Good morning, and welcome to the Fulgent fourth quarter and fiscal year 2025 financial results conference call. On the call are Ming Hsieh, Chief Executive Officer, Paul Kim, Chief Financial Officer, and Brandon Perthuis, 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 questions 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 makes 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 included in the company's actual future results may be materially different than what is described in or implied by these forward-looking statements. Please review the more detailed discussions related to these forward-looking statements, including the discussions of some of the risk factors that may cause results to differ from those described in the forward-looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31st, 2024 and subsequently filed reports, which are available on the company's Investor Relations website.

Management's prepared remarks, including discussions of profit, loss, margin, earnings, and earnings per share, 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 fourth quarter 2025 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 the 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 GAAP measures because the information necessary to calculate such reconciliations is unavailable on a forward-looking basis without unreasonable effort.

With that, I'd now like to turn the call over to Ming. Please go ahead.

Thank you, Lauren. I'm pleased with the progress we have made this year as we execute our strategic objectives in both our laboratory services and therapeutic development business.

In 2025, the laboratory services business sustained momentum as we delivered growth and executed our strategy and the product innovation roadmap. We have implemented the best-in-class technology across our platform, and the heavy investment we have made in digital pathology and AI are paying off.

We are seeing the advantage of moving to digital and using AI-enabled workflow with increased quality, turnaround time, and throughput. We have launched our own proprietary imaging management system, HelioPath, which integrates the best-in-class AI tools developed in-house, giving us even greater control and the technology services.

We also accelerated our product innovation in 2025 with the launch of RNA integrated whole genome sequencing and ultra-rapid whole genome sequencing. The investment in AI and digital pathology solutions, coupled with our innovations across our laboratory service platform, will delivers the revenue and margin improvement in 2025.

We see the first half of 2026 in a transition period as our business adjusts to the impact from our largest customer moving significant volume in-house. We believe our technology platform will continue to get stronger, and the strategic investment and innovations we have made will continue to work at an accelerated pace, offering new and expanded opportunity for growth and improved operating leverage in future.

We also accelerated the progress of our therapeutic development pipeline in 2025 and expect continued progress this year. Starting with our first clinical candidate, FID-007, advanced through the Phase 2 with 46 patients enrolled.

The trial enrollment closed on time on December 29, 2025. We are encouraged by the early efficacy and safety data.

FID-007, combined with cetuximab, demonstrated meaningful anti-cancer efficacy and a favorable tolerable profile at both dose levels for the second-line treatment of recurrent metastatic head and neck squamous cell carcinoma. Phase 3 protocol development is long ongoing with the trial initiation planned as early as the first half of 2027.

This year, we are planned to submit a new request to FDA in the second quarter of 2026, and hope to have a Phase 2 meeting with FDA in the third quarter of 2026. We anticipate presenting our interim findings at ASCO in June 2026, and expect a full data read-out by the second half of 2027.

We are encouraged by our clinical trial progress achieved so far and believe entering into the Phase 3 registration trial will further increase the probability of the success of commercialization FID-007 for the treatment of recurrent metastatic head and neck squamous cell carcinoma patients currently having very few effective treatment options. Our second clinical candidate, FID-022, is progressing through the Phase 1 dose escalation, with the first dose level successfully completed at the end of December 2025, and the second dose level successfully completed on January 28, 2026.

The third dose level begins on February 2nd, 2026. We expect to finish the study and determine the maximum tolerated dose level later this year.

FID-022 is a nanoencapsulated SN-38 for the treatment of solid tumors, including potentially colon, pancreatic, ovarian, and bile duct cancers. Overall, I'm pleased with the progress we have made this year.

Our pharma R&D efforts are progressing faster, better, and more cost-effectively than planned. Additionally, our laboratory services business is greatly benefited from our investment of AI technology, which makes our service more efficient and precise.

Although our revenue of 2025 slightly short of our updated expectation, we are exceeded our non-GAAP EPS guidance and proud of the progress we have made, and believe our business is intact. As we look to 2026, we believe the first half of the year will be impacted by our largest customer moving a significant volume of its work in-house.

Also the strategic initiative we have made may help offset this impact over the long term. I would like to thank our employees, partners, and the stakeholders for your hard work and loyalty in a great quarter of our business.

