Fulgent Genetics Q4 2025 Earnings Call - Largest Customer Moving In-House Forces 2026 Revenue Rebalance

Operator: Greetings, welcome to Fulgent Genetics fourth quarter 2025 conference call and webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Lauren Sloane, Investor Relations. Thank you. You may begin.

Lauren Sloane, Investor Relations, Fulgent Genetics: Good morning, welcome to the Fulgent fourth quarter and fiscal year 2025 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 makes 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 included in the company’s actual future results may be materially different than 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-K for the year ended December 31st, 2024, and subsequently filed reports, which are available on the company’s investor relations website.

Management’s prepared remarks, including discussions of profit, loss, margin, earnings, and earnings per share, contain financial measures not prepared in accordance with accounting principles generally accepted in the United States, or GAAP. Management has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons, but these measures should not be viewed as a substitute for or superior to the company’s financial results prepared in accordance with GAAP.

Please see the company’s press release discussing its financial results for the fourth quarter of 2025 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 and loss per share and operating margin, the most directly comparable GAAP financial measures. The company does not provide reconciliations of forward-looking non-GAAP measures to the most directly comparable GAAP measures, because the information necessary to calculate such reconciliations is unavailable on a forward-looking basis without unreasonable effort. With that, I’d now like to turn the call over to Ming. Please go ahead.

Ming Hsieh, Chief Executive Officer, Fulgent Genetics: Thank you, Lauren Sloane. I’m pleased with the progress we have made this year as we execute our strategic objectives in both our laboratory services and the therapeutic development business. In 2025, the laboratory services business sustained the momentum as we delivered growth and executed our strategic and product innovation roadmap. We have implemented the best-in-class technology across our platform, and the investment we have made in digital pathology and AI are paying off. We are seeing the advantage of moving to digital and using AI-enabled workflow with increased quality, turnaround time, and throughput. We have launched our own proprietary imaging management system, Eziopath, which integrates the best-in-class AI tools developed in-house, giving us even greater control in the technology services. We also accelerated our product innovation in 2025 with the launch of RNA-integrated whole genome sequencing and ultra-rapid whole genome sequencing.

The investment in AI and digital pathology solutions, coupled with our innovations across our laboratory service platform, will deliver the revenue and margin improvement in 2025. We see the first half of 2026 in a transition period as our business adjusts to the impact from our largest customer moving significant volume in-house. We believe our technology platform will continue to get stronger, the strategic investment and the innovations we have made will continue to work at an accelerated pace, offering new and expanded opportunity for growth and improve the operating leverage in future. We also accelerate the progress of our therapeutic development pipeline in 2025, and expect continued progress this year. Starting with our first clinical candidate, FID-007, at once through the phase 2, with 46 patients enrolled.

The trial enrollment closed on time on December 29, 2025. We are encouraged by the early efficacy and safety data. FID-007, combined with cetuximab, demonstrated meaningful anticancer efficacy and a favorable tolerable profile at both those levels for the second-line treatment of recurrent metastatic head, neck squamous cell carcinoma. phase 3 protocol development is long ongoing, with the trial initiation planned as early as the first half of 2027. This year, we are planning to submit a request to FDA in the second quarter of 2026, and hope to have a phase 2 meeting with FDA in the third quarter of 2026. We anticipate presenting our interim findings at the ASCO in June 2026, and expect a full data readout by the second half of 2027.

We are encouraged by our clinical trial progress achieved so far, and believe entering into the phase 3 registration trial will further increase the probability of the success of commercialization FID-007 for the treatment of recurrent metastatic head, neck squamous cell carcinoma patients currently having very few effective treatment options. Our second clinical candidate, FID-022, is progressing through the phase 1 dose escalation, with the first dose level successfully completed at the end of December 2025, and the second dose level successfully completed on January 28th, 2026. The third dose level begins on February 2nd, 2026. We expect to finish the study and determine the maximum tolerable dose level later this year. FID-022 is a nano-encapsulated SN-38 for the treatment of solid tumors, including potentially colon, pancreatic, ovarian, and bile duct cancers.

