Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis ofFinancial Condition and Results of Operations.

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, 2024, filed with the SEC on February 28, 2025, or the 2024 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 2024 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 includes technical laboratory services, testing 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 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, as described below and in the 2024 Annual Report. For more information, see "Item 1A. Risk Factors" in Part I of the 2024 Annual Report and "Item 1A. Risk Factors" in Part II of our Quarterly Report for the quarter ended March 31, 2025, filed with the SEC on May 2, 2025, or our Q1 2025 Quarterly 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 Business Risks and Uncertainties and Other Factors Affecting Our Performance" of the 2024 Annual Report and in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations-Factors Affecting Our Performance" in our Q1 2025 Quarterly Report. In particular and as previously mentioned, we continue to be subject to audits and investigations by government agencies, including audits from applicable tax authorities, and continue to navigate changes and the effects of recent international trade policies and tax legislation. The final results of these matters are uncertain and could materially affect our business and results of operations. In addition, we are continuing to evaluate the potential effects of the shutdown of the United States federal government on our business. As disclosed in our financial statements, we have submitted and plan to submit requests for refunds from the IRS in connection with our purchase of tax credits. We are currently expecting approximately $106.7 million in refunds to be issued by the IRS prior to the end of 2025. However, these refunds may be delayed as a result of the "shutdown". Further, the

continued development of our therapeutic candidates often requires interaction with the FDA. Depending on the ultimate length or extent of any "government shutdown", our research and development efforts may also be delayed.

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 operation data, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the 2024 Annual Report.

Revenue

Revenue increased by $12.3 million, or 17%, from $71.7 million in the three months ended September 30, 2024, to $84.1 million in the three months ended September 30, 2025. The increase in revenue between periods was driven by increases of $7.2 million in precision diagnostics, $1.8 million in anatomic pathology, and $3.3 million in BioPharma services.

Revenue increased by $32.1 million, or 16%, from $207.3 million in the nine months ended September 30, 2024, to $239.3 million in the nine months ended September 30, 2025. The increase in revenue between periods was driven by increases of $18.0 million in precision diagnostics, $8.6 million in anatomic pathology, and $7.3 million in BioPharma services, partially offset by a decrease of $2.0 million in COVID-19 testing.

The increase in precision diagnostics revenue was driven by growth in our reproductive health services and continued strength in legacy diagnostic offerings. Anatomic pathology services revenue increased primarily due to the absence of weather-related disruptions and client losses that had affected the prior year; in addition, the investment that we have made in digital pathology is starting to show return. BioPharma services revenue increased largely as a result of the timing of service projects, though this revenue is expected to remain variable due to the long sale cycles and fluctuations in project timing. Additionally, COVID-19 related revenue recognized in 2024 was due to variable consideration recognized for services completed in prior periods. We do not expect future material revenues from our COVID-19 testing services for the laboratory services.

We believe the factors that will affect our ability to grow these revenue streams are 1) the average price point we offer and the reimbursement rate from insurance 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 insurance 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. Because our proprietary technology platform allows for rapid scaling of a broad, flexible testing menu, we can offer our customers more scalable and affordable testing. Going forward, we will strive to maintain this competitive advantage and emphasize this in our marketing efforts to grow our testing revenue.

Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated in a smaller number of customers. For the laboratory services segment, aggregating customers that are under common control, one customer comprised $19.2 million, or 23%, of our revenue in the three months ended September 30, 2025, and contributed $54.4 million, or 23%, of total revenue in the nine months ended September 30, 2025. The same customer contributed $16.2 million, or 23%, of our 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. To reduce this revenue risk, we will focus on increasing the number of customers and thereby reducing the concentration.

Revenue from the therapeutic development segment includes amounts recognized by ANP, a recently acquired entity, from technologies licensed to pharmaceutical and biotechnology companies, as well as CROs. In addition, ANP has entered into a manufacturing and supply agreement with a customer for specific COVID-19 testing kits, under which, ANP is entitled to participate in gross-margin sharing on the sale of those kits. The timing of the gross-margin sharing revenue is dependent on the customer's

downstream sales of the kits. An insignificant amount of gross-margin sharing revenue was recognized for the three-months ended September 30, 2025.

