Fulgent Genetics Inc

Previous wording

Revenue increased $1.5 million or 1%, from $134.0 million in the six months ended June 30, 2023, to $135.5 million in the six months ended June 30, 2024. The increase in revenue was due to an increase of $20.8 million in precision diagnostics, partially offset by decreases of $7.3 million in anatomic pathology, $9.9 million in BioPharma services, and $2.1 million in COVID-19 testing services.

Current wording

Revenue decreased by $12.9 million, or (15)%, from $84.7 million in the three months ended September 30, 2023 to $71.7 million in the three months ended September 30, 2024. The decrease in revenue was due to decreases of $18.9 million in COVID-19 testing services, $0.6 million in BioPharma services, and $0.3 million in anatomic pathology, partially offset by an increase of $6.9 million in precision diagnostics.

Previous wording

Revenue increased $3.2 million or 5%, from $67.9 million in the three months ended June 30, 2023 to $71.0 million in the three months ended June 30, 2024. The increase in revenue was due to an increase of $11.2 million in precision diagnostics, partially offset by decreases of $4.0 million in anatomic pathology and $4.2 million in BioPharma services.

Current wording

Revenue decreased by $11.5 million, or (5)%, from $218.7 million in the nine months ended September 30, 2023 to $207.3 million in the nine months ended September 30, 2024. The decrease in revenue was due to decreases of $21.0 million in COVID-19 testing services, $10.5 million in BioPharma services, $7.6 million in anatomic pathology, and partially offset by an increase of $27.6 million in precision diagnostics.

Previous wording

The increase in precision diagnostics revenue was due to a growth in our reproductive health services, and growth in our specialized oncology tests and testing services. The decrease in anatomic pathology services was due to decreased reimbursement rates from third-party payors. We also have experienced and expect to continue to experience seasonality in our anatomic pathology testing services which are dependent on patients being treated by healthcare providers. The volume of our anatomic pathology testing services can fluctuate during holiday periods and can decline due to extreme adverse weather conditions. The decrease in BioPharma services was attributed to timing of BioPharma service projects. We also expect that our BioPharma services revenue may continue to fluctuate from period to period due in part to the length of the sales cycle and variation in timing amongst projects.

Current wording

The increase in precision diagnostics revenue was due to a growth in our reproductive health services and growth in our specialized oncology tests and testing services. The decrease in anatomic pathology services was due to decreased reimbursement rates from third-party payors. We have also experienced, and expect to continue to experience, seasonality in our anatomic pathology testing services which are dependent on patients being treated by healthcare providers. The volume of our anatomic pathology testing services can fluctuate during holiday periods and can decline due to extreme adverse weather conditions. The decrease in BioPharma services was attributed to timing of BioPharma service projects. We also expect that our BioPharma services revenue may continue to fluctuate from period to period due in part to the length of the sales cycle and variation in timing amongst projects. The decrease in COVID-19 testing services was primarily due to revenue recorded for testing services completed in the prior periods and ceased testing operations at the end of March 2023.

Previous wording

We believe the factors that will affect our ability to grow these revenue streams are 1) the average price point we offer and the reimbursement rate from third-party payors; 2) the concentration of our payor base; 3) the competitive advantage we have due to our broad and flexible test menu, detection rate, and turnaround times; and 4) growth in size of an addressable market. Estimated collection amounts from third-party payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs.

Current wording

We believe the factors that will affect our ability to grow or maintain these revenue streams are 1) the average price point we offer and the reimbursement rate from third-party payors; 2) the concentration of our payor base; 3) the competitive advantage we have due to our broad and flexible test menu, detection rate, and turnaround times; and 4) growth in size of an addressable market. Estimated collection amounts from third-party payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs.

Previous wording

Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated on a smaller number of customers. For the laboratory services business, aggregating customers that are under common control, one customer comprised of $16.9 million or 24% of total revenue in the three months ended June 30, 2024, and contributed $29.6 million or 22% of total revenue in the six months ended June 30, 2024. The same customer contributed $9.1 million or 13% of total revenue in the three months ended June 30, 2023, and no customer contributed more than 10% of the Company’s revenue in the six months ended June 30, 2023. To reduce this revenue concentration risk, we continue to focus on increasing the number of customers and thereby reducing the concentration.

