Q2 2025 Fulgent Genetics Inc Earnings Call
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It's now my pleasure to introduce your host loran, Sloan investor relations. Please go ahead.
Thank you, and good morning, and welcome to the Fulgent Genetics Inc. Q2 2025 Financial Results conference call.
On the call today 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. Irf feulgen, genetics.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 will contain forward-looking statements.
These forward-looking statements represent, Management's estimates based on current views, expectations, and assumptions which may prove to be incorrect as a result matters, discussed in any forward-looking statements, or 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 and expectations.
Listeners should not rely on any forward-looking statements as predictions or 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 material difference than what is described in or implied by these forward-looking statements.
Please review the more detailed discussion related to these forward-looking statements, including the discussion 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 10K for the year ended December 30th 2024 and subsequently filed reports which are available on the company's investor relations website.
Management's prepared remarks, including discussions of profit loss, margin earnings and earnings per share contain, Financial measures, not prepared in accordance with accounting principles, generally accepted in the United States or Gap.
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 gaps.
Please see the company's press release, discussing the financial results. For second quarter, 2025, for more information, including the description of how the company calculates, non-guided income lost non-gaap earnings loss, per share, non-gaap gross profit, non-gaap gross margin non-gaap operating profit and loss and margin and adjusted ibida. And a Reconciliation of these Financial measures to income or loss earnings and loss per share in operating margins.
The most directly comparable gaap Financial measures.
With that. I now turn the call over to Ming. Please go ahead.
Thank you, Lauren.
Good morning, and thank you for trying to avoid call today.
I will start with the sum of comments on the second quarter of 2025.
And our 2 business lines.
Then Brandon will review our product and go to market updates for our laboratory services business.
And Paul will conclude with the financials and all of it before we take your questions.
We are pleased with our second quarter results.
We have a shampoo sequential and a year-over-year growth in later services.
We are pleased with the momentum. We are seeing as we move through 2025.
Our therapeutic development pipeline is on track.
Our first clinical candidate.
Fido 7 is a program through a phase 2, clinical trial in combination with the sax.
In patients with recurrent or metastatic cell carcinoma, 32 patients were enrolled in those.
We expect to complete patient enrollment that the end of this year with the data readout in 2026.
Project the clinical trial for Phase 2 to be approximately $30 million over a market year period.
our second clinical candidate FID 022 beginning of Phase 1 trial and the first book of patient has been enrolled
FID, 022 is a nano incapacitated and 38 for treatment of solid tumors, including potentially colon pancreatic ovarian, and Bella cancers.
We continue to expect the clinical trial costs of the Phase 1 trial of FID 022 to be approximately $8 million.
I am encouraged by the continuing progress with our clinical pipeline and the potential for both Fido 7 and Fido 2 too.
This drug cases address heavily predated the patients with a worthy few option left, I hope it will be able to provide alternatives to further their lives.
Our anticipation is that the cause for this program is very reasonable, and we believe our investment will be rewarded.
Overall and pleased with our progress in the first half of the year in both our business area.
We'll continue to be in a strong financial position to execute our strategy.
Public. Thank you to 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 the second half of 2025.
I'm now telling her over to Brandon pus, our chief commercial officer to talk more about the laboratory services.
My name is Ming. We had a very successful quarter with all areas of our business performing well and delivering nearly 81.7 million in core Revenue, which is up 16% year-over-year and 11% sequentially.
On a sequential basis. Precision Diagnostics was up 7%, biofarma Services was up 54% and anatomic. Pathology was up 11%
During the second quarter, we launched a new whole genome sequencing service.
While we have offered whole genome sequencing for some time. Our latest version includes several new features that clinicians find important. For example we have moved to a PCR free NGS test which provides more uniform coverage. And reduces amplification bias from traditional pcr-based Library preparation leading to higher accuracy in variant calling
Our new whole genome includes exceptional resolution, detecting CNVs with greater than 2 exon resolution and genome-wide deletions and duplications surpassing traditional exome sequencing.
In addition we are 1 of the only Laboratories who integrate RNA sequencing into the interpretation integrated RNA analysis provides functional insights into genetic variance. Enabling deeper characterization of pathogenicity.
RNA is able to detect abrant. Gene expression monoalphabetic.