Overall, I’m pleased with the progress we have made this year. Our pharma R&D efforts are progressing faster, better and more cost effectively than planned. Additionally, our laboratory services business is greatly benefiting from our investment of AI technology, which makes our services more efficient and precise. Although our revenue of 2025 slightly short of our updated expectations, we are exceeded our non-GAAP EPS guidance, and I’m proud of the progress we have made and believe our business is intact. As we look to 2026, we believe the first half of the year will be impacted by our largest customer moving a significant volume of his work in-house. Also the strategic initiatives we have made may help offset this impact over the long term.

I would like to thank our employees, partners, and stakeholders for your hard work and loyalty in a great quarter of our business. We look forward to further progress in 2026. I will now turn over the call over to Brandon Perthuis, our Chief Commercial Officer, to talk more about our laboratory services business. Brandon?

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Thanks, Ming. We ended the fourth quarter at $83.3 million, which was an increase of 9% year-over-year, and a slight decrease quarter-over-quarter. Looking at how we closed the year, total revenue came in at $322.7 million, which was an increase of approximately 14% year-over-year. Looking closer at our three areas of business, precision diagnostics revenue for the fourth quarter was $48.2 million, an increase of 11% year-over-year, however, down 5% sequentially, driven primarily by lower than anticipated volume from our largest customer, who has begun transitioning the testing in-house. AP revenue for the fourth quarter was $27 million, an increase of 3% year-over-year, and up 4% sequentially.

For biopharma services, revenue was $8.1 million, an increase of 32% year-over-year and 10% sequentially. For the year, precision diagnostics revenue was $190.5 million, a 14% increase over 2024. AP revenue, or anatomic pathology revenue, was $106.4 million, an increase of 10% over 2024, and biopharma services was $25.8 million, a 58% increase. Overall, we are pleased with the performance in 2025, delivering double-digit year-over-year growth. During the quarter, we announced our intention to acquire Bako Diagnostics and StrataDx, pending regulatory approvals for a total purchase price of $55.5 million. This proposed acquisition will add new anatomic pathology services, proprietary PCR tests, and a national client base.

Bako Diagnostics is a premier national provider of specialty laboratory testing services, which offers a comprehensive testing menu, including complete anatomic pathology services, proprietary molecular genetic testing, and peripheral neuropathy immunohistochemical testing. Bako Diagnostics is CLIA certified, CAP accredited, and licensed by the Georgia Department of Public Health. StrataDx is a premier national provider of dermatopathology testing services. StrataDx is CLIA certified, CAP accredited, and licensed by the State of Massachusetts. With these acquisitions, we will further strengthen our laboratory services business by adding new products and services, and further expand our national client base, national sales team, and team of expert pathologists. We expect to close the transaction in March. We are excited to announce that during the fourth quarter, we received approval from New York State for both our proprietary NIPT offering, Nova, as well as our whole genome sequencing test.

These are significant approvals and a high validation of our quality services. These approvals open a new market for us to commercialize these tests in New York, and we look forward to servicing New York clients and patients in both the rare disease and reproductive markets. We mentioned on previous calls the investments we are making in digital pathology, specifically our new in-house developed platform, EasyoPath. digital pathology is changing the dynamics of our laboratory, enabling remote reading, remote consults, and most importantly, the use of AI modules for certain disease subtypes. As of today, we are approximately 100% digital across all of our cases, and they are being read on EasyoPath as we transition off our previous third-party platform. In AI development, we have launched several internally developed modules, including tissue region detection, eosinophil counting, and eosinophilic esophagitis, and lymphocyte ratio in duodenal intraepithelial lymphocytosis.

EasyoPath also supports third-party AI modules such as Paige Prostate and Mindpeak for HER2 in breast cancer. In our 2026 AI R&D pipeline, we have a dozen AI modules planned. We expect to significantly improve our medical team’s operational efficiency once deployed. Fulgent has always viewed itself as a technology company. We have developed most of the systems that support our business. EasyoPath is just another example. With in-house clinical AI, R&D, and software engineering teams, a large group of medical pathologists across various specialties, and most importantly, clinical data with diagnostic outcomes, we believe Fulgent is well-positioned to become a major player in the AI-enabled digital pathology field. Within our oncology business, we see great potential in leveraging AI technology to improve clinical diagnosis for patients.

