Q1 2025 Fulgent Genetics Inc Earnings Call
Operator: Greetings and welcome to the Fulgent Genetics Q1 2025 conference call and webcast. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
Greetings and welcome to the Folgers Genetics Q1, 2025 conference call and webcast at this time all participants are in listen only mode.
It will just require operator assistance. Please press star zero on your telephone keypad.
Operator: A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone. As a reminder, this conference is being recorded.
A question and answer session will follow the formal presentation. He may be placed in the question queue at any time by pressing star one on your telephone keypad.
As a reminder, this conference is being recorded.
Melanie Solomon: It's now my pleasure to turn the call over to Melanie Solomon. Please go ahead. Thank you. Thank you, Kevin.
Speaker Change: It's now my pleasure to turn the call over to Melanie Solomon Investor Relations. Please go ahead.
Yes.
Melanie Solomon: Thank you Kevin Good morning, and welcome to the <unk> first quarter 2025 financial results Conference call.
Melanie Solomon: Good morning and welcome to the Fulgent first quarter 2025. 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 on the Investor Relations section of the company's website, ir.fulgentgenetics.com.
Paul Kim: On the call are being shaped Chief Executive Officer, Paul Kim Chief Financial Officer, and Brandon <unk>, Chief Commercial officer.
Paul Kim: The company's press release discussing our financial results is available on the Investor Relations section of the company's website IR deck, but 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 Companys website.
Melanie Solomon: 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 will contain forward-looking statements. These forward-looking statements represent management estimates based on current views, expectations, 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 to reflect actual results or changes in expectations.
Paul Kim: Management's prepared remarks and answers to your questions on today's call will contain forward looking statements. These forward looking statements represent managements estimates based on current views expectations and assumptions, which may prove to be incorrect.
Paul Kim: 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.
Paul Kim: The company assumes no obligation to update any of the forward looking statements. It may make today to reflect actual results or changes in expectation listeners should not rely on any forward looking statements as predictions of future events and just listen to management's remarks today with the understanding that actual events, including the company's actual future results may be materially different than what is described in or implied by these forward looking statements.
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 than what is described in or implied by these forward-looking statements.
Melanie Solomon: 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, 2024, and subsequently filed reports which are available on the company's investor relations website.
Paul Kim: 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, 2024, and subsequently filed reports which are available on the.
Paul Kim: Company's Investor Relations website.
Melanie Solomon: 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. Please see the company's press release discussing its financial results for the first quarter, 2025, for more information, including the description of how the company calculates non-GAAP income or loss, earnings or loss per share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating profit or loss, and margin and adjusted EBITDA, and a reconciliation of these financial measures to income or loss, earnings or loss per share, and operating margin, the most directly comparable GAAP financial measures.
Paul Kim: 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 the navy has slowed to investors for various reasons, but these measures should not be viewed as a substitute for or superior to the company.
Paul Kim: These financial results prepared in accordance with GAAP.
Paul Kim: Please see the company's press release discussing its financial results for the first quarter 2025 for more information, including the description of how the company calculates non-GAAP income or loss earnings or loss per share non-GAAP gross profit non-GAAP gross margin.
Paul Kim: non-GAAP operating profit or loss in margin and adjusted EBITDA and a reconciliation of these financial measures to income or loss earnings or loss per share and operating margin.
The most directly comparable GAAP financial measures.
Melanie Solomon: Thank you very much.
Ming Hsieh: With that, I'd now like to turn the call over to Ming. Thank you, Melanie. Good morning. And thank you for joining our call today. I will start with some comments on the first quarter of 2025. and our two business lines.
Paul Kim: I'd now like to turn the call over to me.
Speaker Change: Thank you Mary good morning, and thank you for joining our call today.
Speaker Change: I will start with some comments on the first quarter of 2025.
Speaker Change: And our two business lines.
Brandon Perthuis: And Brandon will review our product and go-to-market updates for our laboratory services business.
Speaker Change: Brendan will review, our product and go to market updates for our laboratory services business and Paul will conclude with the financials and the outlook before we take your questions.
Ming Hsieh: And Paul will conclude with the financials and outlook before we take your questions. We are pleased with our first quarter results. have shown year-over-year growth in laboratory services. and we're looking Seeing great good from Intel. 2025. Our therapeutic development pipeline is on track. for our first clinical candidate. FID-007. Our Phase II clinical trial in combination with the sexotoximab in patients with recurrent or metastatic head, neck, sarcomas, cell carcinoma is progressing well. with 17 patients receiving treatment and 23 enrolled. will continue to enroll patients throughout this year, will continue to project the clinical trial cost of these two to be approximately $10 million over multiple year period.
Speaker Change: We are pleased with our first quarter results.
Speaker Change: Shown year over year growth in laboratory service and.
Speaker Change: We're looking.
Speaker Change: Great.
Speaker Change: The momentum in 2025.
Speaker Change: Our therapeutic development pipeline is on track.
Speaker Change: For our first clinical Kennedy.
Speaker Change: Oh, seven our phase II clinical trial in combination with the sector I'm, sorry in patients with recurrent or metastatic head and neck C. Commerce. So custody of Newmar is progressing well.
Speaker Change: With 17 patients receiving treatment in 'twenty three in road well.
Speaker Change: We will continue to enroll patients throughout this year well continue to project the clinical trial cost of space too to be approximate $10 million of war mode, two full year period.
Ming Hsieh: Our second clinical candidate, FID-022, is set to begin Phase 1 trials over the next few weeks. FID-022 is a nano-encapsulated SN38 for treatment of solid tumors, including, potentially, colon, pancreatic, ovarian, and bile duct cancer. We continue to expect the clinical trial cost of Phase 1, Slice 1B trial for FID 022 to be approximately $8 million. I'm encouraged by the continued progress with our clinical pipeline and the potential for both FID 07 and FID 022. We are targeting heavily pre-treated patients with few options left. I hope we will be able to provide additional treatment options to further their lives.
Speaker Change: Our second clinical.
Speaker Change: Kennedy the ultra tool is set to begin a phase one trials over the next few weeks.
