Q4 2023 Fulgent Genetics Inc Earnings Call

Operator: Greetings and welcome to the Fulgent Genetics fourth quarter and full year 2023 conference call and webinar. At this time, all participants are in a listen-only mode.

Greetings and welcome to the full Gent genetics fourth quarter and full year 2023 conference call and webcast. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone. 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. Please go ahead.

This conference is being recorded.

I would now like to turn the conference over to your host Melanie Solomon Investor Relations for Fulgent Genetics. Please go ahead.

Melanie Solomon: Thank you. Good morning, and welcome to the Fulgent 4th Quarter and Full Year 2023 Financial Results Conference Call. On the call are Ming Hsieh, Chief Executive Officer, Paul Kim, Chief Financial Officer, and Brandon Perthuis, Chief Commercial Officer. The company's press release discussing the financial results is available in the Investor Relations section of the company's website, www.fulgentgenetics.com. A replay of this call will be available shortly after the call concludes on the Investor Relations section of the company website. Management's prepared remarks and answers to your questions on today's call contain forward-looking statements. These forward-looking statements represent management's estimates based on current views and assumptions, which may prove to be incorrect. As a result, matters discussed in any forward-looking statements are subject to risks, uncertainties, and changes in circumstances that may cause actual results to differ from those described in the forward-looking statement. The company assumes no obligation to update any of the forward-looking statements it may make today to reflect actual results or changes in expectations.

Thank you good morning, and welcome to the full fourth quarter and full year 2023 financial results conference call on.

On the call are named Shea, Chief Executive Officer, Paul Kim Chief Financial Officer, and Brendan Perfused, Chief Commercial officer.

The company's press release discussing our financial results is available on the Investor Relations section of the company's website www dot full didn't genetics dot com a replay of this call will be available. Shortly after the call concludes on the Investor Relations section of the company's website.

Management's prepared remarks and answers to your questions on today's call contain forward looking statements. These forward looking statements represent managements estimates based on current views and assumptions, which may prove to be incorrect. As a result matters discussed in any forward looking statements are subject to risks uncertainties and changes in circumstances that may cause actual results to differ from those described in the forward looking statements.

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

Melanie Solomon: Listeners should not rely on any forward-looking statements as predictions of future events and should listen to management's remarks today with the understanding that actual events, including the company's actual future results, may be materially different from what is described in or implied by these forward-looking statements. Please review the more detailed discussions related to these forward-looking statements, including the discussions of some of the risk factors that may cause results to differ from those described in the forward-looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31st, 2022, and subsequently filed reports, which are available on the company's investor relations website. Management's prepared remarks, including discussions of earnings and earnings per share, contain financial measures not prepared in accordance with accounting principles generally accepted in the United States or GAAP. Management has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons. But these measures should not be viewed as a substitute for or superior to the company's financial results prepared in accordance with GAAP. [inaudible] Thank you, Melanie.

Uh huh.

Please review the more detailed discussions related to these forward looking statements, including the discussions of some of the risk factors that may cause results to differ from those described in the forward looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31, 2022, and subsequently filed reports which are available on the company's Investor Relations website.

Management's prepared remarks, including discussions of earnings and earnings per share contain financial measures not prepared in accordance with accounting principles generally accepted in the United States work out there.

It has been has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons, but these measures should not be viewed as a substitute for or superior to the company's financial results prepared in accordance with GAAP.

Please see the company's press release discussing its financial results for the fourth quarter and full year 2023 for more information, including the description of how the company calculates non-GAAP income or loss earnings or loss per share and adjusted EBITDA and a reconciliation of these financial measures to income or loss and earnings per share or a loss per share. The most directly comparable GAAP financial measures.

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

Thank you Mary good morning, and thank you for joining our call today.

Ming Hsieh: Good morning, and thank you for joining our call today. I will start with some comments on the fourth quarter and the year ended December 31, 2023. Then Brandon will review our product and go-to-market updates from the fourth quarter, and Paul will conclude with the financials in the 2024 Outlook before we take your questions.

I will start with some comments on the fourth quarter and year ended December 31st 2023.

And then Brendan will review, our product and go to market updates from the fourth quarter.

And Paul will conclude with the financials and the 2024 outlook before we take your questions.

Ming Hsieh: We are pleased with our results in the fourth quarter with $70 million of total revenue. Due to our successful collection efforts, we recognize $4 million of revenue on previously billed COVID-19 tests, as you will see in our 10K.

We are pleased with our results in the fourth quarter with the $70 million of total revenue due.

Due to our successful collection efforts, we recognized a $4 million awful revenue on previously build a COVID-19 test.

As you will see our.

10-K.

Ming Hsieh: We are now reporting our business in two segments. One, our lab-free service business, which we will previously refer to as our clinical diagnosis business. [inaudible] Our therapeutic development business. We have renamed our clinical diagnosis business to better represent the inclusion of technical laboratory services and the professional interpretation of lab results by licensed physicians.

We're now reporting our business in two segments.

One our luxury service business, which we will previous through refer as our clinical attack analysis business.

And second.

Our therapeutic development business, we have renamed our clinical diagnosis pieces to better represent the inclusion of a technical laboratory services and the professional interpretation of lapsed result by licensed physicians. This.

Ming Hsieh: This will now be called lab 3 service. As a reminder, core revenue is the total laboratory service revenue from the company without COVID-19 test revenue. Fourth quarter core revenue of $66 million was driven by the momentum in precision diagnostics and the better-than-expected revenue from anatomic pathology and biopharma services. After raising full year guidance twice in 2023, we outperformed the full year by $2 million in core revenue from the latest race in Cairo, with a positive impact on margins and earnings. Moving on our therapeutic development business, we are continuing to make good progress with Fulgent Pharm. Our nano-encapsulation technology includes over 40 issued or active patents and active patent applications and a targeted therapeutic platform designed to improve the therapeutic window and the pharmacokinetic profile of both new and existing cancer drugs. Our lead drug candidate, FID-07, has shown promising results in clinical trials today for the treatment of numerous cancers, including head, neck, ampullary, pancreatic, with a manageable safety profile observed in trials performed to date and abstract on preliminary head and neck cancer clinical trial.

I would now be called Laboratory service.

As a reminder, core revenue as a total laboratory services revenue from the company without a COVID-19 test revenue.

Fourth quarter core revenue over $66 million was driven by the momentum in precision diagnostics and the.

Better than expected revenue from anatomic pathology.

And the final pharma services.

After raising full year guidance twice in 2023, we outperform the full year by $2 million.

Core revenue from them.

Ladies race in guidance with a positive impact on margins and earnings.

Moving on our therapeutic development business, we are continue to make good progress with <unk>.

<unk> pump.

Our novel Nano Encapsulation Technology, Inc was over 40 issued.

Or active patents and active patent applications and a targeted therapeutic platform designed to improve.

Therapeutic window and the final call kinetic profile, both new and existing drugs.

Sensor drugs.

Our lead drug candidate <unk>.

Oh seven has shown promising results in clinical trials today.