Fulgent is one of the very few companies that provide end-to-end diagnostic services for cancer patients, including flow cytometry, IHC, FISH, cytogenetics, and NGS. Our team is currently working on a project to develop AI modules that analyze data across multiple modalities and provide summary diagnostic information for our medical team to review before final reporting. We believe this could be a game changer in cancer diagnosis. Overall, we are pleased with our progress in 2025. We believe the investments we have made in our technology and capabilities will continue to pay dividends as we strive to expand our market reach. I’d like to thank our employees for their hard work and dedication throughout the year. I’m thankful to have such a strong team in place as we kick off the new year. I’ll now turn the call over to our Chief Financial Officer, Paul Kim. Paul?

Paul Kim, Chief Financial Officer, Fulgent Genetics: Thank you, Brandon Perthuis. Full year revenue for 2025 totaled $322.7 million, growing approximately 14% compared to revenue of $283.5 million in 2024, which fell slightly short of the updated guidance we provided on last quarter’s earnings call, but ahead of the original guidance we provided at the beginning of 2025. Revenue in the 4th quarter of 2025 totaled $83.3 million, compared to $84.1 million in the 3rd quarter of 2025. The decrease in our Q4 revenue was primarily the result of lower than anticipated volume from our largest customer, who has begun transitioning the test in-house. Gross margin for the 4th quarter on a non-GAAP basis was 41%, and a GAAP basis was 39.1%.

Full year gross margins improved year-over-year due to streamlined operations and from the enhanced efficiencies we achieved as a result of our investment in scaling and centralizing lab operations. Turning over to operating expenses. Total GAAP operating expenses were $68.8 million in the fourth quarter, which increased when compared to $50.9 million in the prior quarter. The increase in operating expenses was partially driven by acquisition-related costs, payroll-related expenses, and a one-time professional liability expense. Non-GAAP operating expenses totaled $43.1 million, compared to $40.7 million in the previous quarter. We remain committed to R&D spending to support both our laboratory testing services and our clinical studies, and to sales and marketing spending to expand the sales team. Non-GAAP operating margin decreased sequentially to a -10.7%.

Our GAAP loss in the current quarter was $23.4 million, an increase from the prior quarter GAAP loss of $6.6 million. Adjusted EBITDA for the fourth quarter was a loss of approximately $4.5 million, compared to a gain of $700,000 in Q3 2025. On a non-GAAP basis and excluding equity-based compensation expense, intangible asset amortization, acquisition-related costs, and a one-time professional liability expense, income for the quarter was approximately $5.2 million, or $0.16 per share, based on 31.7 million weighted average diluted shares outstanding.

Looking at the full year 2025 on a non-GAAP basis and excluding equity-based compensation expense, intangible asset amortization, acquisition-related costs, and a one-time professional liability expense, income was approximately $13.2 million, or $0.42 per share, based on 31.1 million weighted average shares outstanding, beating the updated guidance we provided on last quarter’s earnings call. Turning to the balance sheet, we ended the fourth quarter and full year with approximately $705.5 million in cash equivalents, restricted cash, and marketable securities. The decrease in cash from the previous quarter is driven by the purchase of income tax credits and capital expenditures. As of year-end, we have not yet received the $106 million in federal income tax refund, which has been delayed due to government shutdown in the fourth quarter of 2025.

Excluding the delay in the income tax refund, we beat the updated cash guidance we provided on our last quarter’s earnings call. Before providing our guidance for 2026, I would like to talk through certain drivers shaping our expectations for the first and second half of the year and the anticipated impact from the acquisition of Bako and StrataDx. As Ming mentioned, we expect revenue in the first half of the year to be impacted by a significant decrease in volume from our largest customer moving their testing capabilities in-house. We anticipate revenue from this customer, which was $70.8 million, or 22% in 2025, to decline sharply quarter-over-quarter through Q2 2026 and potentially stabilize in the second half of the year. The revenue from our largest customer in 2025 was all classified as precision diagnostics.

