Fulgent Genetics, Inc.

Previous wording

The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are statements other than historical facts and relate to future events or circumstances or our future performance, and they are based on our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. The forward-looking statements in this discussion and analysis include statements about, among other things, our future financial and operating performance, our future cash flows and liquidity and our growth strategies, as well as anticipated trends in our business and industry. These forward-looking statements are subject to a number of risks and uncertainties, including, among others, those described under “Item 1A. Risk Factors” in Part I of the 2025 Annual Report. Moreover, we operate in a competitive and rapidly evolving industry and new risks emerge from time to time. It is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations. In light of these risks and uncertainties, the forward-looking events and circumstances described in this discussion and analysis may not occur, and actual results could differ materially and adversely from those described in or implied by any forward-looking statements we make. Although we have based our forward-looking statements on assumptions and expectations we believe are reasonable, we cannot guarantee future results, levels of activity, performance or achievements or other future events. As a result, forward-looking statements should not be relied on or viewed as predictions of future events, and this discussion and analysis should be read with the understanding that actual future results, levels of activity, performance and achievements may be materially different than our current expectations. The forward-looking statements in this discussion and analysis speak only as of the date of this report, and except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.

Current wording

The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are statements other than historical facts and relate to future events or circumstances or our future performance, and they are based on our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. The forward-looking statements in this discussion and analysis include statements about, among other things, our future financial and operating performance, our future cash flows and liquidity and our growth strategies, as well as anticipated trends in our business and industry. These forward-looking statements are subject to a number of risks and uncertainties, including, among others, risks related to the completion of the transition of our billing and revenue cycle management system and its effect on our collections, revenue, gross margin and liquidity; the decline in revenue from our largest customer; the integration of Bako and our other acquired businesses; potential future impairment of our goodwill and intangible assets; the ongoing DOJ investigation and our ability to comply with complex regulations regarding billing, FDA therapeutic and device approval regulations, and other regulations applicable to our business; and the development of our therapeutic product candidates, and those described under “Item 1A. Risk Factors” in Part I of the 2025 Annual Report. Moreover, we operate in a competitive and rapidly evolving industry and new risks emerge from time to time. It is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations. In light of these risks and uncertainties, the forward-looking events and circumstances described in this discussion and analysis may not occur, and actual results could differ materially and adversely from those described in or implied by any forward-looking statements we make. Although we have based our forward-looking statements on assumptions and expectations we believe are reasonable, we cannot guarantee future results, levels of activity, performance or achievements or other future events. As a result, forward-looking statements should not be relied on or viewed as predictions of future events, and this discussion and analysis should be read with the understanding that actual future results, levels of activity, performance and achievements may be materially different than our current expectations. The forward-looking statements in this discussion and analysis speak only as of the date of this report, and except as required by law, we undertake no obligation to update publicly any forward-…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

On March 17, 2026, and as further described in Note 15. Business Combinations, to the condensed consolidated financial statements included in this report, we completed the acquisition of certain assets of Bako Diagnostics and acquired StrataDx, or collectively, the Bako Acquisition, which together provide dermatopathology, podiatric pathology, and molecular diagnostic services and therapeutic products. As the Bako Acquisition closed late in the first quarter, the results for the six months ended June 30, 2026, include only approximately three and a half months of the acquired operations. We expect the additional impact of the Bako Acquisition on our consolidated results of operations, including revenue, cost of revenue, and operating expenses, to be reflected in future periods.

Current wording

On March 17, 2026, and as further described in Note 15. Business Combinations, to the condensed consolidated financial statements included in this report, we completed the acquisition of certain assets of Bako Diagnostics and acquired StrataDx, or collectively, the Bako Acquisition, which together provide dermatopathology, podiatric pathology, and molecular diagnostic services and therapeutic products. As the Bako Acquisition closed late in the first quarter, the results for the nine months ended September 30, 2026, include only approximately six and a half months of the acquired operations. We expect the additional impact of the Bako Acquisition on our consolidated results of operations, including revenue, cost of revenue, and operating expenses, to be reflected in future periods.

Previous wording

Revenue increased by $3.6 million, or 4%, from $81.8 million in the three months ended June 30, 2025, to $85.4 million in the three months ended June 30, 2026. The increase in revenue between periods was driven by increases of $9.4 million in anatomic pathology and $0.2 million in BioPharma services, partially offset by decreases of $6.0 million in precision diagnostics.

