Fulgent Genetics Reports Third Quarter 2019 Financial Results

Date : 11/04/2019 @ 9:05PM
Source : GlobeNewswire Inc.
Stock : Fulgent Genetics Inc (FLGT)
Quote : 17.45  0.59 (3.50%) @ 11:43PM
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Fulgent Genetics Reports Third Quarter 2019 Financial Results

Fulgent Genetics (NASDAQ:FLGT)
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Fulgent Genetics (NASDAQ: FLGT) (“Fulgent Genetics” or the “company”), a provider of comprehensive genetic testing and Next Generation Sequencing (NGS) solutions, today announced financial results for its third quarter ended September 30, 2019.

Third quarter revenue was $10.3 million, an increase of 84% year over year from $5.6 million in the third quarter of 2018. GAAP income for the third quarter of 2019 was $1.5 million, or $0.08 per share, and non-GAAP income was $2.6 million, or $0.14 per share.

Adjusted EBITDA was $3.0 million in the third quarter of 2019, an increase of 950% year over year from $281,000 in the third quarter of 2018.

Non-GAAP income (loss) and adjusted EBITDA are described below under “Note Regarding Non-GAAP Financial Measures” and are reconciled to the most directly comparable GAAP financial measure, GAAP income (loss), in the accompanying tables.

Ming Hsieh, Chairman and Chief Executive Officer, said, “We continued to build on our momentum in the third quarter and once again posted very strong results. Revenue and billable test volume reached new record highs in the third quarter, while cost per test continued to improve. Our strong top line results have been driven by the growing traction with our oncology and reproductive health businesses, as well as our sequencing-as-service offering. Our established strategic investments and partnerships are contributing to our ongoing momentum, and we have been successful in meeting the growing demand from our new commercial genomic customers. We believe our superior test capabilities, extensive and flexible test menu, along with our competitive pricing will continue to drive strong growth across our business.”

Paul Kim, Chief Financial Officer, said, “We once again achieved record results in the third quarter, exceeding our expectations for test volume, revenue and profit. At the same time, we have seen increasing efficiencies across our business which have resulted in ongoing improvements in gross and operating margins. These efficiencies coupled with our increasing scale resulted in meaningful EBITDA, net income and cash flow generation in the quarter. We expect to see continued progress as we close out the year.”

Mr. Kim added, “We will provide a formal update on our guidance regarding certain financial measures during our investment community conference call to shortly follow the issuance of this press release.”

Conference Call Information

Fulgent Genetics will host a conference call for the investment community today at 4:30 PM ET (1:30 PM PT) to discuss its third quarter results. Press and industry analysts are invited to attend in listen-only mode.

The call can be accessed through a live audio webcast in the Investors section of the company’s website, http://ir.fulgentgenetics.com, and through a live conference call by dialing (855) 321-9535 using the conference ID 8069749. An audio replay will be available in the Investors section of the company’s website or by calling (855) 859-2056 using passcode 8069749 through November 11, 2019.

Note Regarding Non-GAAP Financial Measures

Certain of the information set forth in this press release, including non-GAAP income (loss) and adjusted EBITDA, are non-GAAP financial measures. Fulgent Genetics believes this information is useful to investors because it provides a basis for measuring the performance of Fulgent’s business excluding certain income or expense items that management believes are not directly attributable to the company’s core operating results. Fulgent Genetics defines non-GAAP income (loss) as income (loss) calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”), plus or minus provisions (benefits) for income taxes, plus equity-based compensation expenses, plus or minus equity income (loss) in investee, plus or minus the effect of a corporate tax rate, and plus or minus other charges or gains, as identified, that management believes are not representative of the company’s core operations. Fulgent Genetics defines adjusted EBITDA as GAAP income (loss) plus or minus interest expense (income), plus or minus provisions (benefits) for income taxes, plus depreciation, plus equity-based compensation expenses, plus or minus equity income (loss) in investee, and plus or minus other charges or gains, as identified, that management believes are not representative of the company’s core operations.