For the treatment of numerous cancers, including head and neck and purity.

Pancreatic.

With a manageable safety profile episode in trial performed to date.

Apps right preliminary head neck cancer clinical trial.

Ming Hsieh: Results from our Phase 1B study have been submitted for the 2024 ESCO annual meetings, which will be held in the second quarter. Our Phase II clinical protocol for the second-line treatment of head and neck cancer has been accepted by the FDA, and we expect to enroll the first patient early in the second quarter of this year. We are excited about reaching these next milestones for the pharma and bringing FID-07 to more patients in the clinical setting. In addition, using the same non-drug delivery platform, we are also advancing our second drug candidate, FID-002, a nano-encapsulated SN38, very rapidly, and expect to file an IND, or Investigational New Drug Application, by the end of the year. While Irene Keegan, a prodrug for SN38, has been approved by the FDA for colon cancer treatment, formulations using its active components, FN38, have not been successfully developed so far, primarily due to poor drug solubility and toxicity safety issues.

Results from a hour.

Phase one B study has been submitted for the 2020 for ESCO.

Annual meetings, which will be held in the second quarter.

Our phase two clinical protocol for a second line treatment of head and neck cancer has been accepted by the FDA and we.

We expect to enroll the first patient.

Early in the second quarter of this year.

We are excited about reaching this next milestones for the farmer and the brain.

Oh seven to more patients in the clinical setting.

In addition, using the same like no drug delivery platform. We are also advancing our second drug Kennedy F. D O two for nano encapsulated as in 38 very rapidly and expect to file an I N D O investigation on new drug.

Application.

By the end of the year.

Well Irene chicken a pro drug for Sn 38 has been approved by the FDA for a colon cancer treatment.

Eliminations are using it actively called women's Evan 38, having not been successfully so far.

Memory due to poor drug solubility and toxicity safety issues, we believe our nano drug delivery platform has the potential to address these challenges.

Ming Hsieh: We believe our nanodrug delivery platform has the potential to address these challenges, building upon clinically proven nanoparticle technology while also developing a next generation antibody drug conjugate technology platform that could potentially prove even broader killing towards heterogeneous cancer cells than those ADC with the bystander killing effect. Our ADC platform is not target-dependent, and it could potentially be applied to many different targeted ADCs, particularly for new targets with low antigen expression, where existing ADC platforms have failed to show effectiveness.

On the R&D front building.

Building upon where clinically proven nano particle technology, while also developing a next generation antibody drug conjugate technology platform.

That could potentially proved even broader killing towards the heterogeneous cancer cells than those ADC with a bystander killing effects.

Our ABC platform is not target dependent that could potentially be applied to many different targeted auc's, particularly for new targets.

With a low antigen expression, where existing ADC player from have failed to show effectiveness.

Ming Hsieh: Overall, we believe we have been good stewards of cash and maintain a strong balance sheet with which to execute our strategy. I'd like to thank our employees, partners, and stakeholders for your loyalty during the past year. We look forward to a strong year in 2024 and capitalizing on the momentum we see ahead. I will now turn the call over to Brandon Perthuis, our Chief Commercial Officer, to talk about our laboratory service business results during the fourth quarter. Brandon?

Overall, we believe we have been good stewards of cash and maintain a strong balance sheet with which to execute our strategy.

I'd like to thank our employees partners and stakeholders for your loyalty during the past year, we look for a strong year in 2024 and capitalizing on the momentum we see ahead.

I will now turn the call over to Brendan <unk>, our Chief commercial officer to talk about our laboratory service business results during the fourth quarter Brennan.

Brandon Perthuis: Thank you, Ming. It was a solid year for Fulgent, slightly exceeding our overall core revenue guidance, ending the year at $262 million, shattering our 2022 record by $81 million, an increase of 44 percent year over year. These numbers exclude any COVID-19 testing revenue. We hit many new company milestones in 2023, which I will reflect on momentarily. At a high level, precision diagnostics continues to be the main growth driver, and it's precision diagnostics where our technology shines the brightest.

Thank you and we.

As a solid year for fulgent slightly exceeding our overall core revenue guidance ending the year at $262 million shattering, our 2022 record by $81 million, an increase of 44% year over year. These numbers exclude any COVID-19 testing revenue.

We had many new company milestones in 2023, which I'll reflect on momentarily.

At a high level of precision diagnostics continues to be the main growth driver and as precision diagnostics, where our technology shines the brightest.

Brandon Perthuis: Precision Diagnostics performed well in 2023, contributing $132 million to the business. The main product outperforming was our Beacon Expanded Carrier Screen. Beacon has proven to be a very well-received product in the IVF space, offering gene content flexibility up to 787 genes and rapid turnaround time of approximately two weeks on average.

For precision diagnostics performed well.

2023, contributing $132 million to the business the main products outperforming what's our beacon expanded carrier screen.

<unk> has proven to be a very well received product in the IVF space offering gene content flexibility up to 787 genes and rapid turnaround time of approximately two weeks on average.

Brandon Perthuis: In addition, using our in-house developed informatics, databases, and pipelines, we are able to deliver reliable detection rates for difficult genes, such as pseudogenes or genes with high sequence homology. Our mix of clients for carrier screening services at this time is mostly IVF clinics, as well as robust B2B partnerships. A few months ago, we announced the new Beacon 787 Expanded Carrier Screening Panel, and we recently followed that up with the new Beacon Preconception Panel. Beacon Preconception includes an additional focus on manifesting carriers in mild disease compared to standard Beacon panels, making it a better fit for some clients working with gamete donors or in the IVF clinic.

In addition, using our in house developed informatics databases and pipelines, we are able to deliver reliable detection rates and difficult genes such as pseudo genes or genes with high sequence homology.

Our mix of clients for carrier screening services at this time is mostly IVF clinics as well as robust b to b partnerships.

A few months ago, we announced the new <unk> 787 expanded carrier screening panel and we recently followed that up with launching the new Beacon Preconception panel Beacon Preconception includes an additional focus on manifest in carriers and mild disease compared to standard beacon panels, making it a better fit for <unk>.

Some clients working with <unk> or in the IVF clinic.

Brandon Perthuis: We see Beacon continuing to be an important growth driver in 2024 as a result of additional market shakeup as well as sales and R&D execution. Recently, we announced a new partnership with Cooper Surgical, a global leader in fertility and women's health, to offer exclusive newborn genetic screening panels to core blood registry families. Utilizing our Pitcher Genetics platform, CBR, the largest private newborn stem cell bank in the world, now offers a range of testing options to its families, including CBR Snapshot, which screens children for over 250 genes related to metabolic disorders, blood disorders, cancers, cardiovascular disorders, hearing loss, and vision loss. Snapshot focuses on screening for conditions where early detection provides actionable information. Secondly, CBR Portrait screens children for over 600 genes, covering everything CBR Portrait includes more than twice as many genes as CBR Snapshot and may identify more rare causes of these conditions, and if negative, the results further reduce the likelihood that a patient has the conditions included on the test.

