Fulgent Genetics (FLGT) Q3 2026 earnings review
Fulgent collects more from insurers, but its original business shrinks
Fulgent Genetics, a testing lab that also develops cancer drugs, collects its bills better, but its original business keeps shrinking. Sales rose 8%, all of it from the pathology labs it bought in March. Without them, sales fell 18% from a year ago. Finance chief Paul Kim credited better bill collection, and the loss excluding one-offs narrowed to $2 million.
| Sales from businesses owned a year ago | $68.6M -18% from a year ago |
|---|---|
| Gross margin, excluding one-offs | 36.3% 31.3% last quarter |
| Loss per share, excluding one-offs | -$0.09 +$0.14 a year ago |
| Full-year outlook | Sales unchanged; loss forecast cut middle of the range: $335M sales, $48M loss excluding one-offs |
⚖️ Verdict: 🟢 Bullish
The story got better because the billing system that hurt revenue and margins for a year has started to work. Kim raised the year-end cash forecast and cut the expected full-year loss. One caution: by our math, the plan still has a fourth-quarter loss near $18 million, so it treats the third quarter as partly one-off.
The question now is whether the stronger collections last without one-time help from recovered old debts. Either the fourth quarter again lands ahead of the plan, or losses drift back toward first-half levels. Fourth-quarter results, due early next year, will settle it.
🐂 Bull Case
Better Bill Collection Lifted Gross Margin Five Points
Fulgent moved its billing of insurers to a new system, and the switch cut what it collected on each test. Gross margin, the share of sales left after lab running costs, then fell for three straight quarters. Finance chief Paul Kim said the third quarter turned on "the improvement in our collection rates".
The numbers support him. Gross margin excluding one-offs reached 36.3%, against 31.3% in the second quarter, because the labs earned more on the same work while their costs stayed fixed.
- Gross margin excluding one-offs a year ago: 44.3%
- Lab running costs: 64.7% of sales, against 69.9% last quarter
- Lab running costs against a year ago: up 6.9 percentage points of sales
This matters because the margin still sits eight percentage points below last year. Kim said the gain arrived "quicker than we thought", but the quarterly filing warns that "some delayed amounts may not ultimately be collected at the rate we expect". No executive has disclosed the collection rate itself.
What to watch: fourth-quarter gross margin, due with results early next year. Fulgent's own full-year plan points to about 39% by our math, so a reading near that level would show the billing repair is holding.
The $112 Million Tax Refund Finally Arrived
For a year Fulgent waited on a federal tax refund of about $106 million, which the IRS held back because of staff shortages. Three straight cash forecasts counted on it, so each delay put the year-end balance in doubt.
The money arrived in the third quarter: $112.3 million with interest. Kim then lifted the year-end cash forecast to about $630 million, from $610 million, which settles the question the delay raised.
What to watch: year-end cash, due with fourth-quarter results. Excluding the refund, operations and equipment still used $11.4 million in the quarter, so a balance near the forecast would show that spending stayed in check.
Bought Labs Now Bring a Quarter of Sales
In March Fulgent bought Bako Diagnostics and StrataDx, labs that diagnose skin and foot disease from tissue samples. The $56 million deal nearly doubled its pathology sales team and added clients across the US.
The new labs earned $21.8 million in the third quarter, up from $16.4 million in the second. They now bring almost a quarter of sales, and Kim said they caused most of the quarter's growth.
What to watch: fourth-quarter pathology sales, due early next year. By our math the full-year plan needs about $44.5 million, 9% above the third quarter, so reaching it would show the acquired labs still expanding.
Positives this quarter didn't test
Two standing positives showed activity this quarter but no effect yet on sales or costs. Each item says what reading would test it.
- AI tools that help pathologists read tissue slides: images analysed rose 23% from the second quarter, and five new modules are due in the fourth. A lower cost per case would test them.
- Epic Aura integration, which Perthuis said in August would go live with early users this quarter: neither the release nor the call mentioned it. A go-live date would test it.
🐻 Bear Case
Without the New Labs, Sales Fell 18%
"We are pleased with our third quarter results, driven by the improvement in our collection rates," finance chief Paul Kim said. Better collections should lift reported sales too, because Fulgent books revenue at the amount it expects to be paid.
Sales outside the acquired labs did not move. By our math they came to $68.6 million, slightly below the second quarter's $69.0 million. Kim himself said the quarter's increase was "primarily due to the integration of Bako Diagnostics and StrataDx", the labs bought in March.
- Sales excluding acquired labs: down 18% from a year ago, by our math
- Precision diagnostics, the genetic testing line: $41.8 million, down 18%
- Largest client a year ago: $19.2 million, or 23% of sales
This cuts against Kim's account, because the collection gains lifted margins without lifting the original business. Much of the yearly drop reflects the largest client, which moved its testing in-house. But this quarter's filing no longer splits pathology sales between old and acquired labs, so no one can yet tell whether Fulgent's own pathology business grew.
What to watch: fourth-quarter sales excluding the acquired labs. A figure still near $69 million would mean better collections have not yet reached the original business.
The Plan Points to a Weaker Fourth Quarter
Fulgent kept its full-year sales range unchanged. With nine months done, the range now fixes the fourth quarter: by our math, about $88 million at the middle, below the third quarter's $90.4 million. Chief commercial officer Brandon Perthuis said the team was "taking a prudent approach" while billing fixes continue.
The loss forecast points the same way. By our math, the new full-year range leaves a fourth-quarter loss excluding one-offs of about $18 million, against $2.4 million in the third. That quarter had help, including a $3.2 million recovery of old bad debts, Kim said.
What to watch: the fourth-quarter loss excluding one-offs, due early next year. A loss well under $18 million would show this plan, like the August one, was set with room to spare.