Current wording

Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated on a smaller number of customers. For the laboratory services business, aggregating customers that are under common control, one customer comprised of $16.2 million, or 23%, of total revenue in the three months ended September 30, 2024, and contributed $45.7 million, or 22%, of total revenue in the nine months ended September 30, 2024. The same customer contributed $12.2 million, or 14%, of total revenue in the three months ended September 30, 2023, and contributed $24.8 million, or 11%, of the Company’s total revenue in the nine months ended September 30, 2023. To reduce this revenue concentration risk, we continue to focus on increasing the number of customers and thereby reducing the concentration.

Previous wording

Revenue from non-U.S. sources increased $2.0 million or 42%, from $4.8 million in the three months ended June 30, 2023 to $6.8 million in the three months ended June 30, 2024. Revenue from non-U.S. sources increased $4.6 million, or 51%, from $8.9 million in the six months ended June 30, 2023, to $13.5 million in the six months ended June 30, 2024. The increase in revenue from non-U.S. sources between periods were primarily due to new foreign customers and increased sales of our testing services to some of our existing non-U.S. customers.

Current wording

Revenue from non-U.S. sources increased by $0.3 million, or 6%, from $5.7 million in the three months ended September 30, 2023 to $6.0 million in the three months ended September 30, 2024. Revenue from non-U.S. sources increased by $3.6 million, or 25%, from $14.6 million in the nine months ended September 30, 2023, to $18.2 million in the nine months ended September 30, 2024. The increase in revenue from non-U.S. sources between periods were primarily due to new foreign customers and increased sales of our testing services to some of our existing non-U.S. customers.

Previous wording

Our consolidated cost of revenue decreased $7.7 million or 8%, from $94.6 million in the six months ended June 30, 2023 to $86.9 million in the six months ended June 30, 2024. The decrease in consolidated cost of revenue was due to decreases of $4.1 million in consulting and outside labor costs, $1.4 million in shipping and handling expenses, $1.3 million in software expenses, and $0.7 million in reagents and supply expenses, related to the cessation of COVID-19 testing operations, closure of a laboratory, and efforts of optimizing cost structures mentioned above.

Current wording

Our consolidated cost of revenue decreased by $7.6 million, or 5%, from $139.5 million in the nine months ended September 30, 2023 to $131.9 million in the nine months ended September 30, 2024. The decrease in consolidated cost of revenue was due to decreases of $5.6 million in consulting and outside labor costs, $1.7 million in software expenses, $1.0 million in shipping and handling expenses, related to the cessation of COVID-19 testing operations, closure of a laboratory, and efforts of optimizing cost structures mentioned above, partially offset by an increase of $0.9 million in reagents and supply expenses.

Previous wording

Our consolidated cost of revenues as a percentage of revenue decreased from 70% in the three months ended June 30, 2023 to 63% in the three months ended June 30, 2024. Our consolidated cost of revenues as a percentage of revenue decreased from 71% in the six months ended June 30, 2023 to 64% in the six months ended June 30, 2024.

Current wording

Our consolidated cost of revenues as a percentage of revenue increased from 53% in the three months ended September 30, 2023 to 63% in the three months ended September 30, 2024, due to revenue recorded in 2023 for COVID-19 testing services completed in the prior periods due to collection efforts. Our consolidated cost of revenues as a percentage of revenue was flat in the nine-month periods ended September 30, 2024 and 2023.

Previous wording

Our gross profit increased $5.9 million, or 29%, from $20.6 million in the three months ended June 30, 2023 to $26.5 million in the three months ended June 30, 2024, and increased $9.2 million, or 23%, from $39.4 million in the six months ended June 30, 2023 to $48.6 million in the six months ended June 30, 2024. Our gross profit as a percentage of revenue, or gross margin, increased from 30% in the three months ended June 30, 2023 to 37% in the three months ended June 30, 2024, and increased from 29% in the six months ended June 30, 2023 to 36% in the six months ended June 30, 2024. The changes were primarily due to efforts of optimizing cost structures mentioned above.

Current wording

Our gross profit decreased by $13.1 million, or 33%, from $39.8 million in the three months ended September 30, 2023 to $26.8 million in the three months ended September 30, 2024, and decreased by $3.9 million, or 5%, from $79.2 million in the nine months ended September 30, 2023 to $75.4 million in the nine months ended September 30, 2024. Our gross profit as a percentage of revenue, or gross margin, decreased from 47% in the three months ended September 30, 2023 to 37% in the three months ended September 30, 2024, and was flat in the nine-month periods ended September 30, 2024 and 2023. The decreases were primarily due to revenue recorded in 2023 for COVID-19 testing services completed in the prior periods due to collection efforts.