Speaker Change: Of I D O two is nano in caps.
Speaker Change: As in 38 for treatment for solid tumors, including potentially colon pancreatic.
Speaker Change: And about the cancers.
Speaker Change: Tim you too excited or clinical trial caused the old faithful one slice the one b trial for everybody the <unk> to be approximately $8 million.
Speaker Change: I'm encouraged that the by the couldn't continue to progress with our clinical pipeline and the potential for both.
Speaker Change: Oh, seven and <unk> two.
Speaker Change: We are targeting them heavily pre treated patients with.
Speaker Change: A few options left.
Speaker Change: I hope, we'll be able to provide additional treatment options to further their remarks.
Ming Hsieh: We anticipate the cost of this program is very reasonable and we believe our investment will be rewarded. As a reminder, our drug candidates were formulated with our novel nano-encapsulation technology, which includes many issued or active patent applications. and with a therapy platform designed to improve Therapeutic Windows and Pharmacokinetics Profiles for Both New and Existing Cancer Drugs.
Speaker Change: We are in terms of the cost of this program is the word reasonable and there wouldn't be view, our investment will be rewarded.
Speaker Change: As a reminder, our drug candidates were formulas with our novel Nano encapsulation technology, which include mainly issued or active patents or patent applications and the wizard therapy pay from designed to improve the.
Speaker Change: Therapeutic windows and the pharmacokinetics profile for both new and existing cancer drugs.
Ming Hsieh: Overall, I'm pleased with our strong start to the year in our core laboratory services business and the progress we're making with our therapeutic development pipeline. We continue to be in a strong financial position to execute our strategy.
Speaker Change: Overall, I'm pleased with our strong start to the year in our core laboratory services business and the progress, we're making with our therapeutic <unk> 51 of our pipeline.
Speaker Change: We continued to be strong financial position to execute our strategy.
Ming Hsieh: I would like to thank our employees, partners and stakeholders for your hard work and loyalty in a great quarter for our business. We look forward to further progress in 2025.
Speaker Change: Thanks, our employees partners and stakeholders for your hard work and the loyalty.
Speaker Change: Good quarter for our business, we look forward to further progress in 2025.
Brandon Perthuis: I will now turn over the call to Brandon Perthuis, our Chief Commercial Officer, to talk more about our laboratory services business. Brandon? Thanks, Ming. It was a great quarter, with all three business areas showing year-over-year growth. At a high level, precision diagnostics was up $6.7 million, or 17.8% year over year. Anatomic pathology was up $2.2 million, or 9.5% year over year, and biopharma services was up $1.4 million, or 51.3% year over year. Precision Diagnostics was up 1.2% sequentially, while Anatomic Pathology was down approximately 3.9% sequentially. Biopharma coming off a record fourth quarter was down 33.7% sequentially, but as we have mentioned, this is expected due to the nature of this business and timing of the contract.
Speaker Change: I will now turn where the coal to Brendan produce our chief commercial officer to talk more about our laboratory services business.
It was a great quarter with all three business areas showing year over year growth.
At a high level precision diagnostics was up $6 $7 million or 17, 8% year over year.
Speaker Change: Anatomic pathology was up $2 $2 million or nine 5% year over year, and Biopharma services was up $1.4 million or 51, 3% year over year.
Speaker Change: Precision diagnostics was up one 2% sequentially, while anatomic pathology was down approximately three 9% sequentially.
Speaker Change: Biopharma coming off of a record fourth quarter was down 33, 7% sequentially, but as we have mentioned this as expected due to the nature of this business and timing of the contracts.
Brandon Perthuis: The growth and precision diagnostics for the quarter was led by our reproductive health services, continued strength in our legacy diagnostics offerings, and Beacon expanded carrier screening. We continue to pick up market share in this area by expanding our business with existing customers as well as new client wins.
The growth in precision diagnostics for the quarter was led by our reproductive health services continued strength in our legacy diagnostics offerings and Beacon expanded carrier screening we.
Speaker Change: We continue to pick up market share in this area by expanding our business with existing customers as well as new client wins.
Brandon Perthuis: In previous calls, we announced two new initiatives, hereditary cancer testing with the VA and a partnership with Foundation Medicine. While both are still fairly new to us, we are very pleased with the progress. The sales team has done a great job onboarding new VA hospitals, and we are seeing significant usage. The focus will be to continue to sell through the contract and expand our footprint nationally. Regarding Foundation Medicine, we are seeing nice momentum onboarding clients and the demand for hereditary cancer tests appears to be there. We are optimistic these initiatives will provide potential upside for us this year.
Speaker Change: In previous calls, we announced two new initiatives hereditary cancer testing with the VA and a partnership with Foundation medicine.
Speaker Change: While both are still fairly new to us we are very pleased with the progress.
The sales team has done a great job Onboarding, new VA hospitals, and we are seeing significant usage.
Speaker Change: The focus will be to continue to sell through the contract and expand our footprint nationally rigor.
Speaker Change: Regarding foundation Medicine, we are seeing nice momentum onboarding clients and the demand for hereditary cancer test appears to be there. We are optimistic these initiatives will provide potential upside for us this year.
Brandon Perthuis: In terms of our anatomic pathology business, our laboratory continues to deliver excellent quality and turnaround time, and the improved sales team is doing a great job delivering this message to potential clients. Regarding the sales team, we continue to methodically hire, focus mostly on new expansion territories. I suspect this will continue into 2026. We've now posted back-to-back quarters of solid year-over-year growth, so it's exciting to see the investments we've made in this area paying off.
Speaker Change: In terms of our anatomic pathology business. Our laboratory continues to deliver excellent quality and turnaround time and improved sales team is doing a great job delivering this message to potential clients.
Speaker Change: Regarding the sales team, we continue to methodically higher focus mostly on new expansion territories I suspect this will continue into 2026.
Speaker Change: We've now posted back to back quarters of solid year over year growth. So it's exciting to see the investments. We've made in this area are paying off.
