Fulgent Genetics(FLGT) - 2024 Q4 - Annual Report

Financial Performance - Revenue for 2024 was $283.5 million, a decrease of 2.4% from$ 289.2 million in 2023, while net loss improved from ( $167.8) million in 2023 to ($ 42.7) million in 2024[483]. - Revenue decreased by $5.7 million, or 2%, from$ 289.2 million in 2023 to $283.5 million in 2024, primarily due to a$ 24.8 million decline in COVID-19 testing[517]. - Gross profit increased by $2.8 million, or 3%, from$ 104.5 million in 2023 to $107.2 million in 2024, with gross margin improving from 36.1% to 37.8%[524]. - Precision diagnostics revenue increased by$ 35.8 million, or 27%, while COVID-19 testing revenue decreased by $24.8 million, or 92%[517][518]. - Other income increased to$ 31.3 million in 2024 from $21.6 million in 2023, primarily due to higher interest rates on marketable securities[534]. - The effective income tax rate was 16.11% in 2024 compared to (0.69)% in 2023, influenced by a valuation allowance related to net operating losses[535]. Expenses and Costs - Research and development expenses rose by$ 7.4 million, or 18%, from $41.4 million in 2023 to$ 48.8 million in 2024, driven by a 74% increase in therapeutic development expenses[525][528]. - Selling and marketing expenses decreased by $5.2 million, or 13%, from$ 41.5 million in 2023 to $36.2 million in 2024[530]. - General and administrative expenses decreased by$ 0.9 million, or 1%, from $89.0 million in 2023 to$ 88.1 million in 2024[531]. - Cost of revenue decreased by $8.5 million, or 5%, from$ 184.8 million in 2023 to $176.3 million in 2024, with cost of revenue as a percentage of revenue improving from 63.9% to 62.2%[523][522]. Research and Development - In 2024, the company began a Phase 2 trial for FID-007, enrolling 17 patients across seven sites, and filed an IND for FID-022, which was cleared by the FDA in January 2025[485]. - The company expects research and development expenses to increase as it invests in drug candidates currently under development and in clinical trials, particularly for FID-007 and FID-022[507]. - The company expects research and development expenses to continue increasing as clinical trials progress for FID-007 and FID-022[529]. Customer and Market Strategy - The company aims to diversify its customer base by building relationships with hospitals and payors, including Medicare and state Medicaid programs, to enhance coverage and reimbursement for its tests[491]. - The company has contracted with national health insurance companies and enrolled as a supplier with Medicare, aiming for adequate reimbursement levels to achieve profitability[497]. - A single customer accounted for$ 62.6 million, or 22%, of total revenue in 2024, highlighting revenue concentration risk[520]. Cash Flow and Investments - Cash, cash equivalents, and marketable securities totaled $828.6 million as of December 31, 2024, down from$ 847.7 million in 2023[539]. - Net cash provided by operating activities decreased to $21.1 million in 2024 from$ 27.0 million in 2023, attributed to timing of cash receipts and payments[544]. - Cash used in investing activities in 2024 was $58.4 million, primarily due to$ 472.4 million in marketable securities purchases[546]. - Cash used in financing activities was $4.8 million in 2024, significantly lower than$ 47.8 million in 2023, which included $25.1 million for stock repurchases[548]. - The company repurchased 10,000 shares at a cost of$ 0.2 million in 2024, compared to 1.0 million shares for $25.1 million in 2023[552]. Market Risks - The company is exposed to market risks from fluctuations in interest rates and foreign currency translation, which may adversely affect its results of operations and financial condition[570]. - A hypothetical 100 basis point increase in interest rates would result in an incremental decline of$ 14.5 million and $10.1 million in the fair market value of the investment portfolio as of December 31, 2024 and 2023, respectively[572]. - An adverse 10% foreign currency exchange rate change would have resulted in a decrease in assets of approximately$ 1.1 million as of December 31, 2024, and $1.3 million as of December 31, 2023[574]. Goodwill and Impairment - Goodwill impairment loss for 2023 was$ 120.2 million for the laboratory services unit, with no impairment loss reported for 2024[533]. - The company monitors the therapeutic development reporting unit for potential impairment or recoverability of goodwill and intangible assets[565]. - Major risks and uncertainties are associated with the timely and successful completion of IPR&D projects, including regulatory approvals and clinical trial efficacy[565]. - The eventual realized value of acquired IPR&D projects may vary from their estimated fair values due to uncertainties in development and commercialization[565]. Off-Balance Sheet Arrangements - The company does not currently have any off-balance sheet arrangements that could materially affect its financial condition[569]. - The company’s investment policy aims to minimize the potential risk of principal loss through investments in fixed-rate interest-earning securities[571]. - The company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars, primarily exposing it to risks in the Chinese yuan[573].