Greetings. Welcome to Fulgent Genetics' first quarter 2026 conference call and webcast. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Lauren Sloan, Investor Relations. Thank you. You may begin.

Good morning and welcome to Fulgent's first quarter 2026 Financial Results Conference Call. On the call are Ming Shea, Chief Executive Officer, Paul Kim, Chief Financial Officer, and Brandon Perthuse, Chief Commercial Officer. The company's press release discussing the financial results is available on the Investor Relations section of the company's website, ir.fulgentgenetics.com. A replay of this call will be available shortly after the call concludes on the Investor Relations section of the company's website. Management's prepared remarks and answers to your question on today's call will contain forward-looking statements. These forward-looking statements represent management's estimates based on current views, expectations, 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 material different than what is described in or implied by these forward-looking statements. Please review the more detailed discussion related to these forward-looking statements, including the discussions of some of the risks factors that may cause results to differ from those described in the forward-looking statements contained in the company's filings and with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31, 2025, and subsequently filed reports, which are available on the company's Investor Relations website. Management's prepared remarks, including discussion of non-GAAP profit, loss, operating expense, margin, earnings and earnings per share, and adjusted EBITDA, 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 these measures 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 first quarter 2026 for more information, including the description of how the company calculates non-GAAP income and loss, non-GAAP earnings and loss per share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating profit and loss, and margin and adjusted EBITDA, and a reconciliation of these financial measures to income and loss, earnings and loss per share, and operating margin, the most directly comparable GAAP financial measures. The company does not provide reconciliations of forward-looking non-GAAP measures to the most directly comparable gap measures, because the information necessary to calculate such reconciliation, including equity-based compensation, tax effects, acquisition-related items, and potential impairment, any of which may be material, is unavailable on a forward-looking basis without unreasonable effort, and the probable significance of those items cannot be predicted. With that, I'd now like to turn the call over to Ming. Please go ahead.

Thank you, Lauren. I will start with some comments on our two business lines. Then Brandon will review our product and go-to-market updates for our laboratory service business. And Paul will conclude with financials and outlook before we take your questions. I am pleased with our first quarter results in our laboratory service business and the momentum in our therapeutic development business. In Q1, we also successfully completed acquisition of Barcode Diagnostics and StrataDX, which contributed our strong first quarter results as we had anticipated. In the laboratory service business, we are seeing that the investment in AI and digital pathology solutions are continuing to work at an accelerated pace, offering new and expanded the opportunities for growth and improved operating leverage in future. And as of today, with our in-house developed platform, EZO-PAC, we are approximately 100% visual across all our cases. We also accelerated progress on our therapeutic development pipeline in the fourth quarter and expect to continue progress this year. Starting with our first clinical candidate, FID-07, advanced through phase two, with 46 patients enrolled. Last week, we announced that our abstract on the phase two trial of FID-07 was selected by ASCO as a rapid oral presentation with head and neck cancer track session. The phase two trial enrollment of FID-07 closed on time on December 29th, 2025. We are encouraged by the early efficacy and safety data. FID-07 combined with cetacumab demonstrates meaningful anti-cancer activities and the favorable tolerability profile that at both levels for the second line treatment of recurrent metastatic head and neck sycoma cell carcinoma. We anticipate having end of phase two meeting with FDA for the second half of this year. and hope to enter into a phase three registration trial for the treatment of recurrent or metastatic head and neck sucoma cell calcidumab patients in the first half of 2027. We are encouraged by our clinical trial progress achieved so far and believe entering into the phase three registration trial will further increase the probability of the success of the commercialization of FID-07 for the treatment of recurrence or metastatic head and neck sucoma cell as a normal patients, who currently have very few effective treatment options. Our second clinical candidate, FID-022, is progressing through phase one dose escalation with the third dose level successfully completed. And the fourth dose escalation is ongoing. We expect to finish the study and determine the maximum tolerance dose level later this year. FID-022, it is nano-encapsulate Nexin 38 for the treatment of solid tumors, including percystrelate, colon, pancreatic, ovarian, and the bile duct cancers. Overall, I'm pleased with the progress we have made in the first quarter. Our pharma R&D efforts are progressing faster, better, and more cost-effectively than planned it. We look forward to present our detailed findings from our phase two study on FID 07 at this year's ASCO meeting. We believe that we executed our strategic initiative and are in a strong financial position to execute our strategies. We are pleased to reiterate our popular revenue guidance for 2026. We are adjusting our non-GAAP EPS and cash balance guidance to reflect the cash retained to shareholders, pursue our stock repurchase program and the resulting reduction in the number of our previously forecast outstanding shares. I would like to thank our employees, partners and stockholders for your hard work, loyalty and a strong quarter. we look forward to further progress in 2026. i will now turn the call over to brandon perthew our chief commercial officer to talk more about our laboratory service business brandon thanks ming we ended the first quarter at 71.1 million dollars which was a decrease of 3.2 percent year-over-year and 14.6 percent quarter-over-quarter, driven by the reduction in

