Fulgent Genetics (FLGT) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Ming Hsieh
• Chief Financial Officer - Paul Kim
• Chief Commercial Officer - Brandon Perthuis
• Investor Relations - Lauren Sloane

TAKEAWAYS

• Revenue -- $90.4 million, representing 8% growth year over year and a 6% increase from the second quarter of 2026.
• Anatomic Pathology Revenue -- $40.9 million, increasing 57% year over year and 9% sequentially.
• Precision Diagnostics Revenue -- $41.8 million, reflecting an 18% decrease year over year but a 1% increase sequentially.
• Biopharma Services Revenue -- $7.7 million, increasing 5% year over year and 19% from the second quarter of 2026.
• Non-GAAP Gross Margin -- 36.3%, an increase from the second quarter driven by fixed cost leverage and improved collection rates.
• GAAP Operating Loss -- $22.5 million, compared to a loss of $15.4 million in the third quarter of 2025.
• Non-GAAP Loss Per Share -- $0.09, based on 27.7 million weighted average diluted shares outstanding.
• Cash and Marketable Securities -- $652.4 million, including a $112.3 million federal tax refund and related interest.
• Full Year 2026 Revenue Guidance -- $330 million to $340 million, representing year-over-year growth of 2.3% to 5.4%.
• Non-GAAP Loss Guidance -- $1.65 to $1.75 per share, an improvement from the previous range of a loss of $2.22 to $2.35 per share.
• Therapeutic Development Investment -- $21 million planned for the full year 2026, supporting clinical trials for FID-022 and FID-007.
• AI Platform Performance -- 255,000 slide images analyzed, a 23% increase from the second quarter of 2026 with a failed analysis rate of 0.01%.
• Bad Debt Recovery -- $3.2 million in the third quarter of 2026, contributing to a decrease in operating expenses.
• Share Repurchase Program -- $75.6 million remaining for future purchases, with 7.5 million shares repurchased since March 2022.
• Capital Expenditures -- $13 million estimated for the full year 2026.
• Precision Diagnostics Guidance -- $161 million to $165 million for the full year 2026.
• Anatomic Pathology Guidance -- $146 million to $150 million for the full year 2026.
• Biopharma Services Guidance -- $23 million to $25 million for the full year 2026.
• RCM Impact -- $21.8 million in revenue contributed from Bako Diagnostics and StrataDx integration during the third quarter.
• Guidance Share Count -- 4.1 million shares repurchased year to date are reflected in the updated per share guidance.

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RISKS

• Perthuis stated, "While this transition continued to have a negative impact on the third quarter, we are pleased to announce we have made significant progress," referring to the ongoing transition of the company's billing and revenue cycle management system.
• Perthuis noted that while management sees a line of sight to historical collection rates, the company "cannot predict more precise timing for future improvements" regarding the finalization of the billing system transition.

SUMMARY

Fulgent Genetics, Inc. (NASDAQ:FLGT) reported third quarter revenue growth driven by the integration of Bako Diagnostics and StrataDx alongside improvements in collection rates. Management raised the full year 2026 outlook for non-GAAP earnings and year-end cash, citing disciplined spending and a more favorable operating outlook. The company is advancing its therapeutic pipeline, particularly the nano-drug delivery platform candidates FID-007 and FID-022, while scaling its AI pathology solutions. A substantial federal tax refund significantly bolstered the cash balance during the period. The company maintains its annual revenue target while forecasting improved operating margins due to lower bad debt and refined therapeutic development spending.

• The company completed an end of Phase 2 meeting with the FDA for FID-007 in August and is preparing for a Phase 3 study for head and neck squamous cell carcinoma.
• Management expects to determine the maximum tolerated dose for the FID-022 Phase 1 dose escalation in the first half of 2027.
• The AI platform currently has four modules in production, with five additional applications planned for deployment in the fourth quarter of 2026.
• CEO Hsieh stated, "We believe our common platform strategy is making meaningful progress," noting the potential for commercializing therapeutic candidates in oncology.
• Management indicated that exposure to clinical lab fee schedule reductions under PAMA is expected to be minimal based on current CPT code assessments.
• CFO Kim noted that the year-end cash forecast was raised to $630 million from $610 million due to improved operating outlook and lower therapeutic development spend.
• In internal testing for the prostate cancer AI application, the module identified 768 of 770 cancer-containing parts across 262 cases.