Current wording

Revenue increased by $6.3 million, or 8%, from $84.1 million in the three months ended September 30, 2025, to $90.4 million in the three months ended September 30, 2026. The increase in revenue between periods was driven by increases of $14.9 million in anatomic pathology and $0.3 million in BioPharma services, partially offset by a decrease of $8.9 million in precision diagnostics.

Previous wording

Revenue increased by $1.3 million, or 1%, from $155.3 million in the six months ended June 30, 2025, to $156.5 million in the six months ended June 30, 2026. The increase in revenue between periods was driven by increases of $9.2 million in anatomic pathology and $1.8 million in BioPharma services, partially offset by decreases of $9.8 million in precision diagnostics.

Current wording

Revenue increased by $7.6 million, or 3%, from $239.3 million in the nine months ended September 30, 2025, to $246.9 million in the nine months ended September 30, 2026. The increase in revenue between periods was driven by increases of $24.1 million in anatomic pathology and $2.3 million in BioPharma services, partially offset by a decrease of $18.7 million in precision diagnostics.

Previous wording

The decrease in precision diagnostics revenue was driven by the decline in revenue from our largest customer as this customer begins to perform tests internally. As previously disclosed in our 2025 Annual Report, we expect revenues for our largest customer to continue to decline in 2026 as this customer continues to increase the performance of tests internally. The tests and testing services this customer has historically purchased were primarily precision diagnostic tests. To reduce this revenue risk, we will focus on developing existing customers and increasing the number of customers and thereby reducing the concentration and on successfully integrating our acquired businesses. The increase in anatomic pathology services was primarily due to $12.9 million in revenue resulting from assets and the business acquired in the Bako Acquisition, partially offset by decreases due to the impact of the final phase of the transition of our billing and revenue cycle management system which has resulted in significant processing backlogs and collections delays. We are actively seeking to address these transition issues, but we may be unable to resolve these issues in a timely manner or as quickly as we presently expect. The volume of our anatomic pathology testing services can fluctuate during holiday periods and can decline due to extreme adverse weather conditions leading to temporary laboratory closures as experienced during 2026. The increase in BioPharma services revenue was primarily due to the timing of service projects, though this revenue is expected to remain variable due to the long sales cycle and fluctuations in project timing.

Current wording

The decrease in precision diagnostics revenue was driven by the decline in revenue from our largest customer as this customer transitions to performing tests internally. As previously disclosed in our 2025 Annual Report, we expect revenues for our largest customer to continue to decline in 2026 as this customer continues to increase the performance of tests internally. The tests and testing services this customer has historically purchased were primarily precision diagnostic tests. To reduce this revenue risk, we will focus on developing existing customers and increasing the number of customers and thereby reducing the concentration and on successfully integrating our acquired businesses. The increase in anatomic pathology services was primarily due to $21.8 million and $41.3 million of revenue in the three and nine months ended September 30, 2026, respectively, resulting from assets and the business acquired in the Bako Acquisition, partially offset by decreases due to the impact of the final phase of the transition of our billing and revenue cycle management system which has resulted in significant processing backlogs and collections delays. We are in the process of addressing these transition issues, but may continue to experience adverse collection results pending completion of this effort. The volume of our anatomic pathology testing services can fluctuate during holiday periods and can decline due to extreme adverse weather conditions leading to temporary laboratory closures as experienced during 2026. The increase in BioPharma services revenue was primarily due to the timing of service projects, though this revenue is expected to remain variable due to the long sales cycle and fluctuations in project timing.

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 segment, aggregating customers that are under common control, no customer represented a significant concentration of revenue in the three months ended June 30, 2026, but one customer comprised $16.1 million, or 10%, of total revenue in the six months ended June 30, 2026. The same customer contributed $17.6 million, or 22%, of our revenue in the three months ended June 30, 2025, and contributed $35.2 million, or 23%, of total revenue in the six months ended June 30, 2025. As previously disclosed, we expect revenues for this customer to continue to decline in 2026 as this customer continues to transition the performance of tests internally.

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 segment, aggregating customers that are under common control, no customer represented a significant concentration of revenue in the three and nine months ended September 30, 2026. One customer contributed $19.2 million, or 23%, of our revenue in the three months ended September 30, 2025, and contributed $54.4 million, or 23%, of total revenue in the nine months ended September 30, 2025. As previously disclosed, we expect revenues for this customer to continue to decline in 2026 as this customer continues to transition the performance of tests internally.