We see beacon continuing to be an important growth driver in 2024, as a result of additional market shakeout as well as sales and R&D execution.

Yeah.

Recently, we announced a new partnership with Cooper surgical a global leader in fertility and women's health to offer exclusive newborn genetic screening panel to cord blood registry families utilizing our picture genetics platform CBR the largest private newborn stem cell bank in the World now offers a range of testing.

Options to its families, including CBR snapshot, which screened children for over 250 genes related to metabolic disorders blood disorders cancers cardiovascular disorders hearing loss envisioned loss snapshot focuses on screening for conditions were early detection provides actionable information.

And it may be managed with medication diet or other therapies.

Lee CBR portrait screen children for over 600 genes covering everything and CBR snapshot along with additional genes related to hearing loss actionable epilepsy, immunodeficiency heart conditions and neonatal diabetes CV.

<unk> portrait includes more than twice as many genes at CVR snapshot and may identify more rare causes of these conditions and if negative the results further reduced the likelihood that a patient has the conditions included on the test.

Brandon Perthuis: Lastly, CBR Landscape screens children for over 1,500 genes in more than 1,000 conditions and includes a pharmacogenetic component that identifies the potential for adverse reactions to more than 100 medications. Switching to AP, while anatomic pathology is critical to our mission of being a one-stop shop for physicians and contributes meaningfully to our overall revenue, we are seeing some headwinds in the business. That said, we have recently expanded our commercial footprint, plan to continue to layer on new sales hires, and we are committed to growing the business. In addition, we are making significant investments in operations, digital pathology, and AI to improve our efficiency. We estimate seeing these investments beginning to pay off late in 2024.

Lastly, CVR landscape screens children for over 1500 genes and more than 1000 conditions and includes a pharmacogenetics component component that identifies the potential for adverse reactions to more than 100 medications.

Yeah.

Switching to AP, while anatomic pathology is critical to our mission of being a one stop shop for physicians and contribute meaningfully to our overall revenue we are seeing some headwinds in the business that said, we have recently expanded our commercial footprint plan to continue to layer on new sales hires and we're committed to.

Growing the business in.

In addition, we are making significant investments in operations digital digital pathology and AI to improve our efficiency. We estimate seeing these investments beginning to pay off late in 2024.

Brandon Perthuis: Previously, we reported on pharma services when we provided a breakout of revenue. For clarity purposes, we have renamed this breakout of revenue to biopharma services to include any revenue related to clinical testing for pharma, biotech, CRO, or research organizations, of which approximately $4 million had been previously classified under precision diagnostics in 2023. Regarding biopharma services, we exited 2022 with tremendous momentum, and 2023 took off at a very fast pace. However, unrelated to Fulgent, some of our biopharma clients have had issues, and some of those projects have either pulled way back or been terminated altogether. Unfortunately, this did affect two of our larger clients.

Yeah.

Previously we reported on pharma services, when we provided a breakout of revenue for clarity purposes. We have renamed this breakout of revenue to Biopharma services to include any revenue related to clinical testing for pharma biotech CRO or research organizations of which approximately $4 million.

That had been previously classified under precision diagnostics in 2023.

Regarding Biopharma services, we exited 2022 with tremendous momentum and 2023 took off at a very fast pace. However, unrelated to <unk>. Some of our biopharma clients have had issues and some of those projects have either pulled way back or have been terminated.

Altogether. Unfortunately, this did affect two of our larger clients that said, we believe our biopharma services capabilities are stronger today than ever offering an impressive multi year ohmic platform, including technology for single cell multi omics rounding out our capabilities in whole genome whole exome RNA sequencing the tumor pro.

Brandon Perthuis: That said, we believe our biopharma services capabilities are stronger today than ever, offering an impressive multi-omics platform, including technology for single-cell multi-omics, rounding out our capabilities in whole genome, whole exome, RNA sequencing, tumor profiling, methylation sequencing, liquid biopsy, single-cell sequencing, spatial biology, and pathology. The focus for 2024 is to forge new relationships and expand on existing ones. We'd like to thank all of our employees who have dedicated so much energy to making Fulgent a great success. We have an amazing team.

Piling methylation sequencing liquid biopsy single cell sequencing, especially biology in pathology.

The focus for 2024 is the first new relationships and expand on existing ones.

We'd like to thank all of our employees, who have dedicated so much energy and <unk>.

The polls and a great success, we have an amazing team.

Brandon Perthuis: As one of our important clients recently said, quote, Fulgent seems to have a magic wand. If we don't, it would certainly be easier if we did. But we do have an absolutely amazing team.

As one of our important clients recently said quote fulgent seems to have a magic wand. If we don't it would certainly be easier if we did.

But we do have an absolutely amazing team that said 2023 has come to pass and now our focus and energy is just the 2024 is a fast paced dynamic market and we look forward to keeping our investors updated throughout the year.

Paul Kim: That said, 2023 has come to pass, and now all focus and energy shifts to 2024. It's a fast-paced, dynamic market, and we look forward to keeping our investors updated throughout the year. I'll now turn the call over to Paul Kim, our chief financial officer.

I'll now turn the call over to Paul Kim Our Chief Financial Officer Paul.

Paul Kim: Thanks, Brandon. Revenue in the fourth quarter totaled $70 million compared to $68 million in the fourth quarter of 2022. $4 million came from COVID-19 testing in Q4, which was not part of our guidance. Revenue from our core business totaled $66 million, which slightly exceeded our guidance of $64 million and grew 21% year-over-year. Gross margin was 36%. The increase in gross margin year-over-year is primarily related to $4 million of COVID-19 revenue recognized on previously billed tests due to successful insurance collections in the current year and to charges which resulted from the wind-down of COVID-19 business in Q4 of the prior year, including inventory reserves and accelerated. Before turning to operating expenses, I would like to explain an impairment charge we took this quarter. We incurred a one-time non-cash goodwill impairment charge of $120 million.

Thanks, Brandon and revenue in the fourth quarter totaled $70 million compared to $68 million in the fourth quarter of 2022 4 million came from COVID-19 testing in Q4, which was not part of our guidance revenue from our core business totaled $66 million, which slightly exceeded our guidance of 64 million and grew too.

21% year over year gross margin was 36% the increase in gross margin year over year is primarily related to a $4 million of COVID-19 revenue recognized on previously billed test due to successful collections in the current year and two charges, which resulted from the wind on our COVID-19 business.

During Q4 of the prior year, including inventory reserves.

Equipment depreciation.

Before turning to operating expenses I would like to explain an impairment charge. We took this quarter, we incurred a onetime noncash goodwill impairment charge of $120 million. This charge resulted from a sustained decline in our share price and associated market capitalization compared to the book value of our equity as a core.

Paul Kim: This charge resulted from a sustained decline in our share price and associated market capitalization compared to the book value of our equity as of quarter end. I want to reiterate that the non-cash goodwill impairment charge was due to generally accepted accounting principles given the current market capitalization. It's important to note that the goodwill impairment charge does not affect the company's cash position, and we do not believe it will have any impact on our future operations. And we remain highly encouraged by the momentum we see ahead, as discussed earlier by Ming and Brandon. The GAAP operating expenses were $176.4 million in the fourth quarter, an increase from $39.6 million in the third quarter of 2023. Non-GAAP operating expenses, totaled $45.1 million, increased from $29.4 million in the third quarter of 2023.