Brandon Perthuis: One area to highlight in particular is the investment we have made in digital pathology. During the first quarter, we digitized over 85% of our slides and recognized over $1 million in digital billing for the first quarter. We believe we are significantly ahead of the curve in this area. Moving to digital has several advantages, notably the ability to use AI to assist our pathologists as well as providing our pathologists the option to read remotely. Remote reading has been huge for us since we can now recruit pathologists from all over the country without the need to relocate to one of our labs.
Speaker Change: One area to highlight in particular is the investment we've made in digital pathology during the first quarter, we digitize over 85% of our slides and recognize over $1 million in digital billing for the first quarter.
Speaker Change: We believe we are significantly ahead of the curve in this area.
Speaker Change: Moving to digital has several advantages, notably the ability to use AI to assist our pathologists as well as providing a pathologist the option to read remotely remote reading has been huge for us because we can now recruit pathologist from all over the country without the need to relocate to one of our labs.
Brandon Perthuis: With this new recruiting tool, we now work with over 60 pathologists, most of which are subspecialty trained. In terms of AI, now that most of our slides have been scanned, we can use commercially available AI and we are currently building our own AI tools, both of which have the potential to increase quality, turnaround time and throughput. Our biopharma services business continues to perform well and had an excellent quarter. We are seeing continued strength from existing clients as well as a deepening pipeline of opportunities. We expect to see some variability from quarter to quarter based on the nature of this business.
Speaker Change: With this new recruiting tool, we now work with over 60 pathologist most of which are subspecialty trained in.
Speaker Change: In terms of AI now that most of our slides have been scanned we can use commercially available AI and we are currently building our own AI tools, both of which have the potential to increase quality turnaround time and throughput.
Speaker Change: Our Biopharma services business continues to perform well and had an excellent quarter.
Speaker Change: We are seeing continued strength from existing clients as well as a deepening pipeline of opportunities, we expect to see some variability from quarter to quarter based on the nature of this business.
Brandon Perthuis: But with a vastly improved product offering, we believe we'll continue to see demand for these services.
Speaker Change: With a vastly improved product offering we believe we will continue to see demand for these services.
Brandon Perthuis: In previous calls, we discussed the potential for the FDA to regulate lab-developed tests, or LDTs. Recently, a district court ruling overturned the FDA's final rule on LDTs, and as a result, further regulatory efforts regarding LDTs may be unlikely in the near term. The court stated that, quote, the text, structure, and history of the Food, Drug, and Cosmetic Act and the Clinical Laboratory Improvement Amendments make clear that the FDA lacks the authority to regulate laboratory-developed tests. Although there is a possibility of an appeal, an appeal may be unlikely at this time for a variety of reasons.
Speaker Change: In previous calls we discussed the potential for the F. D. A to regulate lab developed test or L. D Ts Reese.
Speaker Change: Recently, a district court ruling overturned the F. D. A final rule on L. D Ts and as a result further regulatory efforts regarding L. D cheese, maybe unlikely in the near term.
<unk> stated that quote the text structure in history, or the food drug and cosmetic Act and the clinical laboratory improvement amendments made clear that the F. D. A lacks the authority to regulate laboratory developed test.
Speaker Change: Although there is a possibility of an appeal an appeal maybe unlikely at this time for a variety of reasons.
Brandon Perthuis: This is an evolving and fast-moving topic, so we will continue to monitor developments for the foreseeable future.
Speaker Change: This is an evolving fast moving topic. So we will continue to monitor developments for this foreseeable future.
Brandon Perthuis: We were pleased to see 2025 get off to a fast start, and we hope to see the momentum continue. We believe the investments we are making in our operation and business have paid off and should continue to do so.
Speaker Change: We were pleased to see 2025 get off to a fast start and we hope to see the momentum continue we believe the investments we were making in our operation and business have paid off and should continue to do so.
Paul Kim: I'll now turn the call over to Paul Kim, our Chief Financial Officer. Paul? I've totaled 73.5 million compared to 76.2 million in the fourth quarter of 2021.
Speaker Change: I'll now turn the call over to Paul Kim Our Chief Financial Officer Paul.
Paul Kim: Thank you Brian revenue in the first quarter 2025 totaled $73 5 million compared to $76 2 million in the fourth quarter of 2024.
Paul Kim: Revenue from COVID-19 testing is Revenues from our core business totaled $73.5 million. Gap gross margin was 38.6% in a non-gap basis was 41%. Gross margins improved year over year, showing the benefit of our continued efficiencies and streamlining of our business.
Speaker Change: Revenue from COVID-19 testing is negligible.
Speaker Change: Revenue from our core business totaled $73 5 billion GAAP gross margin was 38, 6%.
Speaker Change: On a non-GAAP basis was 41% gross margins improved year over year, showing the benefit of our continued efficiencies and streamlining of our business.
Paul Kim: Now to operating expenses. Total GAAP operating expenses were $48.1 million in the first quarter compared to $48 million in the fourth quarter of 2024. Non-GAAP operating expenses totaled $37.4 million, remaining essentially flat compared to the fourth quarter of 2024. First quarter operating expenses benefited from the reversal of $1 million previously accrued as a potential liability related to the FEC. Since the SEC has advised the company that it has concluded its investigation with no enforcement action recommended. Non-GAAP operating margins decreased approximately 5 percentage points sequentially to a minus 10%, primarily due to lower revenue and growth margins.
Speaker Change: Now to operating expenses total GAAP operating expenses were $48 1 million in the fourth first quarter compares with $48 million in the fourth quarter of 2024, non-GAAP operating expenses totaled 37, 4 million remaining essentially flat compared to the fourth quarter 2024.
Speaker Change: First quarter operating expenses benefited from the reversal of.
Speaker Change: $1 million previously accrued as a potential liability related to the SEC.
Speaker Change: Since the SEC has advised the company that it has concluded its investigation with no enforcement action recommended non.
Speaker Change: non-GAAP operating margin decreased approximately five percentage points sequentially to minus 10%, primarily due to lower revenue and gross margin.
Paul Kim: Adjusted EBITDA loss for the first quarter was approximately $2.9 million, compared to a loss of $3.2 million in Q1 2024. On a non-GAAP basis and excluding equity based compensation expense and intangible asset amortization income for the quarter was approximately 1.2 million or four cents per share based on 30.9 million weighted average diluted shares outstanding.