Previous wording

For our largest laboratory customer, and for our customers generally, tests are typically purchased on a test-by-test basis and not pursuant to any long-term purchasing arrangements. Any or all of our customers, including affiliated customers or customers under common control who purchase large quantities of tests, have decided, and could again decide at any time, to decrease, delay, or discontinue their orders from us, which could adversely affect our revenue. In addition to the decline in demand from our largest customer transitioning testing services internally discussed above, we believe fluctuations in customer demand for our tests may be attributable, in part, to the nature of our business. Testing demand can often fluctuate throughout the year with lower demand during holiday periods. Our traditional laboratory and testing services customers can also experience significant volatility in their testing demand from period to period in the ordinary course of their operations. Demand fluctuations, particularly for any large customers, often have a significant impact on our period-to-period performance regardless of their cause.

Current wording

For our customers generally, tests are typically purchased on a test-by-test basis and not pursuant to any long-term purchasing arrangements. Any or all of our customers, including affiliated customers or customers under common control who purchase large quantities of tests, have decided, and could again decide at any time, to decrease, delay, or discontinue their orders from us, which could adversely affect our revenue. In addition to the decline in demand from our largest customer transitioning testing services internally discussed above, we believe fluctuations in customer demand for our tests may be attributable, in part, to the nature of our business. Testing demand can often fluctuate throughout the year with lower demand during holiday periods. Our traditional laboratory and testing services customers can also experience significant volatility in their testing demand from period to period in the ordinary course of their operations. Demand fluctuations, particularly for any large customers, often have a significant impact on our period-to-period performance regardless of their cause.

Previous wording

Revenue from the therapeutic development segment includes amounts recognized by ANP Technologies, Inc., or ANP, from technologies licensed to pharmaceutical and biotechnology companies, as well as CROs. An insignificant amount of gross-margin sharing revenue was recognized for the six months ended June 30, 2026. No further gross-margin sharing revenue is expected from this manufacturing and supply agreement.

Current wording

Revenue from the therapeutic development segment includes amounts recognized by ANP Technologies, Inc., or ANP, from technologies licensed to pharmaceutical and biotechnology companies, as well as CROs. An insignificant amount of gross-margin sharing revenue was recognized for the nine months ended September 30, 2026. No further gross-margin sharing revenue is expected from this manufacturing and supply agreement.

Previous wording

Revenue from non-U.S. sources increased by $1.5 million, or 27%, from $5.6 million in the three months ended June 30, 2025, to $7.1 million in the three months ended June 30, 2026. The increase in the three-month period was primarily due to increases in total revenue to China of $0.7 million, Australia of $0.4 million, and United Kingdom of $0.2 million. Revenue from non-U.S. sources increased by $1.9 million, or 17%, from $11.2 million in the six months ended June 30, 2025, to $13.2 million in the six months ended June 30, 2026. The increase in the six-month period was primarily due to increases in total revenue to Australia of $0.7 million, China of $0.6 million, and United Kingdom of $0.4 million.

Current wording

Revenue from non-U.S. sources increased by $0.7 million, or 11%, from $6.5 million in the three months ended September 30, 2025, to $7.2 million in the three months ended September 30, 2026. The increase in the three-month period was primarily due to increases in total revenue from China of $0.3 million and United Kingdom of $0.2 million. Revenue from non-U.S. sources increased by $2.6 million, or 15%, from $17.7 million in the nine months ended September 30, 2025, to $20.3 million in the nine months ended September 30, 2026. The increase in the nine-month period was primarily due to increases in total revenue from China of $0.9 million, Australia of $0.7 million, and United Kingdom of $0.6 million.

Previous wording

Our consolidated cost of revenue increased by $12.3 million, or 26%, from $47.4 million in the three months ended June 30, 2025, to $59.7 million in the three months ended June 30, 2026. The increase in cost of revenue was primarily due to increases of $11.1 million in cost of revenue resulting from assets and the business acquired in the Bako Acquisition and $1.2 million in depreciation expenses.

Current wording

Our consolidated cost of revenue increased by $9.9 million, or 20%, from $48.6 million in the three months ended September 30, 2025, to $58.5 million in the three months ended September 30, 2026. The increase in cost of revenue was primarily due to increases of $10.9 million in cost of revenue resulting from assets and the business acquired in the Bako Acquisition partially offset by a decrease of $1.2 million in personnel costs due to decreased equity-based compensation.