INDUSTRY GLOSSARY

• CPT Codes: Current Procedural Terminology codes used by insurers to identify and bill for medical, surgical, and diagnostic services.
• FID-007: A nano-encapsulated peptide drug candidate designed to reduce toxicity while maintaining efficacy in chemotherapy.
• FID-022: A nano-encapsulated SN-38 therapeutic candidate for the treatment of solid tumors, including colon and pancreatic cancers.
• PAMA: Protecting Access to Medicare Act, which established a new method for setting market-based prices for clinical laboratory tests.
• RCM: Revenue Cycle Management, the financial process used by healthcare facilities to track patient care episodes from registration to final payment.
• SN-38: An active metabolite of the chemotherapy drug irinotecan, used in the company's nano-drug delivery platform.

Full Conference Call Transcript

Operator: Good afternoon, ladies and gentlemen, and welcome to the Fulgent Genetics Q3 26 Conference Call and Webcast Call. At this time, all lines are in listen-only mode. And following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, This call is being recorded on Thursday, November 5, 2026. I would now like to turn the call over to Lauren Sloane. Please go ahead.

Lauren Sloane: Good afternoon, and welcome to Fulgent's Third Quarter 26 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 on the Investor Relations section of the company's website ir.fulgentgenetics.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 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. 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-Ks for the year ended December 31, 2025. And subsequently filed reports, which are available on the company's Investor Relations website. Management's remarks, including discussions of non GAAP profits, loss, operating expense, margin, earnings and earnings per share, and adjusted EBITDA 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 for investors for various reasons. But these measures should not be viewed as a substitute for or superior to the company's financial results in accordance with GAAP. Please see the company's press release discussing its financial results for the third quarter of 26 for more information including the description of how the company calculates non GAAP income and loss, non GAAP earnings and loss per share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating profit and loss and margin. And adjusted EBITDA and a reconciliation of these financial measures to income and loss earnings loss per share and operating margin.

The most directly comparable GAAP financial measures. The company does not provide reconciliation of forward-looking non-GAAP measures to the most directly comparable GAAP measures because the information necessary to calculate such reconciliations including equity based compensation, tax effects, acquisition related items, and potential impairments, any of which may be material, is unavailable on a forward-looking basis without unreasonable effort and the probable significance of those items cannot be predicted. With that, I would now like to turn the call over to Ming. Please go ahead.

Ming Hsieh: Thank you, Lauren. I will start with some comments on our 2 business lines. Then Brandon will review our product go-to-market updates for our laboratory service business. And Paul will conclude with the financials and outlook before we take your questions. I am pleased with the momentum in our therapeutic development business as we progress on our clinical pipeline. We are seeing encouraging clinical data from our proprietary nano drug delivery platform which empowers both FIDO7 and FIDO22. Let me share the recent updates from FID-007 and then share the progress we have made with FID-022. As a reminder, Fulgent has taken a different approach with FID-007. FID-007 is a nano-encapsulated peptide EXO developed under Fulgent's clean chemo platform.

The platform is designed to reduce toxicity typically associated with conventional chemotherapy while maintaining or improving efficacy. A profile Fulgent delivery is preferable in combination oncology regimen. Starting with FID-007, with the majority of Phase 2 complete, We held the end of the Phase 2 meeting with the FDA in August. We look forward to sharing more with you later this year. Our Phase 3 study is in preparation. We are encouraged by our clinical trial progress achieved so far and believe the interim Phase 3 registration trial is the important step towards a potential commercialization of FID-007 for the treatment of a recurrence or metastatic head and neck squamous cell carcinoma patients.

Who currently have very few effective treatment options. We continue to approach conversations with the partners who bring both resource and strategic alignment. In the third quarter, we were pleased with the momentum of our second principal candidate FID-022 with a Phase 1 dose escalation and the phase of dose level ongoing we expect to determine the maximum tolerated dose level in the first half of next year. FIDO22 is a nano-encapsulated SN-38 for the treatment of solid tumors, including potentially colon pancreatic, and bile duct cancers. Please note that both FID-007 and FID-22 are derived from the same proprietary clean chemo delivery platform patent and fully owned by Fulgent.

Similar to FID-007, FID-022 can also be used in various oncology drug combinations. In conclusion, we believe our common platform strategy is making meaningful progress. We are seeing greater potential in commercializing FID-007 and FID-022 to drive large and growing market. In laboratory services business, we continue to see our AI and digital pathology solutions are at an accelerated pace and continuing to expand our AI portfolios. We are pleased with the progress we have made to address billing and revenue cycle management delays. We which continued to affect our third quarter results. And our team's ability to work effectively to deliver improvements to our collection rates.

I would like to thank our employees, partners and stakeholders for your hard work and loyalty. I will now turn over the call to Brandon Perthuis, our Chief Commercial Officer to talk more about our laboratory services business. Brandon?