We look forward to further progress in 2026. I will now turn the call over to Brandon Perthuis, our Chief Commercial Officer, to talk more about our laboratory services business.

Brandon?

Thanks, Ming. We ended the fourth quarter at $83.3 million, which was an increase of 9% year-over-year and a slight decrease quarter-over-quarter.

Looking at how we closed the year, total revenue came in at $322.7 million, which was an increase of approximately 14% year-over-year. Looking closer at our three areas of business, Precision Diagnostics revenue for the fourth quarter was $48.2 million, an increase of 11% year-over-year, however, down 5% sequentially, driven primarily by lower-than-anticipated volume from our largest customer, who has begun transitioning the testing in-house.

AP revenue for the fourth quarter was $27 million, an increase of 3% year-over-year and up 4% sequentially. For BioPharma Services, revenue was $8.1 million, an increase of 32% year-over-year and 10% sequentially.

For the year, Precision Diagnostics revenue was $190.5 million, a 14% increase over 2024. AP revenue, or Anatomic Pathology revenue, was $106.4 million, an increase of 10% over 2024.

BioPharma Services was $25.8 million, a 58% increase. Overall, we are pleased with the performance in 2025, delivering double-digit year-over-year growth.

During the quarter, we announced our intention to acquire Bako Diagnostics and StrataDx, pending regulatory approvals, for a total purchase price of $55.5 million. This proposed acquisition will add new anatomic pathology services, proprietary PCR tests, and a national client base.

Bako Diagnostics is a premier national provider of specialty laboratory testing services, which offers a comprehensive testing menu, including complete anatomic pathology services, proprietary molecular genetic testing, and peripheral neuropathy immunohistochemical testing. Bako Diagnostics is CLIA certified, CAP accredited, and licensed by the Georgia Department of Public Health.

StrataDx is a premier national provider of dermatopathology testing services. StrataDx is CLIA certified, CAP accredited, and licensed by the state of Massachusetts.

With these acquisitions, we will further strengthen our laboratory services business by adding new products and services, and further expand our national client base, national sales team, and team of expert pathologists. We expect to close the transaction in March.

We are excited to announce that during the fourth quarter, we received approval from New York State for both our proprietary NIPT offering, Nova, as well as our whole genome sequencing test. These are significant approvals and a high validation of our quality services.

These approvals open a new market for us to commercialize these tests in New York, and we look forward to servicing New York clients and patients in both the rare disease and reproductive markets. We mentioned on previous calls the investments we are making in digital pathology, specifically our new in-house developed platform, HelioPath.

Digital pathology is changing the dynamics of our laboratory, enabling remote reading, remote consults, and most importantly, the use of AI modules for certain disease subtypes. As of today, we are approximately 100% digital across all of our cases, and they are being read on HelioPath as we transition off our previous third-party platform.

In AI development, we have launched several internally developed modules, including tissue region detection, eosinophil counting in eosinophilic esophagitis, and lymphocyte ratio in duodenal intraepithelial lymphocytosis. HelioPath also supports third-party AI modules, such as Paige AI prostate and Mindpeak for HER2 in breast cancer.

In our 2026 AI R&D pipeline, we have a dozen AI modules planned, and we expect to significantly improve our medical team's operational efficiency once deployed. Fulgent has always viewed itself as a technology company, and we have developed most of the systems that support our business.

HelioPath is just another example. With in-house clinical AI R&D and software engineering teams, a large group of medical pathologists across various specialties, and most importantly, clinical data with diagnostic outcomes, we believe Fulgent is well-positioned to become a major player in the AI-enabled digital pathology field.

Within our oncology business, we see great potential in leveraging AI technology to improve clinical diagnosis for patients. Fulgent is one of the very few companies that provides end-to-end diagnostic services for cancer patients, including flow cytometry, IHC, FISH, cytogenetics, and NGS.

Our team is currently working on a project to develop AI modules that analyze data across multiple modalities to provide summary diagnostic information for our medical team to review before final reporting. We believe this could be a game changer in cancer diagnosis.

Overall, we are pleased with our progress in 2025. We believe the investments we have made in our technology capabilities will continue to pay dividends as we strive to expand our market reach.

