Fulgent Genetics(FLGT) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and detailed notes, offering insights into the company's financial position, performance, and cash flows Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, financial instrument fair values, segment information, and contingencies Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific reporting dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total assets | $1,199,838 | $1,219,964 | | Total liabilities | $88,202 | $90,805 | | Total stockholders' equity | $1,111,636 | $1,129,159 | | Cash and cash equivalents | $87,880 | $55,144 | | Marketable securities (long-term) | $484,471 | $570,351 | | Trade accounts receivable, net | $77,190 | $69,021 | Condensed Consolidated Statements of Operations This section outlines the company's financial performance, including revenue, gross profit, operating loss, and net loss over specific periods Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $81,803 | $71,028 | $155,266 | $135,513 | | Gross profit | $34,435 | $26,491 | $62,781 | $48,595 | | Operating loss | $(19,713) | $(18,906) | $(39,508) | $(40,704) | | Impairment loss | $(9,926) | — | $(9,926) | — | | Net loss attributable to Fulgent | $(18,957) | $(8,710) | $(30,487) | $(22,172) | | Basic net loss per common share | $(0.62) | $(0.29) | $(0.99) | $(0.74) | Condensed Consolidated Statements of Comprehensive Loss This section details the company's comprehensive loss, including net loss and other comprehensive income or loss components Condensed Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss from consolidated operations | $(19,256) | $(9,090) | $(31,155) | $(22,936) | | Net gain (loss) on available-for-sale debt securities, net of tax | $1,193 | $312 | $5,817 | $(1,760) | | Net comprehensive loss from consolidated operations | $(17,830) | $(8,889) | $(24,996) | $(25,140) | | Comprehensive loss attributable to Fulgent | $(17,294) | $(8,485) | $(24,121) | $(24,254) | Condensed Consolidated Statements of Stockholders' Equity This section presents changes in the company's stockholders' equity, reflecting net loss, equity-based compensation, and stock repurchases Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | December 31, 2024 | June 30, 2025 | | :----------------------------------- | :---------------- | :------------ | | Total Fulgent stockholders' equity | $1,133,228 | $1,116,580 | Changes for Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :----------------------------------- | :------------------ | :------------------ | | Equity-based compensation | $20,589 | $23,153 | | Repurchase of common stock | $(10,884) | $(225) | | Net loss | $(30,487) | $(22,172) | Condensed Consolidated Statements of Cash Flows This section summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity (Six Months Ended June 30) | 2025 | 2024 | | :-------------------------------------------- | :----- | :----- | | Net cash (used in) provided by operating activities | $(34,602) | $11,551 | | Net cash provided by (used in) investing activities | $81,133 | $(39,882) | | Net cash used in financing activities | $(13,810) | $(3,953) | | Cash, cash equivalents, and restricted cash at end of period | $88,015 | $65,111 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, financial instruments, and segment information Note 1. Overview and Basis of Presentation This note describes the company's business segments and strategic goals, along with the basis of presentation for its unaudited interim financial statements - Fulgent Genetics, Inc. operates two main businesses: laboratory services (technical, testing, and professional interpretation) and therapeutic development (cancer drug candidates using nanoencapsulation and targeted therapy)[28] - The company's strategic goal is to transform from a genomic diagnostic business into a fully integrated precision medicine company[28] Note 2. Summary of Significant Accounting Policies This note details the company's key accounting policies, including the use of estimates, management of trade accounts receivable and credit losses, treatment of intangible assets, fair value measurements, and revenue recognition by payor type. It also highlights the company's reliance on a limited number of suppliers and ongoing evaluation of new accounting pronouncements Allowance for Credit Losses Activity (Six Months Ended June 30, 2025, in thousands) | Metric | Amount | | :------------------------------------ | :----- | | Allowance at beginning of year | $20,458 | | Current period provision | $4,666 | | Write-downs | $(4,326) | | Recoveries | $618 | | Allowance as of June 30, 2025 | $21,416 | Revenue by Payor Type (in thousands) | Payor Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Institutional | $45,619 | $38,950 | $86,943 | $72,554 | | Insurance | $34,385 | $31,100 | $65,129 | $61,143 | | Patients | $1,799 | $978 | $3,194 | $1,816 | | Total Revenue | $81,803 | $71,028 | $155,266 | $135,513 | - One customer accounted for 22% of total revenue for the three months ended June 30, 2025, and 23% for the six months ended June 30, 2025, in the laboratory services segment[44] - The company