Fulgent Genetics (NYSE: NASDAQ:FLGT), a provider of comprehensive genetic testing solutions, has reported a robust first quarter for 2024, with total revenues reaching $64.5 million. The company's core revenue, excluding COVID-19 test sales, stood at $63.2 million, driven by strong performance in precision diagnostics, particularly in reproductive health and oncology.
Fulgent Genetics is also making strides in its therapeutic development business, with its Fulgent Pharma division showing promise. The company anticipates a 10% sequential growth in core revenue for the second quarter and expects its anatomic pathology business to stabilize throughout 2024.
With the launch of a new noninvasive prenatal testing product, KNOVA, and a solid financial position, boasting $846.2 million in cash and marketable securities, Fulgent Genetics is poised for continued growth.
Key Takeaways
- Fulgent Genetics reported Q1 2024 revenues of $64.5 million, with $63.2 million from core businesses.
- The company launched a new NIPT product, KNOVA, and expects anatomic pathology to stabilize in 2024.
- Fulgent Genetics anticipates 10% sequential core revenue growth in Q2 and a 7% year-over-year growth with $280 million in core revenue for 2024.
- Gross margin improved to 34.3%, with a non-GAAP gross margin target of 40% or slightly above by year-end.
- Fulgent Genetics plans to expand its sales team to about 20 by the end of 2024 and is confident in its revenue growth opportunities.
Company Outlook
- Fulgent Genetics reiterates a positive outlook for 2024 with expected core revenue of $280 million.
- The company aims for a non-GAAP gross margin of 40% or above by the end of the year.
- Fulgent Genetics expects to achieve a net non-GAAP loss of approximately $1.05 per share for 2024.
Bearish Highlights
- The company acknowledges entering the NIPT market late but is optimistic about its differentiated product.
- Fulgent Genetics anticipates operating expenses of around $43 million for each remaining quarter of 2024.
Bullish Highlights
- Fulgent Genetics sees strength in its core business and is confident in its revenue growth opportunities.
- The company has raised its core revenue guidance from $260 million to $280 million.
- Gross margins are expected to increase, potentially reaching 42% in the second half of 2024.
Misses
- There were no specific misses reported in the earnings call.
Q&A Highlights
- The company discussed expanding its sales team and launching the KNOVA NIPT product.
- Fulgent Genetics plans to ramp up sales headcount to around 20 by the end of 2024.
- The company's go-to-market strategy and sales organization have been revamped to improve performance in the anatomic pathology business.
Fulgent Genetics has demonstrated a strong start to 2024, with a focus on growth and operational efficiency. The company's strategic investments in its product lineup and sales force expansion indicate a commitment to capturing market share and enhancing profitability. With a solid financial foundation and a clear strategic direction, Fulgent Genetics is setting the stage for sustained success in the genetic testing market.
InvestingPro Insights
Fulgent Genetics (FLGT) has shown a commitment to growth and operational efficiency in the first quarter of 2024, which is reflected in its strong financial position and strategic initiatives. To provide further context to the company's performance and outlook, here are some insights from InvestingPro:
InvestingPro Data:
- The company's Market Cap stands at $642.86 million, illustrating its mid-cap status in the market.
- With a Price / Book ratio of 0.57 as of the last twelve months ending Q4 2023, the company's stock appears to be valued modestly in relation to its net assets.
- Despite a significant revenue decline of 53.27% over the last twelve months as of Q4 2023, the company managed a quarterly revenue growth of 4.14% in Q1 2024, indicating a potential turnaround.
InvestingPro Tips:
- Fulgent Genetics' management has been actively buying back shares, which could signal confidence in the company's future prospects and a commitment to returning value to shareholders.
- The company holds more cash than debt on its balance sheet, providing financial flexibility and a buffer against market volatility.
For investors seeking a deeper dive into Fulgent Genetics' financial health and future performance, there are additional InvestingPro Tips available. There are 9 more tips that could provide valuable insights, which can be accessed through InvestingPro's platform at https://www.investing.com/pro/FLGT. Remember to use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, helping you make more informed investment decisions.
Full transcript - Fulgent Genetics Inc (FLGT) Q1 2024:
Operator: Greetings, and welcome to the Fulgent Genetics First Quarter 2024 Conference Call and Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Melanie Solomon, Investor Relations for Fulgent Genetics. Thank you. You may begin.
