FLGT - Earnings call transcript Q1 2024

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Operator

Greetings, and welcome to the Fulgent Genetics First Quarter 2024 Conference Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Melanie Solomon, Investor Relations for Fulgent Genetics. Thank you.

begin. may You

Melanie Solomon

welcome Results and Fulgent Quarter First Good Call. to Financial Conference XXXX morning, the

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

Relations press website. after Investor section replay the on the of call company's available www.fulgentgenetics.com. will call Investor company's Relations release results concludes of financial The is section the be company's on this website the of the A discussing available the shortly

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

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

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

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

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

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

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

Ming Hsieh

morning, first will and our will outlook review before you, and we joining in laboratory with quarter. business our Thank comments Melanie. conclude Good our call market the your financials thank quarter on some with take update the business, development then I therapeutic first service Paul you the total our questions. will for for Brandon product start today. and

million built with results million previously pleased $XX.X total the With quarter. revenue revenue, first are We on test. we $X.X recognized COVID-XX in our of in

driven by will referred was in All laboratory in as from revenue, services further. oncology. health core reproductive momentum diagnostics this our and originated previously business. at million our this revenue revenue of diagnostics, COVID-XX quarter clinical precision Excluding time $XX.X Brandon business business first particularly Fulgent discuss

business. Turning development therapeutic our to

good make the to Fulgent continue progress We with Pharma.

patent cancer includes platform pharmacokinetics new patents drugs. profile therapy the and XX active and designed over windows or existing technology applications Our issued and of to and therapeutic improve target novel both nanoencapsulation active

platform this potential about to excited candidates. drug yield are because it's several We

ASCO XXXX has our been study trials and XX at X/Xb Annual today Meeting, held preliminary numerous abstract through for and Phase June be We from -- results of cancers, has believe in shown HNSCC that promise FID-XXX has head of include X An for then our will lead shown Chicago. drug ampullary clinical results which neck, clinical candidate, the pancreatic. accepted treatment May presentation in

expect Our quarter. the in progress look to Phase first II we by clinical clinical updated patient enroll protocol keeping trial. on the for second FID-XXX to We setting line was to HNSCC bring treatment this the more you and and FDA, of patients of trial the accepted

potential We believe SN-XX by the of year. challenges are to or for a currently available our can has drug be treatment SN-XX. nano-encapsulated nanodrug of this SN-XX the prodrug a IND new colon, application inside of advancing delivery a We using cancers and of FID-XXX, second drug end [indiscernible] platform investigational the bile-duct other address

towards antibody our are technology, even with up ADCs platform ADC [indiscernible] de those effect. nova than provide ] technology broader [ particle could heterogeneous nano bystander drug we cancer Building next-generation [indiscernible] also that cells conjugates potentially developing

effect. is more low Our with inflation, targets ADCs, target-driven ADC and platform not the antigen show potentially being to existing maybe new applied particularly ADC platform failed targeted have where

and have with therapeutic development business laboratory both we the strategy a strong service Overall, business.

to continue execute balance with We this strong a strategy. maintain which sheet we'll

We turn and I'd to first continued like the to look quarter. the hard over for stakeholders thank our progress call employees, business service results during Brandon our about Perthuis, in laboratory to to loyalty. Commercial forward XXXX. Brandon? your Officer, our Chief partners, work talk I'll now

Brandon Perthuis

Ming. you, Thank

do anatomic X streams testing and precision and represent not services COVID-XX biopharma diagnostics, pathology These business our laboratory core Our revenue. include revenue services. includes

million up was revenue core approximately $XXX,XXX quarter year-over-year, however, down First sequentially. about $X.X

sequential decline pathology in and revenue. of service to attributed a our contracts The was anatomic biopharma decline timing

precision led precision volumes growth great sequential quarter, the However, and oncology. We the million believe stream, into health exited second diagnostics looking momentum. expect first We saw sequentially. diagnostics diagnostics the will million momentum and approximately and carry up reproductive late the $X.X revenue XX% this at in continue was up or year-over-year quarter. we trend our core by quarter for we The $X increased was X% Thus, precision in quarter. growth to second revenue with XX% or

