# Fulgent Genetics, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Fulgent Genetics, Inc.](/companies/flgt.md) (CIK 1674930)
- Form: 10-Q
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 07:17 ET
- Period: 2024-09-30
- Accession: 0000950170-24-123684
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1674930/000095017024123684/flgt-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1674930/000095017024123684/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $71.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $207.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $45.0m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $131.9m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $26.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $75.4m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $11.8m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $36.7m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$17.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$57.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $14.0k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | −$210.0k | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | −$3.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | −$6.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$14.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$36.8m | us-gaap:NetIncomeLoss |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 30,416,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 30,095,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$4.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $36.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $225.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $58.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $326.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $1.23bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $74.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $98.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $1.14bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 29,666 characters.

*The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included in this report. Additionally, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K promulgated by the U.S. Securities and Exchange Commission, or SEC, in preparing this discussion and analysis, we presume that readers have access to and have read the discussion and analysis of our financial condition and results of operations included in our annual report on Form 10-K for our fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024, or the 2023 Annual Report. As used in this discussion and analysis and elsewhere in this report, unless the context otherwise requires, the terms “Fulgent,” the “Company,” “we,” “us” and “our” refer to Fulgent Genetics, Inc. and its consolidated subsidiaries.*

### Forward-Looking Statements

*The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are statements other than historical facts and relate to future events or circumstances or our future performance, and they are based on our current assumptions, expectations and beliefs concerning future developments and their potential effect on our business. The forward-looking statements in this discussion and analysis include statements about, among other things, our future financial and operating performance, our future cash flows and liquidity and our growth strategies, the development of our drug candidates, as well as anticipated trends in our business and industry. These forward-looking statements are subject to a number of risks and uncertainties, including, among others, those described under “Item 1A. Risk Factors” in Part I of the 2023 Annual Report. Moreover, we operate in a competitive and rapidly evolving industry and new risks emerge from time to time. It is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations. In light of these risks and uncertainties, the forward-looking events and circumstances described in this discussion and analysis may not occur, and actual results could differ materially and adversely from those described in or implied by any forward-looking statements we make. Although we have based our forward-looking statements on assumptions and expectations we believe are reasonable, we cannot guarantee future results, levels of activity, performance or achievements or other future events. As a result, forward-looking statements should not be relied on or viewed as predictions of future events, and this discussion and analysis should be read with the understanding that actual future results, levels of activity, performance and achievements may be materially different than our current expectations. The forward-looking statements in this discussion and analysis speak only as of the date of this report, and except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.*

### Overview

We are a technology-based company with a well-established laboratory services business and a therapeutic development business. Our laboratory services business, to which we formerly referred to as our clinical diagnostic business, includes technical laboratory services and professional interpretation of laboratory results by licensed physicians. Our therapeutic development business is focused on developing drug candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and pharmacokinetic profile, or PK profile, of new and existing cancer drugs.

### Business Risks and Uncertainties and Other Factors Affecting Our Performance

Our business and prospects are exposed to numerous risks and uncertainties. For more information, see “Item 1A. Risk Factors” in Part I of the 2023 Annual Report. In addition, our performance in any period is affected by a number of other factors. See the description of some of the material factors affecting our performance in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Annual Report.

### Results of Operations

The table below summarizes the results of our continuing operations for each of the periods presented. For a financial overview relating to our results of operations, including general descriptions of the make-up of material line items of our statement of operations data, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Annual Report.