Revenue from non-U.S. sources increased by $0.4 million, or 7%, from $6.0 million in the three months ended September 30, 2024, to $6.5 million in the three months ended September 30, 2025. Revenue from non-U.S. sources decreased by $0.5 million, or 3%, from $18.2 million in the nine months ended September 30, 2024, to $17.7 million in the nine months ended September 30, 2025. The decrease in the nine-month period was primarily due to a one-time licensing arrangement recognized in the prior period that did not recur in the current period. Additionally, the Company started to group revenue from Puerto Rico and the U.S. Virgin Islands as United States geographic revenue beginning in the third quarter of 2024. These revenues had historically been grouped as non-U.S.

Cost of Revenue

Our consolidated cost of revenue increased by $3.6 million, or 8%, from $45.0 million in the three months ended September 30, 2024, to $48.6 million in the three months ended September 30, 2025. The increase was primarily due to increases of $2.0 million in personnel expenses due to increased headcount, $0.6 million in consulting and outside labor costs, $0.3 million in reagent and supply costs, $0.3 million in software and software licensing, and $0.3 million in depreciation expenses.

Our consolidated cost of revenue increased by $9.2 million, or 7%, from $131.9 million in the nine months ended September 30, 2024, to $141.0 million in the nine months ended September 30, 2025. The increase was primarily due to increases of $5.0 million in personnel costs due to increased headcount, $1.9 million in reagent and supply costs, $1.0 million in consulting and outside labor costs, $0.8 million in depreciation expenses, $0.6 million in software and software licensing, $0.5 million in office expenses, and $0.4 million in facility expenses, partially offset by a decrease of $1.1 million in shipping and handling expenses.

The cost of revenue for the therapeutic development segment, resulted from ANP, is insignificant for the three and nine months ended September 30, 2025.

Our consolidated cost of revenues as a percentage of revenue decreased from 63% in the three months ended September 30, 2024, to 58% in the three months ended September 30, 2025. Our consolidated cost of revenues as a percentage of revenue decreased from 64% in the nine months ended September 30, 2024, to 59% in the nine months ended September 30, 2025.

Our gross profit increased by $8.7 million, or 33%, from $26.8 million in the three months ended September 30, 2024, to $35.5 million in the three months ended September 30, 2025, and increased $22.9 million, or 30%, from $75.4 million in the nine months ended September 30, 2024, to $98.3 million in the nine months ended September 30, 2025. Our gross profit as a percentage of revenue, or gross margin, increased from 37% in the three months ended September 30, 2024, to 42% in the three months ended September 30, 2025, and 36% in the nine months ended September 30, 2024, to 41% in the nine months ended September 30, 2025. This was driven by the increased revenue, streamlined operations, and efficiency as a result of our investments in scaling and centralizing lab operations.

Research and Development

Laboratory Services

During the three and nine months ended September 30, 2025, research and development expenses for our laboratory services segment remained largely in line with prior-year periods. This consistent spending supports advancing our core technology and expanding future testing services. Personnel costs, including bonuses and equity-based compensation, were the primary driver, totaling approximately $6.6 million and $6.3 million in the three months ended September 30, 2025, and 2024, respectively, and $19.7 million and $19.3 million in the nine months ended September 30, 2025, and 2024, respectively. All other expense categories including reagent and supply costs, facilities, depreciation, software and software licensing, are not individually significant and have remained stable. We expect research and development expenses for our laboratory services segment to continue to remain consistent for the remainder of 2025.

Therapeutic Development

For the therapeutic development segment, the research and development expenses in the three months ended September 30, 2025, totaled $6.8 million and consisted of $3.7 million in contract research organizations, or CRO, costs, and $2.8 million in personnel costs, including equity-based compensation. In the three months ended September 30, 2024, these expenses totaled $4.8 million and comprised $2.3 million in CRO costs and $2.2 million of personnel costs, including equity-based compensation. All other expense categories including facilities and depreciation are not individually significant and have remained stable.