And I want to reiterate that the noncash goodwill impairment charge was due to generally accepted accounting principles given the current market capitalization. That's important to note that a goodwill impairment charge does not affect the company's cash position and we do not believe it will have any impact on our future operations and we remain highly incur.

With the momentum we see ahead as discussed earlier by Meghan Brandon.

The GAAP operating expenses were $176 4 million in the fourth quarter increased for.

$39 6 million in the third quarter of 2023 non-GAAP operating expenses.

Totaled $45 1 million increase from $29 4 million in the third quarter of 2023, non-GAAP operating margin decreased 40 percentage points sequentially to a negative 24, 8% primarily due to lower COVID-19 testing revenue recognized higher bad debt reserve.

Paul Kim: Non-GAAP operating margin decreased 40 percentage points sequentially to a negative 24.8%, primarily due to lower COVID-19 testing revenue recognized, higher bad debt reserve, and one-time legal fees. Suggested EBITDA loss for the fourth quarter was $6.8 million compared to $15.1 million in the fourth quarter of 2022 on a non-GAAP basis and excluding equity-based compensation expense, goodwill impairment loss, and intang Income for the quarter was $8.3 million, or $0.28 per share on 30 million weighted average shares outstanding.

And one time legal fees.

Adjusted EBITDA loss for the fourth quarter was six.

$6 8 million compared to $15 1 million in the fourth quarter of 2022 on a non-GAAP basis, and excluding equity based compensation expense goodwill impairment loss and intangible asset amortization.

<unk> for the quarter was $8 3 million or <unk> 28 per share on 30 million weighted average shares outstanding.

Paul Kim: Turning to the balance sheet, we ended the fourth quarter with approximately $848 million in cash, cash equivalents, and marketable securities. We were active with our share repurchase program during the fourth quarter of 2023. We repurchased approximately 873,000 shares of our common stock at an aggregate cost of $22.9 million, at an average price of $26.15, under the Stock Repurchase Program announced in March 2022. As of December 31, 2023, a total of approximately $150.7 million remained available for future repurchases of our common stock under the Stock Repurchase Program. Now moving on to our outlook for 2024, starting with revenue. We may have some minimal revenue from COVID-19 testing in 2024, but we'll be guiding to core revenue, which is total laboratory services revenue for the company without COVID-19 testing.

Turning to the balance sheet, we ended the fourth quarter with approximately $848 million in cash cash equivalent to marketable securities. We were active with our share repurchase program. During the fourth quarter of 2023, we repurchased approximately 873000 shares of our <unk>.

<unk> stock at an aggregate cost of $22 9 million.

At an average price of $26 15 under the stock repurchase program announced in March of 2022.

As of December 31, 2023, a total of approximately $150 7 million remained available for future repurchases of our common stock under the stock repurchase program.

Now moving onto our outlook for 2024, starting with revenue.

We may have some minimal revenue from COVID-19 testing in 2024, but we'll be guiding to core revenue, which is total laboratory services revenue for the company without COVID-19 testing.

Paul Kim: We expect total core revenues to be approximately $280 million in 2024, representing a core growth of 7% year over year. Breaking down this guidance between precision diagnostics, anatomic pathology, and biopharma services, the expected 2024 revenue is estimated as follows. $173 million from precision diagnostics, $96 million from anatomic pathology, and the remaining $11 million from biopharma services. Precision diagnostics, which includes all of our clinical NGS revenue, oncology, reproductive services, rare diseases, neurogenetics, B2B relationships with labs, and our joint venture in China, continues to be the highest growth area for the company in 2024. As Brandon discussed, we have seen strength in reproductive services from our Beacon product line. Given the timing of certain lab arrangements, there may be variability quarter to quarter. However, both anatomic pathology and biopharma services will continue to be major contributors to revenue in 2024. However, we are expecting a decline in both these revenue streams in 2024 as compared to 2023.

We expect total core revenues to be approximately $280 million for 2024, representing a core growth of 7% year over year.

Breaking down the guidance between precision diagnostics anatomic pathology and Biopharma services. The expected 2020 for revenue is estimated as flow as follows a $173 million from precision diagnostics $96 million from anatomic pathology and the remaining 11.

For Biopharma services on precision diagnostics, which includes all of our clinical Ngls revenue oncology reproductive services rare disease narrow genetics <unk> relationship with labs, and our joint venture in China continues to be the highest growth area for the company in 2024 <unk>.

Brandon discussed we have seen strength in reproductive services from our Beacon product line.

The timing of certain lab arrangements, there may be variability quarter to quarter to quarter.

Both anatomic pathology and Biopharma services continue to be a major contributors to revenue in 2024. However, we are expecting a decline in both of these revenue streams in 2024 as compared to 2023, four anatomic pathology, which includes the business we have integrated from informed diagnostics pricing pressure.

Paul Kim: For anatomic pathology, which includes the business we have integrated from Informed Diagnostics, pricing pressure and lower contract rates are impacting revenue. Biopharma services, which include sequencing as a service, which we sell to pharmaceutical businesses and are dependent on these partners, have been impacted by projects that have terminated or have scaled back significantly. There is no revenue from our therapeutic development business anticipated for our 2024 guidance.

Sure and lower contract rates are impacting revenue Biopharma services, which include sequencing as a service, which we sell to pharmaceutical businesses and is dependent on these partners have been impacted by projects that have terminated or have scaled back significantly. There is no revenue from our therapeutic development business and.

<unk> for our 2020 for guidance.

Yeah.

Paul Kim: Turning to expected margins in 2024, excluding COVID-19 revenue and stock-based compensation, we expect non-gap gross margins to improve as we see the efficiencies of our integration efforts take effect, reaching the mid-30% range and positioning us to approach our target of 40% by the end of the year. We expect to see lower non-gap operating margins in the quarters ahead as we further invest resources to grow our business, with operating margins of approximately minus 20% for the year. We remain focused on managing our spend and continue to believe that our foundational technology and platform support a long-term strong margin profile. We expect an Associated Cash Fund for the Therapeutics business of about $15 to $17 million this year, which is contemplated in our EPS and our cash guidance provided today. For the full year 2024, utilizing non-GAAP tax provision and an average share count of $31 million, we expect that our non-GAAP loss will be approximately $1.05 per share for our shareholders, excluding the thought-based compensation and amortization of intangible assets, as well as any one-time charge.

Turning to expected margins in 2024, excluding COVID-19 revenue and stock based compensation, we expect non-GAAP gross margins to improve as we see the efficiencies of our integration efforts take effect, reaching the mid 30% range and positioning us to approach our target of 40% by the end of the year.

We expect to see lower non-GAAP operating margins in the quarters ahead as we further invest resources to grow our business with operating margin of approximately minus 20% for the year. We remain focused on managing our spend and continue to believe that our foundational technology and platform supports our long term.