Speaker Change: Adjusted EBITDA loss for the first quarter was approximately $2 9 million.
Speaker Change: Compared to a loss of $3 $2 million in Q1 2024.
Speaker Change: On a non-GAAP basis, and excluding equity based compensation expense and.
Speaker Change: And intangible asset amortization income for the quarter was approximately $1 2 million.
Speaker Change: Our <unk> per share based on 39 million weighted average diluted shares outstanding.
Paul Kim: Since the beginning of 2025 as of today, we have repurchased approximately 646 shares at an aggregated cost of $10.9 million pursuant to our stock repurchase program. Since the inception of the repurchase program in March 2022, a total of approximately $110.4 million has been spent, with approximately $139.6 million remaining available for future repurchases of our common stock.
Speaker Change: Since the beginning of 2025.
Speaker Change: We have repurchased approximately 646.
Speaker Change: <unk> thousand shares at an aggregate cost of $10 9 million pursuant to our stock repurchase program.
Speaker Change: Since the inception of the repurchase program in March 2022.
Speaker Change: Total of approximately $110.
Speaker Change: 4 million.
Speaker Change: With approximately $139 6 million remaining available for future repurchases of our common stock.
Paul Kim: Turning to the balance sheet, we ended the first quarter with approximately $814.6 million of cash cash equivalents, restricted cash and marketable securities. We are reiterating our outlook for 2025 provided in February. We are guiding the core revenue, which is total laboratory service revenue for the company without COVID-19 testing revenue. We expect total core revenue to be approximately $310 million for 2025, representing a growth of 10% year-over-year. We continue to expect non-GAAP gross margins for the full year to slightly exceed 40%, continuing the strong momentum we've experienced in recent quarters. We continue to expect non-GAAP operating margins of approximately minus 15% for the year as we...
Speaker Change: Turning to the balance sheet, we ended the first quarter with approximately $814 $6 million of cash cash equivalents restricted cash and marketable securities.
Speaker Change: We are reiterating our outlook for 2025 provided in February.
Speaker Change: We are guiding to core revenue, what's the total laboratory service revenue for the company without COVID-19 testing revenue.
Speaker Change: We expect total core revenue to be approximately $310 million for 2025, representing a growth of 10% year over year. We continue to expect non-GAAP gross margins for the full year to slightly exceed 40% continuing the strong momentum we've experienced in recent quarters.
Speaker Change: Continue to expect non-GAAP operating margin of approximately minus 15% for the year.
Speaker Change: Great.
Paul Kim: continue to invest in business growth, further develop laboratory operations, and enhance our existing laboratory facilities. We remain focused on managing our spend and continue to believe that our foundational technology platform supports a strong margin profile longer term. We continue to expect associated cash burn for our therapeutics development business of approximately $25 million this year, which is contemplated in our EPS and cash guide. We continue to expect our GAAP EPS to be a loss of approximately $1.95 per share, excluding any future one-time charges, using a $32 million average share count. Utilizing a non-GAAP tax provision, an average share count of $32 million, we currently expect full year 2025 per share.
Speaker Change: Continue to invest in business growth further develop laboratory operation and enhance our existing laboratory facilities.
Speaker Change: We remain focused on managing our spend.
Speaker Change: <unk> believes that our foundational technology platform supports a strong margin profile longer term, we continue to expect the associated cash burn for our therapeutic development business of approximately $25 million. This year, which is contemplated in our EPS and cash guidance.
Speaker Change: We continue to expect our GAAP EPS to be a loss of approximately $1 95 per share excluding any future one time charges using a $32 million average share count.
Speaker Change: Utilizing our non-GAAP tax provision and average share count of $32 million. We currently expect full year 2025.
Paul Kim: � to be at a net non-gap loss of $0.65 per share, excluding stock-based compensation impairments and amortization of intangible assets, as well as any one-time charges.
Speaker Change: To be at a net non-GAAP loss of 65 per share excluding stock based compensation impairment and amortization of intangible assets as well as any one time charges.
Paul Kim: Finally, our cash position remains strong. We're focused on efficient capital allocation that allows us to reinvest in the business, fund key initiatives, and support future growth. Excluding any future stock repurchases and other expenditures outside the ordinary course, which could include M&A, we anticipate ending 2025 with approximately $770 million of cash, cash-equivalent investments, and marketable securities. The decrease from the previous estimate of $780 million relates to the $10.9 million spent year-to-date on stock repurchases. Overall, we see strength in our core business, which has grown organically, and we see good momentum in 2025.
Speaker Change: Finally, our cash position remains strong.
Speaker Change: Focus on efficient capital allocation that allows us to reinvest in the business from key initiatives and support future growth <unk>.
Speaker Change: Excluding any future stock repurchases and other expenditures outside the ordinary course, which could include M&A, we anticipate ending 2025 with approximately $770 million of cash cash equivalents and investments and marketable securities.
Speaker Change: The decrease from the previous estimate of $780 million relates to the $10 9 million spent year to date on stock repurchases.
Speaker Change: We're all we see strength in our core business, which has grown organically and we see good momentum in 2025. Thank you for joining us on our call today, operator, you may open it up for questions.
Operator: Thank you for joining us on our call today. Operator, now you may open it up for questions. Certainly.
Operator: We'll now be conducting a question and answer session. If you'd like to be placed into question... press star one on your telephone.
Speaker Change: Certainly, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Lu Li: Our first question today is coming from Lu Li from UBS. Your line is now live. Thank you so much for taking my question. The first one is on the 4-year guide. So you mentioned the great momentum in the VA contract and the Foundation Madison, and you bid the quarter. So why not raising the guide? Do you think that there are any more upsides or downsides to the $25 million?
Speaker Change: Our first question today is coming from Louie from UBS. Your line is now live.
Louie: Thank you so much for taking my question. The first one is on the full year guide. So you mentioned a great momentum in the VA contract and the Foundation medicine.
Louie: And you pick a quarter or so I don't really think the guy Yeah. Do you think that there are any more upside or downside.
