Ladies and gentlemen, thank you for standing by, and welcome to the Fulgent Genetics Fourth Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference to your speaker today, Nicole Borsje. 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 Perthuis, 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 use 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 results, including 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-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 our call today to discuss our fourth quarter and full year of 2020 results. I will provide some opening remarks before handing it over to our Chief Commercial Officer, Brandon Perthuis, to provide updates on our commercial success. And finally, Paul Kim 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 disruption it has caused was heavy on our hearts. We have continued to find a way to do our part in combating the spread of this virus and have been at the forefront positioned 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 Fulgent 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 and generated 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 leveraged scale would not have been possible without our fundamental genetic testing technology, our proprietary lab operations and reporting system, our ability to rapidly secure multiple reimbursement agreements, and the execution capabilities of our sales and lab team. I'm extremely proud of what we have been able to accomplish this year. And the future of Fulgent looks very bright for years ahead. Throughout the challenging landscapes and difficulties in 2020, our team has not only been able to meet the demand that came our way but have gone above and beyond to establish Fulgent as a true leader in the genetic testing and screening market. This 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 pioneer new projects in 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, Fulgent was recognized as the number one provider of COVID-19 testing in the State of California by California Department of Public Health in late January, processing the highest volume of 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 Fulgent at the top of 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 Fulgent over some of the largest testing providers in the country. Our approach is fundamentally different. And the proof is in the results when you see the success that we have achieved in one of the most populated states in our nation. Other highlights on the leadership front include multiple large testing contracts that we have continued to sign, with specific wins 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. 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 potential mutations, which Brandon will elaborate on momentarily. In terms of pioneering new approaches to the market, we have accomplished some exciting feats with our software and technology programs by using them as a new way to service our customers. Our software offerings include our vaccine management solutions and community testing software platform, which enable our customers 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 stages of rollout, we are optimistic that we will be able to leverage our software platforms as an avenue to service and maintain customers in the months and 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 NGS business to grow above 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 sets a higher bar in the market by bringing business disciplines as our strategic wins have been through robust competitive bid processes and sustainable value for our customers through our ability to continue to drive down costs in the market. At the same time, we believe that by applying our technology and operational execution into adjacent areas, we will be able to address a larger market for Fulgent going forward. Throughout the balance of 2021, we plan to invest in sales and marketing initiatives as well as 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 diagnostic capabilities. A last point I would like to make is around the philanthropic efforts that we have undertaken in recent months in response to the pandemic. Advances in engineering are an important part of the response to the challenges presented by COVID-19, but they need to be carefully applied, not only to address current circumstances but to promote future productive collaboration and engagement. In the fourth quarter, Fulgent donated $1 million to the National Academy of Engineering. The National Academy of Engineering, in collaboration with the Chinese Academy of Engineering and the United Kingdom's Royal Academy of Engineering, will use the funds to identify, highlight, and formulate the best thinking on engineering system solutions for COVID-19. We also made an initial donation of $250,000 as part of a $1 million commitment to USC to support cancer research initiatives. We believe supporting these projects will bring Fulgent 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 reimbursement, the scale we have created with our lab operations, the extensions of our software applications into customer use, and the ramp of our Picture platform, together create significant sustainable tailwinds for our business. We are excited about what the future holds 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 the customer dynamics we saw this quarter.