Brandon Perthuis: Thank you, Ming. We ended the quarter at $90.4 million an increase of 8% year over year and 6% sequentially. The continued integration efforts for Bako and StrataDx during the third quarter which contributed to the overall performance. Breaking it down further, Precision Diagnostics ended at $41.8 million a decrease of 18% year over year but an increase of 1% sequentially. Anatomic pathology came in at $40.9 million an increase of 57% year over year and 9% sequentially And biopharma services ended the quarter at $7.7 million an increase of 5% year over year and 19% sequentially. Last quarter, we discussed managing the final phase of the transition of our billing and revenue cycle management system.

We originally undertook this transition to achieve greater consistency across our operations and to drive long-term efficiency. While this transition continued to have a negative impact on the third quarter, we are pleased to announce we have made significant progress and have seen a positive sequential trend in reimbursement which has contributed to improvements in our total revenue and gross margins as compared to the second quarter. While there is still additional effort needed to finalize the remaining, and we cannot predict more precise timing for future improvements, we believe we have a clear line of sight into what is needed to return to historical collection rates.

We continue to monitor developments related to PAMA and any potential changes to the clinical lab fee schedule. Based on what we know today, we expect the impact to our business to be minimal. Our primary CPT codes have limited exposure to the reimbursement reductions currently contemplated under PAMA. As a result, we do not currently view PAMA as a material headwind to our revenue or earnings outlook. We will remain engaged with the evolving reimbursement landscape. At this point, we feel comfortable with our positioning. We continue to make significant progress integrating artificial intelligence into our pathology workflow. During the third quarter, our AI platform analyzed approximately 255 thousand slide images representing a 23% increase from the second quarter.

Importantly, as utilization has scaled, the technical reliability of the platform has improved substantially. With failed analysis declining to just 0.01% during the quarter. We now have 4 AI modules in production, with our prostate cancer detection and grading module undergoing pathologist evaluation. During the quarter, we also transitioned our production environment to a new AI analysis platform designed to improve speed, reliability and scalability. The new architecture has meaningfully reduced processing times across several of our highest volume applications and provides the infrastructure to efficiently support additional AI modules as they move into production.

We are particularly encouraged by the continued development of our prostate cancer application, In internal testing across 262 cases, the module identified 768 of 770 cancer containing parts. Looking ahead, we expect to continue expanding the platform with 5 additional AI applications planned for deployment in the fourth quarter. We believe these investments can improve diagnostic consistency, enhance pathologist productivity, and create meaningful operating leverage as testing volumes grow. Overall, we are pleased with our progress during the third quarter, especially around the improvements in revenue cycle management and the use of AI to scale our business. I will now turn the call over to our Chief Financial Officer, Paul Kim. Paul?

Paul Kim: Thank you, Brandon. Revenue in the third quarter of 26 totaled $90.4 million including $21.8 million from Baco Diagnostics and StrataDx compared to $85.4 million in the second quarter of 26. Which included a $16.4 million from Baco Diagnostics and StrataDx. The increase in our Q3 revenue was primarily due to the integration of Bako Diagnostics and StrataDx. GAAP gross margin was 35.3% and non GAAP gross margin for the third quarter was 36.3% The increase sequentially in gross margin reflects fixed cost spread over a higher revenue base. Driven by better collection rates. We expect gross margins to normalize as our collection rate returns to historic norms and as revenue increases. Now turning to operating expenses.

Total GAAP operating expenses were $54.5 million for the third quarter, down from $61.8 million in the second quarter. Decrease in operating expenses was driven by a $3.2 million of bad debt expense recovery to the third quarter of 26 and the absence of a 1-time $2.2 million in impairment charge recorded in the second quarter on a customer relationship intangible asset following the loss of a customer in our therapeutic development segment. Non GAAP operating expenses were $44.8 million in the third quarter down from $49.2 million in the second quarter. GAAP operating margin improved to a -24.9% in Q3 compared to a -42.3% in Q2.

Non GAAP operating margin improved sequentially to a -13.2% in Q3 compared to a -26.2% in Q2. Our GAAP loss in the current quarter was $13.2 million a decrease from the prior quarter's GAAP loss of $29.5 million and a GAAP loss of $0.48 per share based on 27.7 million weighted average diluted shares outstanding. On a non GAAP basis, and excluding equity based compensation expense, and intangible asset amortization Loss for the quarter was approximately $2.4 million or $0.09 per share based on 27.7 million weighted average diluted shares outstanding. Adjusted EBITDA for the third quarter was a loss of approximately $7.5 million compared to a loss of $17.1 million in the prior quarter.