sales to our large customer who has begun transitioning testing in-house, which we discussed last quarter. Breaking this down into our three business areas, precision diagnostics revenue for the first quarter was $40.2 million, a decrease of 8.8 percent year-over-year, and down 16.5 percent sequentially. Anatomic pathology revenue for the first quarter was $25.1 million, a decrease of 0.9 percent year-over-year, and down 7.2 percent sequentially. For biopharma services, revenue was $5.8 million, an increase of 43.2 percent year-over-year, but down 28.0 percent sequentially. We were excited to announce during the first quarter that we completed the acquisition of BACO Diagnostics and Strata DX. This acquisition adds to our market presence in anatomic pathology and more than doubles the size of our pathology sales team. The focus now shifts the integration, which is off to a very good start. One of the top priorities is to cross-train the BACO and Strata sales team to sell fulgent pathology services and vice versa. We believe a well-trained cross-functional sales team will pay dividends as we look to expand our market size in anatomic pathology. We have made a few announcements around our new whole genome test. In this quarter, we continue to advance the product. We have now integrated the Illumina's TruePath genome, targeting the variant classes that have historically required separate testing workflows, such as complex structural variants, repeat expansions in difficult-to-map regions, and variant phasing without parental samples. Unlike traditional long read platforms, TruePath Genome achieves this through proximity math read technology, delivering long-range genomic insight on the same high-throughput infrastructure already powering our genome tests without the workflow or scalability tradeoffs. Designed to deliver comprehensive results in a single report covering SNVs, CNVs, genome-wide deletions and duplications, mitochondrial variants, and repeat expansions across 20,000 genes, our genome test is built on the principle that a rare disease patient shouldn't have to navigate a gauntlet of sequential tests to get an answer. On our last call, we detailed our AI strategy, which involved rolling out several new modules this year. In the first quarter, we went live with a new dermatopathology ai tool digital dermatopathology slides often arrive in inconsistent orientation this slows the diagnostic process and may introduce interpretation errors the objective was to implement an auto rotation solution to automatically align slides to a standard orientation doing so will reduce time spent adjusting images ensure consistent presentation of structures like epidermis and dermis, improved diagnostic accuracy, enhanced workflow efficiency, reduced turnaround time, and potentially lower cost. Proper orientation is crucial because pathologists rely on consistent visual cues. When slides are automatically aligned, key structures appear in a predictable orientation. This reduces the cognitive load on the pathologist, allowing them to interpret images faster with fewer errors. It also helps standardize the diagnostic process, making it easier to compare cases and train new staff. Overall, this leads to improved accuracy in diagnosis and a smoother workflow as pathologists spend less time manipulating slides and more time on actual diagnoses. We are excited to announce that during the quarter, we received MoldeX approval and pricing for our PGX test. This is a perfect timing with the recent updates and positioning from the American Society of Clinical Oncology for pharmacogenomic testing, particularly for the gene DPYD. While ASCO historically stopped short of endorsing universal testing, newer clinical notices and meeting data signal a clear shift toward proactive integration of DPYD testing into routine oncology care. In 2026, ASCO issued clinical notice urging clinicians to prioritize DPYD genotyping as part of the initial diagnostic workup for patients being considered for certain chemotherapy drugs such as 5-FU. This represents a notable evolution from earlier physicians where ASCO and other US bodies did not recommend routine pretreatment testing due to concerns about evidence insufficiency and potential impact on efficacy. The clinical driver behind these recommendations is well established. Patients with deleterious DPYD variants are at a significant increased risk of severe or fatal toxicity from fluoro pyrimidines. Studies show that genotype-guided dosing can substantially reduce grade 3 and above toxicities without compromising efficacy. In parallel, health economic analysis presented at ASCO highlights that pre-treatment DPYD testing reduces downstream costs by avoiding hospitalizations, intensive supportive care, and treatment interruptions. As ASCO, NCCN, and FDA guidance converge, ordering behavior is potentially expected to shift from discretionary to routine. Given that fluoropyrimidines are used in a large portion of solid tumors, this translates into a substantial addressable market. We believe this represents a near-term opportunity to scale pharmacogenomics and a longer-term positioning play in precision oncology, where proactive, safety-driven testing is becoming integral to therapeutic decision-making rather than an optional add-on diagnostic test. We remain focused on executing our strategy with discipline, investing in opportunities that will drive sustainable growth, and delivering long-term value for our shareholders. While the environment continues to evolve, we are confident in the strength of our team, the resilience of our business, and our ability to navigate ahead. We appreciate your time today and look forward to updating you on our progress next quarter. I'll now turn the call over to our Chief Financial Officer, Paul Kim. Thank you, Brandon.

