Fulgent Genetics, Inc. Q3 FY2024 earnings call

• Ming Hsieh noted Q3 revenue of $71.7 million, driven by precision diagnostics in preproductive health and oncology, and provided updates on therapeutic development, including a Phase II trial of FID-007 and progress on FID-022.
• Brandon Perthuis highlighted growth in all three lab service areas: precision diagnostics (reproductive health strength, VA contract, KNOVA test launch), anatomic pathology (improved turnaround time, digital pathology, new Texas building), and pharma services (expanded test portfolio).
• Paul Kim reviewed financials: Q3 revenue $71.7M, GAAP gross margin 37.3%, non-GAAP gross margin 40%, strong balance sheet with ~$815.4M in cash, and provided guidance for 2024 core revenue, margins, and EPS.

In the third quarter, Fulgent Genetics saw growth in all three segments of its laboratory services business. Precision diagnostics showed strength in reproductive health, with the Deacon carrier screening test in high demand and a new $99 million five-year contract with VA hospitals for hereditary cancer and germline tests. Revenue in precision diagnostics increased 18.8% year-over-year. Anatomic pathology showed improvement due to a larger sales team, improved turnaround time, and digital pathology adoption (80% of slides digitized in Q3), with operations running at scale in the new Texas building. Pharma services expanded its test portfolio to include platforms from 10x Genomics, Akoya, etc., increasing the addressable market.

• Reiterated 2024 core revenue guidance of approximately $280 million (7% YoY growth).
• Expected non-GAAP gross margins for full year in the high 30% range, exiting Q4 around 40%.
• Anticipated lower non-GAAP operating margin in Q4 due to investment, but improvement in GAAP EPS from $1.95 to ~$1.70 per share.
• Cash position expected to end 2024 with ~$800 million in cash, cash equivalents, etc.

• Forward-looking statements subject to risks, uncertainties, and changes in circumstances that may affect actual results.
• Impairment of available for sale debt securities related to Helio Health investment.
• Dependence on reimbursement for certain tests, which could impact revenue and margins.

Q: What are the trends in the next 12 months for Fulgent's business?

A: Brandon Perthuis stated momentum continues in precision diagnostics and anatomic pathology, with strong pipelines and sales team execution driving growth into 2025.

Q: How should we think about the VA contract's contribution to revenue in 2025?

A: Brandon Perthuis said the VA contract is not simply divided by five, takes time to scale, but is expected to contribute meaningfully in 2025 as the sales team works to onboard VA hospitals.

Q: Any comments on M&A and PGX in the VA contract?

A: Brandon Perthuis mentioned no specific M&A to call out, and PGX in the VA is a cash-paid opportunity with no reliance on third-party reimbursement.