We believe this decrease in revenue will be partially or fully offset by the anticipated contribution of approximately $50 million-$55 million from the acquisition of Bako and StrataDx, which we expect to close in March of 2026, contributing to an overall revenue growth in the second half of the year. Bako’s revenue is expected to primarily be categorized as anatomic pathology. Assuming we’re able to close Bako and StrataDx acquisitions in a timely manner and that these acquired businesses perform as we currently expect, we’re forecasting that in 2026, no single customer will account for more than 10% of our total revenue, reflecting an improvement in our customer concentration profile. We would also expect total revenues to be approximately $350 million for 2026, representing an 8.5% year-over-year growth.

Excluding our largest customer’s revenue and assuming that Bako and StrataDx acquisitions timely close and acquired businesses perform as expected, the net estimated growth in precision diagnostics would be approximately 31% from 2025-2026. Our pipeline for customer opportunities with precision diagnostics would remain strong. With these acquisitions, 2026 anatomic pathology revenue would be expected to increase to an aggregate of $162 million, up 53% from $106 million in 2025, largely driven by the Bako acquisition. Biopharma revenue is expected to decrease from $25.8 million to $20 million, reflecting a long sales cycle as we see in this area. As we move through the year, we expect to see continued momentum from our laboratory services business as it continues to benefit from the investment of AI and anatomic pathology, which is making our services more efficient and precise.

We expect non-GAAP growth margins for the full year to be slightly above 40% as the product mix shifts with the changes in our customer composition. We anticipate the gross margins to be lower in the first half of the year due to the impact of cost of sales charges being allocated across a smaller revenue base. We expect non-GAAP operating margins to decrease from a -8% to a -18% for the year, largely driven by the incremental expenses from the Bako and StrataDx acquisitions, our continued investment in expanding our sales team, and our ongoing commitment to research and development for both our laboratory services business and therapeutic development business. Our strategy for success centers on scaling efficiently and driving innovation across our service offerings, while carefully managing spend and integrating our expected strategic acquisitions effectively.

The anticipated spend for the therapeutic development business is approximately $26 million in 2026 as we continue advancing clinical trials for FID-002 and FID-007. We will continue to invest in business expansion, further improving our laboratory operations and upgrading laboratory facilities. We believe that our foundational technology platform supports a strong long-term margin. Using an average share count of 32 million, we expect our full year 2026 non-GAAP EPS guidance to be a loss of $1.45 per share, excluding stock-based compensation, impairment loss, acquisition related costs, and amortization of intangible assets, as well as any one-time charges. Our cash position continues to be strong. We remain confident to efficient capital allocation to support future growth as we invest in key initiatives and look for opportunities to expand.

Assuming the close of Bako Diagnostics and StrataDx acquisition, with a purchase price of approximately $56 million, capital purchases approximately $12 million, spend on our therapeutic development business of $26 million, $14.5 million for the one-time professional liability expense, and excluding any future stock repurchases or other expenditures outside the ordinary course, which could include other M&A, we anticipate ending 2026 with approximately $685 million of cash equivalents, restricted cash and investments in marketable securities. This number assumes receipt of approximately $106 million in tax refunds, which have been delayed as a result of the Q4 2025 government shutdown.

Overall, we’re proud for the organic growth that we have achieved over the past couple of years, and we believe that our strong technology platform, we’re well positioned for longer term growth and our strategic investments and innovations deliver value. Thank you for joining our call today. Operator, now you may open it up for questions.

Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Lu Li with UBS. Please proceed.

Lu Li, Analyst, UBS: Great. Thank you for taking my question. I think the first question on your largest customer. If I’m doing my math correct, I think the revenue loss for that customer is about 70% for 2026. I’m just wondering if you can confirm the math and then also how conservative is this, like any risks that they can, kind of like, in-house more?