Louie: How that 25 number.
Paul Kim: Yeah, on the guide, I think your comment was on revenues, but I'll also cover EPS as well. Given the fact that we just initially had the guide about eight or nine weeks ago when we announced our year-end results, we see good, we actually see great momentum in our overall core business, particularly in the area of precision diagnostics. We just want to be a little bit more comfortable before we adjust the guide because, you know, when we do potentially make any adjustments to the revenue guide, we want that to be a bit considerable rather than, you know, something that's less than that.
Louie: Yes.
Louie: On the guide I think your comment was on revenue, but I'll also cover EPS as well given the fact that we just initially have a guide about eight or nine weeks ago, when we announced our year end results.
Louie: We see.
Louie: We're actually seeing great momentum in our overall <unk>.
Louie: Business, particularly in the area of precision diagnostics.
Louie: Wanted to get a little bit more comfortable before we adjust the guide because when we.
Louie: We do potentially.
Louie: Potentially make any adjustments to the revenue guide.
Louie: We want that to be considerable rather than something.
Louie: Less than that and then on the EPS as you see we had a very good first quarter and the EPS came in.
Paul Kim: And then on the EPS, as you see, we had a, you know, very good first quarter and the EPS came in a bit better than what we internally estimated. But we also want the adjustment to the EPS to be something that's considerable when we do alter that. There's certainly a possibility that we can do that in the second quarter, but we're monitoring that. The other thing on why we did not adjust the EPS guide at this point is because we have been a bit aggressive on our stock buyback. And the way the mechanics work on the stock buyback when you have losses is less shares that you have out there outstanding actually decreases your EPS.
Louie: A bit better than what we internally estimated.
Louie: But we also want the.
Louie: The adjustment to the EPS to be something thats considerable when we do alter that theres certainly a possibility that we can do that in the second quarter, but we're monitoring that.
Louie: Other thing.
Louie: On why we did not adjust the EPS guide at this point is because we have been a bit aggressive on our stock buyback and the way the mechanics work on the stock buyback when you have losses.
Louie: Less shares that you have out there outstanding actually.
Louie: Decreases your EPS. So we're actually monitoring those dynamics before we adjust the guide on both the top as well as the bottom line.
Lu Li: So we're actually monitoring those dynamics before we adjust the guide on both the top as well as the bottom line. Got it. Appreciate the color.
Louie: Alright, I appreciate the color.
Brandon Perthuis: So I think this question is for Brendan. I think in the last quarter, you mentioned that there are some of the new accounts that you're running, slipped into 2025, so like Q1 and Q2. So I wonder your Q1 result, like how much of that is coming out from those new accounts where you already fully aborted them and how much is actually the kind of like the base position? I think it does, and thanks for the question. So I think the strong performance we had in the first quarter was certainly a mix of our existing clients ordering more from us, but probably more so new client wins.
Brian: So I think this question for Brian.
Brian: I think in the last quarter, you mentioned that there are some of the new account that you win in professional diagnostics slipped into 2025 felt like Q1 and Q2.
Brian: So I Wonder you know Q1 Q1, we felt like how much is from Oh, that's coming out from both new accounts. There like you already fully appointed them and how much is actually kind of like a base precision diagnostics, that's nice but that makes sense.
Brian: I think it does and thanks for the question. So I think the strong performance we had in the first quarter was certainly a mix of our existing clients.
Brian: <unk> more from us but.
Brian: More so new client wins, we continue to pick up market share in precision diagnostics, especially in the reproductive health arena.
Brandon Perthuis: We continue to pick up market share and precision diagnostics, especially in the reproductive health arena. Yes, we've talked about new meaningful wins in previous quarters, and then onboarding early this year. We mentioned that some of these larger clients take some time to onboard, to get implemented. That's all happening in real time. So I think the strong performance we're seeing is Fulgent gaining additional market share in some of these areas with meaningful new client wins. Some of these new clients are still not fully onboarded, and we think about some of the very large practices and clinics throughout the country.
Brian: Yes, we've talked about new meaningful wins in previous quarters.
Brian: And NIM Onboarding.
Brian: Early this year and we mentioned that some of these larger.
Brian: Clients take some time to onboard you can implemented that's all happening in real time. So I think the strong performance. We are seeing is <unk> gaining additional market share in some of these areas with meaningful new client wins. Some of these new clients are still not fully on boarded and we think about some of the very large.
Brian: Practices in clinics throughout the country. It takes a while to onboard clinics when they have 2030 50 clinics across the country. So it's a bit of a rollout and it just takes some time, but all of that's progressing quite nicely.
Brandon Perthuis: It takes a while to onboard clinics when they have 20, 30, 50 clinics across the country. So it's a bit of a rollout, and it just takes some time. But all that's progressing quite nicely, and I think we're going to continue to see that momentum pick up from new client wins. Got it.
Brian: And I think we're going to continue to see that momentum pick up from new client wins.
Brian: Got it.
Unknown Executive: So final question for me on capital deployment. Do you expect to doing more buyback in 2025?
Brian: Final question for me on capital deployment.
Brian: You're expecting you're doing more buybacks in 2025, and how should we think about kind of by the MMA pension all.
Unknown Executive: And how should we think about kind of like the M&A Yes, thank you for the questions. Definitely you see we are starting to deploy the capital for the stock buybacks aggressively. In addition, we are evaluating various options for the potential M&A to enhance our distribution network and deploy our technologies. So all those options are open and we will actively review every deal we are seeing.
Brian: Thank you yes. Thank you for the questions definitely you will see we are starting to deploy the capital for the stock buybacks gross equity. In addition, we are.
Brian: If everything were also options for the potential MAA tool.
Brian: Our.
Brian: The distribution network and.
Brian: The deployed with technologies, so all of those options.
Brian: We are open and.
Brian: Clearly reveal.
Brian: Deals that we're seeing.
Brian: Thank you. Our next question today is coming from David Westenburg from Piper Sandler Your line is now live.