Previous wording

Our consolidated cost of revenue increased by $16.9 million, or 18%, from $92.5 million in the six months ended June 30, 2025, to $109.4 million in the six months ended June 30, 2026. The increase in cost of revenue was primarily due to increases of $12.8 million in cost of revenue resulting from assets and the business acquired in the Bako Acquisition and increases of $1.8 million in shipping and handling expenses, $1.6 million in depreciation expenses, and $0.9 million in consulting and outside labor costs.

Current wording

Our consolidated cost of revenue increased by $26.8 million, or 19%, from $141.0 million in the nine months ended September 30, 2025, to $167.8 million in the nine months ended September 30, 2026. The increase in cost of revenue was primarily due to increases of $23.7 million in cost of revenue resulting from assets and the business acquired in the Bako Acquisition, $2.0 million in depreciation costs, $1.9 million in shipping and handling expenses, and $0.9 million in consulting and outside labor costs, and partially offset by decreases of $0.7 million in personnel costs due to decreased equity-based compensation, $0.4 million in software and software licensing expenses, and $0.4 million in supplies and materials expenses.

Previous wording

Our consolidated cost of revenue as a percentage of revenue increased from 58% in the three months ended June 30, 2025, to 70% in the three months ended June 30, 2026. Our consolidated cost of revenues as a percentage of revenue increased from 60% in the six months ended June 30, 2025, to 70% in the six months ended June 30, 2026.

Current wording

Our consolidated cost of revenue as a percentage of revenue increased from 58% in the three months ended September 30, 2025, to 65% in the three months ended September 30, 2026. Our consolidated cost of revenue as a percentage of revenue increased from 59% in the nine months ended September 30, 2025, to 68% in the nine months ended September 30, 2026.

Previous wording

Our gross profit decreased by $8.8 million, or 25%, from $34.4 million in the three months ended June 30, 2025, to $25.7 million in the three months ended June 30, 2026, and decreased by $15.6 million, or 25%, from $62.8 million in the six months ended June 30, 2025, to $47.2 million in the six months ended June 30, 2026. Our gross profit as a percentage of revenue, or gross margin, decreased from 42% in the three months ended June 30, 2025, to 30% in the three months ended June 30, 2026, and 40% in the six months ended June 30, 2025, to 30% in the six months ended June 30, 2026. This was driven by the lower collection rate and higher fixed costs, reducing operating leverage primarily resulting from processing and collections delays in connection with the final phase of the implementation of our new billing and revenue cycle management system. This system is complex, and the challenges have been mostly related to implementing the customizations needed to maximize reimbursement that were not fully built into the initial launch. That customization work remains ongoing today. We have made progress implementing a number of the required customizations and remain focused on completing the remaining work as quickly as possible. As the remaining customizations are completed and integrated across our revenue cycle, we expect our collection rate, and correspondingly our gross margin, to improve, though we cannot predict the exact timing of that improvement.

Current wording

Our gross profit decreased by $3.6 million, or 10%, from $35.5 million in the three months ended September 30, 2025, to $31.9 million in the three months ended September 30, 2026, and decreased by $19.2 million, or 20%, from $98.3 million in the nine months ended September 30, 2025, to $79.1 million in the nine months ended September 30, 2026. Our gross profit as a percentage of revenue, or gross margin, decreased from 42% in the three months ended September 30, 2025, to 35% in the three months ended September 30, 2026, and 41% in the nine months ended September 30, 2025, to 32% in the nine months ended September 30, 2026. This was driven by the lower collection rate and higher fixed costs, reducing operating leverage primarily resulting from processing and collections delays in connection with the final phase of the implementation of our new billing and revenue cycle management system. This system is complex, and the challenges were mostly related to implementing the customizations needed to maximize reimbursement that were not fully built into the initial launch. We have made progress implementing the required customizations, and our collection rate improved in the third quarter of 2026 compared to the second quarter of 2026. As the remaining customizations are completed and integrated across our revenue cycle, we expect our collection rate, and correspondingly our gross margin, to improve, though we cannot predict the exact timing of that improvement.

Previous wording

For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services. The expenses increased by $1.1 million, or 15% from $7.5 million in the three months ended June 30, 2025, to $8.5 million in the three months ended June 30, 2026. The increase was primarily attributed to increases of $1.0 million in reagents and supplies expenses.

Current wording

For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services. The expenses increased by $0.7 million, or 11%, from $7.1 million in the three months ended September 30, 2025, to $7.8 million in the three months ended September 30, 2026. The increase was primarily attributable to increases of $0.9 million in reagents and supplies expenses.