In the third quarter, we repurchased just over 15 thousand shares under our stock repurchase program. Since the inception of the stock repurchase program in March 2022, a total of over 7.5 million shares of common stock have been repurchased under our program with approximately $75.6 million currently remaining available for future purchases of our common stock. Turning to the balance sheet, we ended the third quarter with approximately $652.4 million in cash, cash equivalents, restricted cash and marketable securities. The $100.9 million increase in cash from the previous quarter was primarily driven by the receipt of $112.3 million federal tax refund and related interest partially offset by $11.4 million cash used in operations and CapEx.

We are reaffirming our full year revenue guidance and continue to expect total revenue to be in the range of $330 million to $340 million for 2020, representing year over year growth of 2.3% to 5.4%. We estimate Precision Diagnostics revenues of approximately $161 million to $165 million anatomic pathology approximately $146 million to $150 million and biopharma services to be approximately $23 million to $25 million On margins, we expect full year non GAAP gross margins to be in the mid-30 percent range reflecting product mix shifts, tied to our changing customer composition and lower collection rates associated with the transition to our new revenue cycle management and billing system.

We expect non GAAP operating margins to be in the low negative 20s range for the year, an improvement from our prior expectation of the mid-negative 20s range. We continue to prioritize our investment across 2 key areas: R&D, where we are advancing both our laboratory testing capabilities and clinical study pipeline and the integration of Bako Diagnostics and StrataDx where we are aligning our expanded sales organization, cross-selling our broad testing menu and consolidating operations to drive productivity and operating efficiency. Our billing system transition is still underway and we saw encouraging improvements in the third quarter that we expect will support more consistent collections.

Along with targeted upgrades to our laboratory infrastructure, these investments are designed to strengthen our competitive position and enhance throughput capacity. We believe our technology platform is highly scalable and positions us to drive operating leverage and margin expansion as volumes grow. Our clinical programs continue to progress and we updated the timing of related spending accordingly. We now expect approximately $21 million in therapeutic development investment in 2026 as we continue advancing trials for FID-22 and FID-007.

We now expect the full year 2026 non GAAP loss of $1.65 to $1.75 per share, an improvement from our prior guidance of a loss of $2.22 to $2.35 per share, This reflects disciplined spending across the business, which has lowered our operating expenses. This excludes stock based compensation, impairment loss, acquisition related costs, amortization of intangible assets as well as other charges or gains that we believe are not representative of our operations. Our per share guidance reflects the 4.1 million shares repurchased year to date and assumes no further repurchases. Finally, cash position remains strong.

During the third quarter, we received approximately $112.3 million in federal tax refunds and related interest that were delayed due to constrained resources at the IRS. For fiscal year 26, assuming capital purchases of $13 million and on our therapeutic development business of $21 million and excluding any future stock repurchases or other expenditures outside the ordinary course which could include additional M&A we are anticipating ending the year with approximately $630 million of cash, cash equivalents restricted cash and investments in marketable securities, The increase from our prior forecast of $610 million is attributed to the improved operating outlook and lower therapeutic development spend.

We are pleased with our results for the quarter and are encouraged by the operational progress we made executing against our strategic initiatives to drive AI and digital solutions across our laboratory services business and are proud of the momentum on our pharmaceutical pipeline. We believe we are well positioned for longer term growth and strategic investments, innovation and expanded offerings that deliver value. Thank you for joining our call today. Operator, you may now open it up for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you wish to decline from the polling process, please press the *2. And if you are using a speakerphone, please lift the handset before pressing any keys. And your first question comes from David Westenberg from Piper Sandler. Please go ahead.

Karan Patel: Hey, guys. This is Karan Patel on for David Westenberg. Thanks for taking the call. Congrats on the sequential improvement here To start off, I had a couple of questions on the billing transition. It sounds like there is still some work to be done. But we have seen improvement. I guess, can you maybe quantify what inning we may be in there? And what kind of sight we have into when that may be done and fully transitioned. And also, can you parse out maybe collection rates today versus historical levels and the step up in revenue? Is any of that from catch-up claims from prior periods or not?

Brandon Perthuis: Yeah. Thank you for the question. This is Brandon. Go ahead, Paul.

Paul Kim: Nope. I will let Brandon tee it up, and then I will put some numbers around it. Go ahead, Brandon.

Brandon Perthuis: Yes. Thanks, Paul, and thanks, Karan, for the question. Interesting analogy to asking what kind of inning it is in using the baseball analogy, and perhaps a little bit hard to say, but we are pretty deep into the game. I think as I addressed, you know, last quarter, we had challenges related to implementation of customizations. That were needed in the new RCM system to maximize reimbursement. Since we have noticed that, we have made progress implementing a number of these required customizations and, we are seeing the impact of those customizations on our improved collection rate. That was reflected, you know, in the third quarter performance.