relies on a sole supplier for next-generation sequencers and associated reagents, posing a risk of operational interruption if supply or service is disrupted[45] - The company is currently evaluating the impacts of ASU 2024-03, 'Disaggregation of Income Statement Expenses,' which is effective for annual periods beginning after December 15, 2026[58] Note 3. Equity and Debt Securities This note provides a breakdown of the company's equity and debt securities, detailing their amortized cost, unrealized gains/losses, and fair values Total Equity and Debt Securities (in thousands) | Date | Amortized Cost Basis | Unrealized Gains | Unrealized Losses | Aggregate Fair Value | | :--- | :------------------- | :--------------- | :---------------- | :------------------- | | Jun 30, 2025 | $701,797 | $3,454 | $(732) | $704,519 | | Dec 31, 2024 | $801,337 | $977 | $(4,074) | $798,240 | - Gross unrealized losses on the company's equity and debt securities decreased from $4.1 million as of December 31, 2024, to $0.7 million as of June 30, 2025[61] - There were no sales of available-for-sale securities in the three and six months ended June 30, 2025, compared to $75.6 million in proceeds from sales for the six months ended June 30, 2024[62] Note 4. Fair Value Measurements This note outlines the fair value hierarchy for financial instruments and details assets measured at fair value, including a significant impairment loss on an equity investment - The company recognized a $9.9 million impairment loss on its non-marketable equity investment in Helio Genomics, Inc. during the three and six months ended June 30, 2025, due to the investee's deteriorating financial condition and inability to secure sufficient financing[67][69] - Level 1 assets include U.S. treasury bills and money market instruments; Level 2 assets consist of U.S. government and agency debt securities, municipal bonds, corporate debt securities, and Yankee debt securities; Level 3 assets include preferred stock of privately-held companies[65][68] Note 5. Fixed Assets This note provides a detailed breakdown of the company's fixed assets, their useful lives, and net carrying amounts, along with depreciation expense Fixed Assets, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Fixed assets, net | $110,223 | $105,549 | | Medical lab equipment | $61,118 | $57,541 | Depreciation Expense (in thousands) | Period | 2025 | 2024 | | :----- | :----- | :----- | | Three Months Ended June 30, | $3,900 | $4,000 | | Six Months Ended June 30, | $7,700 | $8,600 | Note 6. Other Significant Balance Sheet Accounts This note details the composition of other current assets, accrued liabilities, and other long-term liabilities, including changes in prepaid income taxes and a released SEC investigation liability Other Current Assets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Prepaid income taxes | $36,454 | $3,422 | | Total | $58,610 | $26,444 | Accrued Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Payroll liabilities | $7,618 | $8,210 | | Accrued bonus and commission | $2,882 | $5,803 | | Total | $21,699 | $24,279 | - A $1.0 million potential liability related to an SEC investigation, previously included in other accrued liabilities as of December 31, 2024, has been released following the closure of the investigation without enforcement action[75] Note 7. Reportable Segment and Geographic Information This note provides financial data for the company's laboratory services and therapeutic development segments, including revenue and adjusted operating loss by sub-segment and geographic region - The company operates two reportable segments: Laboratory Services (technical laboratory and testing services, professional interpretation) and Therapeutic Development (pharmaceutical research and development)[77] Adjusted Operating Loss by Segment (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | | :---------------------- | :----- | :----- | | Laboratory Services | $(5,813) | $(5,269) | | Therapeutic Development | $(9,126) | $(8,302) | | Total Adjusted Operating Loss | $(14,939) | $(13,571) | Revenue by Laboratory Services Sub-segment (Six Months Ended June 30, in thousands) | Sub-segment | 2025 | 2024 | % Change | | :-------------------- | :----- | :----- | :------- | | Precision diagnostics | $91,389 | $80,590 | 13% | | Anatomic pathology | $53,422 | $46,538 | 15% | | BioPharma services | $10,319 | $6,268 | 65% | | COVID-19 | $136 | $2,117 | (94)% | Geographic Distribution of Revenue (Six Months Ended June 30, in thousands) | Region | 2025 | 2024 | | :------------- | :----- | :----- | | United States | $144,033 | $122,044 | | Foreign | $11,233 | $13,469 | | Total | $155,266 | $135,513 | Note 8. Debt, Commitments, and Contingencies This note details the company's notes payable and ongoing legal matters, including DOJ Civil Investigative Demands and the closure of an SEC investigation - Notes payable totaled $2.4 million as of June 30, 2025, related to a building installment sale contract, with $0.5 million classified as current and $2.0 million as noncurrent[82] - The company is cooperating with DOJ Civil Investigative Demands (CIDs) concerning