Long term strong margin profile.

We expect associated cash burn for our therapeutics business of.

About $15 million to $17 million this year, which is contemplated in our EPS or cash guidance provided today.

For the full year 2024, utilizing non-GAAP tax provision.

An average share count of $31 million, we expect that our non-GAAP loss to be approximately $1 five per share for our shareholders.

Excluding the stock based compensation and amortization of intangible assets as well as any one time charges.

Yeah.

Operator: Moving on to cash, our cash position remains strong. We expect to have a significant cash outlay of over $15 million this year as we build out and move into our brand-new 96,500-square-foot facility in the Dallas area. This facility will have state-of-the-art operations, which include both pathology, neuropathology, and the NGS labs that broaden our diagnostics reach, as well as further streamline our clinical operations. Excluding any stock repurchases or any other Overall, we see strength in our core business, which has grown organically and through strategic acquisitions, and we see good momentum ahead. Thank you for joining us on our call today. Operator, now you may open up for questions.

Moving on to cash our.

Our cash position remains strong we expect to have significant cash outlay of over $15 million. This year as we build out and move into our brand New 96500 square foot facility in the Dallas area. This facility will have state of the art operations, which include both pathology.

In Europe pathology, and the Ngls lastly, broaden our diagnostics reach as well as further streamline our clinical operations, excluding any stock repurchases or any other expenditures.

Outside ordinary course, we still anticipate ending 2024 with approximately $800 million of cash cash equivalents in investments and marketable securities overall, we see strength in our core business, which has grown organically and through strategic acquisitions and we see good momentum ahead. Thank you for joining our call today operator.

You may open it up for questions.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone. The confirmation tone will indicate your line is in the question. You may press star 2 if you'd like to remove your question from the list. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press star two if you'd like to remove your question from Nokia.

Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

David Michael Westenberg: We ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of David Westenberg with Piper Sandler: Hi, thank you for taking the question and good job in 2.4.

I ask that you each keep to one question and one follow up thank you.

Our first question comes from the line of David Westenburg with Piper Sandler. Please proceed with your question.

Hi, Thank you for taking the question and good job in Q4.

Brandon Perthuis: So just a couple different things here. So let's just start with expectations for expanded carrier screening. Is that going to impact, or do you still anticipate that being a front half of the year ACOG recommendation? How fast would that impact your revenue? And, you know, just given the fact that you are, you know, I think mainly working in IVF, would that kind of thing catalyze maybe further investments in the sales force in order to look at that opportunity outside of, you know, the broader market? Thank you. Thanks, David. It's Brandon.

So just a couple of different things here, so, let's just start with expectations for expanded carrier screening.

Is that going to impact or do you anticipate still anticipate that being a front half of the year.

A cog recommendation, how fast is that would that impact your revenue.

And just given the fact that you are I think mainly working on it.

IVF would that would that kind of thing catalyze maybe.

Further investments in the sales force in order to look at that opportunity to outside of <unk>.

Into the broader markets. Thank you.

Hey, Thanks, David It's Brandon I appreciate the question.

Brandon Perthuis: I appreciate the question. You know, it's hard to comment on the timing of ACOG policy changes, but certainly, we see it trending in that direction. We are participating in some of those discussions and advocating for, you know, better policy statements. So look, expanded care screening is standard of care today in medical practice, right? Doctors realize that, and they treat it as such, and the guidelines are just sometimes lagging in that area, but when they align and when they catch up, good things happen. So, you know, any positive movement in those guidelines would be just additional tailwinds, you know, around reimbursement and coverage. I don't think those guidelines, you know, change adoption too much but really would have some positive impact on reimbursements and things like that.

It's hard to comment on the timing of a card policy changes, but certainly we see trending in that direction.

We are participating in some of those discussions and advocating for better policy statements. So.

Expanded carrier screening is standard of care today in medical practice doctors realize that they treat it as such and the guidelines are just sometimes lagging in that area, but when they align and when they catch up good things happen. So any positive movement in those guidelines.

<unk>.

It would be just additional tailwind around reimbursement and coverage.

I don't think those guidelines change adoption too much but really with <unk>.

<unk> have some positive impact.

On reimbursements and things like that.

Brandon Perthuis: You know, in terms of investing in the sales team and addressing the broader market, and you are correct, a lot of our Beacon expanded care screening today is coming from IVF clinics, and we've yet to penetrate the OBGYN market. We believe there's some sort of ancillary and parallel products that are needed to bundle with Beacon before we really can penetrate that OBGYN market, and we do have some development, you know, in those areas, and it's certainly an area we want to expand into. So we think once we have that product portfolio ready to go to market, we could invest significantly in the sales team to address that broader market. I got it.

In terms of investing in our sales team and addressing the broader market and you are correct.

Lot of our Beacon expanded carrier screening today is coming from the IVF clinics and we've yet to.

Penetrate the obgyn market.

We believe there is some sort of ancillary in parallel products that are needed.

The bundle with Beacon before you really can can penetrate that obgyn market and we do have some development in those areas and.

It's certainly an area we want to expand into so we think once we have that product portfolio ready to go to market.

Could invest significantly in the sales team to address that broader market.

Brandon Perthuis: Thank you. That was a great answer. So maybe on COVID testing, I mean, if you just back out, you get $4 million in COVID testing in Q4. We are kind of in the heart of respiratory disease areas with only $4 million in revenue. Would it make strategic sense to just, you know, flat out exit that business? Or maybe DM, I mean, I think you guys already are de-emphasizing it.

Got it. Thank you Danielle that was a great answer.

Maybe on on Covid testing I mean, if you just back out you get $4 million of Covid testing in Q4, I mean, we are kind of in the heart of respiratory.

Disease areas with with only $4 million in revenue when it makes strategic sense to just flat out exit that business.

Or.

Maybe <unk> I mean, I think you guys already are deemphasizing it just talk about strategies around that.

Brandon Perthuis: Just, you know, talk about strategies around that. Thank you. Yeah, for all intents and purposes, we have exited the business. I mean, the amount of new testing we're doing is tiny. The revenue you're seeing is the result of our efforts to collect on tests that we've run in the past. So we have a phenomenal revenue cycle management team. They're tenacious.

And thank you.

Yes for all intents and purposes, we have exited the business I mean, the amount of new testing. We're doing is tiny the revenue Youre seeing is a result of.

Our efforts to collect on tests that we've run in the past. So we have a phenomenal revenue cycle management team there.

Brandon Perthuis: We fight for every dollar that we can. And what you're seeing is the results of our team collecting on tests that we had previously run. So the amount of new testing, and new revenue is practically zero.

Theyre tenacious, we fight for every dollar that we can and what Youre seeing is results of <unk>.

Our team.

<unk> test that we had previously run so the amount of new testing new revenue is.

Practically zero I mean, like I said, it's pretty much completely de emphasize that the company, but again, we want to collect on every dollar that were owed.

