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Fulgent Genetics (FLGT) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Jul 30, 2026

Source: earnings call transcript

Executive summary

Fulgent Genetics Q2 FY26 — Revenue Cycle Management Challenges Impact Guidance, Clinical Pipeline Advances

Fulgent Genetics reported Q2 FY26 results marked by significant challenges in its revenue cycle management system, leading to lower collection rates and a downward revision of full-year revenue and EPS guidance. Despite these operational headwinds, the company's therapeutic development pipeline showed promising progress, with FID-07 advancing towards Phase 3 and FID-022 completing its fourth dose level in Phase 1. Acquisitions of Bako and StrataDX contributed to strong growth in Anatomic Pathology, though their integration coincided with the RCM issues.

Highlights

5

  • FID-07 Phase 2 data showed encouraging activity in recurrent/metastatic head and neck squamous cell carcinoma, with an FDA end-of-phase 2 meeting scheduled for later this summer.

  • FID-022 Phase 1 dose escalation successfully completed its fourth dose level, with maximum tolerated dose expected later this year.

  • Anatomic Pathology revenue increased 33% YoY and 50% sequentially to $37.5 million, driven by Bako and StrataDX acquisitions.

  • The company repurchased over 1.5 million shares in Q2, with $75.8 million remaining in the stock repurchase program.

  • Cash, cash equivalents, restricted cash, and marketable securities totaled $551.5 million at quarter-end.

Concerns

5

  • Full-year 2026 revenue guidance revised down to $330-$340 million from $350 million, primarily due to revenue cycle management (RCM) transition issues.

  • Q2 GAAP gross margin declined to 30.1% and non-GAAP gross margin to 31.3%, reflecting fixed costs over a lower revenue base due to lower collection rates.

  • Q2 GAAP loss increased to $29.5 million ($1.05 per share) from $24.8 million in Q1.

  • Adjusted EBITDA for Q2 was a loss of $17.1 million, compared to a loss of $15.2 million in Q1.

  • Full-year non-GAAP EPS guidance revised to a loss of $2.22 to $2.25, down from previous expectations.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Revenue
$330 million to $340 million
high materiality
High
Full-year 2026 Precision Diagnostics Revenue
approximately $161 million to $166 million
medium materiality
High
Full-year 2026 Anatomic Pathology Revenue
approximately $146 million to $150 million
medium materiality
High
Full-year 2026 Biopharma Services Revenue
approximately $23 million to $24 million
medium materiality
High
Full-year 2026 Non-GAAP Gross Margins
mid 30% range
high materiality
High
Full-year 2026 Non-GAAP Operating Margins
mid-20% for the year
high materiality
High
Full-year 2026 Therapeutic Development Business Spend
approximately $26 million
medium materiality
High
Full-year 2026 Non-GAAP EPS
loss of $2.22 to $2.25
high materiality
High
Full-year 2026 Capital Purchases
$12 million
low materiality
High
End of Year 2026 Cash, Cash Equivalents, Restricted Cash and Marketable Securities
approximately $610 million
high materiality
High
FID-07 Phase 3 Registration Trial Entry
first half of 2027
high materiality
High
FID-022 Maximum Tolerated Dose Determination
later this year
medium materiality
High
Epic ARA Platform Go-Live
Q3 2026
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Precision Diagnostics
Affected by billing delays and lower collection rates.
$41.5 milliondecrease of 13%increased 3%—
Anatomic Pathology
Includes contributions from Bako and StrataDX acquisitions. Affected by billing delays and lower collection rates.
$37.5 millionincrease of 33%50% sequentially—
Biopharma Services
Affected by billing delays and lower collection rates.
$6.4 millionincrease of 3%11% sequentially—

Product announcements

ProductTypeDetails
Novel stain-aware algorithmlaunch
Standard whole genome sequencing service on Illumina TruePath systemupdate
RNA integrated sequencing evaluation, or RISEupdate

Deals & partnerships

Bako Diagnostics Integration of Bako Diagnostics

The second quarter was our first full quarter of having Baco and StrataDX integrated. From the operations perspective, things have gone incredibly well.