We still have some fine tuning to do, but we are pretty encouraged, with the progress so far.

Paul Kim: Hi, Karan. This is Paul Kim. Yeah. The uptick in the gross margins aside from the higher revenues for Q3, we were pleased to see that. Actually, uptick in the gross margins that happened quicker than we thought. And as Brandon indicated, we are not done yet. We have gotten started this quarter. We did make it a priority for the company. To have the to optimize the collection rates as much as possible. So we believe with additional work that we have in terms of policies and focus that there is ample amount for gross margins to continue to grind higher.

The other thing that I would like to point out is given the fact that it is the end of Q3, when we take a look at our overall forecast, the cash forecast for the year it is actually coming in a lot more favorable than we thought. So we raised our ending cash forecast from 610 to 630 million. And the narrowing of the EPS as well If you take a look at the operating expenses, the operating expenses, particularly for the G&A, you will see that is lower than our historical run rate. And that is because even on the operating expense side, we shored up a lot of bad debt that we had.

We continue to go after some of the old balances we had favorable collections even on the bad debt side. The last thing that I will comment on is the revenue range. The revenue range, we left it the same. As how we had it last quarter between $330 million and $340 million. But we anticipate that Q4 should be a nice quarter for the company as well. And just leaving the range from $3.30 to $3.40 gives us ample room for us to reach a target that we will be satisfied with. That.

Karan Patel: that is very helpful, Howard. Thank you. And I guess maybe to ask 1 more here on the range. I think the guide held implies Q4 between the range of, what, $82 million to $92 million Maybe you could help us parse out the puts and takes to the upside downside there? And separately, this does imply sequential deceleration if I am not mistaken. Maybe could you speak to that if it is in terms of timing of some orders or seasonality, etcetera?

Paul Kim: Yeah. So I will tee it up in terms of the numbers. We will go into reverse order, and then I will turn it over to Brandon. So if you take a look at our forecast, right, for Q4, If you look at the midpoint of the range, if we came in at the midpoint of that, which is $335 million, it says that Q4, if you back into that number, is about flat in terms of our revenues compared to Q3. But we do not--we are not shooting for that. Right? We are shooting for a number that is higher than that.

So if you take a look at the upper end of the range, right, of the $3.30 to $3.40, that leaves us room to have sequential increase from Q3 to Q4. We always reserve the right to come in even higher than that. But I will turn it over to Brandon who can talk about the dynamics of what he sees in terms of customer orders and flow. Right, in November and December. To give you additional comfort that, you know, we are doing everything possible to expand our footprint We are doing everything possible to continue to increase our, you know, revenues and then all in the meanwhile, improving our gross margins and our overall spend. Go ahead, Brandon.

Brandon Perthuis: Yeah. Well, Paul, I think you covered it really well. You know, in addition to what Paul said, we still do have some fine tuning to do on this RCM system, our revenue cycle management system. Again, we are really proud of the progress that we have made so far. But still additional, you know, work to do there. So, you know, taking a prudent approach, to the range as we really get this system where we want it. In terms of seasonality, I think at this point, with our diversified business across, you know, pathology, rare disease, women's health, biopharma services. You know, we see some seasonality, we are becoming a little bit more sort of shielded from it.

So as Paul mentioned, we are going to shoot for a good Q4. I think we have opportunities, and we need, hopefully, to be at the higher end of that range. But like I said, still some work to do in areas, but feeling pretty good about, you know, where we are from a business perspective.

Karan Patel: that is very helpful. And maybe 1 last 1 for me. I guess, Bako and AI, that was very good detail. But as we kind of think about I guess, the modules that are already implemented, the ones that are planned for Q4 in future AI efforts. Can you maybe speak to how this has maybe shown in the P&L or any sort of KPIs in terms of productivity or margin, turnaround time, etcetera. And in respects to BACO integration, if that is--you know, how that is going and that would be great. Thank you.

Ming Hsieh: Yeah, thank you for the questions. I think with AI that will help us increase the efficiency. But more importantly, it would be quality. We have a second level of quality assurance to assist our pathologists. getting the data with more speed and less errors. So I think we will see the productivity improvement and as well as the future gross margin improvements. Guys.

Karan Patel: That will be it for me.

Paul Kim: Operator, if we are not seeing any more questions, we can conclude the call. We appreciate everyone for joining our conference call. We look forward to updating you on our next quarter results. And when we report next quarterly results, we also look forward to giving out our guidance for 2027. Thank you very much.

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