Fulgent Genetics BLOWOUT!

Well Fulgent Genetics just redefined what a blowout quarter is, Zoom didn’t get to hold the crown for long. Here is the company release, it is just spectacular!


Fourth Quarter 2020 Results:

Record Revenue of $295.0 million, growing more than 3,400% year-over-year
Record Billable tests delivered approximately 3.2 million, approximately 230 times the volume of fourth quarter of 2019
Gross Margin improved over 8 percentage points sequentially and approximately 26 percentage points year-over-year; cost per test improved approximately 36% sequentially
Non-COVID Revenue grew 43% year-over-year
Record GAAP income of $166.3 million, or $6.16 per share
Record Non-GAAP income of $167.5 million, or $6.20 per share
Record Adjusted EBITDA of $230.1 million

2021 Outlook:

Expects overall revenue of approximately $800.0 million in 2021, representing growth of 90% year-over-year
Of the $800.0 million, anticipates $70.0 million in revenue from NGS testing, representing growth of 92% year-over-year
Expects GAAP income of approximately $12.00 per share; non-GAAP income of approximately $12.50 per share in 2021

And here is a past post of mine (#74761) with more historical details I won’t go through right now.


In that previous post, I pointed out their rev guide for Q4 was $173M, they did $295M!

In Q3 they did 1,000,000 tests, up 4800% YOY, and 16-17X as many tests as in ALL of 2019! I stated, what if they’re able to do 1.5M or 2M or more in Q4? Well, I was estimating WAY low, as they did 3,200,000 tests in the quarter! About 54X all the tests done in 2019!

CFO Paul Kim said, “in the fourth quarter, our team was able to process approximately 3.2 million tests in the quarter and more than 4.4 million tests in the year, compared to 59,000 tests in all of 2019. We continued to demonstrate improving leverage in the quarter with record gross margin of 82% and operating margin of 77%, while generating non-GAAP income of $6.20 per share in the quarter.”

And yes, most of this revenue and testing volume is due to Covid, but they are still projecting growth in 2021 of 90%, because Covid testing is not going to go away, with variants, Covid testing will be an ongoing thing for years (not at the same level as Nov/Dec/Jan/Feb, but will still be a LOT of testing)…“We remain optimistic about our positioning for the quarters ahead and expect to see revenue growth of at least 90% for the full year 2021.”

Their 2020 total revenue was $422M (last estimate was $300M), 1244% growth over 2019, and they’re still giving a 2021 estimate of $800M, 90% growth over 2020.

I have no idea how this market will react to it, but looks positive (how could it not be) in after hours trading, up over 30%!



Realized that for the few here that are interested in FLGT, you may not have access to the ticker FLGT board that’s part of paid subscription. So reposting my notes below.

Key points heading into the call:

  • Projected rate of decreasing tapering of COVID testing revenue.
  • Results of core genetic testing business. Expected growth rate.
  • Impact of the above two factors on 2021 cost structure.
  • Possible updates on distribution related acquisition.
  • Overall update on COVID.
  • More information on the add-on subscription service models introduced due to customer demand discussed in previous industry presentation.

Some takeaways:
Unbelievable numbers:

  • $420MM revenue for 2020
  • Almost 51% net margins.
  • Operating margin 69%.
  • $600MM cash and cash equivalents end of year.
  • Guided $800MM revenue for next year.
  • Expected to have $1B in cash and cash equivalents by end of year.

Other points that stood out:

  • Share dilution, 31M outstanding compared to 25M, but offset by dramatic increase in EPS. Multiple reiterations and reassurances though of importance of minimal dilution and recognition of its negative effects on shareholders.
  • Suggested permanence of Covid-19 NGS testing with emphasis on the two categories: NGS and non-NGS.
  • The 92% increase includes covid testing. But its inclusion implies long term sustainability.
  • Did not break out non-covid NGS testing.
  • $800M guidance considered conservative. Does not include DHS revenue. And early in the year.

I skipped some sections but got most of it. Might have some typos. Got some verbatim and others paraphrased. Might be some confusion with speakers. I’ll be waiting for the expedited transcripts from seeking alpha later this evening.

Ming opening remarks:
Test captures all mutations
NGS leveraging research on virus and potential mutation

New approach to market
Technology platform and software

  • Vaccine management system
  • Community testing platform
  • Workflow improvement
  • Several customers already purchased offerings
  • Early stages
  • Able to leverage software platform as avenue of maintaining customers in months and years ahead

NGS continue to grow

Looking ahead to 2021
NGS grow 92M

Business discipline strategy
Ruthless competitive process
Continue drive down costs
Applying technique and operational execution in adjacent areas, address larger markets moving forward

Sales and marketing
International expansion to continue driving momentum
Potential M&A for addressable market

Q4 donated $1M to engineering scholarships
$1M to USC for cancer treatment initiatives
Long term growth potential – proven this year
Inroads made with new customers and partnerships
Lab operations
Extension of software applications
Picture platform
Create sustainable tailwinds

15 contracts for non-covid testing
Expand testing footprint nationally
100K tests per day currently
228 times scale up

Genetic counselors
Lab technicians
Business operators
Fierce commitment

Back to school testing NY
Emerging testing markets additional opportunities
Clark county also

FLGT Department of Homeland Security. 1 of 4 vendors
Large contract $2B

Demand for RT PCR remains strong

Many labs are struggling for turnaround time

Other labs missed the variants

NGS in addition to RT PCR
NGS in spotlight in pandemic for ability to screen for variant
“perfect intersection” for NGS
10k NGS test per day
Genomics of the virus
Leading position to partner with orgs studying