Beacon expanded screening carrier by reproductive driven our terms of health, was In the product. outperformance

and leading to front, to turnaround clinical the continue increased execute support gene content rates. detection operational We on time, comprehensive delivering excellent

continue win We and winning BXB the accounts also execute to our partners commercial new on with accounts. new front, working to

predicting for pipeline opportunities. Thus, in Beacon robust a area. have continued this we are We growth

Our has to with carrier OB-GYN volume mostly prenatal or coupled noninvasive at clinics Beacon level. limited testing, IVF screening the due being often NIPT, to been

are include OB-GYN new first However, we This NIPT the time, launching will new in test. OB-GYN to a focus for experience on progress. a and will more the allow team gears sales market. us This shift currently with hiring

de we sample. all spelled marketed Our on new one include ] point unique approach. NIPT a screening, [ which KNOVA aneuploidy KNOVA K-N-O-V-A is and first-of-its-kind as deletion/duplication nova mutations, screening blood maternal will test,

not today include aneuploidy the deletion and market for ] While that screening not their and more into This NIPT one all [ will look there test to and both use one. nova lab one other duplication mutations, combine the needs. analysis process been streamline there on lab to X them to that offer point allowing for for are one has tests test importantly, de physicians,

as opinion adopters We our volume leaders. we key onboard early to expect KNOVA slowly and start

our oncology services. to Moving

oncologist base. FISH and an cytometry, our the pathologist caters tumor diagnosis, reports while As laboratory to offer and provide to and oncology Phoenix, based comprehensive client to cytogenetics, laboratories, a you full-service clientele, have molecular. to Both The Phoenix immunohistochemistry, Alpharetta enabling X we laboratories hematopathology Georgia, recall, may solid caters heme one specifically clientele, one relevant Both in laboratory in testing. Arizona. the in based us expert tailor Alpharetta, flow

prognostic in providing to solid service with testing, tumor lab, tech-only and Alpharetta Phoenix -- testing immunohistochemical along oncologists. solid services, pathologists tumor prognostic Phoenix The provides FISH on concentrates as FISH to particular, consultation the operation including immunohistochemical while services while and

neoplasms with performed in state-of-the-art well oncologists offering is NGS pathologists germline hematological our for NGS that centrally else including includes is to heme available biopsy soft tissue. has solid usually unlike as laboratory. heme liquid to is exclusively both assay, extremely a This testing. solid other our either in Monte providers, believe El assay tumor and and or something tumor, We and assays offer hematologic like as separate neoplasms which comprehensive devoted combined

on time cancer in days We only of based somatic in XX for points: We turnaround insufficient less a XX% X than business rate Fulgent and on main assays. that deliver use turnaround our of time specimens. actually now promised Clients generally extraction, is of of cases. rate overall rate than and industry for lung. an with nucleic QNS lower rates QNS been X.X% expertise due the X.X% have to And in specifically what our insufficient seen acid our

For at X.X%. heme, our rate QMS sits

transitioning started laboratory now sales as into growing location nicely, sales before Southern lab country as is growing we it an the and focus lab, in multiple with with grown team. a expanded from excellent has was regions oncology an Fulgent Our the in national more have regional into Alpharetta which its force. In a regional California acquired it a footprint expanded

pathology. to Turning anatomic

structure and beginning some seen has stream see sales revenue headwinds, this off. the to are team new we While pay

business We to on and team stabilize in are XXXX. members sales layer this to continuing expect gradually additional see

we addition, working have diligently In been improving efficiency. on operational

new just our York purchased building outside operation recently where our Irving, operation. We and have of to we able Texas will be New existing consolidate a Texas,

In improve addition, to both our efficiency for imaging of AI we invest and to digital continue and technology slide in operation. quality

time. our of focus will this deeper this well smooth out is revenue business. offering, we lumpiness revenue to continue help expanded With funnel believe services stream, terms plan stream to a the are over on tracking biopharma in Finally, perform for opportunity the and to we XXXX, our build product in

existing biopharma at relationships we end, look that and forging To are continuing ones. on new to expanding

of biopharma the a sales allowing to small market we biopharma build we robust value, address a degree, clients expanded team continue these large types believed product have to We on to that offering recently and a for studies. us

and We progress on are business, to we updating throughout XXXX. momentum in forward investors encouraged the look by the our our

our turn Paul Kim, the over call now Paul? to I'll CFO.