I'd like to thank our employees for their hard work and dedication throughout the year, and I'm thankful to have such a strong team in place as we kick off the new year. I'll now turn the call over to our Chief Financial Officer, Paul Kim.

Paul?

Thank you, Brandon. Full year revenue for 2025 totaled $322.7 million, growing approximately 14% compared to revenue of $283.5 million in 2024, which fell slightly short of the updated guidance we provided on last quarter's earnings call, but ahead of the original guidance we provided at the beginning of 2025.

Revenue in the fourth quarter of 2025 totaled $83.3 million, compared to $84.1 million in the third quarter of 2025. The decrease in our Q4 revenue was primarily the result of lower-than-anticipated volume from our largest customer, who has begun transitioning the test in-house.

Gross margin for the fourth quarter on a non-GAAP basis was 41%, and a GAAP basis was 39.1%. Full year gross margins improved year-over-year due to streamlined operations and from the enhanced efficiencies we achieved as a result of our investment in scaling and centralizing lab operations.

Now turning over to operating expenses. Total GAAP operating expenses were $68.8 million in the fourth quarter, which increased when compared to $50.9 million in the prior quarter.

The increase in operating expenses was partially driven by acquisition-related costs, payroll-related expenses, and a one-time professional liability expense. Non-GAAP operating expenses totaled $43.1 million, compared to $40.7 million in the previous quarter.

We remain committed to R&D spending to support both our laboratory testing services and our clinical studies, and to sales and marketing spending to expand the sales team. Non-GAAP operating margin decreased sequentially to a minus 10.7%.

Our GAAP loss in the current quarter was $23.4 million, an increase from the prior quarter GAAP loss of $6.6 million. Adjusted EBITDA for the fourth quarter was a loss of approximately $4.5 million, compared to a gain of $700,000 in Q3 2025.

On a non-GAAP basis and excluding equity-based compensation expense, intangible asset amortization, acquisition-related costs, and a one-time professional liability expense, income for the quarter was approximately $5.2 million, or 16 cents per share based on 31.7 million weighted average diluted shares outstanding. Looking at the full year 2025, on a non-GAAP basis and excluding equity-based compensation expense, intangible asset amortization, acquisition-related costs, and a one-time professional liability expense, income was approximately $13.2 million, or 42 cents per share based on 31.1 million weighted average shares outstanding, beating the updated guidance we provided on last quarter's earnings call.

Turning to the balance sheet, we ended the fourth quarter and full year with approximately $705.5 million in cash, cash equivalents, restricted cash, and marketable securities. The decrease in cash from the previous quarter is driven by the purchase of income tax credits and capital expenditures.

As of year-end, we have not yet received the $106 million in federal income tax refund, which has been delayed due to government shutdown in the fourth quarter of 2025. Excluding the delay in the income tax refund, we beat the updated cash guidance we provided on our last quarter's earnings call.

Before providing our guidance for 2026, I would like to talk through certain drivers shaping our expectations for the first and second half of the year and the anticipated impact from the acquisition of Bako and StrataDx. As Ming mentioned, we expect revenue in the first half of the year to be impacted by a significant decrease in volume from our largest customer moving their testing capabilities in-house.

We anticipate revenue from this customer, which was $70.8 million, or 22% in 2025, to decline sharply quarter-over-quarter through Q2 2026, and potentially stabilizing in the second half of the year. The revenue from our largest customer in 2025 was all classified as Precision Diagnostics.

We believe this decrease in revenue will be partially or fully offset by the anticipated contribution of approximately $50 to $55 million from the acquisition of Bako and StrataDx, which we expect to close in March of 2026, contributing to an overall revenue growth in the second half of the year. Bako's revenue is expected to primarily be categorized as anatomic pathology.

Assuming we're able to close Bako and StrataDx acquisitions in a timely manner and that these acquired businesses perform as we currently expect, we're forecasting that in 2026, no single customer will account for more than 10% of our total revenue, reflecting an improvement in our customer concentration profile. We would also expect total revenues to be approximately $350 million for 2026, representing an 8.5% year-over-year growth.