Previous wording

Research and development expenses for the laboratory services business were mainly for developing our technology and testing services. The research and development expenses were flat for both periods.

Current wording

Research and development expenses for the laboratory services business were mainly for developing our technology and testing services and were flat for both periods.

Previous wording

Research and development expenses for the therapeutic development business were primarily related to the development of FID-007. The expenses increased $3.5 million or 129% from $2.7 million in the three months ended June 30, 2023 to $6.2 million in the three months ended June 30, 2024, and increased $5.1 million or 99% from $5.2 million in the six months ended June 30, 2023 to $10.3 million in the six months ended June 30, 2024. The increase was primarily due to increased expenses related to a drug study with our contract research organizations. We anticipate research and development expenditures for this segment to continue to increase as we have begun enrollment for the phase 2 study of FID-007 in the second quarter of 2024.

Current wording

Research and development expenses for the therapeutic development business were primarily related to the development of FID-007. The expenses increased by $2.2 million, or 87%, from $2.6 million in the three months ended September 30, 2023 to $4.8 million in the three months ended September 30, 2024, and increased by $7.3 million, or 95%, from $7.7 million in the nine months ended September 30, 2023 to $15.1 million in the nine months ended September 30, 2024. The increase was primarily due to increased expenses related to the drug study with our contract research organizations. We anticipate research and development expenditures for this segment to continue to increase as we began enrollment for the phase 2 study of FID-007 in the second quarter of 2024. We expect to enroll approximately 40 patients at various sites for this clinical trial and to complete enrollment by late 2025. We anticipate research and development expenditures to continue to increase as and if the pace of our enrollment for the phase 2 study for FID-007 increases and as we continue the development of FID-007 and other potential therapeutic candidates.

Previous wording

Our consolidated selling and marketing expenses decreased $2.1 million or 20%, from $10.7 million in the three months ended June 30, 2023 to $8.6 million in the three months ended June 30, 2024. The decrease in consolidated selling and marketing expenses was due to decreases of $0.7 million in personnel expenses, $0.4 million in consulting and outside labor costs, $0.3 million in facility expense, $0.2 million in marketing expenses, and $0.2 million in software expenses.

Current wording

Our consolidated selling and marketing expenses decreased by $1.0 million, or 10%, from $10.2 million in the three months ended September 30, 2023 to $9.1 million in the three months ended September 30, 2024. The decrease in consolidated selling and marketing expenses was due to decreases of $0.6 million in marketing expenses and $0.5 million in facility expense.

Previous wording

Our consolidated selling and marketing expenses decreased $3.2 million or 16% from $20.8 million in the six months ended June 30, 2023 to $17.6 million in the six months ended June 30, 2024. The decrease in consolidated selling and marketing expenses was primarily due to decreases of $1.1 million in consulting and outside labor costs, $0.8 million in facility expenses, $0.4 million in marketing expenses, $0.3 million in software expenses, and $0.2 million in commission.

Current wording

Our consolidated selling and marketing expenses decreased by $4.3 million, or 14%, from $31.0 million in the nine months ended September 30, 2023 to $26.7 million in the nine months ended September 30, 2024. The decrease in consolidated selling and marketing expenses was primarily due to decreases of $1.3 million in facility expenses, $1.2 million in consulting and outside labor costs, $1.0 million in marketing expenses, $0.5 million in depreciation expenses, and $0.4 million in commission.

Previous wording

The change in selling and marketing expenses for both periods is mainly due to discontinued marketing efforts related to the COVID-19 business and decreased revenue in BioPharma and anatomic pathology services.

Current wording

The change in selling and marketing expenses for both periods is mainly due to discontinued marketing efforts related to the COVID-19 business and decreased revenue in BioPharma and anatomic pathology services. The decrease in facility expenses was due to terminations of certain leases.

Previous wording

Our consolidated general and administrative expenses increased $3.3 million or 19%, from $18.0 million in the three months ended June 30, 2023 to $21.3 million in the three months ended June 30, 2024. The increase in consolidated general and administrative expenses was due to increases of $2.6 million in personnel costs including equity-based compensation expenses, $0.7 million in legal fees, and $0.2 million in provision for credit losses, partially offset by a decrease of $0.4 million in business insurance.