Paul Kim

of first came the the part testing XXXX, guidance. our in million to which was not $XX.X XXXX in first quarter compared $XX.X QX, million quarter Revenue million in of COVID-XX $X.X totaled from of

optimize a margin in increase our The business Gross expense compensation we primarily was related $XX.X structure. gross million. Revenue XX.X%. from is to core year-over-year our decrease overall cost as margin totaled in

GAAP onetime $XX.X related $XXX.X in a the Total for were incurred of expenses from in noncash impairment the goodwill primarily fourth quarter, quarter. quarter XXXX, first the charge the million million fourth decrease operating to

minus $XX.X decreased and lower Non-GAAP margin million, from bad of the to debt to operating XXXX. due reserve expenses a quarter XX Non-GAAP operating million primarily $XX.X XX.X%, fees. in fourth points approximately legal percentage sequentially totaled increased

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

balance with approximately cash, cash to ended We marketable in the and sheet. equivalents first million $XXX.X Turning the securities. quarter

COVID-XX minimal core laboratory testing revenue. for we're is expected, testing provided outlook COVID-XX from to services our reiterating without are total the We revenue guiding for XXXX which revenue February. in company With revenue,

revenues representing We core continue core million of in $XXX from our our X% growth development anticipated guidance. year-over-year. to expect for total revenues XXXX, be to XXXX business therapeutics no approximately There's

stock-based Turning we mid-XX% the XX% integration range as margins saw COVID-XX XXXX, compensation, or the non-GAAP excluding gross by XX% target efforts of increasing improve take to for continue revenue to end effect, to expected margins QX above from and of of our year. our we in to efficiencies slightly expect

quarters continue We the as our platform with in and minus foundational expect profile XX% margins approximately to our see to business grow resources focused further year. a term. on spend slightly supports the strong longer believe operating our lower for margin We we invest technology remain that non-GAAP at margins operating to managing ahead

XXXX of cash million, share any guidance. approximately year EPS full for $XX in associated business shareholders, charges. of tax our million non-GAAP amortization burn our we Utilizing excluding development provision count assets cash this expect per non-GAAP net million of XX $X.XX of well as and is and a share for loss intangible stock-based average approximately compensation our as and We onetime contemplated reiterate $XX which therapeutics year, to

Moving cash. remains position on strong. Cash to

stock any and approximately of ordinary cash repurchases other XXXX equivalents Excluding investments anticipate outside marketable we $XXX cash or expenditures securities. with and would million ending course, cash, of

core our acquisitions our see grown has good organically momentum we in business, strength ahead. and through Overall, see which strategic

you now for Operator, today. open questions. call it up the joining may for you Thank

Operator

Dan UBS. with [Operator the Instructions] comes Our line first Leonard of question from

Daniel Leonard

entire perhaps but the revenue What required if ramp Brandon. wasn't business. to diagnostics question, if XX% that sequential first think target And the second on My me for for that gives I you target, you precision that hit you, growth, that or gave services comfort $XXX it clear just year? the sales quarter was to a was million lab

Brandon Perthuis

be the for for Thanks would business. That question, the lab entire Dan. services

share We're So winning in the giving gaining in guide confidence what's gaining reproductive the right? market it's the seeing momentum, and new us what We're in health. the market share door, opportunities. come front we're oncology. through We're

stabilize. pathology to Our beginning anatomic business is

mentioned contracts in were in place, timing not for biopharma had roll Those they QX. into I that services issue. a will delivered in QX. place We contracts are

streams, And also So annual double-digit in in momentum. QX. really see like revenue confidence expect that the us, we across the said, -- the those that guide, I growth the gives but we