*(in thousands, except percentages)*

| Statement of Operation Data: | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $71,743 | $84,687 | $(12,944) | (15)% | $207,256 | $218,708 | $(11,452) | (5)% |
| Cost of revenue | 44,972 | 44,843 | 129 | 0% | 131,890 | 139,481 | (7,591) | (5)% |
| Gross profit | 26,771 | 39,844 | (13,073) | (33)% | 75,366 | 79,227 | (3,861) | (5)% |
| Operating expenses: |  |  |  |  |  |  |  |  |
| Research and development | 11,783 | 10,014 | 1,769 | 18% | 36,703 | 29,488 | 7,215 | 24% |
| Selling and marketing | 9,124 | 10,161 | (1,037) | (10)% | 26,708 | 30,967 | (4,259) | (14)% |
| General and administrative | 20,950 | 17,498 | 3,452 | 20% | 63,765 | 57,293 | 6,472 | 11% |
| Amortization of intangible assets | 1,993 | 1,957 | 36 | 2% | 5,973 | 5,887 | 86 | 1% |
| Total operating expenses | 43,850 | 39,630 | 4,220 | 11% | 133,149 | 123,635 | 9,514 | 8% |
| Operating (loss) income | (17,079) | 214 | (17,293) | (8081)% | (57,783) | (44,408) | (13,375) | 30% |
| Other income (expenses): |  |  |  |  |  |  |  |  |
| Interest income | 8,090 | 6,472 | 1,618 | 25% | 23,181 | 15,802 | 7,379 | 47% |
| Interest expense | (14) | (70) | 56 | (80)% | 210 | (625) | 835 | (134)% |
| Impairment of available-for-sale debt securities | (10,073) | — | (10,073) | \* | (10,073) | — | (10,073) | \* |
| Other income, net | 544 | 244 | 300 | 123% | 554 | 342 | 212 | 62% |
| Total other (expense) income, net | (1,453) | 6,646 | (8,099) | (122)% | 13,872 | 15,519 | (1,647) | (11)% |
| (Loss) income before income taxes | (18,532) | 6,860 | (25,392) | (370)% | (43,911) | (28,889) | (15,022) | 52% |
| (Benefit from) provision for income taxes | (3,838) | 20,326 | (24,164) | (119)% | (6,281) | 12,016 | (18,297) | (152)% |
| Net loss from consolidated operations | (14,694) | (13,466) | (1,228) | 9% | (37,630) | (40,905) | 3,275 | (8)% |
| Net loss attributable to noncontrolling interests | 46 | 359 | (313) | (87)% | 810 | 1,229 | (419) | (34)% |
| Net loss attributable to Fulgent | $(14,648) | $(13,107) | $(1,541) | 12% | $(36,820) | $(39,676) | $2,856 | (7)% |

\* not meaningful

### Revenue

*(in thousands, except percentages)*

| Revenue from laboratory services: | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Precision diagnostics | $43,582 | $36,691 | $6,891 | 19% | $124,172 | $96,531 | $27,641 | 29% |
| Anatomic pathology | 24,228 | 24,560 | (332) | (1)% | 70,766 | 78,361 | (7,595) | (10)% |
| BioPharma services | 3,933 | 4,496 | (563) | (13)% | 10,201 | 20,687 | (10,486) | (51)% |
| COVID-19 | — | 18,940 | (18,940) | (100)% | 2,117 | 23,129 | (21,012) | (91)% |
| Total laboratory services | $71,743 | $84,687 | $(12,944) | (15)% | $207,256 | $218,708 | $(11,452) | (5)% |

Revenue decreased by $12.9 million, or (15)%, from $84.7 million in the three months ended September 30, 2023 to $71.7 million in the three months ended September 30, 2024. The decrease in revenue was due to decreases of $18.9 million in COVID-19 testing services, $0.6 million in BioPharma services, and $0.3 million in anatomic pathology, partially offset by an increase of $6.9 million in precision diagnostics.

Revenue decreased by $11.5 million, or (5)%, from $218.7 million in the nine months ended September 30, 2023 to $207.3 million in the nine months ended September 30, 2024. The decrease in revenue was due to decreases of $21.0 million in COVID-19 testing services, $10.5 million in BioPharma services, $7.6 million in anatomic pathology, and partially offset by an increase of $27.6 million in precision diagnostics.