Excluding our largest customer's revenue and assuming that Bako and StrataDx acquisitions timely close and acquired businesses perform as expected, the net estimated growth in Precision Diagnostics would be approximately 31% from 2025 to 2026, and our pipeline for customer opportunities with Precision Diagnostics would remain strong. With these acquisitions, 2026 anatomic pathology revenue would be expected to increase to an aggregate of $162 million, up 53% from $106 million in 2025, largely driven by the Bako acquisition.

BioPharma revenue is expected to decrease from $25.8 million to $20 million, reflecting a long sales cycle as we see in this area. As we move through the year, we expect to see continued momentum from our laboratory services business as it continues to benefit from the investment of AI and anatomic pathology, which is making our services more efficient and precise.

We expect non-GAAP gross margins for the full year to be slightly above 40% as the product mix shifts with the changes in our customer composition. We anticipate that gross margins to be lower in the first half of the year due to the impact of cost of sales charges being allocated across a smaller revenue base.

We expect non-GAAP operating margins to decrease from a minus 8% to a minus 18% for the year, largely driven by the incremental expenses from the Bako and Strata acquisitions, our continued investment in expanding our sales team, and our ongoing commitment to research and development for both our laboratory services business and therapeutic development business. Our strategy for success centers on scaling efficiently and driving innovation across our service offerings, while carefully managing spend and integrating our expected strategic acquisitions effectively.

The anticipated spend for the therapeutic development business is approximately $26 million in 2026 as we continue advancing clinical trials for FID-002 and FID-007. We will continue to invest in business expansion, further improving our laboratory operations, and upgrading laboratory facilities.

We believe that our foundational technology platform supports a strong long-term margin. Using an average share count of 32 million, we expect our full year 2026 non-GAAP EPS guidance to be a loss of $1.45 per share, excluding stock-based compensation, impairment loss, acquisition-related costs, and amortization of intangible assets, as well as any one-time charges.

Finally, our cash position continues to be strong. We remain confident to efficient capital allocation to support future growth as we invest in key initiatives and look for opportunities to expand.

Assuming the close of Bako and StrataDx acquisitions with the purchase price of approximately $56 million, capital purchases of approximately $12 million, spend on our therapeutic development business of $26 million, $14.5 million for the one-time professional liability expense, and excluding any future stock repurchases or other expenditures outside the ordinary course, which could include other M&A, we anticipate ending 2026 with approximately 600 $685 million of cash, cash equivalents, restricted cash, and investments in marketable securities. This number assumes receipt of approximately $106 million in tax refunds, which have been delayed as a result of the Q4 2025 government shutdown.

Overall, we're proud for the organic growth that we have achieved over the past couple of years, and we believe that our strong technology platform, we're well-positioned for longer-term growth, and our strategic investments and innovations deliver value. Thank you for joining our call today.

Operator, now you may open it up for questions.

Great, thank you for taking my question. I think the first question on your largest customer.

If I'm doing my math correct, I think the revenue loss for that customer is about 70% for 2026. I'm just wondering if you can confirm the math.

Then also how conservative is this? Any risk that they can kind of in-house more?

Thank you for that question. I'll take you through the numbers, and then I'll turn it over to Brandon, who can give further color into the dynamics regarding this customer.

You are correct. The revenue from our largest customer was $70.8 million in 2025, and when we lay out the plan for 2026, the $350 million, we assume that we're going to be getting about $11.8 million from this customer.

So 70.8 minus 11.8 is $59 million. The impact of the loss of this customer was a decrease of $59 million to our business.

Then you add to that the impact of the Bako acquisition, which should provide approximately $50 to $55 million of revenues for the year. For 2025, we achieved $322 million of revenues, and in 2026, we're guiding to $350 million.

The minus 59 plus the partial or almost all offset from the Bako still provides a nice organic growth for our business, including Precision Diagnostics. I'll turn it over to Brandon, who can comment on this customer taking this testing in-house.

Yeah. Lu, thank you for the question.

I think Paul did a good job there describing the impact. I think in terms of what we have modeled for 2026, we have pretty good visibility into that.

We think that's a number that we can live with, and that our customer has committed to. There are some contractual arrangements that still need to be met for the year.

Again, we have pretty good visibility into that number.

Got it. Then just follow on that.