Melanie Solomon: Good morning, and welcome to the Fulgent first quarter 2024 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 www.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 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 that may make 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 looking to management's remarks today with the understanding that actual events, including the company's actual future results, may be materially different in 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 31, 2023, and subsequently filed reports, which are available on the company's Investor Relations website. Management's prepared remarks including discussions of 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 prepared 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 first quarter of 2024 for more information, including the description of how the company calculates non-GAAP income or loss, earnings or loss per share, non-GAAP operating margin and adjusted EBITDA, and a reconciliation of these financial measures to income or loss, earnings or loss per share and operating margin, the most directly comparable GAAP financial measures. With that, I'd now like to turn the call over to Ming.
Ming Hsieh: Thank you, Melanie. Good morning, and thank you for joining our call today. I will start with some comments on the first quarter and our therapeutic development business, then Brandon will review our product, go-to-market update for our laboratory service business in the first quarter. Paul will conclude with the financials and outlook before we take your questions. We are pleased with our results in the first quarter. With $64.5 million in total revenue, we recognized $1.3 million of revenue on previously built COVID-19 test. Excluding COVID-19 revenue, first quarter core revenue of $63.2 million was driven by momentum in precision diagnostics, particularly reproductive health and oncology. All Fulgent revenue at this time originated from our laboratory services business, previously referred as our clinical diagnostics business. Brandon will discuss this business further. Turning to our therapeutic development business. We continue to make good progress with the Fulgent Pharma. Our novel nanoencapsulation technology includes over 30 issued or active patents and active patent applications and target therapy platform designed to improve therapeutic windows and the pharmacokinetics profile of both new and existing cancer drugs. We are excited about this platform because it's potential to yield several drug candidates. We believe that our lead drug candidate, FID-007 has shown promising results in clinical trials to date for treatment of numerous cancers, include head and neck, ampullary and pancreatic. An abstract of a preliminary HNSCC clinical results from our Phase 1/1b study has shown -- has been accepted for presentation at the 2024 ASCO Annual Meeting, which will be held May 31 through June 4 in Chicago. Our Phase 2 clinical protocol for second line treatment of HNSCC was accepted by the FDA, and we expect to enroll first patient this quarter. We look to bring FID-007 to more patients in the clinical trial setting and keeping you updated on the progress of the trial. We are advancing a second drug candidate, FID-002, a nanoencapsulated SN38 toward an IND or investigational new drug application by end of this year. We believe our nano drug delivery platform has the potential to address the challenges of currently available treatment for the colon, bile duct and other cancers using SN38 inside of a pro-drug of SN38. Building up our nano particle technology, we are also developing next-generation antibody drug conjugates ADC technology platform that could potentially provide even broader killings towards heterogeneous cancer cells than those ADCs with bystander killing effect. Our ADC platform is not target-driven and maybe potentially being applied more targeted ADCs, particularly new targets with low antigen inflation, where existing ADC platform have failed to show the effect. Overall, we have a strong strategy with both laboratory service business and the therapeutic development business. We continue to maintain a strong balance sheet with which we will execute this strategy. I'd like to thank our employees, partners, stakeholders for your hard work and loyalty. We look forward to continued progress in 2024. I'll now turn over the call to Brandon Perthuis, our Chief Commercial Officer, to talk about our laboratory service business results during the first quarter. Brandon?
Brandon Perthuis: Thank you, Ming. Our laboratory services business includes precision diagnostics, anatomic pathology and biopharma services. These three represent our core revenue streams and do not include COVID-19 testing revenue. First quarter core revenue was up approximately $500,000 year-over-year, however, down about $3.3 million sequentially. The sequential decline was attributed to timing of biopharma service contracts and a decline in our anatomic pathology revenue. However, looking at our precision diagnostics revenue stream, precision diagnostics was up $9.5 million or 34% year-over-year and increased $2 million or 6% sequentially. The growth in precision diagnostics was led by reproductive health and oncology. We saw volumes continue to trend up late in the first quarter, and we exited the quarter with great momentum. We believe this momentum will carry into the second quarter. Thus, we expect approximately 10% sequential core revenue growth for the second quarter. In terms of reproductive health, the outperformance was driven by our Beacon expanded carrier screening product. We continue to execute on the operational front, delivering excellent turnaround time, clinical support and comprehensive gene content leading to increased detection rates. We also continue to execute on the commercial front, winning new accounts and working with our B2B partners to win new accounts. We have a robust pipeline for Beacon opportunities. Thus, we are predicting continued growth in this area. Our Beacon volume