allegations of medically unnecessary laboratory testing, improper billing, Anti-Kickback Statute and Stark Law violations, and false claims to the HRSA Uninsured Program for COVID-19 tests. The outcome is uncertain, and no liability has been recorded[85][87][88] - The SEC concluded its non-public formal investigation in April 2025, with no enforcement action recommended, leading to the release of a previously recorded $1.0 million potential liability[89] Note 9. Leases This note provides information on the company's operating and finance leases, including right-of-use assets, lease liabilities, and lease expenses Lease Liabilities and ROU Assets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Operating lease ROU asset, net | $4,809 | $5,395 | | Operating lease liabilities, long term | $3,765 | $4,120 | | Finance lease ROU asset, net | $508 | $771 | | Finance lease liabilities, long term | $181 | $360 | Total Lease Cost (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $932 | $1,817 | | Six Months Ended June 30, | $2,066 | $3,911 | - The weighted-average remaining lease term for operating leases is 5.91 years, with a weighted-average discount rate of 5.41%[93] Note 10. Equity-Based Compensation This note details the allocation of equity-based compensation expense across cost of revenue and operating expenses Equity-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $1,737 | $1,999 | $3,517 | $4,008 | | Research and development | $3,339 | $4,136 | $6,813 | $7,980 | | Selling and marketing | $711 | $1,002 | $1,601 | $2,052 | | General and administrative | $4,252 | $4,498 | $8,658 | $9,113 | | Total | $10,039 | $11,635 | $20,589 | $23,153 | Note 11. Income Taxes This note discusses the company's benefit from income taxes and effective tax rates, highlighting the impact of a valuation allowance and the purchase of Investment Tax Credits Benefit from Income Taxes (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $2,263 | $2,124 | | Six Months Ended June 30, | $2,087 | $2,451 | Effective Tax Rates | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | 11% | 19% | | Six Months Ended June 30, | 6% | 10% | - The company purchased $33.8 million of Investment Tax Credits for $31.7 million in cash during the three months ended June 30, 2025, resulting in a $2.1 million increase to income tax benefit and a $33.8 million increase in prepaid income tax[98] Note 12. Loss per Share This note presents the calculation of basic and diluted loss per share, clarifying the exclusion of anti-dilutive securities due to net loss Loss per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Net loss attributable to Fulgent (in thousands) | $(30,487) | $(22,172) | | Basic loss per share | $(0.99) | $(0.74) | | Diluted loss per share | $(0.99) | $(0.74) | - Stock options (101 thousand) and restricted stock units (2,187 thousand) were excluded from the calculation of diluted loss per share for both periods due to their anti-dilutive effect resulting from the company's net loss positions[99] Note 13. Related Party This note discloses related party transactions with ANP Technologies, Inc., and reports its subsequent acquisition by the company - The company incurred $0.6 million in licensing and development services from ANP Technologies, Inc. for the six months ended June 30, 2025 (prior to April 25, 2025), and $1.0 million for the same period in 2024[100] - In July 2025, the company completed the acquisition of 100% of ANP, which was previously a related party, to secure ownership of patents utilized in ongoing clinical studies[100] Note 14. Goodwill and Intangible Assets This note provides details on goodwill and intangible assets, including their carrying amounts, impairment testing, and expected amortization schedule - Goodwill remained at $22.1 million as of June 30, 2025, and December 31, 2024, entirely related to the therapeutic development business, with no impairment identified as of December 31, 2024[101][103] Intangible Assets, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total intangible assets, net | $131,060 | $134,978 | | In-process research & development | $64,590 | $64,590 | Expected Annual Amortization Expense for Intangible Assets (in thousands) | Year Ending December 31, | Amount | | :----------------------- | :----- | | 2025 (remaining 6 months) | $3,985 | | 2026 | $7,665 | | 2027 | $7,205 | | 2028 | $7,170 | | 2029 | $6,913 | | 2030 | $6,785 | | Thereafter | $26,747 | | Total | $66,470 | Note 15. Stock Repurchase Program This note provides an update on the company's stock repurchase program, detailing shares repurchased and remaining authorization - The Board of Directors authorized a $250.0 million stock repurchase program in March 2022, with no expiration date[108] Common Stock Repurchases (Six Months Ended June 30) | Period | Shares Repurchased (in millions) | Aggregate Cost (in millions) | | :----- | :------------------------------- | :--------------------------- | | 2025 | 0.6 | $10.9 | | 2024 | 0.01 | $0.2 | - As of June 30, 2025, approximately $139.6 million remained available for future repurchases under the program[109] Note 16. Retirement Plans