Revenue in the first quarter of 2026 totaled $71.1 million, including $2.6 million from BACO Diagnostics and Strata DX, compared to $83.3 million in the fourth quarter of 2025. The decrease in our Q1 revenue was primarily the result of lowered volume from our largest customer, as indicated on our last call, and timing impact as we work through claims processing backlog. Gross margin, gap gross margin was 30.2% and non-gap gross margin for the first quarter was 32.3%. The declining gross margin reflects fixed costs over lower revenue base, attributed to the decline in revenue for the reasons I mentioned. We expect gross margins to normalize as the backlog clears in the coming quarters and as revenue increases. Now turning to operating expenses. Total gap operating expenses were $56.1 million in the first quarter, which decreased when compared to $68.8 million in the prior quarter. The decrease in operating expenses was due to a one-time professional liability expense in the prior quarter. Non-gap operating expenses remained relatively flat in Q1, totaling $42.6 million compared to $43.1 million in the previous quarter. Non-GAAP operating margin decreased sequentially to a minus 27.7% due to decreased revenue. Our GAAP loss in the current quarter was $24.8 million, an increase from the prior quarter's GAAP loss of $23.4 million, and a GAAP loss of $0.08 per share based on $30.9 million weighted average diluted shares outstanding. Adjusted EBITDA for the first quarter was a loss of approximately $15.2 million compared to a loss of $4.5 million in the prior quarter. On a non-gap basis and excluding equity-based compensation expense, intangible asset amortization and acquisition-related costs and severance, loss for the quarter was approximately $11 million or $0.36 per share based on $30.9 million weighted average diluted shares outstanding. In the first quarter, we repurchased 2.6 million shares under our stock repurchase program. We continue to repurchase shares into the current quarter, purchasing an additional half a million shares as of today. Since the inception of the stock repurchase program in March 2022, a total of approximately 6.6 million in shares of common stock has been repurchased under the program, with approximately $91 million currently remaining available for future repurchases of our common stock. According to the balance sheet, we ended the first quarter with approximately $604.7 million in cash, cash equivalents, restricted cash, and marketable securities. The $100.8 million decrease in cash from the previous quarter was primarily driven by $56.6 million paid for the BACO Diagnostics Strata DX acquisition and $40.1 million spent on our stock repurchase program. As of Porter M, we have not yet received $106 million federal income tax refund, which has been delayed due to the government shutdown in the prior year and now due to constrained resources at the IRS. Before providing our guidance for 2026, I would like to provide an update on certain driver shaping our expectations for the year and the anticipated impact from our recent acquisition of BACO Diagnostics and StrategyX. As anticipated and mentioned on our previous call in February, we saw a decrease in revenue from our largest customer, which is moving its testing capabilities in-house. Revenue from this customer this quarter decreased $6 million from the prior quarter. We expect revenue from this customer in the second quarter to continue to be impacted by a significant decrease in volume and expect revenue to potentially stabilize in the second half of the year. We continue to believe this decrease in revenue from our largest customer will be partially or fully offset by the estimated contribution of approximately $53 million from Baco and Strata DX, contributing to overall revenue growth in the second half of the year. Baco's revenue will primarily be categorized as anatomic pathology. We continue to forecast that for the full year 2026, no single customer will account for more than 10% of our total revenue, reflecting an improvement in our customer concentration profile. We reiterate our guidance of total revenue of $350 million for 2026, representing an 8.5% year-over-year growth. We continue to estimate precision diagnostics revenues to be approximately $168 million, anatomic pathology to be approximately $162 million, and biopharma services to be approximately $20 million. We expect non-GAAP gross margins for the full year to be approximately 39% as the product mix shifts with the change in our customer composition. We anticipate the gross margins to improve in the second quarter due to the higher forecasted revenue and then to further improve to approximately 42% by the end of the year. We expect non-GAAP operating margins to be a minus 20% for the year. We continue to prioritize investment across two key areas, R&D, where we're advancing both our laboratory testing capabilities and clinical study pipeline and sales and marketing, where we have grown the team. Our sales and marketing spend this year reflects a full year of our expansion that began last year, combined with the recent BACO and Strata DX acquisition, which more than doubled our sales team. Together, we believe this sets us up with a substantially larger and more capable commercial organization to drive growth going forward. The anticipated spend for the therapeutic development business is approximately $26 million in 2026 as we continue advancing clinical trials for FID-022 and FID-007. We remain committed to the strategic investment in our business, including operational improvements and targeted upgrades to our laboratory infrastructure. These investments are designed to strengthen our competitive position and enhance throughput capacity over time. We believe our foundational technology platform is highly scalable, capable of driving meaningful operating leverage and margin expansion as volumes grow. We believe our business is still on track with our original 2026 revenue guidance. The updates to our EPS and cash guidance are solely attributable to decreased shares resulting from the stock repurchase program and the cash used for these repurchases. Our forecasted average fully diluted share count for 2026 has decreased from 32 million shares to approximately 29 million shares due to the shares purchased so far this year under our stock repurchase program. The decreased share count has an effect of 14 cents to EPS. Therefore, using the updated average share count of 29 million, we expect their full year 2026 non-GAAP EPS guidance to decrease by $0.14 for a loss of $1.59 per share, excluding stock-based compensation, impairment loss, acquisition-related costs, further share repurchases, and amortization of intangible assets, as well as any one-time charges. Finally, our cash position continues to be strong. Assuming for fiscal year 2026, capital purchases of $12 million, spend on our therapeutic development business of $26 million, $14.5 million for the previously disclosed professional liability expense, and excluding any future stock repurchases or other expenditures outside of the ordinary course, which could include other M&A, we anticipate ending the year with approximately $636 million. of cash, cash equivalents, restricted cash, and investments in marketable securities. The $49 million decrease from the original cash guidance of $685 million is directly attributed to the $49 million of stock repurchases made year-to-date. This number further assumes receipt of approximately $106 million in tax refunds, which has been delayed as a result of the Q4 2025 government shutdown and constrained resources at the IRS. Overall, we're proud of the growth we have achieved over the past couple of years, and we're excited by the additional momentum that the acquisition of BACO Diagnostics and StrategyX brings as we look ahead. Together with our strong technology platform, we believe we're well positioned for longer term growth as our strategic investments, innovations, and expanded offerings deliver Thank you for joining our call today. Operator, you may now open it up for questions.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tool will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Lu Li with UBS. Please proceed.

Thank you. Good morning. Thank you for taking my questions.

I think the first one probably sticking to the position diagnostic.

If you ask getting the largest customer impact, what is the underlying business growth for the remainder portfolio? I was doing the quick map. It seems like it's still like a team's growth. I just wanted to make sure if that's correct.

Yeah, so the impact on the largest customer was significant. The amount was substantial for 2025. We are anticipating and have experienced lower volumes from that customer in Q1, and we anticipate, you know, those levels to be further down, although not at the accelerated pace as we experienced in Q1, if you strip that away and take a look at the underlying precision diagnostics business, your math, we're checking it right now, I think is consistent, meaning that we do have growth in the precision diagnostics area for this year.

Got it. Thank you. And then maybe switching to the goals margin in Q1, It seems like a little bit lower than, I think, your initial target of 37%. Any reasons why it's a little bit lower? Is it coming out from acquisition or anything else? And then, yeah, I think that would be the question. And then how comfortable you are to kind of like get back to kind of like 40% in the second half?

Sure. Thank you for that question. The lower gross margins are coming from the lower-than-anticipated revenues. Revenues for the first quarter could have been higher in the millions of dollars than what we've posted, and that's largely happening, as we mentioned in prior, the lower volumes from our largest customer, coupled with timing impact from claims delayed in releasing from processing backlog. We anticipate that to normalize here in the coming quarters, which should provide an uplift to the revenue in addition to normalizing our gross margins. The lower revenues also have some weather and seasonality impact, which Brandon will color in.

Yeah, certainly, Paul. I appreciate that. Q1 historically has been a little bit softer for us, and it is partially related to seasonality. Like this quarter, we did have, you know, our laboratories shut down multiple times due to weather. And in addition, you know, January often sees deductibles being reset, so there's some impact there. But I think, you know, Paul covered probably the larger impact areas.

The other final thing, the other final comment that I will make on the gross margins, because that was the original part of your question, is if you take a look at the guidance for 2026, we're reiterating and keeping the $350 million guidance, as well as the other financial metric, including gross margins for the entirety of the year. The difference in the update that we provided on the loss is solely due to the stock buyback, the aggressive stock buyback that we have conducted since the beginning of this year. In the first quarter, we repurchased 2.6 million shares, and to date, so far, we purchased an additional half a million shares. In total, that's 3.1 million shares, or approximately 10% of our total outstanding shares, or 13, 14% of our float that's out there. So we believe that the amount and the magnitude of the buyback indicates the conviction that we have not only within our capital base, but our overall strategy and value for the Yeah.

And Lou, you asked, was there any impact from the acquisition? I just want to cover that. No, there was no impact from the acquisition.

Thank you. That's very helpful. And then finally, there have been lots of, like, attention on the CMS coercion initiative. I'm wondering if you guys have any in-house view in terms of, like, the potential impact to your business.

Not at this time, Lou. We don't have any comment on that. Thank you.

Our next question is from David Westenberg with Paper Sandler. Please proceed.

Thank you for the question. So first, Paul, a couple of things. What was the – the contribution from Stratos and Bacos would be really small, right, because it closed on the 17th. But I was just wondering what that was for the quarter. And then you also mentioned kind of some of the collections impacting Q1. So what should Q2 look like? So, you know, like I know you're, I think you're saying someone that will go into Q2. I don't want to get too aggressive with the number there, but I also want to include that. So how should we think about Q2 given that impact?

Sure. So two things. One, the contribution from BACO in the first quarter, you are correct, it was small. It was $2.6 million. And your question about what should Q2 look like, Q2 should be a higher quarter. It will be a higher quarter than the first quarter because of the overall positioning of our base business, but we also get the full quarter of BACO and Strata DX. So when we take a look at the forecast for Q2, Q3, and Q4, the targets are in excess of $90 million per quarter in terms of revenues.