You talked about there are some ways to mitigate by growing your customer pipeline. I'm just wondering can you give a little bit more color in terms of how you can kind of grow your own brand diagnostic?

Then related to that, can you also sizing how much of business right now is actually running the other company's assays?

Yeah. Certainly, I can talk about some of the drivers for Precision Diagnostics in 2026.

We think we have several, sort of in no particular order. We're still growing market share for expanded carrier screening tests, our Beacon test.

I think we've mentioned on the previous calls, we've done a great job building a brand and a reputation for Beacon, best-in-class turnaround time, the largest panel out there now with over 1,000 genes, and we continue to improve our connectivity with EMRs. We still see a lot of momentum in Beacon.

We think that's going to be important for 2026. In addition, we've invested a lot in our whole genome sequencing test, bundling it with transcriptomic or RNA sequencing.

We are seeing some really exciting data when we're bundling whole genome sequencing with RNA. We're making diagnoses by combining those that would otherwise be missed in the absence of having that RNA data.

We've expanded that sales team some in 2025, we continue to do so in 2026. We think we're going to continue to gain market share for whole genome sequencing with RISE, our RNA integrated sequencing evaluation.

Looking on sort of a month-to-month basis, we continue to set new records in terms of our volume for whole genome sequencing, we like the momentum there. In addition, we're pretty excited with what we're doing on the somatic side as well.

As we've mentioned, we have MolDX approval for our somatic assay, which we branded Lumera. We're starting now to incorporate our somatic testing into our pathology business, and learning and in operationalizing how to leverage our somatic testing with our AP business.

Our somatic tests, great coverage, great turnaround time, has all the right genes. We think we're going to see some pretty significant improvement in our somatic oncology volume in 2026.

Another area, you're sort of seeing just genetics taking a bigger role in healthcare. You're seeing ASCO announce that patients that are going through certain chemos need to be treated with DPYD testing.

That's a gene that we offer as a service we provide. That seems to be something that's going to drive some demand in 2026.

We see several different drivers for Precision Diagnostics, and we think we're going to deliver a pretty nice growth year.

Lu, this is Paul. As Brandon mentioned, the richness and the diversity of our offering, we feel more excited than ever for 2026.

The incorporation of technology into our businesses, combined with the additional scale we're going to be getting, particularly in the second half of the year with the incorporation of Bako. What does that mean in terms of percentages and numbers?

To take an example, the gross margins, with the impact of this large customer, yes, we are anticipating gross margins to be slightly lower in Q1 and Q2 of 2026. As we end the year, particularly in Q4 of 2026, our forecasted gross margins should be pretty consistent with the record levels that we have achieved in the middle of 2025.

Lu, as both Paul and Brandon mentioned, we do need take the lessons for losing this customer. We still have a reasonable relationship with the customer, they still have the order the other tests from us.

In addition, we have been accelerating the internal the R&D development. We will introduce the new products and the new tests will be the differentiated from the market.

We are feeling pretty strong at the present time, given the technology and the R&D effort we have, we do believe we will recover from this loss.

Great, that's very helpful. Final question for me.

Just wondering what will be your kind of capital allocation strategy? I think in the prepared remark, you're kind of frame it like could have some potential M&A, just wondering what kind of areas that you plan to target after your acquisition of Bako and Strata?

Are you going to do more in precision diagnostic? Then how that balance with your organic investment that you just mentioned?

Thank you.

I think Lu, this will be era of the AI, we have a lot of capability internal. We also will be looking for the synergies we may have in the field for the companies which provide us the AI-enabled the discoveries.

Hi, thanks for taking the question. I'm just going to actually expand on some of Lu's questions.

Can you confirm, I think you actually said that this would be a gross margin headwind, the loss of customer? I believe, secondly, you did do a ton, I thought, carrier screening for this customer, and you have Beacon, which is a great product on your own.

I just want to see if there would've been any loss of cost synergies associated with running that plus your own carrier screening project? Then I just wanted to follow, I think there was a question about if there's a second encompassed customer that's anywhere the size of this still outstanding, just kind of think about.

Then I have a couple questions unrelated. Thank you.

Gross margin headwinds, Paul, you want to take that?