David Westenberg: Your next question today is coming from David Westenberg from Piper Sandler. Your line is now live. Hi, thanks for taking the question. So actually, I'll start off, Ming Hsieh, can you talk about the expected penetration rate once you launch FID? What do you expect to cadence of adoption and can you remind us kind of, is that a cancer with more broad-based chemotherapies or a lot more? Yeah, thank you for the question. It is, by combination with the cetoxamide, we are targeting for the EGFR-positive patients, but it's also with our chemo option, we're also targeting non-EGFR populations together.
David Westenburg: Hi, Thanks for taking the question so actually I'll start out.
David Westenburg: Can you talk about the expected penetration rate once you launch <unk>.
David Westenburg: 107, what do you expect the cadence of adoption and can you remind us kind of is that a cancer with more broad based chemotherapies or a lot more targeted.
David Westenburg: Yes. Thank you for the question.
David Westenburg: By combination with <unk>, but we are covered for the Egfr positive.
David Westenburg: Ah patients, but has also risen by our chemo.
David Westenburg: <unk>, we're also targeting non egfr populations together.
Ming Hsieh: The head and neck cancer is the initial restart, but many other options we could explore once we get concluded our dosing optimization in the phase two trials. But our overall results is good, and also market is quite large for us.
Speaker Change: Head and neck cancer is the initial restart but many other options that we could explore once we have concluded our dosing optimization.
David Westenburg: Phase II trials for the overall result is good and that also market is quite a bit quite a march for us.
David Westenberg: Okay, thank you, Paul.
Speaker Change: Okay.
Speaker Change: Paul.
Paul Kim: I wanna actually talk about maybe the capital. I mean, you you do have a lot of different products now and you do have Lab. Is there any thoughts to maybe using capital deployment to expand sales and marketing? I know that, you know, usually I know you said you guys are looking at talking. University of California, San Diego. Thank you. Yeah, yeah, that's an excellent question. So let me kind of tee that up, and then I'm going to turn it over to Brandon. If you take a look at our Q1 actual results, we talked about the reversal of the SEC, the accrual that we had in the GNA of $1 million.
Speaker Change: Just to talk about maybe the capital deployment.
Speaker Change: You do have a lot of different products now and you do have pretty good efficiencies in the lab is there any thoughts to maybe using capital deployment to expand sales and marketing.
Speaker Change: I know that usually I know you said you guys are looking at tuck ins.
Speaker Change: Stock buyback is there any opportunity you think in terms of expanding that.
Speaker Change: Yes, that's an excellent question. So let me kind of teed up and then I'm going to turn it over to Brandon If you take a look at our.
Speaker Change: Q1 actual results.
Speaker Change: We talked about.
Speaker Change: So the reversal of the SEC.
Speaker Change: The accrual that we had in the G&A of $1 million, though.
Paul Kim: So, you know, you see the GNA being, you know, a bit lower than our, you know, normalized, you know, rate of 22 to 23 million excluding soft base compensation. But to your question on the sales and marketing, that was also lower. Meaning, if you take a look at our sales and marketing spend, it was $7.6 million in Q1, but we see that being ramped up to and 11 million dollars in Q2, Q3, and Q4 respectively. And I'll turn it over to Brandon on why that is happening. Yeah, certainly. Thanks again for the question, David. I mean, the short answer is yes, we are hiring.
Speaker Change: The G&A being.
Speaker Change: Lower than our normalized.
Speaker Change: <unk> $22 million to $23 million, excluding stock based compensation, but to your question on the sales and marketing that was also lower meaning if you take a look at our sales and marketing spend there was $7 6 million in Q1, but we see that being ramped up to between 10 and 11.
Speaker Change: Million.
Speaker Change: In Q2, Q3, and Q4, respectively, and I'll turn it over to Brandon on why that is happening.
Brandon: Certainly thanks again for the question David I mean, the short answer is yes, we are hiring we're hiring in real time, we expect that to pick up some momentum throughout this year.
Brandon Perthuis: We're hiring in real time. We expect that to, you know, pick up some momentum throughout this year. We are hiring new salespeople for pediatric and rare disease testing. We're hiring new salespeople for reproductive health. And we're also hiring people in the pathology division. With Mission McCall, we've done a great job turning the pathology division around. We're seeing that division return to growth. That team is producing, able to take our, you know, great turnaround time and quality to market. So the short answer to your question, yes, we're going to be hiring salespeople across all three divisions throughout the rest of this year.
Brandon: We are hiring new salespeople for pediatric and rare disease testing, we're hiring new salespeople for reproductive health and we're also hiring people in the pathology Division.
Brandon: On the call we've done a great job turning the pathology division around we're seeing that division returned to growth that.
Brandon: That team is producing.
Brandon: Able to take our great turnaround time and quality of the market. So the short answer to your question, yes, we're going to be hiring salespeople across all three divisions throughout the rest of this year. We believe in terms of our go to market strategy. Our competitive advantages are contracts that we now have.
Brandon Perthuis: We believe in terms of our go-to-market strategy, our competitive advantages, our contracts that we now have, we have what it takes, you know, operationally to make this sales team successful. So we'll be updating, you know, you on future phone calls about, you know, the size of the team, how quickly it's growing. But we are excited about recruiting some really good talent here to come help grow the company. No, very helpful, and yeah, you did have good growth. Right. And, you know, good, obviously a positive, right. Just in terms of strength and biopharma, that one actually, I think that you guys were a little bit of an outlier.
Brandon: We have what it takes operationally.
Brandon: To make this sales team successful so we'll be updating you on that.
Brandon: Future phone calls about the size of the team how quickly it's growing but we are excited about recruiting some really good talent here to come help grow the company.
Speaker Change: That's very helpful and yes, you did did you did have good growth in anatomical pathology, which came as a surprise.
Brandon: Good obviously right.
Brandon: Just in terms of strength in Biopharma that would actually I think that you guys were a little bit of an outlier in terms of the magnitude of how good that was.
Unknown Executive: you know, just given the fact that biopharma, at least from our to be a little bit.
Brandon: Just given the fact that biopharma at least from our polls.
Brandon: Seems to be a little bit more conservative in the current environment.
Unknown Executive: Unknown Speaker Can you talk about, you know, appetite for spending the rest of the year and maybe color on like book to bill there just the way we should expect for the rest of the year because I mean, I don't think you guys will be growing at 51% for the rest of the year and just want to be careful about not getting over Yeah, certainly. I think we've on each call, we've mentioned sort of the variability quarter to quarter in our biopharma business. That's a factor of two things. One is still a relatively, you know, low number compared to the size of our other divisions.
Brandon: Can you talk about appetite for spending the rest of the year and maybe color on like book to Bill There just the way we should expect for the rest of the year because I mean, I don't think you guys will be growing at 51% the rest of the.
Brandon: The year and I just wanted to be careful about not getting over our skis in terms of way, we're thinking about that yes.
Brandon: Yes, certainly I think we've.
Brandon: Each call, we've mentioned sort of the variability quarter to quarter in our Biopharma business, Yes, It's a factor of two things one is still a relatively.
Brandon: A low number compared to the size of some of our other divisions.
Brandon: And the nature of that business as we win these awards, we do the work to deliver the product it can be variable and we've used even lumpy in previous calls.
Brandon Perthuis: And the nature of that business, you know, as we win these awards, we do the work, deliver the product, it can be variable. And we've used even lumpy, you know, in previous calls, you know, we hope to continue to gain scale. So some of that variability, you know, kind of smooths out over time. But, you know, as long as we're, you know, working with a relatively, you know, smaller number, and we're winning big awards at, you know, different intervals throughout the year, you're going to continue to see some variability. That said, I think we've mentioned that, you know, our biopharma capabilities have vastly expanded from where they were a year or even two years ago.
Brandon: We hope to continue to gain scale. So some of that variability kind of smoothed out over time, but as long as we're working with a relatively smaller number and we're winning big awards at different intervals throughout the year you are going to continue to see some variability.
Brandon: I think we've mentioned that our biopharma capabilities have vastly expanded from where they were a year or even two years ago.
Brandon Perthuis: So I think some of the strength that we're able to see is that a lot of these new services we've launched... were able to then sell those to these biopharma clients as well. So I think back just a couple of years ago, we were mostly focused on next generation sequencing. So there was a lot of studies, a lot of RFPs, a lot of opportunities we couldn't address. But for the past couple of years, we've launched all these new platforms. So we're able to address a much larger market. So that team continues to build a good pipeline of opportunities.
Brandon: Some of the strength that we're able to see is that a lot of these new services, we've launched <unk>.
Brandon: We're able to then sell those to these biopharma clients as well so think back just a couple of years ago. We were mostly focused on next generation sequencing. So there was a lot of studies a lot of Rfps what opportunities, we couldnt address but for the past couple of years. We've launched all these new platform. So we're able to address a much larger market. So.
Brandon: That team continues to build a good pipeline of opportunities I think our relationships with the biopharma companies are deepening.
Brandon Perthuis: I think our relationships with the biopharma companies are deepening, meaning we're seeing more pull through from existing clients. I think that's great. It's a good testament to our quality and what we're doing with some of these companies. So I think we'll see some variability quarter to quarter, but if you look at it over time, I think that's an area that's gonna grow quite well for the company.
Brandon: Meaning we're seeing more pull through from existing clients I think thats, great to good Testament to our quality and now what we're doing with some of these companies. So I think we'll see some variability quarter to quarter, but if you look at it over time I think that's an area that's going to grow quite well for the company.
Brandon: Yes.
Unknown Executive: Thank you very much. Thank you.
Speaker Change: Thank you very much.
Brandon: Yes.
Speaker Change: Thank you. Your next question is coming from Andrew Cooper from Raymond James Your line is now live.
Andrew Cooper: Next question is coming from Andrew Cooper from Raymond James.
Andrew Cooper: Your line is now Hey, everybody. Thanks for the Maybe first, just was hoping you could unpack a little bit more of the precision diagnostics momentum, you know, what, what sort of being driven by Nova versus Beacon, and then really outside of reproductive health as well, what you're seeing, whether it's. Unknown Speaker Some of those rare disease or frankly some of those newer oncology offerings that you've rolled out over the last several weeks. Yeah, thanks for the question, Andrew. Got a lot to unpack there, right? We have a lot of tests and precision diagnostics, so, you know, it can be a bit overwhelming.
Andrew Cooper: Hey, everybody. Thanks for the questions. Maybe first just was hoping you could unpack a little bit more of a precision diagnostics momentum.
Speaker Change: What sort of being driven by novo her speak in and then really outside of reproductive health as well what you are seeing whether its jane.
Speaker Change: It is rare disease or frankly, some of those newer oncology offerings that you've rolled out over the last.
Speaker Change: Several quarters.
Speaker Change: Yes. Thanks for the question Andrew Yeah, a lot to unpack there right. We have a lot of test in precision diagnostics. So it can be a bit overwhelming.
Brandon Perthuis: I'll get the easy one out of the way. NOVA is not contributing significantly at this point. We are seeing good feedback from the field. We are generating some volume. Even internationally, we're generating some volume, but NOVA wasn't the driver, you know, for the quarter. I think there was probably two areas to highlight out of all the different tests that we offer. Still probably continues to be Beacon. We've just done an excellent job with expanded carrier screening. I think our average turnaround time for the first quarter was something like 11 days, which is just spectacular. The quality of Beacon, what we're doing with our bioinformatics to address the pseudogenes, the quality of our reports, we've just done an excellent job bringing that product to market.
Speaker Change: I'll get the easy went out of the way nobody's not contributing significantly at this point.
Speaker Change: We are seeing good feedback from the field, we are generating some volume even internationally, we're generating some volume, but no there wasn't the driver for the quarter.
Speaker Change: There was probably two areas.
Speaker Change: To highlight that of all the different tests that we offer so probably continues to be beacon.
Speaker Change: We've just done an excellent job with expanded carrier screening I think our average turnaround time for the first quarter was something like 11 days.
Speaker Change: Just spectacular.
Speaker Change: The quality of Beacon, what we're doing with our bioinformatics to address the pseudo genes the quality of our reports.