Thanks, Ming. We'd like to again express our sympathy to those who have been impacted by this terrible virus. It has been a difficult time for many families in our country in general. The spike in cases and testing predicted by medical experts to happen in the fall, indeed, became a reality. During the fourth quarter, we again saw lockdowns increase across many states, which did slow our momentum in our non-COVID-19 business. However, we have seen increasing strength in our business outside of COVID-19. Our non-COVID-19 business grew approximately 43% year-over-year in the fourth quarter. And we signed on over 15 contracts with new customers for services such as hereditary cancer, cardiovascular genetics, carrier screening, and neurodegenerative genetics. During the fourth quarter, we worked tirelessly to increase COVID-19 testing capacity, maintain our best-in-class turnaround time, and expand our testing footprint nationally. These efforts led to a quarter where we were able to service over 3 million patients with COVID-19 testing. At this time, we had the capacity to handle more than 100,000 tests per day across our two laboratories with the ability to continue to scale. During the fourth quarter, we handled accelerating volume while maintaining our best-in-class RT-PCR turnaround time, delivering approximately 90% of tests within 24 hours. We believe our ability to scale our business to roughly 228 times the volume of what we were handling just one year ago is almost unprecedented in our industry and is indicative of everything Fulgent represents. We are a technology platform company with the ability to excel in many areas of health care. We are a team of engineers, geneticists, genetic counselors, and business operators with a fierce motivation to make Fulgent a dominant force. We have proven with our platform and infrastructure that we can run a laboratory that far outpaces many genomic labs in terms of efficiency and scalability, which translates to best-in-class growth in operating margins, which Paul will elaborate on in a minute. Early in the pandemic, our COVID-19 patient volume was concentrated around drive-through testing sites and was somewhat limited to select regions in and around Southern California. Today, our COVID-19 customer base is incredibly diverse with a national reach. At this point, we have direct agreements with 11 counties for our services, many large corporations, testing organizations, sports teams, sports conferences, cruise lines, and hundreds of nursing homes and assisted living facilities, just to name a few. We announced during the fourth quarter an extension of our New York City Department of Education and test and trace contract. The New York City Department of Education selected Fulgent as a partner after evaluating a number of different COVID-19 testing providers through a competitive bid process. Our ability to retain this business through the 2021 school year demonstrates that our platform is not only capable of meeting the stringent needs of the school system, but that our service in doing so resulted in a very positive customer experience for the New York City public school system. We believe we have built an incredible system for back-to-school testing, and we have now had months of experience and many thousands of students tested. We believe this early start in an emerging testing market will help drive additional opportunities for Fulgent. In fact, we are excited to announce we were recently selected by Clark County in the Las Vegas school district to be their back-to-school testing partner. We look forward to continuing to deploy our resources across the U.S. to help students return to school safely. One other exciting announcement, which Ming briefly mentioned, is that Fulgent was selected by the Department of Homeland Security as one of four labs chosen for a $2 billion, five-year indefinite delivery, indefinite quantity contract for COVID-19 testing. This is the largest contract we have been awarded to date. We believe our industry-leading turnaround time, capacity, and delivery platforms give us the ability to take on a meaningful portion of this contract and help our country's first responders stay healthy and safe. The demand for our RT-PCR COVID-19 test remains strong for both existing clients and new opportunities. We continue to build a robust sales funnel in various areas as the country continues to view testing as a critical tool to fight the virus and reopen our country, and RT-PCR remains the gold standard. While rapid tests are available and being used, they cannot replace the accuracy, meaning sensitivity and specificity, of RT-PCR. Many organizations, government entities, and counties are requiring RT-PCR results. However, we do see an opportunity for rapid testing and RT-PCR results to work together. To this day, many labs are struggling with turnaround time, which limits the usefulness of RT-PCR. However, we continue to provide results in generally less than 24 hours. We believe that fast RT-PCR testing continues to be the best option for testing. We continue to monitor the situation regarding new mutations and strains of the virus. Importantly, we want to make sure our RT-PCR test can detect these new strains, which we have been able to do. Recently, there was information released by the CDC that warned that some of the new variants may be missed in testing, and there were, in fact, some labs that had this issue based on the RT-PCR targets used. We are pleased to report that our RT-PCR test can detect the variants published to date. While almost all of our COVID-19 testing volume has been RT-PCR-based, I'll remind you that we actually introduced a next-generation sequencing-based test prior to launching RT-PCR. We realized quickly that the rapid turnaround time of RT-PCR is critical in controlling the spread of the virus. Therefore, we did not