For the therapeutic development segment, the research and development expenses in the nine months ended September 30, 2025, totaled $18.1 million and consisted of $9.3 million in CRO costs and $7.8 million in personnel costs, including equity-based compensation. In the nine months ended September 30, 2024, these expenses totaled $15.1 million and comprised $8.0 million in CRO costs and $6.4 million of personnel expenses, including equity-based compensation. All other expense categories including facilities and depreciation are not individually significant and have remained stable.

Research and development expenses for the therapeutic development segment increased by $2.0 million, or 41%, from $4.8 million in the three months ended September 30, 2024, to $6.8 million for the three months ended September 30, 2025. The increase was driven primarily by an increase in CRO costs of $1.3 million and $0.6 million in personnel cost including equity-based compensation.

Research and development expenses for the therapeutic development segment increased by $3.1 million, or 20%, from $15.1 million in the nine months ended September 30, 2024, to $18.1 million in the nine months ended September 30, 2025. The increase was primarily driven by increases of $1.4 million in personnel costs, including equity-based compensation expense, and $1.4 million in CRO costs.

The overall increase was attributed to the advancement and continuation of the clinical study of FID-007, along with FID-022. In the three and nine months ended September 30, 2025, approximately $0.9 million and $2.6 million, respectively, was incurred for the preclinical and clinical development of FID-022, whereas related costs in the three and nine months ended September 30, 2024, were minimal. Expenses for our therapeutic development segment will be influenced by our ability to progress our therapeutic candidates through development with the Food and Drug Administration, or the FDA, the timing of which can be uncertain and delayed due to a variety of factors beyond our control, including recently announced staff reductions at the FDA and the effects or residual effects of the current U.S. "government shutdown," which may affect the FDA's ability to provide any required approvals or review in a timely manner or in the timelines expected.

Looking ahead, we expect research and development expenses to continue increasing as clinical trials progress for FID-007, FID-022, and other preclinical studies.

Selling and Marketing

Our consolidated selling and marketing expenses increased by $2.5 million, or 28%, from $9.1 million in the three months ended September 30, 2024, to $11.6 million in the three months ended September 30, 2025. The increase in consolidated selling and marketing expenses was due to increases of $1.0 million in personnel costs due to increased headcount, $0.8 million in software and software licensing, and $0.4 million in advertising and marketing expenses.

Our consolidated selling and marketing expenses increased by $5.7 million, or 21%, from $26.7 million in the nine months ended September 30, 2024, to $32.4 million in the nine months ended September 30, 2025. The increase in consolidated selling and marketing expenses was due to increases of $2.3 million in personnel costs due to increased headcount, $1.7 million in advertising and marketing expenses, and $1.0 million in software and software licensing.

General and Administrative

Our consolidated general and administrative expenses increased by $2.4 million, or 11%, from $21.0 million in the three months ended September 30, 2024, to $23.3 million in the three months ended September 30, 2025. The increase in consolidated general and administrative expenses was due to increases of $2.7 million in legal expenses as there was a reversal of overly accrued legal liability in the prior year related to the settlement in principle with the Office of Inspector General of the Department of Health and Human Services, $0.3 million in consulting and outside labor, partially offset by a decrease of $0.8 million in personnel expenses.

Our consolidated general and administrative expenses increased by $11.3 million, or 18%, from $63.8 million in the nine months ended September 30, 2024, to $75.0 million in the nine months ended September 30, 2025. The increase in consolidated general and administrative expenses was due to increases of $9.0 million in provision for credit losses, $2.2 million in legal fees as discussed above, $1.0 million in consulting and outside labor expenses, $0.9 million in personnel costs, $0.6 million in office expenses, $0.6 million in insurance expenses, partially offset by a $2.3 million reduction in facility expenses and $1.4 million in depreciation expenses.

Amortization of Intangible Assets

Our consolidated amortization of intangible assets represents amortization expenses on the intangible assets that arose from the business combinations in 2025, 2022 and 2021, and a patent purchased in 2021.

Other Income (Expenses)

Other income (expense) is primarily comprised of interest income, which was $7.9 million and $24.0 million in the three and nine months ended September 30, 2025, respectively, and $8.1 million and $23.2 million in the three and nine months ended September 30, 2024, respectively. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities. The change in interest income for the nine-month period was primarily due to net loss realized from sale of marketable securities in prior year. Other expenses primarily consisted of a one-time, non-cash impairment of a prior investment as discussed further in Note 4. Fair Value Measurements, of the financial statements included in this quarterly report.