Current wording

Our consolidated general and administrative expenses increased by $3.5 million, or 20%, from $17.5 million in the three months ended September 30, 2023 to $21.0 million in the three months ended September 30, 2024. The increase in consolidated general and administrative expenses was due to increases of $4.2 million in personnel costs including equity-based compensation expenses, and $3.3 million in provision for credit losses, partially offset by decreases of $3.1 million in legal expenses, $0.5 million in facility expenses, and $0.4 million in depreciation expenses.

Previous wording

Our consolidated general and administrative expenses increased $3.0 million or 8% from $39.8 million in the six months ended June 30, 2023 to $42.8 million in the six months ended June 30, 2024. The increase in consolidated general and administrative expenses was due to increases of $4.8 million in personnel expense including equity-based compensation expenses, $0.8 million in facility expenses, $0.6 million in accounting fees, and $0.4 million in legal fees, partially offset by decreases of $2.2 million in provision for credit loss and $1.3 million in business insurance.

Current wording

Our consolidated general and administrative expenses increased by $6.5 million, or 11%, from $57.3 million in the nine months ended September 30, 2023 to $63.8 million in the nine months ended September 30, 2024. The increase in consolidated general and administrative expenses was due to increases of $9.5 million in personnel expense including equity-based compensation expenses and $1.1 million in provision for credit losses, partially offset by decreases of $2.7 million in legal expenses and $1.4 million in business insurance.

Previous wording

The increase in personnel expenses was primarily due to equity awards granted after the second quarter of 2023; the decrease in business insurance was due to savings from consolidating coverages and service providers; the increase in facility expenses was due to the relocation of our facility to Coppell, Texas; and the increase in the accounting fees was due to entities acquired in 2022, which were scoped in for the financial statements and internal control audit and reviews.

Current wording

The increase in personnel expenses was primarily due to equity awards granted after the third quarter of 2023; the decrease in legal expenses was due to reversal of overly accrued legal liabilities; the decrease in business insurance was due to savings from consolidating coverages and service providers; and the change in facility expenses was due to the relocation of certain facilities and termination of certain leases.

Previous wording

Interest and other income, net, is primarily comprised of net interest income (expenses), which was $7.7 million and $15.3 million in three and six months ended June 30, 2024, respectively, and $5.0 million and $8.8 million for the three and six months ended June 30, 2023, respectively. This interest income, net, related to interest earned on various investments in marketable securities including realized gain or loss on sale of marketable securities, net of interest expenses incurred for our notes payable. The increase in interest income, net, was primarily due to increased interest rates on marketable securities relative to the prior comparative period.

Current wording

Other income, net, is primarily comprised of interest income, which was $8.1 million and $23.2 million in the three and nine months ended September 30, 2024, respectively, and $6.5 million and $15.8 million in the three and nine months ended September 30, 2023, respectively, and impairment of available-for-sale debt securities of $10.1 million in each of the three and nine months ended September 30, 2024. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities. The increase in interest income was primarily due to increased interest rates on marketable securities relative to the prior comparative period.

Previous wording

Benefit from income taxes was $2.1 million and $2.5 million for the three and six months ended June 30, 2024, respectively, compared with $3.1 million and $8.3 million for the three and six months ended June 30, 2023, respectively. The effective tax rates were 19% and 10% for the three and six months ended June 30, 2024, respectively, compared to 21% and 23% for the three and six months ended June 30, 2023. The change in the effective tax rate compared to prior period is due to the valuation allowance in the current period that precludes us from recognizing the benefit from our net operating losses.

Current wording

(Benefit from) provision for income taxes was $(3.8) million and $(6.3) million for the three and nine months ended September 30, 2024, respectively, compared with $20.3 million and $12.0 million for the three and nine months ended September 30, 2023, respectively. The effective tax rates were 21% and 14% for the three and nine months ended September 30, 2024, respectively, compared to 296% and (42)% for the three and nine months ended September 30, 2023. The change in the effective tax rate compared to prior period is due to the valuation allowance in the current period that precludes us from recognizing the benefit from our net operating losses.

Previous wording

We had $837.9 million and $847.7 million in cash, cash equivalents, and marketable securities as of June 30, 2024 and December 31, 2023, respectively. Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, U.S. treasury bills, corporate bonds, municipal bonds, and Yankee debt securities.