Previous wording

For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services. The expenses increased by $2.5 million, or 17% from $14.5 million in the six months ended June 30, 2025, to $17.0 million in the six months ended June 30, 2026. The increase was primarily attributed to increases of $1.7 million in reagents and supplies expenses and $0.9 million in personnel expenses.

Current wording

The expenses increased by $3.3 million, or 15%, from $21.6 million in the nine months ended September 30, 2025, to $24.9 million in the nine months ended September 30, 2026. The increase was primarily attributed to increases of $2.7 million in reagents and supplies expenses and $0.7 million in personnel expenses.

Previous wording

For the therapeutic development segment, the research and development expenses in the three months ended June 30, 2026, totaled $6.0 million and consisted of $2.8 million in contract research organization, or CRO, costs, and $2.7 million in personnel costs, including equity-based compensation. In the three months ended June 30, 2025, these expenses totaled $6.0 million and comprised $3.0 million in CRO costs and $2.6 million of personnel costs, including equity-based compensation. Other expense categories including facilities and depreciation are not individually significant and have remained stable.

Current wording

For the therapeutic development segment, the research and development expenses in the three months ended September 30, 2026, totaled $5.8 million and consisted of $3.1 million in personnel costs, including equity-based compensation, and $2.1 million in contract research organization, or CRO, costs. In the three months ended September 30, 2025, these expenses totaled $6.8 million and comprised $3.4 million in CRO costs and $2.8 million of personnel costs, including equity-based compensation. Other expense categories including facilities and depreciation are not individually significant and have remained stable.

Previous wording

For the therapeutic development segment, the research and development expenses in the six months ended June 30, 2026, totaled $11.7 million and consisted of $5.7 million in personnel costs, including equity-based compensation, and $4.8 million in CRO costs. In the six months ended June 30, 2025, these expenses totaled $11.3 million and comprised $5.5 million in CRO costs and $5.0 million of personnel expenses, including equity-based compensation. Other expense categories including facilities and depreciation are not individually significant and have remained stable.

Current wording

For the therapeutic development segment, the research and development expenses in the nine months ended September 30, 2026, totaled $17.5 million and consisted of $8.8 million in personnel costs, including equity-based compensation, and $6.9 million in CRO costs. In the nine months ended September 30, 2025, these expenses totaled $18.1 million and comprised $8.9 million in CRO costs and $7.8 million of personnel expenses, including equity-based compensation. Other expense categories including facilities and depreciation are not individually significant and have remained stable.

Previous wording

Our consolidated selling and marketing expenses increased by $2.9 million, or 24%, from $12.3 million in the three months ended June 30, 2025, to $15.2 million in the three months ended June 30, 2026. The increase in consolidated selling and marketing expenses was due to increase of $3.9 million resulting from assets and the business acquired in the Bako Acquisition, partially offset by decreases of $1.8 million in advertising and marketing expenses.

Current wording

Our consolidated selling and marketing expenses increased by $4.0 million, or 34%, from $11.6 million in the three months ended September 30, 2025, to $15.6 million in the three months ended September 30, 2026. The increase in consolidated selling and marketing expenses was due to increase of $3.3 million resulting from assets and the business acquired in the Bako Acquisition and $0.6 million in software and software licensing expenses.

Previous wording

Our consolidated selling and marketing expenses increased by $6.7 million, or 32%, from $20.8 million in the six months ended June 30, 2025, to $27.4 million in the six months ended June 30, 2026. The increase in consolidated selling and marketing expenses was due to increase of $4.7 million resulting from assets and the business acquired in the Bako Acquisition, $2.2 million in personnel costs due to increased headcount, and $1.4 million in software and software licensing, partially offset by decreases of $1.9 million in advertising and marketing expenses.

Current wording

Our consolidated selling and marketing expenses increased by $10.7 million, or 33%, from $32.4 million in the nine months ended September 30, 2025, to $43.1 million in the nine months ended September 30, 2026. The increase in consolidated selling and marketing expenses was due to increase of $8.1 million resulting from assets and the business acquired in the Bako Acquisition, $2.4 million in personnel costs due to increased headcount, and $2.0 million in software and software licensing expenses, partially offset by a decrease of $2.4 million in advertising and marketing expenses.

Previous wording

Our consolidated general and administrative expenses increased by $0.8 million, or 3%, from $26.4 million in the three months ended June 30, 2025, to $27.2 million in the three months ended June 30, 2026. The increase in consolidated general and administrative expenses was due to increases of $3.6 million resulting from assets and the business acquired in the Bako Acquisition and $0.7 million in software and software licensing costs, partially offset by decreases of $1.9 million in legal expense and $0.7 million of bonus expense.

Current wording

Our consolidated general and administrative expenses increased by $2.6 million, or 3%, from $75.0 million in the nine months ended September 30, 2025, to $77.6 million in the nine months ended September 30, 2026. The increase in consolidated general and administrative expenses was due to increases of $7.9 million resulting from assets and the business acquired in the Bako Acquisition, $2.4 million in acquisition-related expenses, and $1.1 million in software and software licensing expenses, partially offset by decreases of $4.2 million in bad debt expense, $2.0 million in personnel costs due to decreased bonus and equity-based compensation expenses, $1.0 million in accounting expenses, and $0.7 million in consulting and outside labor expenses.

Previous wording

During the three months ended June 30, 2026, we identified a triggering event with respect to a finite-lived customer relationship intangible asset acquired as part of the ANP acquisition, resulting from loss of a significant customer relationship. As a result, we recorded an impairment charge of $2.2 million during the three months ended June 30, 2026, representing the remaining net carrying value of the intangible asset after accumulated amortization since the ANP acquisition date, effectively writing off the asset in its entirety. The impairment charge is reflected within a separate line item in the Condensed Consolidated Statements of Operations. There was no such impairment charges for intangible assets in prior year.

Current wording

During the nine months ended September 30, 2026, we identified a triggering event with respect to a finite-lived customer relationship intangible asset acquired as part of the ANP acquisition, resulting from the loss of a significant customer relationship. As a result, we recorded an impairment charge of $2.2 million, representing the remaining net carrying value of the intangible asset after accumulated amortization since the ANP acquisition date, effectively writing off the asset in its entirety. The impairment charge is reflected within a separate line item in the Condensed Consolidated Statements of Operations. There were no such impairment charges for intangible assets in the prior year.

Previous wording

Other income (expense) is primarily comprised of interest income, which was $6.4 million and $15.1 million in the three and six months ended June 30, 2026, respectively, and $8.1 million and $16.1 million in the three and six months ended June 30, 2025, respectively. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities, as well as interest accrued for outstanding federal tax refunds. The change in interest income was primarily due to the interest earned from the outstanding federal tax refunds, partially offset by lower overall marketable security balances. Other expenses primarily consisted of a one-time, non-cash impairment of a prior investment as discussed further in Note 4. Fair Value Measurements, of the financial statements included in this quarterly report.

Current wording

Other income is primarily comprised of interest income, which was $8.6 million and $23.6 million in the three and nine months ended September 30, 2026, respectively, and $7.9 million and $24.0 million in the three and nine months ended September 30, 2025, respectively. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities, as well as interest accrued for outstanding federal tax refunds. The change in interest income was primarily due to the interest earned from the outstanding federal tax refunds, partially offset by lower overall marketable security balances. Other expenses were minimal in 2026. Other expenses in 2025 primarily consisted of a one-time, non-cash impairment of $9.9 million related to a prior investment as discussed further in Note 4. Fair Value Measurements, of the financial statements included in this quarterly report.

Previous wording

Provision for (Benefit from) Income Taxes

Current wording

Benefit from Income Taxes

Previous wording

We had $551.5 million and $705.5 million in cash, cash equivalents, restricted cash, and marketable securities as of June 30, 2026, and December 31, 2025, respectively. Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, corporate bonds, and municipal bonds as of June 30, 2026, and December 31, 2025.

Current wording

We had $652.4 million and $705.5 million in cash, cash equivalents, restricted cash, and marketable securities as of September 30, 2026, and December 31, 2025, respectively. Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, corporate bonds, and municipal bonds as of September 30, 2026, and December 31, 2025.

Previous wording

Our primary uses of cash are for strategic acquisitions (the Bako Acquisition was funded from existing cash); our stock repurchase program; capital expenditures, mainly in buildings, building improvements, and equipment; repurchases of our stock; the funding of our clinical trials; and the funding of our operations as we continue to invest in and seek to grow our business. Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses. Future repurchases under the stock repurchase program, if any, will depend on a variety of factors, including the market price of our common stock, general market and economic conditions, our financial condition and operating results, our capital requirements and alternative uses of capital, applicable legal requirements, and other factors our board of directors may deem relevant. Our stock repurchase program does not obligate us to repurchase any specific number of shares and may be suspended, modified, or discontinued at any time without prior notice.