Fulgent Genetics may continue to incur expenses similar to the items added to or subtracted from GAAP income (loss) to calculate non-GAAP income (loss) and adjusted EBITDA; accordingly, the exclusion of these items in the presentation of these non-GAAP financial measures should not be construed as an implication that these items are unusual, infrequent or non-recurring. Management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measure of income (loss) in evaluating the company's operating performance. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in conformity with GAAP, and non-GAAP financial measures as reported by Fulgent Genetics may not be comparable to similarly titled metrics reported by other companies.

About Fulgent Genetics

Fulgent Genetics is a technology company with a focus on offering comprehensive genetic testing to provide physicians with clinically actionable diagnostic information they can use to improve the quality of patient care. The company has developed a proprietary technology platform that allows it to offer a broad and flexible test menu and continually expand and improve its proprietary genetic reference library, while maintaining accessible pricing, high accuracy and competitive turnaround times. The company believes its test menu offers more genes for testing than its competitors in today’s market, which enables it to provide expansive options for test customization and clinically actionable results.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements in this press release include statements about, among other things: anticipated growth of and increased stability in the company’s business and performance, including its volume and expected volume growth of billable tests delivered, and evaluations and judgments regarding diversification, traction, momentum, partnerships and the company’s recent performance; the success of the company’s investments in its business; the timing, commercial success and impact on the company’s results of new product launches and other initiatives; and the company’s identification and evaluation of opportunities and its ability to capitalize on opportunities to grow its business.

Forward-looking statements are statements other than historical facts and relate to future events or circumstances or the company’s future performance, and they are based on management’s current assumptions, expectations and beliefs concerning future developments and their potential effect on the company’s business. These forward-looking statements are subject to a number of risks and uncertainties, which may cause the forward-looking events and circumstances described in this press release to not occur, and actual results to differ materially and adversely from those described in or implied by the forward-looking statements. These risks and uncertainties include, among others: the market potential for, and the rate and degree of market adoption of, the company’s tests and genetic testing generally; the company’s ability to capture a sizable share of the developing market for genetic testing and compete successfully in this market, including its ability to continue to develop new tests that are attractive to its various customer markets and otherwise keep pace with rapidly changing technology; the company’s ability to maintain the low internal costs of its business model, particularly as the company makes investments across its business; the company’s ability to maintain an acceptable margin on sales of its tests, particularly in light of increasing competitive pressures and other factors that may continue to reduce the company’s sale prices for and margins on its tests; risks related to volatility in the company’s results, which can fluctuate significantly from period to period; risks associated with the composition of the company’s customer base, which can fluctuate from period to period and can be comprised of a small number of customers that account for a significant portion of the company’s revenue; the company’s ability to grow and diversify its customer base and increase demand from existing and new customers; the company’s investments in its infrastructure, including its sales organization and operational capabilities, and the extent to which these investments impact the company’s business and performance and enable it to manage any growth it may experience in future periods; the company’s level of success in obtaining coverage and adequate reimbursement and collectability levels from third-party payors for its tests; the company’s level of success in establishing and obtaining the intended benefits from partnerships, joint ventures or other relationships; the company’s compliance with the various evolving and complex laws and regulations applicable to its business and its industry; risks associated with the company’s international operations; the company’s ability to protect its proprietary technology platform; and general industry, economic, political and market conditions. As a result of these risks and uncertainties, forward-looking statements should not be relied on or viewed as predictions of future events.

The forward-looking statements made in this press release speak only as of the date of this press release, and the company assumes no obligation to update publicly any such forward-looking statements to reflect actual results or to changes in expectations, except as otherwise required by law.

The company’s reports filed with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission on March 22, 2019 and the other reports it files from time to time, including subsequently filed quarterly and current reports, are made available on the company’s website upon their filing with the Securities and Exchange Commission. These reports contain more information about the company, its business and the risks affecting its business, as well as its results of operations for the periods covered by the financial results included in this press release. In particular, you are encouraged to review the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2019 for any revisions or updates to the information in this release.