Paul Kim, Chief Financial Officer, Fulgent Genetics: Yeah, thank you for that question. I’ll take you through the numbers, and then I’ll turn it over to Brandon, who can give further color into the dynamics regarding this customer. You are correct. The revenue from our largest customer was $70.8 million in 2025, and when we lay out the plan for 2026, the $350 million, we assume that we’re going to be getting about $11.8 million from this customer. 70.8 minus 11.8 is $59 million. The impact of the loss of this customer was a decrease of $59 million to our business, and then you add to that the impact of the Bako acquisition, which should provide approximately $50 million-$55 million of revenues for the year.

For 2025, we achieved $322 million of revenues, and in 2026, we’re guiding to $350 million. The -$59 million plus the partial or almost all offset from the Bako, still provides a nice organic growth for our business, including precision diagnostics. I’ll turn it over to Brandon, who can comment on this customer taking this testing in-house.

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Yeah. Lu, thank you for the question. I think Paul did a good job there describing the impact. I think in terms of where what we have modeled for 2026, we have pretty good visibility into that. What we, you know, we think that’s a number that, you know, we can live with and that our customer has committed to. You know, there are some contractual arrangements that still need to be met for the year. Again, you know, we have pretty good visibility into that number.

Lu Li, Analyst, UBS: Got it. Just follow on that. You talk about there are some ways to mitigate by growing your customer pipeline. I’m just wondering, can you give a little bit more color in terms of like how you can kind of like grow your own brand diagnostic? Related to that, can you also sizing how much of your business right now is actually running the other company’s assays?

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Yeah, I mean, certainly I can talk about some of the drivers for precision diagnostics in 2026. I mean, we think we have several, you know, in sort of in no particular order. We’re still growing market share for expanded carrier screening tests, our Beacon test. I think we’ve mentioned on the previous calls, we’ve done a great job building a brand and reputation for Beacon, best-in-class turnaround time. The largest panel out there now with over 1,000 genes, and we continue to improve our connectivity with EMRs. We, we still see a lot of momentum in Beacon. We think that’s going to be important for 2026. In addition, you know, we’ve invested a lot in our whole genome sequencing test, bundling it with transcriptomic or RNA sequencing.

We are seeing some really exciting data when we’re bundling whole genome sequencing with RNA. We’re making diagnoses by combining those that would otherwise be missed in the absence of having that RNA data. We’ve expanded that sales team some in 2025. We continue to do so in 2026. We think we’re going to continue to gain market share for whole genome sequencing with RISE, our RNA-Integrated Sequence Evaluation. Looking on a sort of a month-to-month basis, we continue to set new records in terms of our volume for whole genome sequencing, so we like the momentum there. In addition, we’re pretty excited with what we’re doing on the somatic side as well. As we’ve mentioned, we have MolDx approval for our somatic assay, which we branded Lumera.

We’re, you know, starting now to incorporate, you know, our somatic testing into our pathology business and learning and, and operationalizing how to leverage our somatic testing with our AP business. Our somatic test, you know, great coverage, great turnaround time. It has all the right genes. You know, we think we’re gonna see some pretty significant improvement in our somatic oncology volume in 2026. You know, another area, you’re sort of seeing just genetics taking a bigger role in healthcare. You’re seeing ASCO announce that, you know, patients that are going through certain chemos need to be treated with DPYD testing. That’s a gene that we offer, that’s a service we provide. That seems to be something that’s going to drive some demand, you know, in 2026.

We see several, you know, different drivers for precision diagnostics. You know, we think we’re gonna deliver a pretty nice growth year.

Paul Kim, Chief Financial Officer, Fulgent Genetics: Lu, this is Paul. As Brandon mentioned, the richness and the diversity of our offering, we feel more excited than ever for 2026. The incorporation of technology into our businesses, combined with the additional scale we’re going to be getting, particularly in the second half of the year, with the incorporation of Bako. What does that mean, you know, in terms of percentages and numbers? Well, to take an example, the gross margins, you know, with the impact of this large customer, yes, we are anticipating gross margins to be slightly lower in Q1 and Q2 of 2026. As we end the year, particularly in Q4 of 2026, our forecasted gross margins should be pretty consistent with the record levels that we have achieved in the middle of 2025.