commercialize the next-generation sequencing test as a diagnostic test. Fast forward to today, next-generation sequencing is now spotlighted in this pandemic due to its ability to identify strains and mutations and screen for potential new mutations. We have now hit a perfect intersection of Fulgent's core competencies. We are primed and ready to take on massive NGS testing volume. With our sequencing capacity and expertise, we can handle approximately 10,000 NGS tests per day. We are currently working with local and federal governments on genomic studies of this virus, which are just getting started. We believe our ability to offer both NGS and RT-PCR puts us in a leading position to partner with organizations conducting these studies. Another key area of opportunity for us has been our Picture at-home COVID-19 test. This has proven to be an important differentiator for Fulgent and has helped many people by providing convenient access to testing. Picture is being used for employee testing, student testing, pre-travel testing, and testing for athletes, just to name a few. Highlighting a couple of specific use cases, we partnered with New York City and JetBlue to provide testing kits to travelers leaving New York airports during the holiday season in response to the testing travel mandates by the state. Also during the holidays, L.A. County launched a new COVID-19 home test collection program, which allows certain county residents to do complementary testing from home. The Picture platform is more than just a COVID-19 testing service; it is a platform designed to change the way genomic testing and other testing is delivered. We believe patients are becoming increasingly proactive in their health care, and consumer-initiated testing will be a rapidly growing market. With the Picture platform seamlessly integrated with telemedicine, we are uniquely positioned to expand the service offering by adding many new tests in the future. We also believe we have dramatically expanded Picture’s visibility and brand recognition due to the role the platform has played in COVID-19 testing. While COVID-19 testing has been unwavering in its demand on our business, we have continued to invest time and resources in our non-COVID-19 operations. We are excited to announce that we have launched a next-generation sequencing-based pharmacogenomic test. Our pharmacogenomic test will target 44 genes and more than 140 drugs to enable personalized dosing in health care and will determine if a patient is a rapid metabolizer of certain drugs or a slow metabolizer, adjusting dosing accordingly; or perhaps a different drug altogether could be recommended. While most pharmacogenomic tests are RT-PCR-based and include limited targets and information, applying our expertise in next-generation sequencing allows us to unlock much more information and provide patients with a more comprehensive report. We look forward to commercializing this product in 2021 and beyond. In addition to our new pharmacogenomic test, we continue to expand the number of disease-specific panels we offer and the number of conditions we test for. As published in the NCBI Genetic Testing Registry, GTR, we now offer over 19,000 genetic tests, making the Fulgent menu one of the largest in the world. We intended 2020 to be the year we dramatically expanded our commercial sales team. However, COVID-19 threw an unexpected curveball. That said, we intend to dramatically increase our sales team headcount by the end of 2021. We believe we now have the product menu, turnaround time, and cost structure to drive significant expansion in the United States and overseas. In addition to a vastly expanded sales team, an important part of our go-to-market strategy has been increasing our managed care contracts. An incremental benefit of COVID-19 testing has been our increased exposure to payers. In the fourth quarter, we billed over 1.8 million more insurance claims than we did in the fourth quarter of 2019. We have become an in-network laboratory with several regional payers and now have close working relationships with several large national payers. We believe we will continue to make meaningful progress becoming an in-network provider for our services. Another opportunity for us is the extension of our software platforms to customers, which Ming briefly touched on. We recently launched two new software products: the Fulgent vaccine management platform and the Fulgent community testing software as a service product, both of which leverage the testing platforms we have built to support our massive COVID-19 testing operation. The vaccine management platform is a layer added to our extremely successful technology platform, which is used by drive-through, walk-up, and other testing operations. Now, on the same web-based platform, patients are able to schedule their vaccinations, pick a location, arrive, preregister with a QR code, get a digital confirmation of their first injection, and reminders for their second. This will be a fee-per-click product. The second product, the Fulgent community software as a service, is a completely novel approach for us. Some counties and municipalities have their own laboratory and testing operations but lack the platform technology to scale and effectively manage testing. In this case, they can now take a license to our Fulgent community software as a service product. Essentially, it's a Fulgent front end, but instead of pointing the order to our laboratory, it will point it to our customers. This will be a subscription service built annually, along with a fee per click. We have a number of irons in the fire as we work to emerge on the other side of this pandemic, and we look forward to what the future holds for Fulgent. I would now like to turn the call over to Paul Kim, who will walk you through our fourth quarter and full year 2020 financial performance.

Thanks, Brandon. Record fourth quarter revenues totaled almost $295 million, an increase of more than 3,400% compared to the fourth quarter of 2019. Billable tests in the quarter totaled almost 3.2 million, growing more than 200 times the volume of Q4 last year. The vast majority of this volume was from our business related to COVID-19. Despite the reemergence of a statewide lockdown in California and stay-at-home orders elsewhere, we saw stable demand for our traditional genetic testing business in Q4. Our core business in Q4 was up 43% year-over-year and 17% sequentially from Q3. We finished the year at almost $37 million in revenues from our core business, which was slightly lower than our original projection before the pandemic hit. Overall, our Q4 results far exceeded our expectations, largely due to the unwavering demand for our COVID capabilities. Our customer base continues to diversify, and in the fourth quarter, we added six major customers who are contributing multimillion dollars each in quarterly revenues. Our ASP in the fourth quarter was $93, slightly lower than the $98 we saw in the third quarter. While our ASP has largely remained stable over the last few quarters, the modest decrease is due to the increasing mix of tests for COVID versus non-COVID. Cost per test for the quarter was a record low $16, an improvement of approximately 36% compared to the last quarter. Gross margin continued to improve and was up more than 8 percentage points sequentially. The gross margin improvement we've seen is a further testament to the scalability and leverage in our platform as revenue increased almost threefold sequentially, and we drove further efficiencies in our lab operations and unit economics. Now turning to operating expenses. Total GAAP operating expenses were $17.3 million in the fourth quarter, up from $11.9 million in the third quarter. Non-GAAP operating expenses totaled $14.8 million, up from $9.2 million last quarter. Our non-GAAP operating margins improved 12 percentage points sequentially to 77.6%. We continue to make meaningful investments across all our departments in the quarter, but our top line outperformance and increasing operating efficiencies continue to outpace the investments into our business. Based on our profits, we recorded a 26% tax rate in Q4. Adjusted EBITDA for the fourth quarter was $230 million compared to $1.1 million in the fourth quarter of 2019. On a non-GAAP basis and excluding equity-based compensation expense, income for the quarter was $167.5 million or $6.20 per share based on 27 million weighted average diluted shares outstanding. Turning over to the balance sheet. We ended the fourth quarter with $432 million in cash, cash equivalents, and marketable securities. During the fourth quarter, our equity shelf program enabled us to sell approximately 4.7 million more shares, raising almost $204 million in cash, net of issuance costs. We have not executed on any shelf program since 12/31 to minimize dilution to our shareholder base. On the other side of the balance sheet, our contract liabilities stood at $26.6 million. I'll also quickly touch on the financial highlights for the full year 2020. Revenues totaled $422 million, up almost 1,200% year-over-year. Operating income totaled $290 million versus an operating loss of $428,000 last year. Non-GAAP EPS was $9.10 based on 24.1 million weighted average diluted shares outstanding. Now moving on to our outlook. We see significant opportunity in 2021 to extend our leadership with COVID testing, while our genetic testing business should continue to expand. As we look at revenue streams in 2021, we see a more diverse mix of revenue drivers attributable to COVID-19. In addition to RT-PCR testing, we see growth potential from our NGS-based COVID test as we continue to win more customers who want sequencing to understand the characteristics of COVID as well as the growing number of variants. We also expect to generate some revenues from our software licensing as customers who are beginning to purchase our software to utilize in their own environments for various applications. Further, we see continued growth in our at-home platform, Picture Genetics, for both COVID and non-COVID tests. On the non-COVID front, we continue to add content and introduce more tests into multiple areas, including oncology and reproductive health. In addition to the aforementioned momentum, we see continued benefits from the expanded partnerships on the reimbursement front by being able to anticipate payments for tests delivered. Based on our initial outlook for momentum in 2021, we expect test volume in 2021 to be over 8.5 million, which translates to approximately $800 million in revenues, representing a growth of 90% year-over-year. In the first quarter of 2021, we expect revenues to be approximately $325 million. Of the $800 million, we estimate approximately $70 million in revenues from NGS testing and $730 million in revenues from RT-PCR or non-NGS tests. We define NGS revenues as revenue from our traditional genetic testing business plus revenues from our NGS-based COVID sequencing. These NGS test agreements include long-term contracts with major regulatory organizations, which provide important baseline information for COVID-19 and other infectious diseases for national- and state-level surveillance, defining important changes in transmission, identifying unusual or emerging variants, and ultimately improving the public health response and decision-making with better laboratory data on a going-forward basis. We believe our revenues from NGS testing will be more sustainable as it is less volatile than the evolving COVID-19 testing market, which is driving our revenues from non-NGS testing. We also note that $70 million represents a 92% growth in our NGS business compared to 2020. From a profitability standpoint, we expect to show ongoing leverage in our business, which drops to the bottom line and drives cash flow generation. We continue to rely on our foundational technology for operating our business, which is producing gross margins above 80% and operating margins above 70%. Even with aggressive hiring and investments in our business, we anticipate growth in operating margins will remain extremely strong. As such, for full year 2021, utilizing an estimated 27% tax rate and an estimated share count of 31 million, we expect net income of approximately $380 million or approximately $12.50 per share for our shareholders, excluding stock-based compensation. Before we turn it over to questions, I'd like to make a few comments on our balance sheet and capital structure. As of the date of our earnings report, our cash balance has grown from $432 million at year-end to $625 million from our operations in January and February. That, plus our accounts receivable which stand at over $200 million, combined with guidance of $800 million in revenue and $380 million in profit, positions the company to have a cash position above $1 billion sooner rather than later. We're proud of Fulgent's capital structure as we achieve this feat organically with minimal dilution to our shareholders by capitalizing on opportunities armed with our technology platform. We believe we're much stronger than we were a year ago with expanded capabilities that address a much larger market. As such, we continue to assess strategic M&A targets regularly. We also plan on opening up new markets in Asia and Europe in the future. Thank you for joining our call today. Operator, you can now open it up for questions.