Further building momentum for genomic sequencing. The American Academy of Pediatrics recently, recommended exome and genome sequencing at first tier tests for children with global developmental delay, or intellectual disability.
This is a significant milestone for genomic sequencing and for those patients and families who can benefit from it.
this new practice guideline with a powerful diagnostic tool in the hands of more than 60,000 pediatricians across the country.
Another key development in our genomic testing was that we received certified CE Mark for feulgen, EXO and fulgent pipeline manager to our knowledge. We may be the first laboratory to receive CE Mark for such a comprehensive end to end germline testing service.
Fing EXO is a patient. Centric phenotype driven analysis designed to examine coding regions and splice Junctions from more than 4,600 genes and to report only the variance which are of plausible, clinical relevance,
Is the next-generation sequencing-based system designed for clinical exam analysis to identify germline variants to aid the clinical diagnosis of suspected genetic conditions relevant to the patient's clinical and family history?
From sequencing data.
Flows In EXO is ideal for patients, who have a complex or very rare combination of phenotypes that are not suggestive of any recognizable syndrome. Or for whom previous focused testing has been negative.
The American College of medical genetics and genomics, recommends, exome, or genome as a first line test for developmental delay into intellectual disability and congenital anomalies. The National Society of genetic counselors exome or genome as firstline tests for all individuals with unexplained epilepsy, and this guideline is endorsed by the American epilepsy Society.
With the CE, Mark, we can now make fgen EXO available to clinics and Hospital Systems throughout Europe, helping families. Get answers to complex clinical phenotypes.
We believe the CE Mark is an important step to Growing our Global business.
An area we continue to make progress in is Managed Care since January. We have executed over 20 new agreements, adding over 35 million new covered lives to our in-network contracts.
We Believe with our extensive product portfolio. Excellent turnaround time, and other features around bioinformatics and AI. We present as a valuable partner to payers.
The focus for the Managed Care team going forward, is to continue maintaining excellent relationships with our key payer partners and continue to expand our in network coverage across the country.
We believe We Are firing on all cylinders and investing in the right areas to continue to expand our capabilities and Commercial reach.
We are excited to deliver a successful second quarter as well as increase our annual revenue guidance for 2025.
For the second half of the year, the focus will be on gaining additional market share in a 3 areas of our business as well as continuing to expand the sales organization. I'd like to thank the fuelant team for all of their hard work and dedication. And I'll now turn the call over to Paul Kim. Our Chief Financial Officer Paul
Thank you, Brandon Revenue in the second quarter of 2025 totaled, 81.8 million compared to 7 3. 5 2 5.
The revenue from Co 19 testing is negligible revenue from our Core Business totaled, 81.7 million gross margin on a non-gaap basis was 44.2% and a gap basis was 42.1%, gross, margins improved year-over-year and sequentially due to streamline operations, enhance, and efficiency. And the impact of certain 1-time adjustments.
Governing the operating expenses non-gaap operating expenses, total 43.9 million compared to 37.4 million in the first quarter of 2025 total Gap, operating expense.
Was 54.1 million in the second quarter compared to 48.1 million in the first quarter of 2025. The rise in operating expenses, reflected 2 key Investments, the expected increase in R&D spending to support our clinical studies and higher in sales and marketing costs driven by the expansion of our sales team and ramped up marketing initiatives.
Non-gaap operating margin increased slightly sequentially to A minus 9.4%.
Our Gap loss was 19 million for the quarter included a 1-time non-cash charge related to a 9.9 million impairment of a prior investment.
Adjusted evida loss for the second quarter was approximately 3 million compared to a loss of 2.9 Million. In q1 of 2025 on a non-gaap basis, and executing equity-based. Compensation expense, intangible asset amortization, and impairment loss income for the quarter, was approximately 2.1 million.
Or a positive 7 cents per share on 30.7 million weighted average diluted shares outstanding.
And the second quarter we repurchase approximately 130,000 shares at an aggregated. Cost of 2.2 million pursuant to our stock repurchase program.
Since the inception of the stock 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.
According to the balance sheet, we ended the second quarter with approximately $777.5 million in cash and cash equivalents.
Restricted cash and marketable securities.
