Fulgent Genetics, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the 4Gen genetics fourth quarter 2020 earnings conference call. At this time, all participant lines are now in listen-only mode. After the speaker presentation, there will be a question and answer session. During the session, you will need to press star 1 on the telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I want to have a conference speaker today, Nicole Borsha. Please go ahead, ma'am.

Great. Thanks very much. Good afternoon and welcome to the Fulgent Genetics fourth quarter and full year 2020 financial results conference call. On the call today are Ming Hsieh, Chief Executive Officer, Paul Kim, Chief Financial Officer, and Brandon Perthews, the company's Chief Commercial Officer. The company's press release discussing its financial results is available in the investor relations section of the company's website, FulgentGenetics.com. An audio replay of this call will be available shortly after the call concludes. Please visit the Investor Relations section of the company's website to access the audio replay. 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 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 may make today to reflect actual results or changes in expectations. Listeners should not rely on any forward-looking statements as predications of future events and should listen to management's remarks today with the understanding that actual results, including the company's actual future results, may be materially different in 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-Q for the quarter ended September 30, 2020, which is available on the company's investor relations website. Management's prepared remarks, including discussions of 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 they 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 and full year 2020 for more information, including the description of how the company calculates non-GAAP income and earnings per share, and a reconciliation of these financial measures to income and income per share, the most directly comparable GAAP financial measures. With that, I'd now like to turn the call over to Ming.

Thank you, Nicole. Good afternoon, and thank you for joining I will call today to discuss our fourth quarter and the full year of 2020 results. I will provide some opening remarks before handing it over to our Chief Commercial Officer, Brandon Pertus, to provide updates on our commercial success. And finally, Paul King will discuss our financial results and outlook in detail. Before I start, I would like to say that our thoughts are with those who have been impacted by this pandemic and the destruction it has caused weighs heavy on our hearts. We will continue to find a way to do our part in combating the spread of this virus. and have been in the forefront position to provide testing and support for our customers throughout this challenging time. We look forward to leveraging our success and expertise for the greater good as we continue to battle this pandemic. With that being said, 2020 was truly a hallmark year for Fulgine Genetics. While the financial trajectory of our business transformed significantly over the last 12 months, our value remained consistent and our genetic testing platform has expanded and evolved to meet the challenges that COVID-19 has presented. I won't go through the details of each step that we took to get where we are today, as I have discussed much of this in detail on prior calls. But I will say that we have emerged in 2021 as a stronger, more robust business than we were a year ago, and that we are extremely well positioned to continue driving growth across our business through 2021 and beyond. Our results in the fourth quarter were truly outstanding. Our fourth quarter revenue of $295 million is almost three times the revenue we generated in the third quarter of this year, and more than 35 times our fourth quarter revenue of last year. We did more than 3 million tests in the quarter, and over 4.4 million tests in the year, compared to about 60,000 tests in all of 2019. At the same time, we demonstrated incredible leverage in generating more than $6 per share in non-GAAP income in the fourth quarter and more than $9 per share in non-GAAP income in the full year and $105.5 million in free cash flow. Paul will cover financial details, but I want to emphasize that this leverage scale would not have been possible without our fundamental genetic testing technology, our proprietary lab operation, and reporting system. our ability to directly secure multiple reimbursement agreement, and the exclusion capabilities of our sales and the lapping. I'm extremely proud of what we have able to accomplish this year. And the future of Fulgine looks very bright for years ahead. Throughout the challenging landscapes and challenges in 2020, our team has not only risen to meet the demands that came our way, but have gone above and beyond to establish Fusion as a true leader with the genetic testing and the screening market. is demonstrated in two ways, both by the customer and the contracts that we have won competitively. But perhaps more importantly, by the work we have done to point near new approaches to lab operations and test management to make testing more accessible and efficient. I would like to highlight a few examples of this. First, on the leadership front, Virgin was recognized as the number one provider of COVID-19 tests in the state of California by California Department of Public Health in late January, processing the highest volume in tests, with over 90% of results returned to patients within 24 hours, and 97% returned within 48 hours. We have announced various wins and partnerships in the states over the last year. But to see Folgen atop the list of all COVID-19 testing providers in California is truly a testament to our ability to execute and service customers successfully in a way that drives them to choose Fulgine over some of the largest testing providers in the country. Our approach is fundamentally different and the tools is in the protein when you see the success in the most popular state in our nation. Other highlights on the leadership front include multiple large testing contracts that we have continued to sign to specific wings and new contracts with the Department of Homeland Security. as well as the extension of our testing partnership with the New York City public school system. Brandon will discuss his partnership in more details in a few minutes. In terms of COVID-19 testing capabilities, we have kept a close eye on the new virus mutations that have emerged and are pleased to announce that. Our tests are detecting all major mutations of the virus. We are also leveraging our next generation sequencing capability to support COVID-19 research on the virus and the potential mutations, which Brandon will elaborate on momentarily. In terms of pointing out the new approaches to the market, we have done some exciting things with our software and technology program, using it as a new way to service our customers. Our software offering including our vaccine management solution and community testing software platform, which enable our customer to better manage their testing and vaccine workflows, programs, and policies. We already have several customers who purchased such offerings. While these programs are still very much in the early stage of all rollout, we are optimistic that we were able to leverage our software platforms as an avenue to servicing and maintaining customers in the month and the years ahead. Aside from COVID-19, our next-generation sequencing business continued to grow in 2020. Despite various lockdowns across the country, volume from NGS tests grew from 59,000 in 2019 to 72,000 in 2020. Looking ahead in 2021, we expect our NGIS business will grow about 92% year over year to $70 million. And looking at our business overall, we expect revenue to almost double in 2021 compared to the record revenue achieved in 2020. Armed with our technology platform, we expect to continue to see strong growth and operating margins due to our best-in-class cost structure. We also believe our technology platform set a higher bar in the market by bringing business disciplines as our strategic wins have been through Roku's competitive bid process and the sustainable value for our customers through our ability to continue to drive down the cost for the market. At the same time, we believe that by applying our technology and operational execution into adjacent areas, will be able to join the larger market for future going forward. Throughout the balance of 2021, we plan to invest in sales, marketing initiatives, as well as invest international expansion efforts to continue driving the momentum. We also view M&A as a potential avenue to expand our addressable market into wider screening and diagnosis capabilities. Our last point I would like to make is around philanthropic efforts that we have undertaken in the recent months in response to the pandemic. advanced in engineering are an important part of the response to the challenges presented by COVID-19. But they need to be careful applied not only to address current circumstances, but to promote future productive collaboration engagement. In the fourth quarter, Fulgham donated $1 million to National Academy of Engineering. The National Academy of Engineering, in collaboration with the China National Academy of Engineering and United Kingdom Royal Academy of Engineering, will use the fund to identify, highlight, and promulgate the best thinking on engineering system solutions to COVID-19. We also made an initial donation of $250,000 as a part of a $1 million commitment to USC to support the cancer research initiatives. We believe supporting these projects will bring COVID closer to these premier institutions and organizations. as we become a larger company with a wider reach than our existing addressable market. Ultimately, we have remained focused on building a business with long-term growth potential, and I believe we've proven that this year. The inroads we have made with new customers The partnerships we have serviced for the reimbursement, the scale we have created with our lab operations, the extensions of our software application into the customer use, and ramp of our picture platform together create a significant, sustainable tailwind for our business. We are excited about the future and look forward to reporting on our success in the quarters ahead. With that, I would like to turn the call over to Brandon to dig into more on customers' dynamics we saw this quarter. Brandon?