Fulgent Genetics, Inc. Q1 FY2026 earnings call

• Ming mentioned the progress in the laboratory service and therapeutic development businesses, including the acquisition of Barcode Diagnostics and Strata DX, and the progress of clinical candidates FID07 and FID-022.
• Brandon discussed the revenue breakdown by business areas, the acquisition integration, the new whole genome test, the AI strategy including the dermatopathology AI tool, and the MoldDX approval and pricing for the PGX test.
• Paul reviewed the financials, including revenue, gross margin, operating expenses, GAAP and non-GAAP results, stock repurchase, cash position, and provided guidance for 2026, mentioning the impact of the largest customer and the acquisition contribution.

In Q1 2026, total revenue was $71.1 million. Precision diagnostics revenue was $40.2 million (decrease of 8.8% y-o-y, 16.5% q-o-q). Anatomic pathology revenue was $25.1 million (decrease of 0.9% y-o-y, 7.2% q-o-q). Biopharma services revenue was $5.8 million (increase of 43.2% y-o-y, 28.0% q-o-q). The acquisition of Barcode Diagnostics and Strata DX contributed to strong first quarter results. The investment in AI and digital pathology solutions in the laboratory service business is showing progress, with EzeoPath being approximately 100% official across all cases. The therapeutic development pipeline is progressing, with FID07 in phase two having 46 patients enrolled and FID-022 in phase one dose escalation.

• Reiterates total revenue guidance for 2026 at $350 million (8.5% y-o-y growth).
• Forecasts precision diagnostics revenues to be ~$168 million, anatomic pathology ~$162 million, and biopharma services ~$20 million.
• Expects non-GAAP gross margins to be ~39% for the full year, improving to ~42% by year-end.
• Anticipates non-GAAP operating margins to be a minus 20% for the year.
• Updates on EPS and cash guidance due to stock repurchase program, with forecasted average fully diluted share count for 2026 decreasing to ~29 million, resulting in non-GAAP EPS loss of $1.59 per share (excluding certain items).
• Anticipates ending 2026 with ~$636 million in cash, cash equivalents, restricted cash, and marketable securities, considering capital purchases, therapeutic development spend, and tax refund delays.

Q: About the largest customer impact on precision diagnostic and underlying business growth.

A: The largest customer's testing capabilities moving in-house impacted revenue in Q1, but the underlying precision diagnostics business has growth.

Q: About Q1 gross margin lower than initial target.

A: Lower gross margins due to lower than anticipated revenues from largest customer and claims processing backlog timing impact.

Q: Contribution from Stratos and Bacos in Q1 and Q2 outlook.

A: Contribution from Stratos and Bacos in Q1 was $2.6 million, Q2 should be higher with full quarter contribution from them.

Q: Impact of CMS question initiative on business.

A: No comment at this time.

Q: About pharma backlog visibility and biopharma business.

A: Biopharma business has lumpiness with large transactions and long sales cycles, but back half of year has continued growth.

Q: About FID007 at ASCO and commercialization.

A: Excited about ASCO presentation of FID007, and considering collaborations for monetization.