Our first question will come from the line of Steven Mah from Piper Sandler.

So just a couple of questions on California and then also on the 2021 guide. I know from our internal channel checks, you seem to be pretty overweight in California. So should we think of that trend continuing in 2021? And how that's been trending in the first months of the year as well? And then secondly, on the cadence of the guide. Your Q1 guide implies about 40% of total 2021 revenues. Just maybe a little bit of details on that. Do you expect a drop in COVID testing volumes in Q2? And just maybe a little bit more color on that.

Okay. Thanks for the question, Steven. In terms of the concentration in California, because we are positioned in Los Angeles and Los Angeles County, it is true that a meaningful amount of revenues come from that county. But having said that, we have continued to diversify our business within the state to various other counties as well as a number of other states. So if you take a look at the characteristics of our Q4 revenues at about $295 million, only about one-fourth of that came from L.A. County. The other thing that I would also say is, in terms of the guidance, that back in 2020, we were one of the few companies to have guidance throughout the course of the year, and we're pleased to exceed expectations in each one of those quarters and for the year. In looking out at 2021, for a company that is largely centered around COVID and COVID testing, we believe that we have confidence in our market share as well as in our positioning to have formal guidance even just earlier in the year. If you take a look at our confidence, that’s based on the contracts that we have and the outlook, even as deep as Q3 and Q4. That can certainly change if the testing landscape changes. But on a conservative basis, we feel confident with the $800 million in revenues. So if you break out the $800 million of revenues in two components, NGS versus non-NGS, we see the non-NGS portion of approximately $730 million of revenues being a 65-35 split. That can certainly change if our market position and the testing environment changes as we get deeper into the year, but that's what we feel comfortable with. On the flip side, on the NGS side, based on the progress that we made from a number of different fronts, including reimbursement and corporate customers that we have been introduced to through COVID, some of those corporate customers are very well aware of our capabilities. And we have executed contracts which bolsters our confidence in being able to hit that $70 million. In terms of a grade of how that $70 million will play out, we see Q1 NGS revenues being flat to slightly up, but that should accelerate nicely as we get into the future quarters throughout 2021.