Investor Relations Contacts:The Blueshirt GroupNicole Borsje, 415-217-2633, nborsje@blueshirtgroup.com 

September 30, 2019 and December 31, 2018    
(in thousands)    
 September 30, 2019December 31, 
ASSETS:(unaudited)  2018 
Cash and cash equivalents$20,522 $6,736 
Investments in marketable securities 23,083  30,684 
Accounts receivable, net 5,292  5,948 
Property and equipment, net 6,396  6,446 
Other assets 5,852  4,090 
Total assets$61,145 $53,904 
Accounts payable and accrued liabilities$6,619 $2,752 
Total stockholders’ equity 54,526  51,152 
Total liabilities & equity$61,145 $53,904 

Three and Nine Months Ended September 30, 2019 and 2018 
(in thousands, except per share data)         
  Three months ended  Nine months ended  
September 30,September 30, 
   2019   2018   2019   2018  
Revenue $10,347  $5,625  $24,141  $15,678  
Cost of revenue (1)  3,885   2,612   10,473   7,928  
Gross profit  6,462   3,013   13,668   7,750  
Operating expenses:         
Research and development (1)  1,744   1,438   4,742   4,108  
Selling and marketing (1)  1,687   1,115   4,263   3,524  
General and administrative (1)  1,522   1,306   4,682   4,159  
Total operating expenses  4,953   3,859   13,687   11,791  
Operating income (loss)  1,509   (846)  (19)  (4,041) 
Interest income and other income  189   143   588   336  
Income (loss) before income taxes and equity loss in investee  1,698   (703)  569   (3,705) 
Provision for (benefit from) income taxes  61   (318)  81   (852) 
Income (loss) before equity loss in investee  1,637   (385)  488   (2,853) 
Equity loss in investee  (175)  (210)  (603)  (701) 
Net income (loss) $1,462  $(595) $(115) $(3,554) 
Basic and diluted income (loss) per common share:         
Basic $0.08  $(0.03) $(0.01) $(0.20) 
Diluted $0.08  $(0.03) $(0.01) $(0.20) 
Weighted average common shares:         
Basic  18,501   18,012   18,358   17,931  
Diluted  19,456   18,012   18,358   17,931  
(1) Equity-based compensation expense was allocated as follows:         
Cost of revenue $174  $121  $483  $396  
Research and development  279   214   690   517  
Selling and marketing  332   115   643   336  
General and administrative  166   138   455   457  
Total equity-based compensation expense $951  $588  $2,271  $1,706  

Non-GAAP Income (Loss) Reconciliation        
Three and Nine Months Ended September 30, 2019 and 2018 
(in thousands, except per share data)        
 Three months ended  Nine months ended  
September 30,September 30, 
 2019  2018  2019   2018  
Net income (loss)$1,462 $(595) $(115) $(3,554) 
Provision for (benefit from) income taxes 61  (318)  81   (852) 
Equity-based compensation expense 951  588   2,271   1,706  
Non-GAAP tax effect (1) -  75   -   621  
Equity loss in investee 175  210   603   701  
Non-GAAP income (loss)$2,649 $(40) $2,840  $(1,378) 
Basic and diluted income (loss) per common share:        
Basic$0.08 $(0.03) $(0.01) $(0.20) 
Diluted$0.08 $(0.03) $(0.01) $(0.20) 
Non-GAAP income (loss) per common share:        
Basic$0.14 $(0.00) $0.15  $(0.08) 
Diluted$0.14 $(0.00) $0.15  $(0.08) 
Weighted average common shares:        
Basic 18,501  18,012   18,358  $17,931  
Diluted 19,456  18,012   18,358  $17,931  
(1) Tax rates as follows:        
Corporate tax rate of zero for the three and nine months ended September 30, 2019 due to full valuation allowance. Corporate tax rate of 23% for the three and nine months ended September 30, 2018. 

Non-GAAP Adjusted EBITDA Reconciliation        
Three and Nine Months Ended September 30, 2019 and 2018 
(in thousands)        
 Three months ended  Nine months ended  
September 30,September 30,
 2019   2018  2019   2018 
Net income (loss)$1,462  $(595) $(115) $(3,554) 
Interest (income) (202)  (151)  (619)  (410) 
Provision for (benefit from) income taxes 61   (318)  81   (852) 
Equity-based compensation expense 951   588   2,271   1,706  
Depreciation 503   547   1,549   1,625  
Equity loss in investee 175   210   603   701  
Adjusted EBITDA$2,950  $281  $3,770  $(784) 

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