Ming Hsieh, Chief Executive Officer, Fulgent Genetics: Lou, as both Paul and Brandon mentioned, we do need to take the lessons for losing this customer. We still have a reasonable relationship with the customer, and they still have the other tests from us. In addition, we have been accelerating the internal R&D development. We will introduce the new products, and new tests will be the differentiated from the market. We are feeling pretty strong at the present time. Given the technology and the R&D effort we have, we do believe we will recover from this loss.

Lu Li, Analyst, UBS: Great. That’s very helpful. Final question from me. Just wondering what will be your kind of, like, capital allocation strategy? I think in the prepared remark, you kind of, like, frame it like could have some potential M&A. Just wondering what kind of areas that you planning to target after your acquisition of Bako and Strata. Like, are you going to do more in precision diagnostic? How that balance with your organic investment that you just mentioned. Thank you.

Ming Hsieh, Chief Executive Officer, Fulgent Genetics: Yeah, I think, Lou, the area of AI, we have a lot of capability internal. We also will be looking for the synergies we may have in the field for the companies which provide us the AI-enabled the discoveries.

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Our next question is from David Westenberg with Piper Sandler. Please proceed.

Paul Kim, Chief Financial Officer, Fulgent Genetics: Hi, thanks for taking the question. I’m just going to actually expand on some of Lu Li’s questions. Can you confirm... I think you actually said that this was, would be a gross margin headwind, the loss of customer. I believe, secondly, you did do a ton, I thought, carrier screening for this customer, and you have Beacon, which is a great product on your own. I just want to see if there would have been any loss of cost synergies associated with, you know, running that plus your own carrier screening project.

Then I just wanted to follow on, I think, there was a question about like the second, if there’s like a second Compass customer that’s anywhere the size of this, like, still outstanding to just kind of think about. Then I have a couple questions unrelated. Thank you.

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Gross margin headwinds, Paul, you want to take that?

Paul Kim, Chief Financial Officer, Fulgent Genetics: Yeah, yeah. I’ll take the gross margin headwinds, in addition to the revenues we anticipate for the first half of the year, you know, compared to the second half. Of the $350 million, we anticipate in the first half of the year, revenues would be approximately $158 million or $159 million. The second half of the year, we anticipate revenues to be approximately $191 million-$192 million. The reason why it’s back-end loaded is because in the second half of the year, we anticipate, you know, increased momentum for our organic growth....

excluding this largest customer, combined with the fact that we’re gonna be getting the full impact of the Bako acquisition. The reason why it’s lower in the first half of the year is because of the fast decline of the impact of the loss of this customer. What that does to our gross margins is, on a non-GAAP basis, we posted gross margins of approximately 41% in Q4 of 2025. We anticipate that to go down by approximately 4 points in the first quarter, about 2 points in the second quarter, but having it, you know, rebound in the third and the fourth quarter, and the rebound being quite significant.

We anticipate that the gross margins on a non-GAAP basis would be in excess of 41% in Q3, and then, you know, rising even higher than that in Q4. I’ll turn it over to Brandon, who can address, you know, your other questions.

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: David, thanks for the question. No, we do not have another customer, that would be greater than 10%. We do not.

David Westenberg, Analyst, Piper Sandler: Got it. Okay. No, thanks, Paul, that was a incredibly good amount of transparency and detail there, so thanks so much. Just in terms of the acquisition of Bako, you kind of mentioned this, you kind of mentioned this sales synergies or like additional sales reps that you might be taking on. You know, are there additional sales synergies to sell your existing products? I think you’ve traditionally been, and correct me if I’m wrong, a lot more oriented on kind of selling to the overall institution more than kind of on a physician, pathologist basis. You know, with this additional scale, do you have kind of opportunity to kind of diversify the way you’re going after kind of the sales approach?

Not just one more.