Benefit from Income Taxes

Benefit from income taxes was $0.7 million and $2.8 million for the three and nine months ended September 30, 2025, respectively, compared with $3.8 million and $6.3 million for the three and nine months ended September 30, 2024, respectively. The Company's effective tax rate was 9% and 7% for the three and nine months ended September 30, 2025, respectively, compared to 21% and 14% for the three and nine months ended September 30, 2024, respectively. 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.

On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was signed into law, making permanent certain provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing. In accordance with ASC 740, "Income Taxes," the Company has recognized the effects of the new tax law in the period of enactment. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The legislation does not have a material impact on our consolidated financial statements for the quarter ended September 30, 2025. The Company is still evaluating the potential impact of the changes in the OBBBA on future periods.

Net Loss Attributable to Noncontrolling Interest

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

Liquidity and Capital Resources

Liquidity and Sources of Cash

We had $787.7 million and $828.6 million in cash, cash equivalents, restricted cash, and marketable securities as of September 30, 2025, and December 31, 2024, 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 as of September 30, 2025, and December 31, 2024.

Our main uses of cash are for capital expenditures, primarily in buildings, building improvements, and medical laboratory equipment, as well as for stock repurchases, supporting our operations and research and development efforts, and to fund strategic acquisitions as we continue to invest in and seek to grow our business. Cash used to cover 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 expect our existing cash, cash equivalents, restricted cash, and short-term marketable securities will continue to 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, the rate and timing of our billing and collections cycles and the timing and amount of our commitments and other payments. We intend to improve our profitability by improving margins and expanding in new markets for our tests, but these efforts are subject to risks, including those described in "Item 1A. Risk Factors" of the 2024 Annual Report, and may not be successful. 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 from continuing operations for each of the periods presented:

Operating Activities

During the nine months ended September 30, 2025, our operations used $23.5 million of cash, as compared to $4.0 million used in the nine months ended September 30, 2024. The increase in cash used in operating activities in the nine months ended September 30, 2025, as compared with the corresponding period in 2024, was primarily due to the purchase of Investment Tax Credits for $31.7 million in cash in 2025, partially offset by timing of cash receipts from customers and 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 FID-022, and as we continue to invest resources to grow our laboratory services business.

Investing Activities

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

Cash provided by investing activities in the nine months ended September 30, 2025 was $100.2 million, which primarily represented $132.9 million in maturities of marketable securities and $3.8 million from the acquisition of ANP, net of cash received, partially offset by $17.6 million related to the purchase of fixed assets consisting mainly of building improvements, medical laboratory equipment, and computer hardware and $18.9 million from the purchase of marketable securities.

Cash used in investing activities in the nine months ended September 30, 2024, was $30.9 million, which primarily represented $374.2 million in purchase of marketable securities and $36.5 million related to the purchase of fixed assets, including real estate, partially offset by $278.0 million related to maturities of marketable securities and $101.5 million related to proceeds from the sale of marketable securities.

Financing Activities

Cash used in financing activities in the nine months ended September 30, 2025, was $14.3 million, which primarily related to $10.9 million used in the repurchase of common stock and $2.6 million used in common stock withholding for employee tax obligations.

Cash used in financing activities in the nine months ended September 30, 2024, was $4.5 million, which primarily related to $2.7 million used in common stock withholding for employee tax obligations, $1.2 million used in the repayment of notes payable, and $0.2 million for repurchase of common stock.

We did not need to draw on any credit facilities due to our strong cash position as of September 30, 2025.

Stock Repurchase Program

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

During the three and nine months ended September 30, 2025, we repurchased zero and 0.6 million shares of our common stock, respectively, at an aggregate cost of zero and $10.9 million, respectively, under the stock repurchase program. 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 zero and $0.2 million, respectively, under the stock repurchase program. As of September 30, 2025, a total of approximately $139.6 million remained available for future repurchases of our common stock under our 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 2024 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, and do not currently have, any off-balance sheet arrangements during the periods presented, 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.