Current wording

Our primary uses of cash are for strategic acquisitions (the Bako Acquisition was funded from existing cash); our stock repurchase program; capital expenditures, mainly in buildings, building improvements, and equipment; the funding of our clinical trials; and the funding of our operations as we continue to invest in and seek to grow our business. Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses. Future repurchases under the stock repurchase program, if any, will depend on a variety of factors, including the market price of our common stock, general market and economic conditions, our financial condition and operating results, our capital requirements and alternative uses of capital, applicable legal requirements, and other factors our board of directors may deem relevant. Our stock repurchase program does not obligate us to repurchase any specific number of shares and may be suspended, modified, or discontinued at any time without prior notice.

Previous wording

We expect our existing cash, cash equivalents, restricted cash, and marketable securities to continue to be sufficient to meet our anticipated cash requirements for at least the next 12 months. Cash provided by operations has significantly contributed to our ability to meet our liquidity needs, including paying for capital expenditures, however, cash provided by our operations has in the past experienced fluctuations from period to period, which we expect may continue in the future. These fluctuations can occur because of a variety of factors, including, among others, factors relating to the demand for our tests, whether large customers continue ordering our tests, the amount and timing of sales, the prices we charge for our tests due to changes in product mix, customer mix, general price degradation for tests, or other factors, the rate and timing of our billing and collections cycles and the timing and amount of our commitments and other payments. We intend to improve our profitability by improving margins and expanding in new markets for our tests, but these efforts are subject to risks, including those described in “Item 1A. Risk Factors” of the 2025 Annual Report, and may not be successful. Moreover, even if our liquidity expectations are correct, we may still seek to raise additional capital through securities offerings, credit facilities or other debt financings, asset sales or collaborations or licensing arrangements.

Current wording

We expect our existing cash, cash equivalents, restricted cash, and marketable securities to continue to be sufficient to meet our anticipated cash requirements for at least the next 12 months. Historically, cash provided by operations has contributed to our ability to meet our liquidity needs, including paying for capital expenditures, however, cash provided by our operations has in the past experienced fluctuations from period to period, which we expect may continue in the future. Cash provided by operating activities in the nine months ended September 30, 2026, was primarily attributable to the receipt of a $112.3 million federal income tax refund, including approximately $6.2 million of interest, which we do not expect to recur. Excluding this refund, our operating activities used approximately $19.8 million of cash in the nine months ended September 30, 2026. These fluctuations can occur because of a variety of factors, including, among others, factors relating to the demand for our tests, whether large customers continue ordering our tests, the amount and timing of sales, the prices we charge for our tests due to changes in product mix, customer mix, general price degradation for tests, or other factors, the rate and timing of our billing and collections cycles and the timing and amount of our commitments and other payments. We intend to improve our profitability by improving margins and expanding in new markets for our tests, but these efforts are subject to risks, including those described in “Item 1A. Risk Factors” of the 2025 Annual Report, and may not be successful. Moreover, even if our liquidity expectations are correct, we may still seek to raise additional capital through securities offerings, credit facilities or other debt financings, asset sales or collaborations or licensing arrangements.

Previous wording

In addition and as discussed above, we are in the process of transitioning our billing and revenue cycle management system, which has required us to rebuild and implement significant customizations. The final phase of this transition and the related customization needed for this system to work as intended remain ongoing and are not yet complete. As a result, we have encountered processing delays affecting our collections rate and some delayed amounts may not ultimately be collected at the rate we expect. As the remaining customizations are completed and integrated across our revenue cycle, we expect our collection rates to improve, though we cannot predict the exact timing of that improvement. We do not believe this matter will impact our ability to meet our anticipated cash requirements for at least the next 12 months, but continued delays in completing this transition could further affect our collections, liquidity, and results of operations.

Current wording

In addition and as discussed above, we are in the process of transitioning our billing and revenue cycle management system, which has required us to rebuild and implement significant customizations. As a result, we have encountered processing delays affecting our collections rate and some delayed amounts may not ultimately be collected at the rate we expect. As the remaining customizations are completed and integrated across our revenue cycle, we expect our collection rates to improve, though we cannot predict the exact timing of that improvement. We do not believe this matter will impact our ability to meet our anticipated cash requirements for at least the next 12 months, but continued delays in completing this transition could further affect our collections, liquidity, and results of operations. We also expect our research and development expenses to increase as we continue our research and development efforts and could encounter liability as a result of an adverse outcome of any government investigation or litigation as described in our financial statements.