Okay. Great. And maybe just if I could sneak in one quick one. On the Department of Homeland Security's contract, can you give us a little bit more details, such as how many other parties are within that contract? And what proportion of that $2 billion can you get? Can you give us a sense, is it all the testing that you can handle? Or is there some other structure in terms of the volumes you might get from that?

Yes. Thanks, Steven. It's Brandon. So yes, the Department of Homeland Security contract, $2 billion over five years. It's an IDIQ contract. We're one of four laboratories that are named in that contract. So that's going to have pretty far reach. I mean the Department of Homeland Security has multiple departments, a lot of employees, and it's essentially driven by the demand for testing. So these are task orders from the government that come in that need testing services and testing kits. I think with Fulgent's delivery platform, our reach, and our turnaround time at the lab, we stand out a little bit. We do have the capacity to take on a meaningful portion of that. We mentioned kind of where we are today, north of 100,000 tests per day capacity. And between our two labs, we can continue to grow that. So it will be entirely driven by the demand for testing. Some of these departments are still back to work full-time, so to speak. So I think as the country begins to reopen and we start thinking about back-to-work and back to a sense of normalcy, testing with the Department of Homeland Security will continue to be a growing area for Fulgent in testing in general.

Our next question will come from the line of Kevin DeGeeter from Oppenheimer.

This is Susan calling in for Kevin. First question, I actually just want to tap onto the geographic split between California and other areas. Based on our model, it looks like the percentage from California increases in Q1. Is that correct?

The percentage of business that we have in California should be pretty consistent with what we saw in the fourth quarter. If you take a look at our major customers that are providing, say, over $10 million of revenues within the fourth quarter, we have a number of different counties driving those revenues aside from L.A. County and San Bernardino County. We have Santa Clara County, Long Beach, Anaheim, several others. And we see the level of testing and the demand for our services being pretty consistent within those customers compared to the fourth quarter.

Great. Just one more related to COVID. Do you guys have a sense of how large the market is for COVID variant characterization?

So the market definitely is there. I'll make a few comments, and then I'll turn it over to Brandon. The market is there in a more significant way for the variants aside from the testing on the NGS side. And that's what has us really excited. Because if you take a look at the NGS and the contracts that we have signed, these are major organizations that are in the business of policy and standard setting. It's a very, very competitive bid. These are sizable contracts, and they chose Fulgent based on our quality capabilities and the value that we have. The value that we have is really unique because the amount of COVID volume that we do is evident, but what is not so obvious is the capabilities of the company before COVID. Because we're a genetic testing company that was at the highest end of testing capability for next-generation sequencing, we were in a perfect spot to capitalize on some of those opportunities and ink those contracts. We believe these contracts will have very good growth potential because they are more predictable, sustainable, and less volatile, and are not tied directly to the demand for testing. We see these contracts as having years of growth potential for the company.

We are also bidding for several projects with various pharmaceutical companies related to NGS tests for COVID-19.

So Susan, to answer your question, right, I mean, how does the market look. The market for testing goes up and down through each one of the ways. And we're in a different environment now because of the vaccine distribution. So we fully recognize that, and that's the reason why we have confidence in the $800 million. But we're anticipating just the immediate testing revenues from, say, drive-through sites to go down. If it doesn't go down, then we can certainly change our guidance. But what we are excited about is our positioning within that testing market. We believe that we're gaining market share, and we can clearly see that. The other thing that we see in the testing area is I think that you will begin to see the concentration, not only in L.A. County, but in the state of California being more diversified. I've talked about the state of New York, but other big states like Texas and Florida, we believe that the testing share and the testing revenues in those states would increase. And then if you combine the need to do work for the variant analysis, which first centers around COVID, but it really is about highly infectious diseases, we believe that we can offer a tremendous amount of value to governmental bodies by being invited to execute on full sequencing. And then the other thing that Ming just mentioned is from the commercial aspect, we are being invited more to do full sequencing for pharmaceutical organizations.

