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    FLGT
    Earnings call· Jun 2026(Q2 FY26)

    Fulgent Genetics Q2 FY26 earnings call FLGT

    Jul 30, 2026 Source

    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

    13
    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

    3
    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—

    Operational metrics

    16
    GAAP Gross Margin
    30.1%
    Q2 FY26

    The decline in gross margin reflects fixed costs spread over a lower revenue base, driven by the lower collection rate.

    Non-GAAP Gross Margin
    31.3%
    Q2 FY26

    The decline in gross margin reflects fixed costs spread over a lower revenue base, driven by the lower collection rate.

    GAAP Operating Expenses
    $61.8 millionincreased when compared to $56.1 million in the prior quarter
    Q2 FY26

    The increase in operating expenses was due to Bako Diagnostics and StrataDx being integrated for the full quarter. The GAAP operating expenses also include a one-time impairment charge on customer relationship and tangible asset of $2.2 million related to loss of a customer in the therapeutic development segment.

    Non-GAAP Operating Expenses
    $49.2 millioncompared to $42.6 million in the previous quarter
    Q2 FY26
    GAAP Operating Margin
    minus 42.3%improved to a minus 42.3% in Q2 compared to a minus 48.7% in Q1
    Q2 FY26
    Non-GAAP Operating Margin
    minus 26.2%improved sequentially to a minus 26.2% in Q2 compared to a minus 27.7% in Q1
    Q2 FY26
    Shares Repurchased
    over 1.5 million
    Q2 FY26

    repurchased over 1.5 million shares of our stock repurchase program.

    Total Shares Repurchased
    over 7.5 million
    since March 2022

    Since the inception of the stock repurchase program in March 2022, a total of over 7.5 million shares of our common stock has been repurchased under the program

    Remaining Share Repurchase Authorization
    $75.8 million
    as of Q2 FY26

    with approximately 75.8 million currently remaining available for future repurchases of our common stock.

    Cash, Cash Equivalents, Restricted Cash and Marketable Securities
    $551.5 million
    as of Q2 FY26

    The 53% of the total decrease in cash from the previous quarter is primarily driven by $23.8 million spent on our stock repurchase program for one time service. $13.5 million payment towards a legal settlement, which was originally discussed and accrued in Q4 of 2025, and a $14.1 million cash used in operations in CapEx.

    Largest Customer Revenue Decrease
    $4.6 millionfrom the prior quarter
    Q2 FY26

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

    Estimated Revenue Contribution from Acquisitions
    $53 million
    H2 FY26

    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.

    Anatomic Pathology Sales Team Size
    approximately 40nearly double our size pre-acquisition
    Q2 FY26

    The new combined anatomic pathology team is at approximately 40, which is nearly double our size pre-acquisition.

    Whole Genome Sequencing Mean Coverage
    60 to 70Xincreased from 40X
    Q2 FY26

    Our standard whole genome sequencing service is now on the Illumina TruePath system... our mean sequencing coverage increased from 40X to 60 to 70X.

    Whole Genome Sequencing Repeat Expansion Coverage
    64Grew from 21
    Q2 FY26

    we are now able to expand the number of repeat expansions we cover. Coverage grew from 21 to 64

    Federal Income Tax Refund
    $106.1 millionnot yet received
    as of Q2 FY26

    As of quarter end, we have not yet received the $106.1 million federal income tax refund, which has been delayed due to a constrained resources at the IRS.

    Industry KPIs

    1
    MetricValueDetails
    Adjusted EPS EBITDA leverage guidanceloss of $2.22 to $2.25 (EPS), loss of approximately $17.1 million (EBITDA)USD

    Product announcements

    3
    ProductTypeDetails
    Novel stain-aware algorithmlaunch
    Standard whole genome sequencing service on Illumina TruePath systemupdate
    RNA integrated sequencing evaluation, or RISEupdate

    Deals & partnerships

    3
    Bako DiagnosticsIntegration 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.

    StrataDXIntegration 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.

    EpicIntegration 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

    4
    Revenue Cycle Management Transition Issuesongoing 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 Declineanticipated 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 ChargeQ2 FY26

    $2.2 million

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

    Delayed Federal Income Tax RefundAs of quarter end

    $106.1 million

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

    What to watch in Q3 FY26

    5

    Revenue Cycle Management Collection Rates

    coming quarters
    Currentlower than historical rates
    Targetreturn 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⏳.

    Q&A highlights

    3

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.