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Yeah. Yeah, thanks for the question, David. You know, on the anatomic pathology side, it is more physician-level sales versus sort of large system sales. That said, our AP team has been subscale. We know that team wasn’t big enough. So this does get us somewhere between 20 and 30 new sales representatives, and the cross-selling sort of synergies are absolutely there. We will be able to use our existing team to sell Bako products and the Bako team to sell Fulgent products. A lot of the call points are very similar. You know, at the end of the day, this gives us more boots on the streets, which is really what we need.

I mean, there’s a lot of call points for anatomic pathology, whether it’s surgery centers, dermatologists, you know, other types of practicing physicians, and we’ve just been subscale there. With the investments that we’ve made in AI, we’ve been able to tackle any sort of capacity constraints, which is always an issue in pathology, especially back when, you know, reading glass slides and microscopes, you know, capacity’s always been an issue. The investments we’ve made in digital pathology and AI has allowed us to really expand that capacity. We’re really looking forward to having this much larger sales team, nearly double the size in 2026, and really setting them loose to go out there and sell.

David Westenberg, Analyst, Piper Sandler: Got it. I’ll just ask one last one on precision oncology here. How did Beacon carrier screening do in the quarter? I mean, Has that been a continued area of strength, and do you see that as a continued area of strength in 2026? Thank you very much.

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Yeah, we do. I mean, Beacon has been doing very well for us. You know, some of the Beacon volume has been impacted by this, you know, large customer dropping off faster than we anticipated. You know, our organic Beacon volume and the pipeline for Beacon opportunities remains very strong. It’s still, you know, one of the most important tests within the company. You know, to that, to the oncology side of things, I mean, what we’re doing with Lumera, post MolDx approval and getting our pricing and approvals there, and how we’re gonna begin to leverage that across our pathology division, you know, we’re often the laboratory that’s making the initial diagnosis of cancer. I mean, that biopsy, whether it’s a breast biopsy, colon biopsy, skin biopsy, you know, that’s coming to our laboratory.

We’re performing, you know, H&E staining. We’re making a cancer diagnosis. Now we’re going to try to take it to the next level, where we’re going to do NGS. We’re gonna profile that tumor, not just perform pathology. We’ve been talking about bridging our divisions together for some time, but we think 2026 is gonna be the year that it actually happens, and we’re gonna be able to provide better cancer diagnosis, better care, and timelier care, for these patients.

David Westenberg, Analyst, Piper Sandler: Thank you.

Paul Kim, Chief Financial Officer, Fulgent Genetics: Our next question is from Andrew Cooper with Raymond James. Please proceed. We have just lost Andrew. Andrew, if you would still like to ask a question, please press star one. Here we go. Go ahead, Andrew. Your line is live.

Andrew Cooper, Analyst, Raymond James: Hey, everybody. Sorry, not sure what happened there. Appreciate the questions. Maybe first, a little bit of a numbers question here. Just thinking about the cash burn and cash dynamics you talk about, if my math is right, you’re looking at sort of the core business X CapEx, X the acquisitions, and X kind of the moving parts you’ve called out, burning about $33 million for the year. Just kind of curious, is that math right? How do we think about sort of the change here, given that’s a little bit bigger than we would have expected, I think even with the customer loss, just giving you net to a pretty similar revenue number overall?

Paul Kim, Chief Financial Officer, Fulgent Genetics: Yeah, I think your math is largely correct. The reason why we’re burning, you know, slightly more than we anticipated is because our operating expenses are gonna be nominally higher as a result of the Bako acquisition. That’s a fully functioning asset that we’re very, very happy with, you know, in terms of what it would do to our product profile, our reach for the markets, as well as our overall capabilities. Our intention is to, you know, keep those businesses, to invest in those businesses, because we anticipate, you know, additional growth and momentum to come from that, as well as our overall business, you know, into 2027.

Kind of like taking a step back and looking at, you know, our cash burn, we ended the year with, you know, approximately $800 million. If you include the receivables that we’re gonna be getting from the IRS tax refund, and now we’re forecasting our cash at the end of 2026 to be $685 million. A huge chunk of that delta of $115 million are costs and a cash outlay that’s not associated with the laboratory services business. For example, of the $115 million, at least $56 million is gonna be associated with the cash outlay that we have for the Bako acquisition.