At-home tests
Specific use case: NY and Jet Blue / LA county

Picture platform – implement with telemedicine
Increased visibility

Continued to invest in non-covid operations

NGS pharmaco genomic test – 44 genes

And expand offerings of NGS
19K menu one of largest

Will increase headcount this year 2021

In-network lab

Software platform – 2
VM – layer added to technology platform
Fee per click
Other one – municipality have their own platform but lack tech to scale. Can license. Subscription billed annual plus fee per click

Paul Kim:
6 major customers
ASP $92
Mix of test
$16 compared to $35 of cost per day
Lab operations and unit economics

Expect strong operating margin
31 share count, $280MM margin

BS and capital structure
Cash balance grown 625MM from Jan and Feb + AR + combined $800 guidance + (missed margin %) with = $1B cash position
Minimal dilution to shareholders
Strategic M&A targets

Steven Mah
Overweight in CA – trend continuing?
Cadence of the guide, implies 40%, details, drop of C19 testing volume?
Paul response: concentration in CA, positioned in LA and LA county, meaningful amount from location. Diversified within CA to other counties and other states
¼ $295MM from CA
Few companies with guidance. And exceeded each quarter
Guidance this early. Confidence in contracts. And outlook
Conservative guidance
$800, NGS and non-NGS 65/35 split
Market position and testing landscape may change
NGS side, based on progress made
Some corporate customers, bolstered confidence
Flat to slightly up in Q1 and accelerate nicely heading throughout the year

2nd followup
DHS contract
How many other parties? What proportion? How about $2B? Capacity handle?
Brandon response: $2B over 5 years. 1 of 4 labs named in contract. Pretty far reach. A lot of employees. Driven by demand in testing.
Fulgent turnaround time should standout. Meaningful portion with current capacity of 100K daily. Entirely driven by demands. Some departments back to work

Kevin D. from Oppenheimer
Susan calling in for Kevin
Geographics of CA – based on model, percentage with CA increases.
Paul: should be pretty consistent Q4 and Q1 2021
$10M exceed per account – SB, SC, LB, A, and several others
See level of testing and demand pretty consistent in Q1

Size of market for variation?
Paul: Make few comments: market is there in bigger way. Aside from testing on the NGS. Really excited. Look at NGS and contracts, these are major organizations that are in the business of policy and standard setting. Competitive and sizeable contracts. Quality, capability, and value FLGT has. Volume we do is obvious but what is not so obvious is our capabilities. Highest end of NGS. Was at perfect spot to capitalize. Will have very good leg. Sustainable and less volatile. These contracts that will have years of growth for the company.
Ming: also competing for testing with insurance companies
Paul: markets go up and down. Different environment now because of vaccine distribution. Recognize. But anticipating testing revenue. Exciting. Positioning. Gaining market share. Also in testing area, begin to see concentration in LA county and CA whole being more diversified. NY, TX, FL. Testing share will increase in those states. Combine with need to do work with variants and analysis. First with COvid but really about highly infectious disease. Can add tremendous value with full sequencing. Commercial basis being invited more for full sequencing. Testing environment better characterization to report, not just C19 and NC19. NGS and Non-NGS.
Software, previous public company was software. Then may update investment community.

Core business
Priority listing in mind different for business development in future?
Paul: covid landscape. Amount invested was very very minimal. Priority and ability to run biz efficiently and show capability have very good positioning. More concentrated on, the NGS side. Really utilize tech and cost discipline to market. Also evaluating other modalities.
Ming: most of Q4 and Q1 2021 from drive-thru test but as school reopens, people go back to work and travel, see revenue shift to return back to normal. That’s related to covid-19 side. NGS, new product, partner channels. Same customers use products for patient treatments.

Erin Credit S
Paul: Minor portion of NGS relating to covid. New contracts will have lots of upside not incorporated into 70M.

How about ASP?
Brandon: sweet spot. Stay generally flat. No expected changes.
collections has been very good. Very little bad debt from AR.
Brandon: evolving

Partnerships with cruise line? Min volume commitment? Antigen?
Some exclusive, some non-exclusive. Multi year and non MY. Lots of competition out there. Have complete offering. Deliver. Customers love us. Confident in contract we have. Antigen testing comes up. Customers have tried but they don’t use them very much. Accuracy not there. Feedback received, RT gold standard. Sometimes turnaround 8 hours
Ming: vaccine tracking importance. Review operating results. 4.4 tests handled 2020. Where are labs? Largest to newcomers. Always have issues dealing with customers. Not accurate tests? FLGT no failures. Looking forward, platform continue to extend in market and also new emerging market.

How about revenue mix?
Paul: short answer, will have both NGS and non-NGS. Laid out guidance. 70MM. But on covid testing front. Drive-thru, contracts largely post vaccine environment. Include school, travel and leisure, open corporations. Testing as part of their policy. Business extension beyond 2021. Have comfortable with guidance. Might still continue to be healthy. Our positioning within market. Capturing market share. Even as vaccines are being administered.
Ming: C19 testing will remain for awhile. University of HK identified that even though individual vaccinated, still could transmit virus. Bring new challenge to society. Too early for prediction but did not build them into target. Also DHS contract, did not include as part of estimate. Early part of the year. Cancer and cancer related diagnostics. Gain market share while protecting shareholder value.

Nam –
C19 surveillance – DHS NGS?
Brandon – DHS strictly RT.
Seeing national effort for NGS. Genomic testing in spotlight right now. Monitoring variants.
Learn about therapeutics. Need definitive diagnostics. Continue for genomic studies. HHS and CDCs involvement
Ming: add to Brandon’s comment. Was not involved in respiratory infectious detection. Now we are leader. Not just COVID. Will be in the market.

International opportunity?
Ming: we are looking into expansion into Europe and Asia. Will update in coming quarters.