Fulgent Genetics, Inc.

Good day and welcome to the First Quarter 2021 Fulgent Genetics Earnings Call. At this time, I would like to turn the conference over to Nicole Borcia with Investor Relations. Please go ahead.

Great, thanks. Good afternoon and welcome to the Fulgent Genetics First Quarter 2021 Financial Results Conference Call. On the call today are Ming Hsieh, Chief Executive Officer, Paul Kim, Chief Financial Officer, and Brandon Perthews, Chief Commercial Officer. The company's press release discussing its financial results is available in the investor relations section of the company's website, bulginggenetics.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 predictions of future events and should listen to management's remarks today with the understanding that actual events 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 discussions of some of the risk factors that may cause results to differ from those described in these forward-looking statements contained in the company's filings with the SEC, including previously filed 10-K for the year ended December 31, 2020, which is available on the company's IR 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 statements for the first quarter of 2021 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 our call today to discuss our first quarter 2021 results. I will provide some operating remarks, before handing it over to Chief Commercial Officer Brandon Perthes to provide updates on our commercial success. And finally, Paul will discuss our financial results and outlook in detail. The first quarter marks a meaningful milestone in our fight against COVID-19. It has been adjusted over a year ago since the lockdown began, and our lives were disrupted in many ways by the pandemic. While it appears that the vaccine rollout is progressing and lives slowly reaching to the state of normalcy, our thoughts remain with those who have been impacted by this pandemic. Our team has worked tirelessly over the last 12 months to provide testing solutions to customers across the country. And while our COVID-19 testing business has been sustained demand, we are turning our focus on how we can support recovery from the virus going forward and drive growth across our core NGS business. I will elaborate on these areas of the focus in a moment, but I will First touch on the highlights from the first quarter. We had a record start for the year with the Q1 revenue totaling $359 million, more than 46 times of the revenue in Q1 last year. And the increase of almost 22% compared the first quarter. We delivered approximately 3.8 million tests in the quarter. and increased roughly 19% compared to first quarter and almost 290 times the volume of the Q1 last year. What's most exciting is the growth with demands in our NGS revenue, which exceeded our expectations and a growth 115% year-over-year in the first quarter. We'll continue to drive with sustained substantial leverage, generating more than $6.59 per share in non-GAAP income in the first quarter and almost $222 million in free cash flow. Our team has continued to fire on all cylinders with great execution from our laboratory operations to our sales organizations. The growth we accomplished in the last year wouldn't have been possible without our support and dedication. And we're looking forward to grow our team and expanding our momentum in the year ahead. We have built a genetic testing business on a strong technology foundation, and that is scalable into new areas with minimum overhead and investment, and we believe this position is extremely well for substantial growth and allow us to become a leader in the very broad genomic diagnostic market. On that note, one of the recent developments I'm most excited about is the announcement of Dr. Larry Weiss. as our new chief medical officer. Dr. Weiss has an extensive background and expertise in pathology and molecular science, and has a successful track record in building healthcare business for sustainability and scale. Dr. Weiss joining us from the new genomics, where he oversaw companies' medical and R&D teams and help to expand their business during his tenure. We are very excited about Dr. Weiss' commitment to 4GEN and look forward to expand our presence in the molecular diagnosis market under his expert oversight. We see a number of opportunities in oncology testing, which we have just begun to scratch the surface. And we believe that with our scalable technology platform and track record for execution, we are extremely well positioned to capitalize on the large opportunities in this area. Moving on our COVID-19 testing business, while our RT-PCR-based testing for COVID-19 has continued to drive sustainable testing volume and the cash flow for our business. We are focusing on leveraging our success in RT-PCR testing into other areas for COVID-19 and the research. In particular, we have been working on various large-scale opportunities for NGIN-S-based testing for COVID-19, evidenced by the large contract were announced with the CDC in March. Folding the differentiation and the success in this contract, it is clear. We were one of the top received by award, the value, and the contract duration compared to other labs that were also selected by the CDC for this contract. Brandon will elaborate on this win in more detail. But we believe this contract work represents accumulations of our efforts in both NGS testing and the COVID-19 expertise. We see an additional opportunity of this nature that we are being considered for an ongoing basis. We also have continued to support vaccine rollout with our vaccine management platform. as well as community software platform. As we look ahead, we expect to continue to invest in our technology platform, our team, and our testing offering to expand our reach into new markets and the geographic area. In particular, we intend to expand our investment in our China JV in the coming months. We have had a president in China through our JV venture in 2017 in the genetic rare disease market. And we see a significant opportunity with additional investment to meaningfully grow our presence in this large and growing genetic death diagnostic market. Our operations on the ground in China leverage our same technology platform, extensive test menu, and the efficiency level management system as our infrastructure in the U.S. We are also continue to evaluate M&A opportunities that will be a natural expansion for our existing business to field our expansion. I remain very optimistic about our future opportunities in NGS testing and other areas that we are just getting our feet wet in. We have proved our ability to rapidly scale up our business with our COVID-19 testing initiatives, and we see opportunities that will underpin our momentum more broadly going forward. We look forward to discuss our progress in the coming quarters ahead. With that, I would like to turn over the call to Brandon to dive in more on the customer dynamics we saw in this quarter.