If I may, sorry, that was a very good long answer. A couple of questions on your core business. Do you guys have a priority listing in mind for the different things that you mentioned for business development in the future?

Yes. So let me take a shot at that, and then I'll turn it over to Ming. In terms of the COVID landscape, the amount that we invested in COVID from a dollar perspective was very, very minimal. So in terms of the priorities, we believe our ability to run a business efficiently and by our ability to show our capabilities, we can certainly have a very good position within the COVID marketplace. What we are more concentrated on is the NGS side and really utilizing our technologies to bring better business discipline, value cost, and sustainable adoption into the marketplace. That includes things like next-generation sequencing that we're fully comfortable with. We are also evaluating other kinds of modalities to address the wider market. And I'll turn it over to Ming, who will make comments on business development and investment in certain areas in the future.

Thank you, Paul. So I think we've talked about a little bit about the COVID-19. Most of our fourth quarter and the first quarter's revenue come through the drive-through test. But as schools reopen and people go back to work and travel, we will see revenues shift from the drive-through to the return-back-to-normal situation. That's related to the COVID-19 side. In terms of NGS, Brandon mentioned our pharmacogenomic testing. That's the new product we offer, which is also going to partner channels to offer the same disease, which we have seen customers use our products for patient treatment related to precision medicine. So Brandon, you probably can cover more regarding our product lines.

No, Ming. I think that covers it adequately, and we'll move on to the next question.

Our next question will come from the line of Erin Wright from Credit Suisse.

Great. So just to clarify, and sorry if you said this already, but in terms of the $70 million in NGS testing revenue, how much of that is related to COVID testing versus the underlying business?

A minor portion is related to COVID testing. Some of these contracts are new. We're very excited about it. We think those new contracts certainly have a lot of upside that we haven't incorporated into that $70 million.

Okay. That's helpful. And then what does your guidance assume now in terms of reimbursement for COVID PCR testing? I guess, how are you thinking about the sustainability of ASPs?

Yes. Erin, it's Brandon. Our expectations for ASP are to stay generally flat. I think we're in a sweet spot. We haven't heard of any expected changes in that. So our model would keep ASPs pretty flat.

And then the collection experience, Erin, has been very, very good. We've written off hardly any receivables that we have on the balance sheet. So the reimbursement experience has been fast because over half our revenues are through reimbursement right now. And the experience has been very, very good. So we feel very good with the rate as well as what we'll encounter in 2021.

Yes. It's evolving, but it looks like the NGS COVID-19 is going to be a bit more of a premium in terms of ASPs as well. So we'll see how that folds into the mix.

Okay. Great. And when we think about some of these partnerships with sports teams, cruise lines, are they largely exclusive relationships? Or have any sort of minimum volume commitments? And how are you thinking about the competitive landscape with antigen testing, for instance?

Some of them are, Erin. Some are exclusive. Some are semi-exclusive. Some are multiyear. Some have minimums, some don't. I mean, with the number of clients we have and the volume we're doing, you can imagine it's pretty dynamic in terms of what these terms look like. But there is a lot of competition out there, but I do think we stand out from the crowd quite a bit. I think we have the complete service offering. Our customers love us. I mean, we deliver. We meet our turnaround time. We make their life easier with our technology platforms. We have the capacity. So we're confident in the contracts we have. We'll continue to be their preferred partner. Antigen testing, it pops up. Some of our largest municipalities have tried some of those kits that were given to them by the federal government. They don't use them very much. It's just the accuracy is not there. It's faster, but I think people want to get the answer right. So the feedback we receive from our customers that have run those in parallel is that they continue to see RT-PCR as the gold standard, especially when Fulgent can turn it around in less than 24 hours. Depending upon when we get the sample, some of our RT-PCR results are around 8 hours. So I think that's a pretty powerful tool that we have to continue to offer.

Okay. That's helpful. And in light of new markets and what you're contemplating. I mean how should we be thinking about your revenue mix in 2022? Do you think a huge component of it will be non-NGS testing? Will it be meaningful in 2022? Or does it just become all NGS testing? Or is there another third leg that we don't even know about?