Yeah. I'll take the gross margins headwinds in addition to the revenues we anticipate for the first half of the year compared to the second half.

Out of the $350 million, we anticipate in the first half of the year revenues would be approximately $158 or $159 million. The second half of the year, we anticipate revenues to be approximately $191 to $192 million.

The reason why it's back-end loaded is because in the second half of the year, we anticipate increased momentum for organic growth, excluding this largest customer, combined with the fact that we're going to be getting the full impact of the Bako acquisition. The reason why it's lower in the first half of the year is because of the fast decline of the impact of the loss of this customer.

What that does to our gross margins is, on a non-GAAP basis, we posted gross margins of approximately 41% in Q4 of 2025. We anticipate that to go down by approximately 4 points in the first quarter, about 2 points in the second quarter, but having it rebound in the third and the fourth quarter, and the rebound being quite significant.

We anticipate that the gross margins on a non-GAAP basis would be in excess of 41% in Q3, and then rising even higher than that in Q4. I'll turn it over to Brandon, who can address your other question.

David, thanks for the question. No, we do not have another customer that would be greater than 10%.

We do not.

Got it. Okay.

No, thanks, Paul. That was an incredibly good amount of transparency and detail there, thanks so much.

Just in terms of the acquisition of Bako, you kind of mentioned this sales synergies, or additional sales reps that you might be taking on. Are there additional sales synergies to sell your existing products?

I think you've traditionally been, and correct me if I'm wrong, a lot more oriented on kind of selling to the overall institution more than kind of on a physician-physician, pathologist-pathologist basis. With this additional scale, do you have kind of opportunity to kind of diversify the way you're going after kind of the sales approach?

Not just one more.

Thanks for the question, David. On the anatomic pathology side, it is more physician-level sales versus sort of large system sales.

That said, our AP team has been subscale. We know that team wasn't big enough.

This does get us somewhere between 20 and 30 new sales representatives. The cross-selling sort of synergies are absolutely there.

We will be able to use our existing team to sell Bako products, and the Bako team to sell Fulgent products. A lot of the call points are very similar.

At the end of the day, this gives us more boots on the streets, which is really what we need. There's a lot of call points for anatomic pathology, whether it's surgery centers, dermatologists, other types of practicing physicians, and we've just been subscale there.

With the investments that we've made in AI, we've been able to tackle any sort of capacity constraints, which is always an issue in pathology, especially back when we were reading glass slides and microscopes, capacity has always been an issue. The investments we've made in digital pathology and AI has allowed us to really expand that capacity.

Really looking forward to having this much larger sales team, nearly double the size in 2026, and really setting them loose to go out there and sell.

Got it. I'll just ask one last one on precision oncology here.

How did Beacon's carrier screening do in the quarter? Has that been a continued area of strength, and do you see that as a continued area of strength in 2026?

Thank you very much.

We do. Beacon has been doing very well for us.

Some of the Beacon volume has been impacted by this large customer dropping off faster than we anticipated. Our organic Beacon volume and the pipeline for Beacon opportunities remains very strong.

It's still one of the most important tests within the company. To the oncology side of things, what we're doing with Lumera post-MolDX approval, and getting our pricing and approvals there, and how we're going to begin to leverage that across our pathology division, we're often the laboratory that's making the initial diagnosis of cancer.

That biopsy, whether it's a breast biopsy, colon biopsy, skin biopsy, that's coming to our laboratory. We're performing H&E staining, we're making a cancer diagnosis.

Now we're going to try to take it to the next level, whereas we're going to do NGS, we're going to profile that tumor, not just perform pathology. We've been talking about bridging our divisions together for some time, but we think 2026 is going to be the year that it actually happens, and we're going to be able to provide better cancer diagnosis, better care, and timelier care for these patients.

Thank you.

Hey, everybody. Sorry, not sure what happened there.

Appreciate the questions. Maybe first, a little bit of a numbers question here.

Just thinking about the cash burn and cash dynamics you talk about, if my math is right, you're looking at sort of the core business ex-CapEx, ex the acquisitions, and ex kind of the moving parts you've called out, burning about $33 million for the year. Just kind of curious, is that math right?

How do we think about sort of the change here given that's a little bit bigger than we would have expected, I think even with the customer loss, just giving you net to a pretty similar revenue number overall?

