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| Statement |
|---|
| It was a solid year for Fulgent, slightly exceeding our overall core revenue guidance, ending the year at $262 million, shattering our 2022 record by $81 million, an increase of 44% year-over-year |
| That said, we believe our bio pharma services capabilities are stronger today than ever, offering an impressive multiomic platform including technology for single-cell multiomics, rounding out our capabilities in whole genome, whole exome, RNA sequencing, tumor profiling, methylation sequencing, liquid biopsy, single cell sequencing, spatial biology, and pathology |
| How the company was constructed, where we were founded, which is full sequencing and NGS, that is having tremendous momentum in 2023 and we anticipate that momentum to continue in 2024 |
| Fourth quarter core revenue of $66 million was driven by the momentum in precision diagnostics and the better than expected revenue from anatomic pathology and bio pharma services |
| After raising full-year guidance twice in 2023, we outperformed the full year by $2 million in core revenue from the latest raise in guidance, with a positive impact on margins and earnings |
| We also anticipated that the cash burn for 2023 would be somewhat more meaningful than what we anticipated, but the ending cash, and that’s including buying back about $25 million worth of stock, was a lot better than I think the general consensus that was out there, so we reserve the right to raise our guidance in 2024 and we also reserve the right to have our cash balance be better than the approximate $800 million |
| Our Beacon product is performing incredibly well, it has the right gene content, the right turnaround time |
| But we think the opportunity is there, the clients seem to be very happy with our turnaround time, our quality, our report layout, our Q&S rate which is fantastic, just very, very good in terms of our ability to process small amounts of tumor tissue, so--yes |
| We are excited about reaching these next milestones for pharma and bringing FID-007 to more patients in the clinical setting |
| As we’ve mentioned previously, we’ve secured very robust [indiscernible] reimbursement for those assays, both north of $2,000, $2,200 for our solid tumor profile and our hematological malignancy profile, so yes, great momentum |
| You will see the improvement of operating margins from the AP business |
| Overall, we believe we have been good stewards of cash and maintain a strong balance sheet with which to execute our strategy |
| Regarding bio pharma services, we exited 2022 with tremendous momentum, and 2023 took off at a very fast pace |
| We are pleased with our results in the fourth quarter with $70 million of total revenue |
| Beacon has proven to be a very well received product in the IVF space, offering gene content flexibility up to 787 genes and rapid turnaround time of approximately two weeks on average |
| On precision diagnostics, which includes all of our clinical NGS revenue - oncology, reproductive services, rare disease, neurogenetics, B2B relationships with labs, and our joint venture in China continues to be the highest growth area for the company in 2024 |
| Also, we’re looking for the companies which give us the--that broaden our distribution channel or adding additional technology to make us even more efficient or more advanced in the testing area, so there is more opportunity we’re looking for now and definitely in the current environment, I think we’re in a good position to be a consolidator |
| Overall, we see strength in our core business, which has grown organically and through strategic acquisitions, and we see good momentum ahead |
| Revenue from our core business totaled $66 million, which slightly exceeded our guidance of $64 million and grew 21% year-over-year |
| As Brandon discussed, we have seen strength in reproductive services from our Beacon product line |
| We remain focused on managing our spend and continue to believe that our foundational technology and platform supports a long term, strong margin profile |
| Turning to expected margins in 2024 excluding COVID-19 revenue and stock-based compensation, we expect non-GAAP gross margin to improve as we see the efficiencies of our integration efforts take effect, reaching the mid-30% range and positioning us to approach our target of 40% by the end of the year |
| Moving onto cash, our cash position remains strong |
| At a high level, precision diagnostics continues to be the main growth driver, and it’s precision diagnostics where our technology shines the brightest |
| We have an amazing team |
| We look forward to a strong year in 2024 and capitalizing on the momentum we see ahead |
| It’s important to note that the goodwill impairment charge does not affect the company’s cash position and we do not believe it will have any impact on our future operations, and we remain highly encouraged with the momentum we see ahead, as discussed earlier by Ming and Brandon |
| We have the quality systems in place, we have the infrastructure, and that could be a benefit to us, actually |
| In addition, using our in-house developed informatics, databases and pipelines, we are able to deliver reliable detection rates in difficult genes such as pseudogenes, or genes with high sequence homology |
| As one of our important clients recently said, quote, Fulgent seems to have a magic wand - we don’t, it would certainly be easier if we did, but we do have an absolutely amazing team |
| Statement |
|---|
| Non-GAAP operating margin decreased 40 percentage points sequentially to a negative 24.8%, primarily due to lower COVID-19 testing revenue recognized, higher bad debt reserve, and one-time legal fees |
| Formulations used in active [indiscernible] SN38 have not been successful [indiscernible] so far primarily due to poor drug solubility and toxicity safety issues |
| Switching to AP, while anatomic pathology is critical to our mission of being a one-stop shop for physicians and contributes meaningfully to our overall revenue, we are seeing some headwinds in the business |
| For anatomic pathology, which includes the business we have integrated from Inform Diagnostics, pricing pressure and lower contract rates are impacting revenue |
| However, unrelated to Fulgent, some of our bio pharma clients have had issues and some of those projects have either pulled way back or been terminated altogether |
| Unfortunately, this did affect two of our larger clients |
| This charge resulted from a sustained decline in our share price and associated market capitalization compared to the book value of our equity as of quarter end |
| I think on the pharma headwinds, it really boils down to a couple, or maybe just a very few significant size clients that wound down their projects |
| These are normal constraints on contract pricing |
| Bio pharma services, which includes sequencing as a service, which we sell to pharmaceutical businesses and is dependent on these partners, has been impacted by projects that have terminated or have scaled back significantly |
| However, the AP business is one of the areas that has lack of technology investment |
| Both anatomic pathology and bio pharma services will continue to be major contributors to revenue in 2024; however, we are expecting a decline in both these revenue streams in 2024 as compared to 2023 |
| We talked a little bit about it in the script, but on the AP side, the anatomic pathology side, that’s really been a mix of issues |
| Adjusted EBITDA loss for the fourth quarter was $6.8 million compared to $15.1 million in the fourth quarter of 2022 |
| Our ADC platform is not target dependent and thus could potentially be applied to many different targeted ADCs, particularly for new targets with low antigen expression where existing ADC platforms have failed to show effectiveness |
| On the pharma side, it’s a little bit more of a centralized issue affecting a couple clients |
| This is mostly related to some of their financial stress and not related to any service issues with Fulgent |
| For the $280 million guide that we’re giving for 2024, that does not include any COVID, the projected are as follows in the three revenue categories: for anatomic pathology, it’s $96.3 million; bio pharma services is $10.7 million, and precision diagnostics is $173.3 million, so as you can see when you compare these categories versus 2023, we had a slight decline projected that we’re anticipating for 2024 in anatomic pathology, we had a significant decline projected for bio pharma services, and we see a lot of momentum behind precision diagnostics |
| We expect to see lower non-GAAP operating margins in the quarters ahead as we further invest resources to grow our business, with operating margin of approximately minus-20% for the year |
| We did mention some limited pressure on reimbursement - I mean, there is a little bit there, but it’s really been a mix of things on the AP side, however it’s really nothing out of the ordinary for the industry |
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