Current wording

We had $815.4 million and $847.7 million in cash, cash equivalents, restricted cash, and marketable securities as of September 30, 2024 and December 31, 2023, respectively. Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, U.S. treasury bills, corporate bonds, municipal bonds, and Yankee debt securities.

Previous wording

During the six months ended June 30, 2024, our operations provided $11.6 million of cash, as compared to $1.8 million provided in the six months ended June 30, 2023. The increase in cash provided from operating activities in the six months ended June 30, 2024, as compared with the corresponding period in 2023 was primarily due to the timing of cash receipts from customers and cash payments for operating expenses. We expect to incur more operating expenses and use more cash in operating activities in the coming quarters as a result of our planned and ongoing clinical trials for FID-007 and as we continue to invest resources to grow our laboratory services business.

Current wording

During the nine months ended September 30, 2024, our operations used $4.0 million of cash, as compared to $12.1 million provided in the nine months ended September 30, 2023. The decrease in cash from operating activities in the nine months ended September 30, 2024, as compared with the corresponding period in 2023 was primarily due to ITCs purchased for $24.6 million in cash in 2024, partially offset by the timing of cash payments for operating expenses. We expect to incur more operating expenses and use more cash in operating activities in the coming quarters as a result of our planned and ongoing clinical trials for FID-007 and as we continue to invest resources to grow our laboratory services business.

Previous wording

Cash used in investing activities in the six months ended June 30, 2024 was $39.9 million, which primarily represents $258.8 million for purchases of marketable securities and $17.0 million for purchases of fixed assets, including real estate, partially offset by proceeds of $160.1 million from maturities of marketable securities, and proceeds of $75.6 million from sales of marketable securities.

Current wording

Cash used in investing activities in the nine months ended September 30, 2024 was $30.9 million, which primarily represents $374.2 million for purchases of marketable securities and $36.5 million for purchases of fixed assets, including real estate consisting of the property where our Alpharetta, Georgia laboratory is located, partially offset by proceeds of $278.0 million from maturities of marketable securities and proceeds of $101.5 million from sales of marketable securities.

Previous wording

Cash used in investing activities in the six months ended June 30, 2023 was $5.5 million, which primarily related to $250.5 million on purchases of marketable securities and $14.2 million on purchases of fixed assets, including real estate, partially offset by $258.8 million related to maturities of marketable securities.

Current wording

Cash provided by investing activities in the nine months ended September 30, 2023 was $14.6 million, which primarily represents proceeds of $376.9 million from maturities of marketable securities, partially offset by $343.6 million for purchases of marketable securities and $19.1 million on purchases of fixed assets, including real estate.

Previous wording

Cash used in financing activities in the six months ended June 30, 2024 was $4.0 million, which primarily related to $2.2 million common stock withholding for employee tax obligations, $1.2 million for repayment of the notes payable, and $0.2 million for repurchase of common stock.

Current wording

Cash used in financing activities in the nine months ended September 30, 2024 was $4.5 million, which primarily related to $2.7 million common stock withholding for employee tax obligations and $1.2 million for repayment of the notes payable.

Previous wording

Cash used in financing activities in the six months ended June 30, 2023 was $17.4 million, which primarily related to $15.0 million repayment to the margin loan account and $1.1 million common stock withholding for employee tax obligations.

Current wording

Cash used in financing activities in the nine months ended September 30, 2023 was $21.8 million, which primarily related to $15.0 million repayment to the margin loan account, $2.4 million repayment to the notes payable, $2.2 million repurchase of common stock, and $1.6 million common stock withholding for employee tax obligations.

Previous wording

During the three and six months ended June 30, 2024, we repurchased zero and 10,000 shares of our common stock, respectively, at an aggregate cost of $0.2 million, under the stock repurchase program. During the three and six months ended June 30, 2023, we did not repurchase any shares of our common stock. As of June 30, 2024, a total of approximately $150.5 million remained available for future repurchases of its common stock under the stock repurchase program.

Current wording

During the three and nine months ended September 30, 2024, we repurchased zero and 10,000 shares of our common stock, respectively, at an aggregate cost of $0.2 million, under the stock repurchase program. During the three and nine months ended September 30, 2023, we repurchased 80,000 shares of our common stock at an aggregate cost of $2.2 million under the stock repurchase program. As of September 30, 2024, a total of approximately $150.5 million remained available for future repurchases of our common stock under the stock repurchase program.