The increase in precision diagnostics revenue was due to a growth in our reproductive health services and growth in our specialized oncology tests and testing services. The decrease in anatomic pathology services was due to decreased reimbursement rates from third-party payors. We have also experienced, and expect to continue to experience, seasonality in our anatomic pathology testing services which are dependent on patients being treated by healthcare providers. The volume of our anatomic pathology testing services can fluctuate during holiday periods and can decline due to extreme adverse weather conditions. The decrease in BioPharma services was attributed to timing of BioPharma service projects. We also expect that our BioPharma services revenue may continue to fluctuate from period to period due in part to the length of the sales cycle and variation in timing amongst projects. The decrease in COVID-19 testing services was primarily due to revenue recorded for testing services completed in the prior periods and ceased testing operations at the end of March 2023.

We believe the factors that will affect our ability to grow or maintain these revenue streams are 1) the average price point we offer and the reimbursement rate from third-party payors; 2) the concentration of our payor base; 3) the competitive advantage we have due to our broad and flexible test menu, detection rate, and turnaround times; and 4) growth in size of an addressable market. Estimated collection amounts from third-party payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs.

Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated on a smaller number of customers. For the laboratory services business, aggregating customers that are under common control, one customer comprised of $16.2 million, or 23%, of total revenue in the three months ended September 30, 2024, and contributed $45.7 million, or 22%, of total revenue in the nine months ended September 30, 2024. The same customer contributed $12.2 million, or 14%, of total revenue in the three months ended September 30, 2023, and contributed $24.8 million, or 11%, of the Company’s total revenue in the nine months ended September 30, 2023. To reduce this revenue concentration risk, we continue to focus on increasing the number of customers and thereby reducing the concentration.

Revenue from non-U.S. sources increased by $0.3 million, or 6%, from $5.7 million in the three months ended September 30, 2023 to $6.0 million in the three months ended September 30, 2024. Revenue from non-U.S. sources increased by $3.6 million, or 25%, from $14.6 million in the nine months ended September 30, 2023, to $18.2 million in the nine months ended September 30, 2024. The increase in revenue from non-U.S. sources between periods were primarily due to new foreign customers and increased sales of our testing services to some of our existing non-U.S. customers.

### Cost of Revenue

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of revenue | $44,972 | $44,843 | $129 | 0% | $131,890 | $139,481 | $(7,591) | (5)% |
| Cost of revenue as a % of revenue | 63% | 53% |  |  | 64% | 64% |  |  |

Our consolidated cost of revenue was flat in the three-month periods ended September 30, 2024 and 2023.

Our consolidated cost of revenue decreased by $7.6 million, or 5%, from $139.5 million in the nine months ended September 30, 2023 to $131.9 million in the nine months ended September 30, 2024. The decrease in consolidated cost of revenue was due to decreases of $5.6 million in consulting and outside labor costs, $1.7 million in software expenses, $1.0 million in shipping and handling expenses, related to the cessation of COVID-19 testing operations, closure of a laboratory, and efforts of optimizing cost structures mentioned above, partially offset by an increase of $0.9 million in reagents and supply expenses.

Our consolidated cost of revenues as a percentage of revenue increased from 53% in the three months ended September 30, 2023 to 63% in the three months ended September 30, 2024, due to revenue recorded in 2023 for COVID-19 testing services completed in the prior periods due to collection efforts. Our consolidated cost of revenues as a percentage of revenue was flat in the nine-month periods ended September 30, 2024 and 2023.

Our gross profit decreased by $13.1 million, or 33%, from $39.8 million in the three months ended September 30, 2023 to $26.8 million in the three months ended September 30, 2024, and decreased by $3.9 million, or 5%, from $79.2 million in the nine months ended September 30, 2023 to $75.4 million in the nine months ended September 30, 2024. Our gross profit as a percentage of revenue, or gross margin, decreased from 47% in the three months ended September 30, 2023 to 37% in the three months ended September 30, 2024, and was flat in the nine-month periods ended September 30, 2024 and 2023. The decreases were primarily due to revenue recorded in 2023 for COVID-19 testing services completed in the prior periods due to collection efforts.