Cash used in the period included. 31.7 million for income tax credits. Purchased as mentioned earlier, 2.2 million of the stock repurchased
19 testing Revenue to reflect current business performance, were adjusting our Revenue outlook. For the remainder of the Year, increasing Revenue, guidance from 310 million to 320 million for 2025 representing. A growth of 14% year-over-year
We continue to expect non-gaap gross margins for the full year to slightly exceed, 40%, continuing the strong momentum. We experienced in recent quarters,
We expect non-GAAP operating margins to improve from a minus 15% to minus 13% for the year, driven largely by increased revenue.
We continue to invest in business growth further, develop laboratory operations, and enhance our existing laboratory facilities. We remained focused on managing our spending and continue to believe that our foundational technology platform supports a strong margin profile in the longer term. In July, we closed the acquisition of AMP Technologies for an enterprise value of approximately $4 million. AMP has already played a pivotal role in Fulgent's R&D progress through a long-standing licensing agreement that granted access to proprietary nano drug delivery technology supporting our lead drug candidates Fido 07 and Fido 22. With this acquisition, we now own the core intellectual property, enabling full control over the development, expansion, and future commercialization.
Of these and related formulations both in oncology and potentially Beyond.
However, even with this acquisition included, we continue to expect our associated cash burn for the therapeutic development business to remain at approximately $25 million this year, which is contemplated in our EPS and cash guidance.
Using an average share count of 32 million. We now, expect an improvement to our full year 2025 non-gaap EPS guidance, from a loss of 65 cents, per share to a loss of 35 cents per share, excluding stock-based, compensation impairments in amortization of intangible assets as well as any 1-time charges.
Reflecting the improvement in our operations, which is offset.
The effect of our 1-time non-cash impairment adjustment. We're now revising our gaap EPS guidance to a loss of $2.10 per share from a $1.95 per share. Excluding any future 1-time charges using a 32 million average Share account.
Finally our cash position remains strong, we're focused on efficient Capital allocation that allows us to invest in future business fund key initiatives.
And to support future growth.
Excluding any future stock repurchases or other expenditures outside of the ordinary course, which could include M&A, we anticipate ending 2025 with approximately $770 million in cash, cash equivalents, restricted cash, and investments in marketable securities.
Overall, we see strength in our Core Business, which has grown organically and we see good momentum for the balance of 2025. Thank you for joining the call today. Operator. Now, you may open it up for questions.
Thank you, and I'll be conducting your question and answer session. If you'd like to be placed into the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Once again, that’s star 1 to be placed into the question queue.
Our first question is coming from Luli from UBS, your line is now live.
Great. Uh, thank you for taking my question, and congrats on the quarter. Um, I guess I maybe, uh, on the guidance. Um, the $10 million increase for the full year, how much is the staff from the K2 bit versus the second half improvement? Um, and then specifically, I say there was a $7 million increase in physician diagnostics. I was wondering if that is coming out from the VA contract or the Foundation Medicine partnership.
Um, the revenue for the quarter was was not Material. Um, but we we see that relationship. Strengthening we see the go to market strategy, Improvement, improving. So we think there could be some additional upside around that, you know this year, but a little bit slower than we anticipated, but, you know, it's a big partnership to to get off the ground. Um, but the, in addition to those 2 Lou, uh, we saw strength across, you know, many different areas of our Precision Diagnostics portfolio. Well, that's hereditary cancer. Um, Beacon, expanding career screening, a little bit of Nova nipt volume but overall, I mean, just the Precision Diagnostics business, was performed very well, uh, very well in the quarter.
Great. Um, and then my second question, on the, um, AP. It seems like pretty strong in the quarter. Um, I was wondering if there were anything like a 1 time Dynamic, that we should think about given that your kind of like guidance or just like the second half of all these slower. Um, I just want to make sure that I understand, um, the dynamic within it.
Yeah. Brandon you want to talk about the strengths and our anatomic pathology? Yeah, absolutely. Um yeah there's really no um 1 Time Event in the quarter, I think for a couple quarters now, um we've said we've been pretty, you know, happy with the turnaround, we've made there. Um, the lab is on an excellent job with quality and turnaround time and EMR Integrations. Um, and I think the
You know, the biggest thing we've done there is improve and expand that sales organization. Um, the growth you're seeing in AP is is purely organic growth. It's blocking and tackling its winning New Deals. Uh, the AP team has excellent sales leadership, and has an excellent team that is much, you know, bigger today than it was, you know, a year or 2 ago. So it's pure execution from both the lab and the sales team. And uh, we're quite excited to see that AP business turnaround and and hit a really nice stride. Um, in terms of growth
On the go 44% it seems like there's some 1 time adjustment there. I was wondering if you asking that what will be the the combo organic growth margin for the quarter? Yeah that's an excellent question. So we're really pleased with the bump that we saw in our uh gross margins um about half of the increase. Was due to uh a 1 time uh, accounting adjustment that we had in there. But the other half is due to the overall strength in our business combined, with the continued efficiency that we see in the operations, um, of our laboratory services business.
Great. Thank you.
Thank you, Lou.
Thank you. Next question, today, is coming from David westenberg from Piper. Sandler, your line is now live.
Uh hey I thanks for taking the question and um, congrats on the, on the, on the color there. Uh, just a, a follow up from Lou's. Question on on tamak, pathology. I, I think he did say 11% growth that, uh, it is a really good number when you talked about the new sales force, um, were you able to enter new geographies? Um that you know and and and if that's the case, is there any other new geographies that you have an opportunity to get into to keep growing? That anatomic pathology business.
Hey, David Brandon, uh, thanks for the question. Uh, and yes, you you nailed it. Um, we did put new sales people in new geographies. Um, I think we've mentioned a few times that our Managed Care contracts are very strong and their National Managed Care. Contracts that gives us a ton of green grass to go out there and hunt in. Um, so the sales team historically has been sub-scale. It's been a lot of territories that were not covered, but you know, there's AP opportunities plentiful across the country. So the focus has been hiring really good sales, people that can hit the ground running, and putting them in territories where we don't either don't have reps or don't have growth consistent with other sales territories. Um, so again, it's not super flashy, it's blocking and tackling hiring the right people putting them in the right, geography is, and then giving them a product and a service.
That they can successfully. Sell it is, turnaround time quality.
The quality of our subspecialty-trained pathologists is excellent. I think we put all of that together. We have an AP business that is growing and will continue to grow throughout the rest of the year.
You might have with the the, you know, existing going out there, existing Hospital systems or, uh, you know, any kind of, um, uh, sales fall through with like, you know, reproductive health and and, and uh, I guess it wouldn't be Obstetricians. But um, uh, um, Pediatrics.
Yeah, certainly um, look, I think the take-home message is the momentum, in exome, and genome, more, and more societies are endorsing. This test as a Frontline test. We've seen the value of getting to a diagnosis earlier in these patient Journeys uh putting these types of tools in the hands of practitioners and of course that helps with insurance coverage and reimbursement as well. So, I mean, I think that's the major takeaway is, you know, exomes and genomes are going to continue to grow as the utilization increases in families and patients are going to benefit from it. You know. I think the uh the move of AAP to um endorse this for their uh Pediatrics is is is great. Uh how you penetrate that market you know it's more fragmented market right? When we talked to when we talk about children's hospitals or academic medical centers, it's a more concentrated call point. So you know, perhaps we might need uh, a larger sales team if we really want to go after the Pediatrics Market, certainly, you know,
The academic medical centers and children's hospitals are the main call Point. Um, you know, I think what we've done in parallel with these, uh, improved, um, recommendations from these societies is build a really, really good service in parallel, our new whole genome, you know, with RNA is a great service. We we are seeing a significant increase in diagnostic yield. When we moved over to this new, whole exome with RNA, um, we hopefully be presenting some of these data. But we're seeing improved detection, rates of 1015 percent, over our previous version. So we're helping a lot more families. So we're encouraged to see the momentum in genomic sequencing. Um and we intend to continue to invest in our capabilities as well as our sales team to gain market share. While this service grows
Perfect.
On um, a a fee, um, 07. I think you said enrolling this year and then reading out next year uh, is there anything that would hold up, um, the enrollment for this year? And as we think about the, the readout in, um, um, 2026, it, it um, what, what could be, what could impact the timelines, uh, there as well. And thank you.
All right. David. Thank you for the, the, the, the, the questions, uh, uh. I think this, we expect to, uh, accelerate the enrollment, uh, during the second half of the, the, the 2025, uh, previously. We excluded the patients pre-created with, uh, Tech taxo, but with the, the current enrollment and the data, we seen the safety data. We seen from the, uh, first 32 patients. We felt that we could open up for the patients who was previously stated with, taxol could be also enrolled into our program. So we are broaden the pools.