Daniel Leonard

And could you Fulgent. then in of regulations my that. touch follow-up for Appreciate I on issued those finalized test earlier the implications implications were week, that hoping the question, was lab-developed the

Brandon Perthuis

mean, certainly. obviously, menu may on already Yes, PMA be some a process. that products big exceptions some are not has for mean, large already to information. Dan, to new appears Fulgent There well test that full still I marketed I are market. obviously, development. and that -- the have a through But are go bodes on made for we our that Fulgent. development digesting read of believe initial We're it that, a

bode So that seems Fulgent. to well for

exceptions to some State test, we addition, seems for of. In several approved have New York there be which

on is expertise perhaps have we learned believe far. place So systems to what Obviously, a to these we're ability guidelines. we PMAs. big regulations, and so for adhere not a those in our need quality be with read good just under will it And still we've the we

our So laboratories. even likely position for barrier this it's bar strengthen to and Perhaps for entry marketplace. increasing new the perhaps in

monitoring these forward be regulations. we'll this closely we and So look FDA with obviously the to closely, very working new on

Operator

Our from Westenberg of David the comes next question Piper with Sandler. line

David Westenberg

to did questions the of of saw maybe the of weather through and much might in XX% January there a so of maybe be been run customer Or us sequentially. I'm actually give more February? February love continuation some growth than I Do actually -- March things question. impacted? you going Dan's some through that Can confidence? that my are you us you why January, you think run have kind might big Just was kind maybe win? been better have of March

Brandon Perthuis

Yes.

in was a win, safe but just wins it's late not multiple think it quarter. were one the to customer win. I big customer say big happened customer There that

continue say as In the contractually, from I that the share close that in Fulgent the I were throughout that our going the but not but business deliver momentum, rest diagnostics market confidence which coming is precision would some that quarter, we addition, mentioned, biopharma able quarter quarter in late of was the most in there we gaining year. believe to was is of to

David Westenberg

Got you.

it was we thoughts very maybe know compliance on look a disease week? look offering to also on hit you FDA a -- rare any Okay. going big think for have do Do to to to ready for that given fact the example, And have Any XXX(k)? to to into I I I you the those, just wanted to cost years? changes. this getting as the of not or is requires you're portfolio. -- the mean this still the go a FDA new go NIPT And all

Brandon Perthuis

the Yes, thanks question. for

Europe. not the You're on exempted haven't But our PMA could are able regulation. for and the the is certainly still quality stuff model again, adhere that right. to in cost to It's working a on exempted on from systems quality have been FDA look and hot we've would IVDR off be from would like. tasks those been process, we reporting, something it place, have the what the and read in We and market press. currently we guidelines similar believe standards We

can think And we're offer these our offering. to products. there's those disruption continue certainly, to a product I place in So adhere no good to We guidelines.

are big products of we part market. think products the of already exemption well continues we'll bodes we amount this offer. play considering But the for Fulgent on a So out PMA see that's for that that currently again, to that how

David Westenberg

Okay. actual then question Great. And original I'll ask here. an

the to submarkets OB-GYN to with So I you years oncology? that about about just how community. the of to terms think of are think just -- you is on. talked the of as mean, -- look point the next Fulgent the Are in Or just like couple I'm target expand go-to-market SG&A to investment you going what's are system would high-level I when going trying wins? the maybe pacing you add with strategy like course maybe then -- you of like? How first that go going over call

there. targeting So what in I'm that's really

Brandon Perthuis

Yes. the Thanks for question.

NIPT of I think is It's what -- right novel XXXX. is we're a now currently a planning net around head by the lost ramping this new new us end on sales to of people not XX for product. that this count but not another relate on in want relate game. product market. market, that launch interested we were was to we've the to But similar this that about this to talked while market a we and did this Again,

to were product, think I a product. differentiated So develop we able this be

volume expect to do start slowly. We

novel offering this product. be will We

involved products is this to So additional conditions a to market. able in how will be on significant currently the there buy missed, detect why diagnostic some are that we'll being product this number of education different and yields product be and leads

of your So year. answer sales a long question team to the throughout will gradually build we the

states. approach, pregnancies see that terms based believe no any other other don't density of reason just regionality I than In certain population we on to reason we But focus there's to density, than a regions in on happening. particular have certain are where and population regions focus or