### Research and Development

*(in thousands, except percentages)*

| Research and development | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Laboratory services | $6,980 | $7,448 | $(468) | (6)% | $21,635 | $21,760 | $(125) | (1)% |
| Therapeutic development | 4,803 | 2,566 | 2,237 | 87% | 15,068 | 7,728 | 7,340 | 95% |
| Total research and development | $11,783 | $10,014 | $1,769 |  | $36,703 | $29,488 | $7,215 |  |

Research and development expenses for the laboratory services business were mainly for developing our technology and testing services and were flat for both periods.

Research and development expenses for the therapeutic development business were primarily related to the development of FID-007. The expenses increased by $2.2 million, or 87%, from $2.6 million in the three months ended September 30, 2023 to $4.8 million in the three months ended September 30, 2024, and increased by $7.3 million, or 95%, from $7.7 million in the nine months ended September 30, 2023 to $15.1 million in the nine months ended September 30, 2024. The increase was primarily due to increased expenses related to the drug study with our contract research organizations. We anticipate research and development expenditures for this segment to continue to increase as we began enrollment for the phase 2 study of FID-007 in the second quarter of 2024. We expect to enroll approximately 40 patients at various sites for this clinical trial and to complete enrollment by late 2025. We anticipate research and development expenditures to continue to increase as and if the pace of our enrollment for the phase 2 study for FID-007 increases and as we continue the development of FID-007 and other potential therapeutic candidates.

### Selling and Marketing

Our consolidated selling and marketing expenses decreased by $1.0 million, or 10%, from $10.2 million in the three months ended September 30, 2023 to $9.1 million in the three months ended September 30, 2024. The decrease in consolidated selling and marketing expenses was due to decreases of $0.6 million in marketing expenses and $0.5 million in facility expense.

Our consolidated selling and marketing expenses decreased by $4.3 million, or 14%, from $31.0 million in the nine months ended September 30, 2023 to $26.7 million in the nine months ended September 30, 2024. The decrease in consolidated selling and marketing expenses was primarily due to decreases of $1.3 million in facility expenses, $1.2 million in consulting and outside labor costs, $1.0 million in marketing expenses, $0.5 million in depreciation expenses, and $0.4 million in commission.

The change in selling and marketing expenses for both periods is mainly due to discontinued marketing efforts related to the COVID-19 business and decreased revenue in BioPharma and anatomic pathology services. The decrease in facility expenses was due to terminations of certain leases.

### General and Administrative

Our consolidated general and administrative expenses increased by $3.5 million, or 20%, from $17.5 million in the three months ended September 30, 2023 to $21.0 million in the three months ended September 30, 2024. The increase in consolidated general and administrative expenses was due to increases of $4.2 million in personnel costs including equity-based compensation expenses, and $3.3 million in provision for credit losses, partially offset by decreases of $3.1 million in legal expenses, $0.5 million in facility expenses, and $0.4 million in depreciation expenses.

Our consolidated general and administrative expenses increased by $6.5 million, or 11%, from $57.3 million in the nine months ended September 30, 2023 to $63.8 million in the nine months ended September 30, 2024. The increase in consolidated general and administrative expenses was due to increases of $9.5 million in personnel expense including equity-based compensation expenses and $1.1 million in provision for credit losses, partially offset by decreases of $2.7 million in legal expenses and $1.4 million in business insurance.

The increase in personnel expenses was primarily due to equity awards granted after the third quarter of 2023; the decrease in legal expenses was due to reversal of overly accrued legal liabilities; the decrease in business insurance was due to savings from consolidating coverages and service providers; and the change in facility expenses was due to the relocation of certain facilities and termination of certain leases.

### Amortization of Intangible Assets

Amortization of intangible assets represents amortization expenses on the intangible assets that arose from the business combinations in prior years. The Company did not have any new business combinations in the current period.

### Other Income (Expenses)

Other income, net, is primarily comprised of interest income, which was $8.1 million and $23.2 million in the three and nine months ended September 30, 2024, respectively, and $6.5 million and $15.8 million in the three and nine months ended September 30, 2023, respectively, and impairment of available-for-sale debt securities of $10.1 million in each of the three and nine months ended September 30, 2024. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities. The increase in interest income was primarily due to increased interest rates on marketable securities relative to the prior comparative period.