has mostly been limited to IVF clinics due to carrier screening often being coupled with noninvasive prenatal testing, or NIPT, at the OB-GYN level. However, for the first time, we are launching a new NIPT test. This will allow us to shift gears and focus more on the OB-GYN market. This will include hiring a new sales team with OB-GYN experience currently in progress. Our new NIPT test, which we marketed as KNOVA spelled K-N-O-V-A is a unique first-of-its-kind approach. KNOVA will include aneuploidy screening, deletion duplication screening and de novo point mutations, all on one maternal blood sample. While there are test on the market today that include aneuploidy screening and deletion duplication analysis and other tests that look for de novo point mutations, there has not been one lab to offer both and more importantly, not one test to combine all three into one. This will streamline the process for physicians, allowing them to use one lab for their NIPT needs. We expect KNOVA volume to start slowly as we onboard early adopters and our key opinion leaders. Moving to our oncology services. As you may recall, we have two oncology laboratories, one based in basin Alpharetta, Georgia, and one based in Phoenix, Arizona. Both laboratories offer comprehensive heme and solid tumor testing. The laboratory in Alpharetta caters to a pathologist clientele, while the Phoenix laboratory caters to an oncologist clientele, enabling us to specifically tailor our reports to the relevant client base. Both provide full-service expert hematopathology diagnosis, cytogenetics, flow cytometry, immunohistochemistry, FISH and molecular. The Alpharetta lab, in particular, provides solid tumor consultation services to pathologists along with prognostic immunohistochemical and FISH testing, including tech-only services while the Phoenix operation -- while the Phoenix solid tumor service concentrates on providing prognostic immunohistochemical and FISH testing to oncologists. NGS is available to both pathologists and oncologists and is performed centrally in our El Monte laboratory. This includes separate state-of-the-art NGS assays for solid tumor, including liquid biopsy in hematological neoplasms as well as offering germline testing. We believe that our heme assay is extremely comprehensive and is exclusively devoted to hematologic neoplasms unlike other providers, which usually offer a heme assay, either combined with solid tumor or something else like soft tissue. Clients use Fulgent based on two main points, turnaround time and rate of insufficient specimens. We not only promise a turnaround time of less than 10 business days for our somatic cancer assays, we actually deliver on that in 96% of cases. And due to our expertise in nucleic acid extraction, our insufficient rates have been lower than what is generally seen in the industry with an overall QNS rate of 8.5% and 4.5% QNS rate specifically for lung. For heme, our QNS rate sits at 0.6%. Our Alpharetta location is growing nicely, transitioning from an excellent regional lab it was before Fulgent acquired it and growing into a more national footprint with an expanded sales force. In the oncology lab, which started as a regional laboratory with a focus in Southern California has now expanded into multiple regions in the country as we have grown its sales team. Turning to anatomic pathology. While this revenue stream has seen some headwinds, we are beginning to see the new sales team and structure pay off. We are continuing to gradually layer on additional sales team members and expect to see this business stabilize in 2024. In addition, we have been diligently working on improving operational efficiency. We have recently purchased a new building just outside of Irving, Texas, where we will be able to consolidate our existing Texas operation and our New York operation. In addition, we continue to invest in digital technology for slide imaging and AI to improve both efficiency and quality of our operation. Finally, in terms of our biopharma services revenue stream, we are tracking on plan for 2024, and we continue to believe this revenue stream will perform well over time. With our expanded product offering, the focus is to build a deeper opportunity funnel to help smooth out the lumpiness in this business. To that end, we are continuing to look at expanding on existing biopharma relationships and forging new ones. We have recently expanded the biopharma sales team to a small degree, and we continue to build on a robust product offering that we believe biopharma clients value, allowing us to address a large market for these types of studies. We are encouraged by the momentum in the business, and we look forward to updating our investors on our progress throughout 2024. I'll now turn the call over to Paul Kim, our CFO. Paul?
Paul Kim: Revenue in the first quarter of 2024 totaled $64.5 million compared to $66.2 million in the first quarter of 2023. $1.3 million came from COVID-19 testing in Q1, which was not part of our guidance. Revenue from our core business totaled $63.2 million. Gross margin was 34.3%. The increase in gross margin year-over-year is primarily related to a decrease in overall compensation expense as we optimize our cost structure. Total GAAP operating expenses were $43.9 million for the first quarter, a decrease from $176.4 million in the fourth quarter of 2023, primarily related to the one-time non-cash goodwill impairment charge incurred in the fourth quarter. Non-GAAP operating expenses totaled $32.4 million, decreased from $45.1 million in the fourth quarter of 2023. Non-GAAP operating margin increased approximately 12 percentage points sequentially to minus 12.9%, primarily due to lower bad debt reserve and legal fees. Adjusted EBITDA loss for the first quarter was $3.2 million compared to a loss of $7.2 million in the first quarter of 2023. On a non-GAAP basis and excluding equity-based compensation expense and intangible asset amortization, loss for the quarter was $269,000 or $0.01 per share based on 30 million weighted average shares outstanding. