now couple and on

flip then We but of lot to side, a efficiencies, are seeing on the are throughout anticipating this the we momentum again, year. of the those continue course

incremental infrastructure investments the in operations get So because we as momentum later we that continue to anticipate actually we quarters. and for make into strengthen to that

Andrew Cooper

in gears for bit, that just Okay. are got the Helpful. And cash least business big a little sticking shifting this the then scale of like you a you’ve at newer, newer maybe screening, with you kind balance. you, U.S., mentioned, carrier expanded at

a more to lot there. think you little on or out How necessarily in there to at we need bundle go footing interesting need OB/GYN with business? feel know, selling to opportunity you’ve you IVF clinics, into anything, where you capitalize now additional the more an least real found Is a than whether to, offerings you or field? add be perspective, like other we some see, carrier carrier potentially to of inorganic there’s do potential to from you just I but out the bit that could know, that expand there screening have screening about, that players think

Brandon Perthuis

question. great a That’s

a bit. quite You talk hit that on area we an about

correct pregnant. carrier trying business are is IVF expanded the couples so of So get coming that screening clinic, lot from our you a to

product, turnaround a to the we the missing are contracts, it time, market, OB/GYN everything but have the penetrate the We piece there, takes, right?

piece partnership, have We tandem while. with something talked for that we’ve was or is So maybe We about but the out puzzle non-invasive in prenatal do often right reproductive in called. wouldn’t do a now. that’s for it the carrier any a we’re important is sort additional of testing could We don’t don’t the one today. maybe exploring all pre-implantation reproductive and NIPS, options expanded have in setting, rule have strategic aneuploidy, once future. genetic NIPT launches which screening we as of ordered the I it that could but launch organically, It’s product screening, we

Andrew Cooper

great. Okay, stop there. I’ll everybody. Thanks,

Operator

you. over the Thank We our to the for I’d back closing of end session. floor question-and-answer further reached or any like turn comments.

Ming Hsieh

Yes. looking Thank you very the much for today. in you update quarters. are you. everyone who And joined the coming our we Thank provide to call forward

Operator

Thank today’s we and today. you. at your That We you day. a have this disconnect time, does webcast, conclude for participation teleconference thank your line wonderful and

Fulgent Genetics (FLGT) 5 May 232023 Q1 Earnings call transcript