I think your math is largely correct. The reason why we're burning, slightly more than we anticipated is because our operating expenses are going to be slightly to nominal nominally higher as a result of the Bako acquisition.

That's a fully functioning asset that we're very, very happy with, in terms of what it would do to our product profile, our reach for the markets, as well as our overall capabilities. Our intention is to, keep those businesses, to invest in those businesses, because we anticipate, additional growth and momentum to come from that, as well as our overall business, into 2027.

Kind of like taking a step back and looking at, our cash burn, we ended the year we ended the year with, approximately $800 million if you if you include the receivables that we're going to be getting from the IRS tax refund. Now we're forecasting our cash at the end of 2026 to be $685 million.

A huge chunk of that delta of $115 million are costs and a cash outlay that's not associated with the laboratory services business. For example, of the $115 million, at least $56 million is going to be associated with the cash outlay that we have for the Bako acquisition.

We have another $26 million of outlay that's associated with the spend for our biotech asset, the 007 and the 002. We also have capital purchases of approximately $12 million, and the one-time professional liability settlement of $14.5 million.

If you kind of like take a step back, and even if you take into account the impact of the loss of this customer, our laboratory services business is going to be using cash, but not that much, which leaves a lot of cash for us to deploy for M&A, investment in our, overall business, as well as other opportunities that can serve the shareholders.

Helpful. Touching on something you touched on there at the start of that answer.

The digital pathology piece, and I guess that Bako and Strata aren't maybe as far along as you are at basically 100% digital at this point. What sort of additional kind of volume capacity capabilities are those two deals adding, and how much incremental volume will you be able to handle thanks to that digital pathology kind of capability without needing to add materially more pathologists that I know are expensive to add at this stage?

Thanks for the question, Andrew. I don't know that anyone is where we are when it comes to digital pathology.

I think we're significantly ahead of the game here, especially developing our own in-house developed viewer and image management system. Really proud of our R&D team and how quickly we've accelerated our AI and digital pathology reach here.

You're correct, Bako is not highly digital yet, but this stuff is quite portable. There's some protocols that we need to improve based on certain sample types and certain biopsies, but it's mostly portable.

We will do our best to bring them up to speed in terms of digital, in terms of using AI. It is a nice improvement in efficiency, ultimately leading to capacity.

You're right, for a long time, often your bottleneck of capacity was hiring pathologists and getting enough pathologists in the office to read. Remote does two things.

It makes them more efficient, but also allows us to hire pathologists all across the country. We don't need to relocate these people to Dallas or Boston or now perhaps Alpharetta once we close the acquisition of Bako.

It really has changed the game in how we run our business, and we're going to hopefully be able to bring a lot of that to Bako to help them as well. Again, these sales teams, a lot of synergies exist within the sales teams.

Now we have one that's roughly twice the size that can sell products for both Fulgent and Bako.

Adding the Brandon's point. The digital pathology do give us more efficiency, and it will also help us to reduce the errors.

In addition, all this pathologists' work becomes a strong data for the us to continue to train the AI and makes it even better. We do see a lot of synergies between this acquisition, and also we do see the benefit of AI will help our pathology works.

Helpful. Maybe just one last one.

With this large customer in-housing, do you have an opportunity to maybe shrink, whether it's physical footprint or at least kind of pull down the labor spend component of things, given, call it 20% of revenues, I assume a pretty big chunk of volumes that are coming out of that Precision Diagnostics business? I know you want to grow the remaining piece, but just would love a sense for sort of whether you're right-sized for the business at this stage once they're out of the equation.

Yeah. For the 2026 plan, excluding Bako, the overall head count for the organization, we kept relatively flat.

We have some nominal increases, particularly in the sales organization. The reason why we did that instead of having it go deeper or considering cuts is because we view the impact of this customer as a one-time event.

We fully believe in this market. We believe in our capabilities, and we will get back to growth, we believe at a decent trajectory.

Combined with the fact that when we take a look at our laboratory services business, as I mentioned, even with the impact of this customer, it's not consuming that much cash. We like where our organization sits, and we look to return to accelerated growth here in the future.

I'll stop there. Thank you.

Thank you, Andrew.