I a year. slowly consider but would So rollout, this again, national the starting throughout

Operator

Andrew question with comes of from Raymond final the Our James. line Cooper

Andrew Cooper

launch. just first kind following of the Maybe up OB-GYN on

KNOVA prior this part guide? on terms in costs understand from the was but Is contemplated that the make reiterating guidance bottom line Or down margins incremental in layering to already some build-out? nice in beat here. in in the ramp sure from of in Just XQ, the the that we of guide, step

Paul Kim

we quarter, have question. you particularly from the The Yes. for perspective. that like had benefits collection we've including fees operating structure experienced, first Thank and lower operating from that expense an expense

look should you normalized, more our guide that and If is a that operating which consistent QX be take we in QX, QX, the original had. at expenses with

So million real of of to QX, QX and one, anticipate excluding elevated business one in be stock-based and wanted the the But quarters to $XX of expenses out the indicated. operating was, point we I compensation, each approximately of the revenues what highlight expansion Brandon the the that QX. we think

about indicating revenue approximately second So excess of what pleased $XXX revenues million. with. very $XX million puts core be a already or annual is the very, for core rate, which we're That in us we're quarter at to

The XX%. thing year We've been gross other if compensation if out in had in out you the to period margins to that at gross margins, for of about want then is XXXX that acquisitions XXXX, margin. about and and then a first some margins our the and or we ago, it X approximately our was our in a increased excluding stock-based I gross gross that approximately made we point take revenues, And increasing you COVID-XX XX%, our with time. XX%. of QX the QX And talking at quarter, strip look

approximately higher to This was But QX approximately quarter, that of or QX even XX%. quarter in XXXX, think approximately excluding to our be than stock-based rate We that XX% second the in grind XX%. gross and gross compensation starting will higher. margin that that, margins anticipate we

business, see million So raised margins from continue of. core we which very one, but proud to our million, what grind the see intact revenues higher we the gross for is, $XXX we're being guidance to because are our $XXX we

Andrew Cooper

shift to you just very That precision on is do next helpful. a want lot doing diagnostics, anything a side and on there? in to or to business AP. how a anatomic you that share maybe Okay. attribute I seen of bit terms get pathology competitive time landscape dive I and on little Maybe well. in just you've what bit growth on of little that know can spend you healthier that the any back

Brandon Perthuis

the question. Yes, Thanks for certainly.

and and specifically, go-to-market organization. don't their want of and responsibilities, wasn't of sort the calibrated finding I think new I overly details business. roles the done to hunting the strategy sales of but we've is one focus a there into to of the sales team, things get of the sort revamp the

this go-to-market change January revamped in So year, this we and that year, -- we've strategy. that

area. In additional some addition, head we've sales on count leadership for layered sales additional that and

to year. competitive So say this we any I better been that team landscape changes there's expect the share. macro or perform in market wouldn't

consolidation see to continue physician We with groups.

of groups to a And continue would physicians-owned so competitor. they these and super sometimes that creation lead to be laboratories,

goal our back and and there getting is tackling But that business. to to blocking growing

menu, have quality subspecialty We in successful to turnaround the the that time, trained product the pathologists, space. be

as talked last division of time, some we've and ability I over fixing so, business, say can to these that cross growing the more energy more the business cross-sell. stabilize, but been we've year see sort on where I we're diagnostics to think or beginning getting For point would we're precision to and sell. we with now synergies opportunities the AP to time about focused on and the the spend

For germline the derm. clients, AP GU perhaps and hereditary of GI, cross-selling include our example, which oncology to many

we in efficiencies. to to line operations So obviously, that return improving see want But do we business, focusing there, growth. importantly, top business continue invest that again, on to operational

Operator

Ladies gentlemen, our concludes Q&A and concludes thank our participation. And interest session. today. your you call for this and that We

disconnect now may your You lines.

Fulgent Genetics (FLGT) 3 May 242024 Q1 Earnings call transcript