Ming Hsieh: I mean, like I said, it's pretty much completely de-emphasized at the company, but again, we want to collect on every dollar that we're owed. It makes a lot of sense. Just quickly, and for my last one, I just want to talk about capital deployment. You had a lot of share purchases in 2023. Is that still kind of the game plan in 2024? Or are you going to look at maybe some acquisitions, particularly with the, I mean, I'm guessing in the market, we're going to see some adjacent market opportunities from companies that are exiting, going under, selling themselves, et cetera? Thank you.

It makes a lot of sense just quickly for my last one just wanted to talk about capital deployment.

Share repurchases in 2023 is that still the kind of the game plan in 2024 or are you going to look at maybe some acquisitions, particularly like with the <unk>.

Guessing in the market, we're going to see some.

Adjacent.

Market opportunity from from companies that are our exiting <unk>.

Going under.

Selling themselves et cetera. Thank you.

Ming Hsieh: Yeah, thank you, David, for the questions. I think we do see more opportunities available in the market, and the evaluations will make more sense. But still, we're looking for the business which they are, profoundly in terms of there being a long-term business plan, and also we're looking for companies which give us a broadened distribution channel or add additional technology to make us even more efficient or more advanced in the testing area. So there is more opportunity we're looking for now, and definitely in the current environment, I think we're in a good position to be a consultant. Thank you. Thank you.

Yes, Thank you David for the questions.

I think we do see more opportunities available in the market and the evaluations will be give you more sense, but it feels that we're looking for the business, which they are.

Profoundly in terms of the long term.

Our business plan.

Also we are looking for the companies.

The the broadening of our distribution channel.

Or adding additional technology to make us even more efficient or more advanced.

In the in the testing area. So there was more opportunity. We're looking for now and are definitely at a currently environment I think we're in a good position to be a consolidator.

Thank you.

Thank you. Our next question comes from the line of Andrew Cooper with Raymond James. Please proceed with your question.

Andrew Harris Cooper: Our next question comes from the line of Andrew Cooper with Raymond James. Please proceed with your, Hey everybody, thanks for the question. Maybe just first, kind of real simply, it sounds like there's some moving parts around moving, I think you said $4 million from PDX down to biopharma services, so can you maybe just help level set where each subsegment came in for 2023 and then also just in 4Q, sort of what the growth looks like in each on an apples-to-apples basis so that we can have sort of the right expectation into 2024? Yeah, sure Okay, I'll first comment on the numbers, and then I'll turn it over to Brandon, who can give color on, you know, where we see the decline and where we see the most amount of, you know, growth and momentum. So for the fourth quarter, we had revenues of $70 million.

Hey, everybody. Thanks for the question.

Maybe just first kind of real simply it sounds like there's some moving parts around moving I think you said $4 million from from Pdx down to Biopharma service system can you maybe just help level set where each sub segment came in for 2023, and then also just in <unk> sort of what the.

Growth looks like in each on an apples to apples basis. So that we can have sort of the right the right expectation into.

2024.

Yes sure. Okay, I'll first I'll first comment on the numbers and then I'll turn it over to Brandon who can give color on where we see the decline and where we see the most amount of our growth and the momentum.

So for the fourth quarter, we had revenues of $70 million approximately $4 million was coming came from covered $35 5 million came from precision diagnostics. The Biopharma services was $4 7 million and anatomic pathology was $26 3 million for the balance of.

Paul Kim: Approximately $4 million came from COVID. $35.5 million came from precision diagnostics, and the biopharma services were $4.7 million.

Paul Kim: And anatomic pathology revenues were $26.3 million. For the balance of 2023, we had $104.7 million in revenues from anatomic pathology, $25.4 million from biopharma services, and $132 million from precision diagnostics. We also had, as we previously discussed with COVID revenues, $27.1 million come from COVID. So the total revenues for 2023 were $289.2 million, of which revenue excluding COVID or core was $262 million. For the $280 million guide that we're doing for 2024, that does not include any COVID, the projected revenue is as follows in the three revenue categories. For anatomic pathology, it's $96.3 million.

2023.

We had 104 point.

$7 million of revenues from anatomic pathology, $25 4 million from Biopharma services and $132 million from precision diagnostics. We also had as we previously discussed uncovered revenues <unk>.

$7 1 million come from Covid. So the total revenues for 2023 was $289 2 million of which revenue, excluding COVID-19 or core <unk> was $262 million.

For the $280 million guide that we're doing for 2024 that does not include any COVID-19.

The projected.

<unk> follows in the three revenue categories for anatomic pathology is $96 3 million.

Paul Kim: Biopharma services is $10.7 million, and precision diagnostics is $173.3 million. So, as you can see, when you compare these categories versus 2023, we had a slight decline projected that we're anticipating for 2024 in anatomic pathology, and we had a significant decline projected for biopharma services.

<unk> pharma services is 10.7.

$7 million and precision diagnostics as a $173 3 million. So as you can see when you compare these categories versus 2023, we had a slight decline projected.

That we're anticipating for 2024 and anatomic pathology, we had a significant decline projected.

For Biopharma services, and we see a lot of momentum behind precision diagnostics and I'll turn it over to Brandon who can give some color into the variability for each of those three areas.

Paul Kim: And we see a lot of momentum behind precision diagnostics. And I'll turn it over to Brandon, who can give some color on the variability for each of those three areas. Yeah, certainly. We talked a little bit about it in the script, but, you know, on the AP side, the anatomic pathology side, that's really been a mix of issues. We've had some physician clients enter retirement.

Yes, certainly.

You know, we talked a little bit about it in the script, but on the AP side of the anti pathology shop side, that's really been a mix of issues. We've had some physician clients enter retirement, we've had practices be acquired we had practices merge with other groups. We had clients join super groups and they'll supergroup usually have their own laboratory.

Brandon Perthuis: We've had practices acquired. We've had practices merge with other groups. We've had clients join supergroups, and those supergroups usually have their own laboratories, for example.

For example.

Brandon Perthuis: We did mention some limited pressure on reimbursement. I mean, there is a little bit of that, but it's really been a mix of things on the AP side. However, it's really nothing out of the sort of ordinary, you know, for the industry.

We did mentioned some limited pressure on reimbursement I mean, there is a little bit there, but it's really been a mix of things on the AP side. However, it's really nothing out of the sort of ordinary you know for the industry.

Brandon Perthuis: I mean, that said, I mean, we need to outpace that, so it's our goal to build a best-in-class sales team and find new opportunities to return AP to growth. You know, I think if you're looking at that division, we have the turnaround time, the quality, subspecialty-trained pathologists, you know, the connectivity. We have what it takes to win, and we intend to do that, but, you know, like I mentioned, we continue to invest in digital pathology and AI and, you know, our operations. We want to become more efficient in that area as well, so, you know, we do intend to address some of those losses by finding and forging new client relationships. On the pharma side, it's a little bit more of a sort of centralized issue affecting a couple of clients, so I think on the pharma headwinds, it really boils down to, you know, a couple or maybe just a few significant size clients that have winded down their projects. This is mostly related to some of their financial stress and not related to any, you know, service issues with Fulgent.

