Fulgent Genetics, Inc. :FLGT-US: Earnings Analysis: Q1, 2017 By the Numbers : June 14, 2017

Fulgent Genetics, Inc. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Fulgent Genetics, Inc. – OncoSec Medical Incorporated, Invitae Corp. and Natera, Inc. (ONCS-US, NVTA-US and NTRA-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 5.31 million, Net Earnings of USD 0.23 million.
  • Gross margins widened from 62.09% to 64.96% compared to the same period last year, operating (EBITDA) margins now 11.89% from -17.88%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 5.31 5.85 5.01 3.97 3.44
Revenue Growth (%YOY) 54.24 101.79 101.16 210.72 38.1
Earnings (mil) 0.23 0.81 -1.11 -4.49 -0.6
Earnings Growth (%YOY) 138.54 111.08 N/A N/A N/A
Net Margin (%) 4.37 13.89 -22.09 -113.12 -17.5
EPS 0.01 0.05 -0.44 -0.25 -0.03
Return on Equity (%) 1.69 9.07 -117.06 -82.79 -46.79
Return on Assets (%) 1.59 8.05 -17.88 -67.1 -41.29

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Market Share Versus Profits

Revenues History
Earnings History

FLGT-US‘s change in revenue this period compared to the same period last year of 54.24% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that FLGT-US is holding onto its market share. Also, for comparison purposes, revenues changed by -9.36% and earnings by -71.46% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 62.09% to 64.96% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -17.88% to 11.89% compared to the same period last year. For comparison, gross margins were 68.18% and EBITDA margins were 28.68% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

FLGT-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 452.01, compared to last year’s level of 59.36 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -17.88% to 4.13% and (2) one-time items. The company’s pretax margins are now 6.37% compared to -17.50% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Fulgent Genetics, Inc. is a technology company, which focus on offering comprehensive genetic testing to provide physicians with clinically actionable diagnostic information they can use to improve the overall quality of patient care. Its technology platform includes proprietary gene probes, advanced database algorithms, adaptive learning software, and proprietary laboratory information management systems. The company was founded on May 13, 2016 and is headquartered in Temple City, CA.

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