StrataDX Integration of StrataDX

The second quarter was our first full quarter of having Baco and StrataDX integrated. From the operations perspective, things have gone incredibly well.

Epic Integration into Epic's specialty diagnostics platform for genetic testing services within health systems EMRs.

Previously, we mentioned we entered into an agreement with Epic to be added to their ARA platform. ARA is Epic's specialty diagnostics platform offering genetic testing services within health systems electronic medical records to send orders and receive results.

Risks & headwinds

Revenue Cycle Management Transition Issues ongoing today

lower than originally anticipated rate of collections

Mitigation:Addressing revenue cycle management is our top operational priority, and we are making progress. ... We have made progress implementing a number of the required customizations and remain completing the remaining work as quickly as possible.

Largest Customer Volume Decline anticipated a continued decline in revenue from this customer through the second half of the year.

revenue from this customer, this, quarter decreased $4.6 million from the prior quarter.

Mitigation:We 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.

Impairment Charge Q2 FY26

$2.2 million

Mitigation:related to loss of a customer in the therapeutic development segment.

Delayed Federal Income Tax Refund As of quarter end

$106.1 million

Mitigation:delayed due to a constrained resources at the IRS.

What to watch in Q3 FY26

Revenue Cycle Management Collection Rates

coming quarters
Current lower than historical rates
Target return to historical norms

Why it matters

Improvement in collection rates is critical for revenue recognition, gross margin normalization, and achieving full-year financial guidance.

I think we do expect to get back to our historical collection rates in the coming quarters.

Find out whether FLGT delivers this. Inve re-checks your case every morning.

Q&A highlights

What specific issues are causing delays in the final phase of the RCM transition, and when is resolution expected?

The issues stem from customizations in the previous billing software that did not carry over to the new platform. These features are being implemented, and the company expects to return to historical collection rates in the coming quarters.

“we really began to realize there was, you know, just certain key features or, you know, customization that was in the previous software that did not carry over. over to the new platform. I think we've identified those features. We're working on implementing those features. It will take some time to get some feedback from the payers, but in terms of timing, I think we do expect to get back to our historical collection rates in the coming quarters.”

asked by Karan Patel · answered by Brandon Perthews

2 min read 6 chapters

Detailed narrative

Revenue Cycle Management Challenges

The company is experiencing significant delays in billing and claims processing due to the transition of its revenue cycle management system. This has impacted collection rates and revenue recognition, leading to a downward revision of full-year guidance. Management has identified the need for customizations in the new system and is actively working to implement them, expecting collection rates to improve in coming quarters.

Therapeutic Development Progress

Fulgent's clinical pipeline is advancing, with FID-07 showing encouraging Phase 2 data in head and neck squamous cell carcinoma. An end-of-phase 2 meeting with the FDA is scheduled for later this summer, with plans to enter a Phase 3 registration trial in the first half of 2027. The second candidate, FID-022, is progressing through Phase 1 dose escalation, with the maximum tolerated dose expected later this year.

Acquisition Integration and Sales Expansion

The acquisitions of Bako and StrataDX are fully integrated, contributing $16.9 million to Q2 revenue. The combined anatomic pathology sales team has nearly doubled to approximately 40 members and is cross-trained to sell legacy services, showing encouraging initial progress in building a robust pipeline.

AI and Digital Pathology Innovation

The company continues to expand its AI portfolio, introducing a novel stain-aware algorithm for automated mast cell quantification in gastrointestinal biopsies. This technology aims to improve workflow efficiency, diagnostic consistency, and establish a foundation for advanced spatial biomarker analysis.

Advanced Genetic Testing Capabilities

Fulgent has enhanced its whole genome sequencing service using the Illumina TruePath system, increasing mean sequencing coverage from 40X to 60-70X and expanding repeat expansion coverage from 21 to 64. This service can be combined with RISE for improved diagnostic yield.

Largest Customer Transition

Revenue from the largest customer decreased by $4.6 million sequentially as they move testing capabilities in-house. This transition is nearly complete, and the company expects minimal revenue from this customer in the second half of the year, with Bako and StrataDX contributions expected to offset this decline.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.