That said I mean, we need to outpace that so it's our goal to build a best in class sales team and and find new opportunities to return <unk> to growth.

I think if you're looking at or that division, we have the turnaround time.

The quality subspecialty trained pathology and the connectivity we have what it takes to win and we intend to do that.

But like I've mentioned, we continued to invest in digital pathology and AI in our operations.

We want to become more efficient in that area as well so.

We do intend to address some of those losses by finding and forging new client relationships on the pharma side, it's a little bit more of a.

Sort of centralized issue.

Affecting a couple of clients so.

On the on the pharma headwinds it really boils down to a couple or maybe just a very few significant sized clients that winded down their projects. This is mostly related to some of their financial stress and not related to any service issues with fulgent.

Brandon Perthuis: We mentioned that, you know, our biopharma services have really expanded, and now it's our goal to, you know, drive deeper relationships with our existing clients but also continue to find, you know, new clients. We do believe there is demand for the types of products and services we've built, but I think that the takeaway from that is, even with the divisional headwinds in AP and pharma, we're still forecasting growth in 2024. You know, there's around 30% growth in precision diagnostics, and this is the area where we can sort of best leverage, you know, our technology platform. Okay, super, super helpful.

We mentioned that in our Biopharma services had really expanded and now is our goal to drive deeper relationships with our existing clients. But also continue to go find new clients. We do believe there is demand for the types of products and services, we've built but I think the takeaway from from that even with the the division.

Headwinds in AP and pharma, we are still forecasting growth in 2024.

It's around 30% growth and precision diagnostics and this is the area, where we can best leverage our technology platform.

Okay Super Super helpful. Appreciate that maybe just kind of dialing in a little bit on an AP.

Brandon Perthuis: I appreciate that. Maybe just kind of dialing in a little bit on AP. You know, if we go back to the deal announcement and sort of the first couple quarters post, I think a lot of the logic was this was a strategic move, I think, in large part on being able to roll some of the contracts across to the broader Fulgent business. I guess, with you just mentioning at least part of the headwind being a little bit lower contract rates, has anything changed there substantially? Or is it more, you know, like you just said, Brandon, kind of the normal course of business in the industry, a little bit of pressure, but nothing that changes the way you view that broader opportunity? You are correct. Normal course of business. These are the normal sort of constraints on contract pricing.

If we go back to the deal announcement and sort of the first couple of quarters post I think a lot of the logic was this was a strategic move I think in large part.

On being able to roll some of the contracts across to the broader fulgent business I guess, when you're just mentioning at least part of the headwind being a little bit lower contract rates anything changed there substantially or is it more like you just said Brandon kind of normal course of business in the industry, a little bit of pressure, but nothing that changes.

The way you view that broader opportunity.

You you are correct normal course of business. These are normal sort of constraints on contract pricing.

Brandon Perthuis: It's what we've seen for forever. Nothing at a macro level that would affect our ability to leverage these contracts across the organization. Actually, that's going quite well.

It's what we've seen for forever.

Nothing at a macro level that would affect our ability to leverage these contracts across the organization actually that's going quite well.

Paul Kim: I think the thing to really note, because we're talking about these categories, is the power and the momentum that we're seeing from precision diagnostics. Meaning that if you kind of take a step back, and these are all organic numbers, in 2022, for precision diagnostics, we did 97.3 million. For 2023, that 97.3 million is 131.1 million. And for the projected 2024, we're anticipating precision diagnostics to be in excess of 173 million. That's over 31% organic growth in that part of the business. So how the company was constructed, where we were founded, which is full sequencing and NGS, that is experiencing tremendous momentum in 2023, and we anticipate that momentum to continue in 2024. Yeah, I think both Brandon and Paul's comments.

I think I think the thing that really note because we're talking about these category.

As the power and the momentum that we're seeing from the precision.

Meaning that if you kind of take a step back and these are all organic numbers and 2022 for precision diagnostics that we did $97 3 million for 2023 that $97 $3 million is 131 point.

$1 million.

And for the projected in 2024, we're anticipating precision diagnostics to be in excess of $173 million that that's over a 31% organic growth in that part of the business. So.

How the company was constructed where we were founded which is false sequencing on Ngls and that is having tremendous momentum in 2023, and we anticipate that momentum to continue in 2024.

Yeah.

Both the branded and impulse Commons.

Paul Kim: I think in terms of when we purchased this asset. We talked about the insurance coverage because those insurance coverage fueled our growth of precision diagnostics, such as the carry screening business.

I think in terms of when we purchased the assets.

Wish you will talk about the insurance courage.

Because those are the insurance courage.

Fueled our growth of precision diagnostics.

As in the carrier screening business.

Ming Hsieh: But in terms of, in general, the AP, it is, uh, in general, this is not that, that is, impressive in terms of margins and strongly depends on labor, and we have been starting to implement our cost-cutting process. You will see the improvement of operating margins from the AP business. However, the AP business is one of the areas that has a lack of technological investment.

But in terms of the in general the AEP It is.

Pretty.

And generally this is not that.

The.

Our impressive in terms of margins.

Strongly depends on the labor and the.

We have been starting in claim that our cost cutting process you will see the improvement of operating margins from the AEP business.

However, the AEP that the business is the one with the areas has lack of technology investment will be heavily invested in the union structure and technology, you will see the turnaround in the AEP business with maybe that one with the areas really drive the future of our <unk>.

Ming Hsieh: We are heavily invested in infrastructure and technology. You will see the turnaround in the AP business. Maybe that's one of the areas that really drives the future of our digital AI innovation.

<unk> AI.

Innovation, so our C that is.

Ming Hsieh: It has taken us about two to three years to turn the business around, but we also see a lot of potential for us to make technological innovation in that area. Okay, super helpful. Maybe just one last quick one.

It's taken us about two years to three years tried to turn it out of the business are wrong, but we also see that a lot of potential for US is the makeup of technology in the <unk> in that area.

Yeah.

Okay Super helpful. Maybe just one last quick one.

Brandon Perthuis: Just an update on the beginning of the more national rollout for Fulgent Oncology. We'd love a little bit of sort of what happened in the fourth quarter and what you've learned, if anything new, and what the trajectory looks like from your perspective there. Yeah, certainly. Thanks for the question. Well, recently, we've seen some tremendous momentum. Recently, as in sort of January and February, so we'll be maybe talking more about this in detail on the next call, but we have had some significant wins in the Fulgent Oncology Division. As we mentioned previously, we've secured very robust Maldi-X reimbursement for those assays, both north of $2,000, $2,200 for our solid tumor profile and our hematological malignancy profile.

An update on the beginning of the more national rollout for Hogging oncology would love a little bit of sort of what happened in the fourth quarter and what you've learned if anything new and what the trajectory looks like from your perspective there.

Yes, certainly and thanks for the question well recently, we've seen some tremendous momentum.

Now recently as any sort of January and February so it will be maybe talking more about this in detail on the next call, but we have had some significant wins in the oncology division as we've mentioned previously we secured very robust multi reimbursed.