This note describes the company's 401(k) retirement savings plan, including employee eligibility and the company's matching contribution policy - The company offers a 401(k) retirement savings plan and matches employee contributions up to 4% of their compensation[110] Total Company 401(k) Matching Contributions (in millions) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $1.0 | $1.0 | | Six Months Ended June 30, | $2.2 | $1.9 | Note 17. Subsequent Events This note reports on two significant events occurring after the balance sheet date: the acquisition of ANP Technologies, Inc. in July 2025, and the enactment of the One Big Beautiful Bill Act (OBBBA), whose financial impact is still being evaluated - On July 9, 2025, the company acquired 100% of ANP Technologies, Inc. for a preliminary consideration of $4.2 million (net of cash received), including contingent consideration of approximately $5.7 million in common stock. This acquisition secures ownership of patents for therapeutic candidates[111][112] - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, making 100% bonus depreciation and domestic research cost expensing permanent. Its effects are not reflected in the June 30, 2025, financial statements and are still being evaluated[113][114] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, covering business overview, risks, detailed analysis of revenue and expenses, liquidity, and capital resources. It highlights revenue growth in core laboratory services, increased operating expenses, and a shift to cash usage in operating activities Overview This section provides a high-level summary of the company's business operations and its strategic objectives - The company operates a technology-based business with established laboratory services and a therapeutic development business focused on cancer drug candidates[119] - The strategic goal is to transform from a genomic diagnostic business into a fully integrated precision medicine company[119] Business Risks and Uncertainties and Other Factors Affecting Our Performance This section outlines various risks and uncertainties, including government investigations and international trade policies, that could impact the company's performance - The company is exposed to numerous risks, including ongoing audits and investigations by government agencies (tax authorities, DOJ, HRSA) and the effects of international trade policies and tax legislation[120] - The final results of these matters are uncertain and could materially affect the company's business and results of operations[120] Results of Operations This section analyzes the company's financial performance, detailing changes in revenue, cost of revenue, and various operating expenses over the reporting periods Key Financial Performance (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Revenue | $81,803 | $71,028 | 15% | $155,266 | $135,513 | 15% | | Gross profit | $34,435 | $26,491 | 30% | $62,781 | $48,595 | 29% | | Operating loss | $(19,713) | $(18,906) | 4% | $(39,508) | $(40,704) | (3)% | | Net loss attributable to Fulgent | $(18,957) | $(8,710) | 118% | $(30,487) | $(22,172) | 38% | | Impairment loss | $(9,926) | — | * | $(9,926) | — | * | Revenue Revenue increased by 15% for both the three and six months ended June 30, 2025, driven by growth in precision diagnostics, anatomic pathology, and BioPharma services, while COVID-19 testing revenue significantly declined. Non-U.S. revenue also decreased due to a non-recurring licensing arrangement and reclassification Revenue from Laboratory Services (in thousands, except percentages) | Sub-segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Precision diagnostics | $47,292 | $43,144 | 10% | $91,389 | $80,590 | 13% | | Anatomic pathology | $28,122 | $23,431 | 20% | $53,422 | $46,538 | 15% | | BioPharma services | $6,253 | $3,612 | 73% | $10,319 | $6,268 | 65% | | COVID-19 | $136 | $841 | (84)% | $136 | $2,117 | (94)% | | Total laboratory services | $81,803 | $71,028 | 15% | $155,266 | $135,513 | 15% | - The increase in precision diagnostics revenue was driven by growth in reproductive health services and continued strength in legacy diagnostic offerings[126] - Non-U.S. revenue decreased by 18% ($1.2 million) for the three months and 17% ($2.2 million) for the six months ended June 30, 2025, primarily due to a non-recurring licensing arrangement in the prior period and reclassification of certain revenues to the United States[129] Cost of Revenue Consolidated cost of revenue increased by 6% for both the three and six months ended June 30, 2025, primarily due to higher personnel, reagent, and supply costs. However, as a percentage of revenue, cost of revenue decreased, leading to an improved gross margin Consolidated Cost of Revenue (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Cost of revenue | $47,368 | $44,537 | 6% | $92,485 | $86,918 | 6% | | Cost of revenue as a % of revenue | 58% | 63% | | 60% | 64% | | | Gross profit | $34,435 | $26,491 | 30% | $62,781 | $48,595 | 29% | | Gross margin | 42% | 37% | | 40% | 36% | | - The increase in cost of revenue was primarily driven by increases in personnel expenses ($1.9 million for 3 months, $3.0 million for 6 months) and reagent and supply costs ($0.7 million for 3 months, $1.6 million for 6 months)[130][131] Research and Development Research and development expenses for laboratory services remained consistent, while therapeutic development R&D increased for the six-month period due to the advancement of clinical studies for FID-007 and FID-022. Further increases are anticipated as clinical trials progress Research and Development Expenses (in thousands, except percentages) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Laboratory services | $7,450 | $7,334 | 2% | $14,532 | $14,655 | (1)% | | Therapeutic development | $6,030 | $6,152 | (2)% | $11,343 | $10,265 | 11% | | Total R&D | $13,480 | $13,486 | 0% | $25,875 | $24,920 | 4% | - The 11% increase in therapeutic development R&D for the six months ended June 30, 2025, was primarily driven by the advancement and continuation of clinical studies for FID-007 and preclinical development of FID-022[138] - Research and development expenses are expected to continue increasing as clinical trials for FID-007, FID-022, and other preclinical studies progress[139] Selling and Marketing Consolidated selling and marketing expenses increased significantly for both the three and six months ended June 30, 2025, primarily due to higher personnel costs and increased advertising and marketing activities Consolidated Selling and Marketing Expenses (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Selling and marketing | $12,286 | $8,595 | 43% | $20,751 | $17,584 | 18% | - The increase was primarily due to higher personnel costs ($1.6 million for 3 months, $1.3 million for 6 months) and increased advertising and marketing expenses ($1.5 million for 3 months, $1.3 million for 6 months)[140][141] General and Administrative Consolidated general and administrative expenses increased for both the three and six months ended June 30, 2025, mainly driven by a significant rise in the provision for credit losses, alongside higher personnel, software, and consulting costs Consolidated General and Administrative Expenses (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | General and administrative | $26,392 | $21,326 | 24% | $51,683 | $42,815 | 21% | - The primary driver for the increase was a significant rise in the provision for credit losses ($4.3 million for 3 months, $8.8 million for 6 months), along with higher personnel, software, and consulting costs[142][143] Amortization of Intangible Assets Consolidated amortization of intangible assets remained consistent for both periods, stemming from prior business combinations and a patent purchase, with no new business combinations in the current period Consolidated Amortization of Intangible Assets (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $1,990 | $1,990 | | Six Months Ended June 30, | $3,980 | $3,980 | - These expenses arise from intangible assets acquired in business combinations in 2021 and 2022, and a patent purchased in 2021, with no new business combinations in the current period[144] Other Income (Expenses) Other income (expense) shifted from net income in 2024 to a net expense in 2025 for the three-month period, primarily due to a one-time impairment loss on a prior investment, partially offset by increased interest income Total Other (Expense) Income, Net (in thousands, except percentages) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Total other (expense) income, net | $(1,806) | $7,692 | (124)% | $6,266 | $15,317 | (59)% | | Interest income | $8,091 | $7,706 | 5% | $16,109 | $15,091 | 7% | | Impairment loss | $(9,926) | — | * | $(9,926) | — | * | - The significant change was primarily due to a one-time, non-cash impairment loss of $9.9 million on a prior investment recognized in the current periods[145] Benefit from Income Taxes The benefit from income taxes remained relatively stable, but the effective tax rate decreased due to a valuation allowance. The impact of the recently enacted One Big Beautiful Bill Act (OBBBA) is still being evaluated and not yet reflected in the financial statements Benefit from Income Taxes (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | $2,263 | $2,124 | | Six Months Ended June 30, | $2,087 | $2,451 | Effective Tax Rates | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three Months Ended June 30, | 11% | 19% | | Six Months Ended June 30, | 6% | 10% | - The change in the effective tax rate is primarily due to a valuation allowance that precludes the company from recognizing the benefit from its net operating losses[146] - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, making 100% bonus depreciation and domestic research cost expensing permanent, is not reflected in the June 30, 2025, financial statements, and its full impact is under evaluation[147][149] Net Loss Attributable to Noncontrolling Interest This section clarifies that net loss attributable to noncontrolling interest represents the portion of net loss allocated to minority shareholders in entities not wholly owned by the company Net Loss Attributable to Noncontrolling Interests (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Net loss attributable to noncontrolling interests | $299 | $380 | (21)% | $668 | $764 | (13)% | Liquidity and Capital Resources This section assesses the company's ability to meet its financial obligations, detailing available cash, marketable securities, and cash flow activities, along with potential future capital needs - Total cash, cash equivalents, restricted cash, and marketable securities were $777.5 million as of June 30, 2025, down from $828.6 million at December 31, 2024[152] - The company expects existing cash and short-term marketable securities to be sufficient for at least the next 12 months, but may seek additional capital through various means, which could lead to dilution or operational restrictions[154][155] - Main uses of cash include capital expenditures (buildings, building improvements, medical laboratory equipment), stock repurchases, supporting operations, and funding strategic acquisitions[153] Liquidity and Sources of Cash The company's liquidity is supported by $777.5 million in cash and marketable securities. While current resources are expected to be sufficient for the next 12 months, the company acknowledges potential needs for additional capital, which could involve equity or debt financing, asset sales, or collaborations - The company's cash, cash equivalents, restricted cash, and marketable securities totaled $777.5 million as of June 30, 2025, primarily consisting of U.S. government and agency debt securities[152] - Existing liquidity is expected to be sufficient for anticipated cash requirements for at least the next 12 months, but the company may still seek additional capital through securities offerings, credit facilities, debt financings, asset sales, or collaborations[154][155] Cash Flows Cash flows from operating activities shifted from providing cash in 2024 to using cash in 2025, primarily due to the purchase of IRA tax credits. Investing activities provided significant cash, mainly from marketable securities maturities, while financing activities used more cash due to increased stock repurchases Summary of Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :-------------------------------------------- | :----- | :----- | | Net cash (used in) provided by operating activities | $(34,602) | $11,551 | | Net cash provided by (used in) investing activities | $81,133 | $(39,882) | | Net cash used in financing activities | $(13,810) | $(3,953) | - Operating activities used $34.6 million of cash in the six months ended June 30, 2025, a decrease from $11.6 million provided in 2024, primarily due to the purchase of $33.8 million in IRA tax credits[158] - Investing activities provided $81.1 million in 2025, mainly from $92.7 million in maturities of marketable securities, contrasting with $39.9 million used in 2024[160][161] - Financing activities used $13.8 million in 2025, primarily due to $10.9 million in common stock repurchases[162] Stock Repurchase Program The company continued its $250.0 million stock repurchase program, repurchasing 0.6 million shares for $10.9 million during the six months ended June 30, 2025, with approximately $139.6 million remaining available - The Board of Directors authorized a $250.0 million stock repurchase program in March 2022, with no expiration[165] Common Stock Repurchases (Six Months Ended June 30) | Period | Shares Repurchased (in millions) | Aggregate Cost (in millions) | | :----- | :------------------------------- | :--------------------------- | | 2025 | 0.6 | $10.9 | | 2024 | 0.01 | $0.2 | - As of June 30, 2025, approximately $139.6 million remained available for future repurchases under the program[166] Critical Accounting Policies and Use of Estimates This section confirms that there have been no material changes to the company's critical accounting policies or estimates since the prior annual report - There have been no material changes to the company's critical accounting policies or estimates from the information provided in the 2024 Annual Report[168] Recent Accounting Pronouncements This section refers to Note 2 for information regarding recent accounting pronouncements and their potential impact on the company's financial statements - Refer to Note 2, Summary of Significant Accounting Policies, for information about recent accounting pronouncements[170] Off-Balance Sheet Arrangements This section confirms the absence of any material off-balance sheet arrangements during the reported periods - The company did not have any material off-balance sheet arrangements during the periods presented[172] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there were no material changes to the company's quantitative and qualitative disclosures about market risk during the six months ended June 30, 2025 - There were no material changes to the quantitative and qualitative disclosures about market risk during the six months ended June 30, 2025, compared to the 2024 Annual Report[173] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and reports no material changes in internal control over financial reporting. It also acknowledges the inherent limitations of any control