Previous wording

During the six months ended June 30, 2026, our operations used $16.7 million of cash, as compared to $34.6 million used in the six months ended June 30, 2025. The decrease in cash used in operating activities in the six months ended June 30, 2026, as compared with the corresponding period in 2025, was primarily due to the purchase of IRA tax credits of $33.8 million in 2025, partially offset by $13.5 million cash payment in connection with the settlement of a professional liability matter during the three months ended June 30, 2026. The remaining is related 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 FID-022, and as we continue to invest resources to grow our laboratory services business.

Current wording

During the nine months ended September 30, 2026, our operations provided $92.6 million of cash, as compared to $23.5 million used in the nine months ended September 30, 2025. The increase in cash provided by operating activities in the nine months ended September 30, 2026, as compared with the corresponding period in 2025, was primarily due to $112.3 million of IRS tax refund and interest received during the three months ended September 30, 2026. The remaining is related 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 over time as a result of our planned and ongoing clinical trials for FID-007 and FID-022, and as we continue to invest resources to grow our laboratory services business.

Previous wording

Cash provided by investing activities in the six months ended June 30, 2026 was $61.7 million, which primarily represented $103.2 million in maturities of marketable securities, $33.1 million in proceeds from sale of marketable securities, partially offset by $55.6 million related to business acquisitions, $10.0 million from the purchase of marketable securities, and $9.1 million related to the purchase of fixed assets consisting mainly of building improvements, medical laboratory equipment, and computer hardware.

Current wording

Cash provided by investing activities in the nine months ended September 30, 2026 was $13.7 million, which primarily represented $166.2 million in maturities of marketable securities, $37.2 million in proceeds from sale of marketable securities, partially offset by $123.0 million from the purchase of marketable securities, $55.9 million related to business acquisitions, and $10.8 million related to the purchase of fixed assets consisting mainly of building improvements, medical laboratory equipment, and computer hardware.

Previous wording

Cash provided by investing activities in the six months ended June 30, 2025, was $81.1 million, which primarily represented $92.7 million related to maturities of marketable securities, partially offset by $11.5 million related to the purchase of fixed assets consisting mainly of building improvement, medical laboratory equipment, and computer hardware.

Current wording

Cash provided by investing activities in the nine months ended September 30, 2025, was $100.2 million, which primarily represented $132.9 million related to maturities of marketable securities and $3.8 million from the acquisition of ANP, net of cash received, partially offset by $18.9 million from the purchase of marketable securities and $17.6 million related to the purchase of fixed assets consisting mainly of building improvements, medical laboratory equipment, and computer hardware.

Previous wording

Cash used in financing activities in the six months ended June 30, 2026, was $69.1 million, which primarily related to $63.9 million used in the repurchase of common stock and $4.5 million used in common stock withholding for employee tax obligations.

Current wording

Cash used in financing activities in the nine months ended September 30, 2026, was $69.8 million, which primarily related to $64.1 million used in the repurchase of common stock and $4.9 million used in common stock withholding for employee tax obligations.

Previous wording

Cash used in financing activities in the six months ended June 30, 2025, was $13.8 million, which primarily related to $10.9 million for repurchase of common stock and $2.2 million used in common stock withholding for employee tax obligations.

Current wording

Cash used in financing activities in the nine months ended September 30, 2025, was $14.3 million, which primarily related to $10.9 million for repurchase of common stock and $2.6 million used in common stock withholding for employee tax obligations.

Previous wording

During the three and six months ended June 30, 2026, we repurchased 1.5 million and 4.1 million shares of our common stock, respectively, at an aggregate cost of $23.8 million and $63.9 million, respectively, under the stock repurchase program. During the three and six months ended June 30, 2025, we repurchased 0.2 million and 0.6 million shares of our common stock, respectively, at an aggregate cost of $3.0 million and $10.9 million, respectively, under the stock repurchase program. As of June 30, 2026, a total of approximately $75.8 million remained available for future repurchases of our common stock under our stock repurchase program.

Current wording

During the three and nine months ended September 30, 2026, we repurchased 15,059 and 4.1 million shares of our common stock, respectively, at an aggregate cost of $0.3 million and $64.1 million, respectively, under the stock repurchase program. During the three and nine months ended September 30, 2025, we repurchased zero and 0.6 million shares of our common stock, respectively, at an aggregate cost of zero and $10.9 million, respectively, under the stock repurchase program. As of September 30, 2026, a total of approximately $75.6 million remained available for future repurchases of our common stock under our stock repurchase program.