Speaker Change: We've just done an excellent job, bringing that product to market. So.
Brandon Perthuis: So, our existing clients are ordering more, but more importantly, we are onboarding new clients and having new client wins for Beacon. Probably the other area to highlight is sort of our, you know, what our core business was for a long time is pediatric rare disease. I believe on the fourth quarter call, we talked about launching a new whole genome that would include RNA sequencing. We branded it RISE, RNA Integrated Sequencing Evaluation. So, we have added to that sales team in a small way so far. We plan to do additional hiring throughout the year. But that area of our business is doing well.
Speaker Change: Our existing clients are ordering more but more importantly, we are onboarding, new clients and adding new client wins for beacon.
Speaker Change: Other area to highlight is sort of our.
Speaker Change: Core business was for a long time is a pediatric rare disease I believe on the fourth quarter call, we talked about launching a new whole genome and that would include RNA sequencing, we branded it rise RNA integrated sequencing evaluation.
Speaker Change: So we have added to that sales team in a small way so far we plan to do additional hiring throughout the year.
Speaker Change: But that area of our business is doing well the market is really receiving the message that.
Brandon Perthuis: The market is really receiving the message that for diagnostic dilemmas, you know, undiagnosed genetic conditions, adding RNA to whole genome sequencing is a very powerful tool. So, that sales team has done a great job approaching children's hospitals, academic medical centers to, you know, really present the benefit of adding RNA to a whole genome. I think we've mentioned that, you know, literature shows with RNA, we could diagnose, you know, up to 20 or 30 percent, you know, more patients. So, we're seeing momentum in the rare disease space. We're investing in that area, and I think it's going to have good momentum for us throughout the rest of the year.
Speaker Change: For diagnostic dilemmas.
Speaker Change: Undiagnosed genetic conditions, adding RNA to whole genome sequencing is a very powerful tool.
Speaker Change: That sales team has done a great job of approaching children's hospitals academic medical centers.
Speaker Change: Two.
Speaker Change: Really presents the benefit of adding RNA to a whole genome.
Speaker Change: We've mentioned that literature shows with RNA, we could diagnose up to 20%, 30% more patients. So.
Speaker Change: We're seeing momentum in the rare disease space, we're investing in that area.
Speaker Change: I think it's going to have good momentum for us throughout the rest of the year.
Speaker Change: Yeah.
Unknown Executive: Perfect.
Speaker Change: Perfect.
Unknown Executive: And then maybe can I start going back to the P&L a little bit? I think all you commented on that sort of 10 to 11 ballpark each of the rest of the quarters for sales and marketing. I guess one.
And then maybe circling back to the P&L a little bit.
Paul Kim: I think Paul you commented on that sort of 10 to 11 ballpark each of the rest of the quarters for sales and marketing I guess one.
Paul Kim: I should that not be going up if if you're talking about hiring kind of incrementally through the rest of the year and then could you also help us think about gross margin trajectories as you do have sort of an evolving Brandon, to your point, kind of a lot of different moving parts, a lot of different products. Reporter, Yeah, as far as the growth margin Back about a year ago, you know, our hope was that we get close to 40%, but we actually overachieved that mark, I believe, in the fourth quarter of 2024. And as we take a look at 2025, you know, even with the revenues, say, for Q1 being, you know, slightly lower than Q4, we actually feel pretty good with our gross margins.
Paul Kim: Should that not be going up if youre talking about hiring kind of incrementally through the rest of the year and then could you also help us think about gross margin trajectories as you do have sort of an evolving mix with.
Paul Kim: Brandon to your point kind of a lot of different moving parts a lot of different products that are contributing different amounts in any given quarter or for the full year.
Paul Kim: Yes, as far as the gross margin.
Paul Kim: Back about a year ago.
Mark: Our hope was that we get close to 40%, but we actually overachieve that Mark I believe in the fourth quarter of two.
Paul Kim: <unk> 2024, and as we take a look at 2025.
Paul Kim: Even what the revenue pay for Q1 being slightly lower than Q4, we actually feel pretty good with our gross margin gross margin excluding stock based comp was running at 41% or maybe a little bit higher than 41%.
Paul Kim: Gross margins, excluding stock-based comp, was running at 41%, or maybe, you know, a little bit higher than 41%. And we don't really see any reason on why, you know, everything being equal, you know, that would dip that much. There's actually a pretty good chance that when we get towards the back half of this year, it might even increase from the gross margin target that we had.
Paul Kim: And we don't really see any reason on why.
Paul Kim: Everything being equal.
With that that much theres actually a pretty good chance that when we get towards the back half of this year it might even increase from the gross margin target that we had.
Paul Kim: and then on the expenses for selling and marketing. I forgot the question that you had for selling and marketing. Was your question why to step up and keep... You talked about the 10 to 11, but you've talked about kind of more hiring. So why the sudden step up and then sort of platitude? Okay, okay. Because, because we are actively hiring, right, in Q1, and, and a number of those people have already, you know, joined the company, it's going to be between 10 and 11, you know, million, that's our forecast, you know, in the last three quarters.
Paul Kim: And then on the expenses for selling and marketing.
Paul Kim: I forgot that.
Paul Kim: The question that you have for selling and marketing.
Paul Kim: Your question why the step up in <unk>.
Paul Kim: You talked about the 10 to 11, but you've talked about kind of more hiring happening through the course of the year. So why the sudden step up and then sort of plateauing as opposed to something a little bit okay.
Paul Kim: Because.
Paul Kim: Because we are actively hiring right.
Paul Kim: Q1 and.
Paul Kim: And a number of those people have already joined the company.
Paul Kim: It's going to be between 10 and $11 million Thats our forecast.
Paul Kim: So in Q2, it might be something closer to 10. And in Q4, it might be something closer to 11.
Paul Kim: And the last three quarters. So in Q2, it might be something closer to 10 and in Q4 it might be helpful.
Paul Kim: Yep.
Speaker Change: Thank you we've reached end of our question and answer session and ladies and gentlemen that does conclude today's teleconference and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.
Operator: We reached the end of our question and answer session.
Operator: And ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
Paul Kim: Thanks.