Reimbursement for those assays, both north of.

2000, $2200 for our solid tumor profile in our Hematological malignancy profile. So yes.

Brandon Perthuis: So yeah, great momentum. Expanded the sales team some, still pretty small, but we're sort of walking before we run approach to things. But we think the opportunity is there. The clients seem to be very happy with our turnaround time, our quality, our report layout, you know, our Q&S rate, which is fantastic. You know, it's just very, very good in terms of our ability to process small amounts of tumor tissue.

Yes, great momentum.

And the sales team some still pretty small but.

We're sort of walking before we run approach to things but.

We think the opportunities there the clients seem to be very happy with our turnaround time, our quality of report lay out.

Our <unk> rate, which is fantastic.

Very very good in terms of our ability to.

Process small amounts of tumor tissue. So yes, the business has momentum and I think next quarter, we'll be giving more color.

Brandon Perthuis: So yeah, the business has momentum, and I think next quarter, we'll be giving more color. Great, I'll stop there. Thanks for the time.

Great I'll stop there thanks for the time.

Andrew Harris Cooper: Thank you. Our next question comes from the line of Lu Li with UBS. Great, thank you. Thank you for taking my question. So I guess I wanted to touch on care screening. I think in a prepared remark, you mentioned Marcus Jacob in the host stage.

Thank you. Our next question comes from the line of.

Li with UBS. Please proceed with your question.

Great. Thank you.

My question, So I guess I wanted to touch a little bit on carrier screening I think in the prepared remark you mentioned market shakeup in the whole space I'm. Just wondering can you guys like any color in terms of supply can see share gain opportunity and its that they can keep the guy.

Lu Li: I'm just wondering, can you give any color in terms of like, do you see shared gain opportunity and if that will bake into the guide? Thank you for the question. You know, we certainly benefited from the market shakeup in 2023. You know, it's one of the larger players exiting the space entirely.

Thank you for the question.

We certainly benefited from the market shake up in 2023, it's one of the larger players exiting the space.

Tirelessly.

Brandon Perthuis: We gained significant market share during that event. A similar but different situation is happening in real time, and we are gaining clients from that shakeup as well. So I think, as I mentioned, clients are looking for stability. Our beacon product is performing incredibly well. It has the right gene content, the right turnaround time, and our ability to custom design these panels and do merged couple reporting for calculating residual risk. We have what it takes to win. So, as these clients whose lives have been disrupted, [inaudible] Got it. Appreciate it.

We gained significant market share during that event.

A similar but different situation and you know sort of happening in real time.

And we are gaining clients from that shake up as well.

I think as I mentioned clients are looking for stability.

Our beacon product is performing incredibly well it has the right gene content, but right turnaround time, our ability to custom design these panels.

Do merged couple reporting for calculating residual risk we have what it takes to win.

So as these clients whose lives have been disrupted by these events look for a new lab partner.

I think we ranked pretty high with them so.

Paul Kim: I think the second question coming back to the guidance. Do you see any potential upside or downside to the guidance? Well, we always see upside to the guidance. If you remember last year, we raised our guidance twice. We first started off at $240 million in revenue. We raised it. And then recently, it was at 260. And I'm just talking about the core, and it came in at 262.

In 2024 living and in real time.

We are seeing the sales sort of pipeline and funnel fill up with new opportunities around carrier screening.

Got it appreciate that.

I think second question coming back to it.

Do you see any like potential upside or downside to guy.

Well.

We always see upside to the guide if you.

Remember last year, we raised our guidance.

Twice, we first started off that $240 million of revenue, we raised debt and then recently.

Recently, it was at $2 60, and I'm just talking about the core and it came in at $2 62.

Paul Kim: We also anticipated that the cash burn for 2023 would be somewhat more meaningful than we anticipated. But the ending cash, and that's including buying back about $25 million worth of stock, was a lot better than I think the general consensus that was out there. So, we reserved the right to raise our guidance for 2024, and we also reserved the right to have our cash balance be better than the approximate $800 million.

Also anticipated that the cash burn for 2023 would be.

Somewhat more meaningful than what we anticipated.

The ending cash and thats, including buying back.

About $25 million worth of stock was a lot better than I think the general consensus that was out there. So we reserve the right to raise our guidance in 2024, and we also reserve the right to have our cash balance be better than the approximate $800 million.

Lu Li: Okay, I think I missed some of it. I think the line is not that clear, but we can definitely go offline on this. I guess, like the final question, any update on the LDT? Have you heard anything? And then when should we see the result? Anything, any color would be great.

Okay.

I missed some of the part I think the line.

But looking at that phone call offline on best I guess like the final question any update on the L. D T.

Have you heard anything.

And when should we see that we saw anything any color would be great.

Brandon Perthuis: Are you asking about the FDA's potential oversight of laboratory-developed tests? Yes. Yeah, we haven't seen too much.

Are you are you asking about the F D as potential oversight of laboratory developed test yes.

We haven't seen too much probably we've seen what you've seen you know some of the write ups that had been published.

Brandon Perthuis: Probably we've seen what you've seen, you know, some of the write-ups that have been published. You know, the FDA warming up to the idea that they do have jurisdictional discretion, jurisdictional oversight of laboratory-developed tests. Look, I mean, they're going to do what they're going to do.

The FDA warming up to the idea that they do have jurisdictional discretionary jurisdictional oversight of laboratory developed tests.

Look I mean, they're going to do what they're going to do theres been a lot of pushback from industry leaders that this is not the right approach and that it could limit patients' access to really important test, but ultimately we will do what they're going to do and we will react accordingly, if we need to put a high risk.

Brandon Perthuis: There's been a lot of pushback from industry leaders that this is not the right approach and that it could limit, you know, patients' access to really important tests, but ultimately, they'll do what they're going to do, and we will react accordingly, right? If we need to put a high-risk genetic testing through their process to get it approved, we'll do that. We have the quality systems in place. We have the infrastructure, and that could be a benefit to us, actually. You know, maybe some of the other labs don't have the ability to get some of these things approved. So, whichever way they go, if they continue to exercise jurisdictional discretion, we will continue to operate as LDTs. If they do give us a list of perhaps high-risk tests that they want us to focus on putting through a 510K process, then we'll do that. Either way, I think we have what it takes to still perform in that new environment.

Genetic testing through their process to get it approved we'll do that we have the quality systems in place we have the infrastructure in.

It could be a benefit to us actually you know maybe some of the other labs don't have the ability to get some of these things approved so.

Whichever way they go if they continue to exercise jurisdictional discretion, we will continue to operate as L. D. Ts if they do give us a list of perhaps high risk test they want us to focus on putting through a 500 10-K process. Then we will do that either way I think we have what it takes to still.

Performance in that new environment.

Operator: I appreciate it. Thank you. That concludes our question and answer session, and this concludes our call today. We thank you for your interest and participation. You may now disconnect your line.

I appreciate it.

Thank you.

That concludes our question and answer session and this concludes our call today. We thank you for your interest and participation you may now disconnect your lines.