Yes. I'll set it up and then hand it over to Ming, who will discuss what the mix might look like after this year. In short, we believe we will have both NGS and non-NGS testing. If you look at our guidance, we mentioned the $70 million, what that includes, and why we're excited about it. Regarding COVID testing, there are different types, including drive-through sites and signed contracts mainly post-vaccine. These cover schools, travel and leisure, and corporate openings. We believe the demand for testing tied to their policies will extend beyond 2021. While we have signed agreements and feel confident about our guidance, the market may remain strong. Regardless of the landscape, we are confident about our position in the market, and we continue to gain market share in the COVID testing sector, even as vaccines are being distributed.

So adding Paul's comments. We do believe the COVID-19 test will remain part of our business for a while. A research team from the University of Hong Kong recently published a paper identifying that even though individuals are vaccinated, those individuals still have the capability to transmit the virus. This presents a new challenge to society, which is how we do prevention, even when people are vaccinated and may still transmit infections. With that being said, with the return of travel, airlines will require travelers to be tested for COVID-19, and that program will start. As people return to work and school, it is still imperative to make sure there are no infections. We believe that COVID-19 testing will still be there. It is very early for us to make predictions. We did not add all those things into our guidance. Same for the contract win from DHS. We did not add that one as part of our estimate. So as Paul mentioned, it is early in the year. We are armed with the technology and our capabilities, not only to address the COVID-19 market, but our capabilities far exceed what we could do for COVID-19. We will work aggressively on new R&D development, and we will invest heavily in cancer-related diagnostics. We do believe we have sustained power in this market to continue to gain market shares while protecting our shareholders' value.

Our last question comes from the line of Sung Ji Nam from BTIG.

I have a couple of quick questions. First, regarding COVID surveillance moving forward, could you clarify what the Department of Homeland Security contract involves? Does it only cover next-gen sequencing, or does it include both PCR and next-gen sequencing? Additionally, it's encouraging to see local and state governments showing interest in COVID surveillance. Are you noticing any significant efforts at the national level to develop infrastructure for not just COVID surveillance but also for future pandemic surveillance? Lastly, are you observing any international interest or demand in this area?

Yes. Sung Ji, it's Brandon. The Department of Homeland Security contract is strictly RT-PCR. So they're looking to screen their employees, enable early detection, get people out of the workforce, keeping the rest of the workforce healthy, minimizing the spread. I think it's exactly what RT-PCR is meant to do in an asymptomatic screening-type setting. We are seeing national efforts around NGS. The CDC is involved. HHS is involved. We are involved at that level. Genomic testing, again, is now in the spotlight. I think monitoring these variants, seeing how they're responding to therapies, and seeing how they're responding to the vaccine, are the vaccines working on these variants? We've seen some home-grown variants pop up in the United States. I also think we will learn a lot about therapeutics in the future. I see RT-PCR playing a role as a bit of a companion diagnostic as we differentiate between the flu and COVID-19. Those symptoms are very similar, but perhaps those treatments could be vastly different. So we do need a definitive diagnosis more so than just symptoms. I think we'll continue to see a push to do more genomic studies, and we applaud the money that's being set aside as part of the budget and the CDC and HHS' involvement.

Adding Brandon's comments, I think if you take a look at where we were last year, we weren't involved in respiratory infection disease detections. The agencies now will be the leaders in that area, not only for COVID-19, but all respiratory infectious disease tracking. We will be in that market.

Great. That's very helpful. And then just lastly, in terms of your international opportunities or investing in international opportunities going forward. Could you talk about what that could look like? Would that largely mirror what you're doing in the U.S.? Or are there distinct opportunities outside the U.S. that you're considering?

Ming, do you want to take that last one? Thank you.

Yes. I think, Sung Ji, we are looking at other expansions in Europe, and we are looking at expansions in Asia. So we'll update you in the coming quarters about our improvements.

And I'm not showing any further questions in the queue. I'd like to turn the call back over to the speakers for any closing remarks.

Thanks so much. Looking forward to speaking to investors in the week ahead. Have a great day.

Thank you.

Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.