We have another $26 million of outlay that’s associated with the spend for our biotech asset, the FID-007 and the FID-002. We also have capital purchases of approximately $12 million and a one-time professional liability settlement of $14.5 million. If you kind of like take a step back, and even if you take into account the impact of the loss of this customer, our laboratory services business is going to be using cash, but not that much, which leaves a lot of cash for us to deploy for M&A, investment in our, you know, overall business, as well as other opportunities that can serve the shareholders.

Andrew Cooper, Analyst, Raymond James: Okay. Helpful. Touching on something you touched on there at the start of that answer. You know, the digital pathology piece, and I assume, I guess, that Bako and StrataDx aren’t maybe as far along as you are at basically 100% digital at this point. What sort of additional kind of volume are those two, or volume capacity capabilities, are those two deals adding? How much incremental volume will you be able to handle thanks to that digital pathology kind of capability, without needing to add materially more pathologists that I know are, you know, expensive to add at this stage?

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Thanks for the question, Andrew. I don’t know that anyone is where we are when it comes to digital pathology. I think we’re significantly ahead of the game here, especially developing our own in-house developed viewer and image management system. I’m really proud of our R&D team and how quickly we’ve accelerated our AI and digital pathology reach here. You’re correct, Bako is not highly digital yet, but this stuff is quite portable. There are, you know, there are some protocols that we need to improve based on certain sample types and certain biopsies, but it’s mostly portable. You know, we will do our best to bring them up to speed in terms of digital, in terms of using AI. It is a, you know, a nice improvement in efficiency, ultimately leading to capacity. You’re right.

I mean, for a long time, often your bottleneck of capacity was hiring pathologists and getting enough pathologists in the office to read. Remote does 2 things: it makes them more efficient, also allows us to hire pathologists all across the country. We don’t need to relocate these people to Dallas or Boston or now perhaps Alpharetta, once we close the acquisition of Bako. It really has changed the game in how we run our business, we’re going to hopefully be able to bring a lot of that to Bako to help them as well. Again, these sales teams, a lot of synergies exist within the sales teams. Now we have one that’s roughly twice the size that can sell products for both Fulgent and Bako.

Paul Kim, Chief Financial Officer, Fulgent Genetics: Yeah, adding the Brandon’s point. The digital pathology do give us more efficiency, and it will also help us to reduce the errors. In addition, all these pathologists that work becomes strong data for us to continue to train the AI and make it even better. We do see the lot of synergies between this acquisition, and also we do see the benefit of AI or how our pathology works.

Andrew Cooper, Analyst, Raymond James: Okay. Helpful. Maybe just one last one. You know, with this large customer in-housing, do you have an opportunity to maybe shrink, whether it’s physical footprint or at least kind of pull down the labor spend component of things, given, you know, call it 20% of revenues, I assume, you know, a pretty big chunk of volumes that are coming out of that precision diagnostics business? I know you want to grow the remaining piece, just would love a sense for sort of whether you’re right size for the business at this stage once they’re out of the equation.

Paul Kim, Chief Financial Officer, Fulgent Genetics: So for the 2026 plan, excluding Bako, the overall headcount for the organization, we kept relatively flat. We have some, you know, nominal increases, particularly at the, you know, sales organization. The reason why we did that instead of, you know, having it, you know, go deeper or considering cuts, is because we view the impact of this customer as a 1-time event. We fully believe in this market, we believe in our, you know, capabilities, and we will get back to, you know, growth, we believe at a decent trajectory. Combined with the fact that, you know, when we take a look at our laboratory services business, as I mentioned, you know, even with the impact of this customer, it’s not consuming, you know, that much cash.

You know, we like where our organization sits and, you know, we look to return to, you know, accelerated growth here in the future.

Andrew Cooper, Analyst, Raymond James: Okay. I’ll stop there. Thank you.

Brandon Perthuis, Chief Commercial Officer, Fulgent Genetics: Thank you, Andrew.

Operator: There are no further questions. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.