system Evaluation of Disclosure Controls and Procedures This section confirms management's conclusion that the company's disclosure controls and procedures were effective as of June 30, 2025 - Management, with the participation of the principal executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[175] Changes in Internal Control over Financial Reporting This section reports no material changes in the company's internal control over financial reporting during the three and six months ended June 30, 2025 - There have been no material changes in the company's internal control over financial reporting during the three and six months ended June 30, 2025[177] Inherent Limitations on Disclosure Controls and Procedures and Internal Control over Financial Reporting This section acknowledges the inherent limitations of control systems, emphasizing that they provide reasonable but not absolute assurance against all potential issues - Management acknowledges that controls and procedures, regardless of design, can only provide reasonable assurance and are subject to inherent limitations, meaning they may not prevent or detect all instances of fraud, misstatements, or other control issues[178] PART II—OTHER INFORMATION This section covers additional information not included in the financial statements, such as legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section refers to Note 8 for details on ongoing legal investigations, audits, and voluntary disclosure processes, emphasizing the inherent uncertainty of outcomes and potential adverse impacts on the company - The company is involved in certain legal investigations, audits, and voluntary disclosure processes, as detailed in Note 8, Debt, Commitments, and Contingencies[180] - The outcomes of these matters are inherently uncertain, and litigation can have an adverse impact due to defense and settlement costs, diversion of management resources, negative publicity, and reputational harm[181] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the 2024 Annual Report and the Form 10-Q for the quarter ended March 31, 2025 - There have been no material changes to the risk factors set forth in Part I, 'Item 1A, Risk Factors,' of the 2024 Annual Report and Part II, 'Item 1A. Risk Factors' of the Form 10-Q for the quarter ended March 31, 2025[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the use of proceeds from registered securities, with $267.9 million allocated to operations and business combinations, and provides information on common stock repurchases made under the authorized program Use of Proceeds from Registered Securities This section outlines how the company has utilized proceeds from common stock sales, primarily for operations and business combinations, with remaining funds invested in securities - The company has used $267.9 million of net proceeds from common stock sales to fund operations and business combinations[184] - All other net proceeds from common stock sales are invested in investment-grade and interest-bearing securities[184] Information on Share Repurchases This section provides details on the company's common stock repurchases under its authorized program, including shares bought back and remaining authorization - The Board of Directors authorized a $250.0 million stock repurchase program in March 2022, with no expiration[186] Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Total Number of Shares Repurchased | Average Price Paid Per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 2025 | 177,000 | $16.91 | | May 2025 | — | $— | | June 2025 | — | $— | | Total | 177,000 | | - As of June 30, 2025, approximately $139.5 million remained available for future repurchases under the program[187] Item 5. Other Information This section discloses the termination of a non-Rule 10b5-1 trading arrangement by the CEO involving pledged common stock - CEO Ming Hsieh terminated a prepaid variable forward agreement (a non-Rule 10b5-1 trading arrangement) on June 9, 2025, involving up to 0.8 million pledged shares of common stock, upon payment of $16.4 million[188] Item 6. Exhibits This section refers to the Exhibit Index for a comprehensive list of all exhibits filed as part of this report - The information required by this Item 6 is set forth on the Exhibit Index immediately preceding the signature page of this report and is incorporated herein by reference[189] Exhibit Index This index lists all exhibits accompanying the Form 10-Q, including corporate governance documents, certifications from executive officers, and Inline XBRL data files - The Exhibit Index includes corporate documents (Certificate of Incorporation, Bylaws), certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1), and Inline XBRL Instance Document and Taxonomy Extension Documents (Exhibits 101.INS to 101.PRE, and 104)[191] Signatures This section contains the required signatures of the company's Chief Executive Officer and Chief Financial Officer, certifying the accuracy and completeness of the Form 10-Q report - The report is signed by Ming Hsieh, Chief Executive Officer, and Paul Kim, Chief Financial Officer, on August 1, 2025[196]