### (Benefit from) Provision for Income Taxes

(Benefit from) provision for income taxes was $(3.8) million and $(6.3) million for the three and nine months ended September 30, 2024, respectively, compared with $20.3 million and $12.0 million for the three and nine months ended September 30, 2023, respectively. The effective tax rates were 21% and 14% for the three and nine months ended September 30, 2024, respectively, compared to 296% and (42)% for the three and nine months ended September 30, 2023. The change in the effective tax rate compared to prior period is due to the valuation allowance in the current period that precludes us from recognizing the benefit from our net operating losses.

### Net Loss Attributable to Noncontrolling Interest

Net loss attributable to noncontrolling interest represents net loss attributable to the minority shareholders from entities not wholly owned.

### Liquidity and Capital Resources

### Liquidity and Sources of Cash

We had $815.4 million and $847.7 million in cash, cash equivalents, restricted cash, and marketable securities as of September 30, 2024 and December 31, 2023, respectively. Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, U.S. treasury bills, corporate bonds, municipal bonds, and Yankee debt securities.

Our primary uses of cash are to fund our operations, repurchase our stock, and to fund strategic acquisitions as we continue to invest in and seek to grow our business. Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses.

We believe our existing cash, cash equivalents, and short-term marketable securities will be sufficient to meet our anticipated cash requirements for at least the next 12 months. Cash provided by operations has significantly contributed to our ability to meet our liquidity needs, including paying for capital expenditures; however, cash provided by our operations has in the past experienced fluctuations from period to period, which we expect may continue in the future. These fluctuations can occur because of a variety of factors, including, among others, factors relating to the demand for our tests, the amount and timing of sales, the prices we charge for our tests due to changes in product mix, customer mix, general price degradation for tests, or other factors, seasonality, the rate and timing of our billing and collections cycles and the timing and amount of our commitments and other payments. Moreover, even if our liquidity expectations are correct, we may still seek to raise additional capital through securities offerings, credit facilities or other debt financings, asset sales or collaborations or licensing arrangements.

If we raise additional funds by issuing equity securities, our existing stockholders could experience substantial dilution. Additionally, any preferred stock we issue could provide for rights, preferences or privileges senior to those of our common stock, and our issuance of any additional equity securities, or the possibility of such an issuance, could cause the market price of our common stock to decline. The terms of any debt securities we issue or borrowings we incur, if available, could impose significant restrictions on our operations, such as limitations on our ability to incur additional debt or issue additional equity or other restrictions that could adversely affect our ability to conduct our business, and would result in increased fixed payment obligations. If we seek to sell assets or enter into collaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms or relinquish or license to a third party our rights to important or valuable technologies or tests we may otherwise seek to develop ourselves. Moreover, we may incur substantial costs in pursuing future capital, including investment banking, legal and accounting fees, printing and distribution expenses and other similar costs. Additional funding may not be available to us when needed, on acceptable terms or at all. If we are not able to secure funding if and when needed and on reasonable terms, we may be forced to delay, reduce the scope of or eliminate one or more sales and marketing initiatives, research and development programs or other growth plans or strategies. In addition, we may be forced to work with a partner on one or more aspects of our tests or market development programs or initiatives, which could lower the economic value to us of these tests, programs or initiatives. Any such outcome could significantly harm our business, performance and prospects.

### Cash Flows

The following table summarizes our cash flows for each of the periods indicated:

*(in thousands)*

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash (used in) provided by operating activities | $(3,958) | $12,070 |
| Net cash (used in) provided by investing activities | $(30,897) | $14,628 |
| Net cash used in financing activities | $(4,520) | $(21,834) |

#### Operating Activities

During the nine months ended September 30, 2024, our operations used $4.0 million of cash, as compared to $12.1 million provided in the nine months ended September 30, 2023. The decrease in cash from operating activities in the nine months ended September 30, 2024, as compared with the corresponding period in 2023 was primarily due to ITCs purchased for $24.6 million in cash in 2024, partially offset by the timing of cash payments for operating expenses. We expect to incur more operating expenses and use more cash in operating activities in the coming quarters as a result of our planned and ongoing clinical trials for FID-007 and as we continue to invest resources to grow our laboratory services business.