Got it. Thank you very much. Yeah, totally mispronounced that. Anyway, secondly, Brandon, I want to kind of catch on to the key product side events, purchase and diagnostics. In terms of the growth in that area, are there any key products, pediatric launches, or, you know, is it Beacon that helps you grow there? Is it some of the stuff you're going to be doing in rare disease? I mean, what are you excited about there in terms of regrowing, you know, to fill the loop of the overall large customer?

Yeah, thanks for the question. You know, I think we benefit tremendously from our diverse, you know, portfolio of tests. At this point, we have, you know, 22,000 genetic tests that, you know, span just about every, you know, area of healthcare. So, you know, it's difficult to pick, you know, a few different areas out of that where we're, you know, particularly excited. But, you know, I think it's safe to say within sort of rare disease, the momentum we have with exomes and genomes is pretty substantial. We do believe we have a differentiated product. With our whole exome now including long reads, short reads, as well as full RNA-seq, transcriptomic analysis, we are going to make more diagnoses than some of our peers and what we've been able to do previously. Analyzing all three of those in parallel is really the best approach to maximize diagnostic yield. So we're really excited with the product development around our whole genome and whole exome products, and we do see a lot of momentum in that space. In addition, we've launched a rapid and ultra-rapid genome. Some of those turnaround times are as quick as 48 hours, which is critical for some of these NICU patients, so we certainly see momentum there. Beacon continues to do very well for us. We now have the largest panel in the industry, up to 1,000 genes, which is fully customizable for our clients. But in addition, you know, our oncology business is doing well. The heme business is doing well. And this momentum, very recent momentum in pharmacogenetic testing related to this DPYD gene, it's very tangible. It's very real. We're seeing a lot of requests for this. We do a great job with that test in terms of our turnaround time and our quality. So, again, I think we have a lot of different areas for growth and really do benefit from having tremendous capabilities across precision diagnostics.

Got it. And then just I want to talk about, sorry, the pharma backlog. Now, this was strong in the quarter and, you know, it is the growth area. So should we expect like visibility for the full year, just given the fact that this is really probably running off backlog and is the book to bill growing in that in that category, Paul?

Well, we continue to see, you know, lumpiness in our biopharma business. We've mentioned this essentially on every call that, you know, the nature of this business are large transactions with long sales cycles, for better or worse. But the business does have momentum overall, but we're going to continue to see sort of these peaks and valleys until we hit this larger steady state for that business segment. But, you know, like the back half of the year, we do have continued growth in biopharma services. But, again, there will be some up and downs in that area.

Got it. And then lastly, Ming, I wanted to talk about the FID007. You're in Phase 2. You do have the presentation at ASCO, so it does seem to be doing well. Can you talk about what we're needing to look at at the ASCO presentation or other words to see if you'd advance it to Q3? And at what stage in the pipeline do you consider commercialization, I mean, or partnerships, licensing, that other kind of thing, in order to monetize that asset? Thank you very much.

Yeah, thank you, David, for the questions. We are excited to be selected by the ASCO for the presentation. Out of 8,000 applications, we belong to a very small group of companies or the clinical trials to be presented in the area. You may remember we also published our data last year at ESMO for the clinical results. During that time, our results are significantly better than the peers in the industry. So, we are excited about the opportunity, and we're looking very much forward for the ASCO presentation. So, that's from the clinical trial side. We have the options for the collaborations with potential partners, but also we want to present the opportunity when we do the collaboration at strength, not at weakness. So, we do have the CAST position to go through the clinical trials by ourselves, but we're also looking for the meaningful partners, not only contribute in terms of the resources for the trials, but also long-term relationships.

Thank you.

There are no further questions. This will conclude today's conference. Friends, you may disconnect your lines at this time, and thank you for your participation.