In another area. What we seen encouragement? Uh, from that the i i is the patients pre previously, uh, created the uh, the temporal. Uh, it becomes the use of the maintenance therapy become a first line. So we're in a good position for the head and neck, cancer patients and whoever they progressed with penro treatment, they can get it into the, our treatment options right away. So we see the old deposit signs in that area.
Thanks so much.
Thank you, David. Thank you. Next. Question, is coming from Andrew Cooper from Raymond James. Your line is now live.
Hey, everybody, thanks for the time. Thanks for the questions. Uh, maybe just first, I want to kind of dig in a little bit more on some of the comments around AP and the guide there. Um, you know, it looks like you are kind of pointing to a little bit lower dollar revenues in the back half on a quarterly basis. Is anything changing there? Is there anything informing that? Is it a little bit of seasonality, a little bit of conservatism? Just help us think about the trends after what was a really good quarter in AP, at least for our outlook?
Around, uh, sort of Dermatological procedures. So, if you think about, you know, the last half of the year, there's a lot of, you know, elective surgeries and and biopsies that maybe pushed past the holiday season, for example. Um, but who knows? I mean, uh, with the progress we're making and some of the new wins, we might be able to outpace some of that seasonality. Um, I think when we take a look at the at the pipeline and the opportunities, I mean there's significant strength there. Um, so I mean it does slow down a bit in the back half of the year. Um, but I think there's some potential upside if these pipelines come to fruition, that could potentially outpace the seasonality. But that's, that's essentially what you're seeing is that slow down in the into into the late Q3 and Q4
Andrew, this is Paul. We don't
We don't really anticipate that much softness. I mean, first of all, we're very, very happy with the, uh, increase and the results and the second quarter in our AP business. I think, if you take a look at the, um, initiative, the marketing and the expansion expansion of the sales organization, you see that investment in the operating expenses, the selling and marketing, that's gone from 8.5 million to 12.3 million.
Um, we think that, uh, investment, uh, as Brandon mentioned, uh, you know, uh, was um, you know, very much needed and we're going to get more aggressive and expanding that sales organization. So, um, you know, we anticipate, uh, you know, uh, uh, you know, elevated numbers in Q3 and Q4. But as Brandon mentioned, um, you know, but they can even be better than what we anticipated. So, we're optimistic about the AP business, um, but, um, at the same time we want to be a little cautious, um, to take that increase and then project that out into Q3 and Q4 until it materializes.
Okay, helpful. And then maybe another kind of high level question about the trends here, you know, if we go back to some of the Acquisitions, there was talk about rolling, you know, contracts through to the broader organization and some of the advantages. There, you talked about the Managed Care wins that you've had since the start of this year,
How has that played out in terms of?
Kind of apples to apples as versus versus giving you the opportunity to win incremental volume just with love. You know how those Dynamics have have driven, the numbers and and informed. The increased guide here whether more price, more volume and and kind of How It's performed versus expectations.
Oh, thanks for the question. I think overall, you know, a strong Managed Care, uh division in strong contracts, helps with your go to market strategy. Um, clinicians nowadays, do not like using out of Network Laboratories. Um, we've seen out of network cost share increase over the years significantly. When we look at out of network, deductibles co-pays and co-insurance. So the more patients we can have under our in network umbrella, the better our go to market strategy is. Um, so I think we're incredibly strong in that area. Uh, We've added significant coverage. Um, this year, I know we haven't updated you much, um, in the past but we have made a lot of progress, so we thought it was, um, a good time for that update. And Our intention is continue to get these contracts continue to expand our in network coverage. Because that is an important part of the sales cycle, to go to market strategy clinicians, want labs to be in network, so patients can take
Advantage of their in network uh, co-pay co- insurance and deductible. But in addition to the go to market strategy, as Brandon mentioned a strong, RCM and reimbursement. Team, you know what the additional volume? We, um, experience, efficiency and better realization, which, um, I think that you're, you know, continue to see and the performance of our gross margins.
Okay, great. I'll leave it there. Thanks everybody.
Hey, Andrew.
Thank you. We appreciate all 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.