#### Investing Activities

The cash provided by or used in investing activities are impacted by capital expenditures for operation needs and timing of payments, timing of maturities of marketable securities, and discretionary business combinations and other investment.

Cash used in investing activities in the nine months ended September 30, 2024 was $30.9 million, which primarily represents $374.2 million for purchases of marketable securities and $36.5 million for purchases of fixed assets, including real estate consisting of the property where our Alpharetta, Georgia laboratory is located, partially offset by proceeds of $278.0 million from maturities of marketable securities and proceeds of $101.5 million from sales of marketable securities.

Cash provided by investing activities in the nine months ended September 30, 2023 was $14.6 million, which primarily represents proceeds of $376.9 million from maturities of marketable securities, partially offset by $343.6 million for purchases of marketable securities and $19.1 million on purchases of fixed assets, including real estate.

#### Financing Activities

Cash used in financing activities in the nine months ended September 30, 2024 was $4.5 million, which primarily related to $2.7 million common stock withholding for employee tax obligations and $1.2 million for repayment of the notes payable.

Cash used in financing activities in the nine months ended September 30, 2023 was $21.8 million, which primarily related to $15.0 million repayment to the margin loan account, $2.4 million repayment to the notes payable, $2.2 million repurchase of common stock, and $1.6 million common stock withholding for employee tax obligations.

We do not expect to use any credit facilities for the foreseeable future due to the strong cash position as of September 30, 2024.

### Stock Repurchase Program

In March 2022, the Board authorized a $250.0 million stock repurchase program. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. The stock repurchase program has no expiration from the date of authorization.

During the three and nine months ended September 30, 2024, we repurchased zero and 10,000 shares of our common stock, respectively, at an aggregate cost of $0.2 million, under the stock repurchase program. During the three and nine months ended September 30, 2023, we repurchased 80,000 shares of our common stock at an aggregate cost of $2.2 million under the stock repurchase program. As of September 30, 2024, a total of approximately $150.5 million remained available for future repurchases of our common stock under the stock repurchase program.

### Critical Accounting Policies and Use of Estimates

There have been no material changes to our critical accounting policies or estimates from the information provided in Part II, “Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the 2023 Annual Report.

### Recent Accounting Pronouncements

See Note 2, *Summary of Significant Accounting Policies*, to our condensed consolidated financial statements included in this report for information about recent accounting pronouncements.

### Off-Balance Sheet Arrangements

We did not have during the periods presented, and do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

## Market risk

As filed, 254 characters.

For quantitative and qualitative disclosures about market risk, see Part II, “Item 7A, Quantitative and Qualitative Disclosures About Market Risk,” in our 2023 Annual Report. There were no material changes during the nine months ended September 30, 2024.

## Controls and procedures

As filed, 2,569 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As required by Rule 13a-15(b) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024.

### Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control (as required by Rule 13a-15(b) under the Exchange Act) over the financial reporting during the three and nine months ended September 30, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

### Inherent Limitations on Disclosure Controls and Procedures and Internal Control over Financial Reporting

Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of these inherent limitations, our disclosure and internal controls may not prevent or detect all instances of fraud, misstatements or other control issues. In addition, projections of any evaluation of the effectiveness of disclosure or internal controls to future periods are subject to risks, including, among others, that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.

## Risk factors

As filed, 329 characters.

Except as set forth in the Company’s Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2024 and June 30, 2024, filed with the SEC on May 3, 2024 and August 2, 2024, respectively, there have been no material changes to the risk factors set forth in Part I, “Item 1A, Risk Factors,” of the 2023 Annual Report.

Filed Nov 8, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-123684. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.