Drug Timelines Move Later as Spending Falls
Fulgent also develops cancer drugs that pack chemotherapy into tiny particles to cut side effects. Chief executive Ming Hsieh said he is "encouraged by the momentum in our therapeutics pipeline", and his team met the FDA in August on FID-007, its head and neck cancer drug.
Hsieh now expects the highest safe dose for the second drug, FID-022, "in the first half of next year"; in August he aimed for this year. Kim cut planned drug spending to $21 million from $26 million, saying the team "updated the timing of related spending".
What to watch: the FDA's view of the FID-007 Phase 3 design, which Hsieh said he would share later this year. A design that needs changes would raise the cost of a trial Fulgent may fund without a partner.
Risks this quarter didn't answer
Six standing risks got no decisive new evidence from the release, the quarterly filing or the call. Each item says where the risk stands after the third quarter.
- Collection rate: still no figure or end date; a stated rate would move it.
- Lab-business goodwill: fair value sat 11% above book value in June, and the filing says it "remains at heightened risk of future impairment".
- Government reviews: Justice Department demands and an audit of $548.9 million in COVID-era payments stay open, with nothing reserved.
- Client loss: no customer buys under a long-term contract, so a large client can leave fast.
- Cash use: the year-end forecast allows about $22 million used in the fourth quarter, by our math.
- BioPharma, testing work for drug companies: the plan leaves about $4 million for the fourth quarter, by our math.
👓 Other Themes
Fulgent Expects Little Effect From Medicare Price Changes
Medicare may change its clinical lab fee schedule, the prices it pays for lab tests, under the law known as PAMA. Chief commercial officer Brandon Perthuis said "we expect the impact to our business to be minimal", because Fulgent's main billing codes have limited exposure to the cuts under discussion. He does not count PAMA as a material threat to the outlook.
💲 Other KPIs
Receivables, bills sent but not yet paid, fell 12% from a year ago while sales rose. By our math they now equal about 63 days of sales, against 77 a year earlier. At the end of 2025 the figure stood near 93 days. Fulgent also wrote off $12.3 million of old COVID-testing bills it had already reserved against.
The share count fell 10% from a year ago. This year the lab group bought back 4.1 million shares for $64.1 million, but purchases almost stopped in the third quarter at 15,059 shares. About $75.6 million of the authorisation remains, and the cash forecast assumes no more buying.
Insurers now pay for more than half of sales, against 39% a year ago. Insurance revenue rose 55%, helped by the acquired labs, while hospitals and other institutions paid 22% less after the largest client left. Insurance claims run through the billing system behind this year's problems, so the mix raises its weight.
🔮 Guidance
Unchanged. The plan still has sales growing about 4% this year. By our math, that leaves about $88 million for the fourth quarter. That is 6% above a year ago but 3% below the third quarter. The range came down once this year, from about $350 million in August.
Raised. The plan now has a full-year loss excluding one-offs of about $48 million, $17 million smaller than in August. By our math, the third quarter alone came in about $16.5 million ahead of the old plan. So the new range leaves about $18 million of loss for the fourth quarter.
Raised. The loss per share now sits near $1.70 at the middle of the range, against about $2.29 before. It counts the 4.1 million shares bought back this year and assumes no more purchases. This is the first raise after two cuts this year.
Raised. The forecast now ends the year with about $630 million of cash and investments. By our math, that allows about $22 million of cash use in the fourth quarter, roughly double the third quarter's pace without the refund. It assumes $13 million of equipment purchases and no more buybacks.
Unchanged. The full-year margin stays in the mid-30s. Nine months ran at 33.4%, so by our math the middle of the band needs about 39% in the fourth quarter. That is three percentage points above the third quarter. Kim tied further gains to collection rates returning to normal.
Raised. The operating loss excluding one-offs now runs near 22% of sales for the year, against about 25% before. By our math, the fourth quarter then lands near minus 22%. The third quarter reached minus 13%, helped by a $3.2 million recovery of old bad debts.
Unchanged in substance; the top came down $1 million. Precision diagnostics, the genetic testing line, needs about $39.5 million in the fourth quarter by our math. That sits 6% below the third quarter. Perthuis said seasonal swings matter less as the business diversifies.
Unchanged. Pathology, diagnosis from tissue samples, needs about $44.5 million in the fourth quarter by our math, 9% above the third. The third quarter came in at $40.9 million, below the pace the August range implied. The step now rests on collections at both old and acquired labs.
Raised at the top. Testing work for drug companies needs only about $4 million in the fourth quarter by our math, about half the third quarter's $7.7 million. The filing says this line varies with project timing, so the range leaves room.
Cut. Planned spending on the drug business falls by $5 million for the year. Kim said the team moved the timing of clinical spending as the trials progress. It feeds directly into the higher year-end cash forecast.
❓ Key Questions
What is the collection rate compared with before?
Kim and Perthuis said collections improved but gave neither the rate nor the gap to the old level. Without it, readers cannot judge how much margin recovery remains or when the billing repair ends.
How much pathology revenue came from the acquired labs?
The filing gave the acquired labs' total sales of $21.8 million but not their pathology share. That split decides whether Fulgent's own pathology business grew or shrank.
Why does the plan expect a wider fourth-quarter loss?
By our math the new loss range leaves about $18 million for the fourth quarter, against $2.4 million in the third. Is that caution, or do costs and one-time gains reverse?
What did the FDA say about FID-007's Phase 3?
Fulgent held the meeting in August but has not shared the outcome. The answer sets the trial's cost and start date, and whether the company needs a partner to pay for it.
What results would trigger a goodwill write-down?
The June test left the lab business's fair value only 11% above book value. The filing names missed sales and cost targets as possible triggers, so investors need to know how large a miss would cut that cushion.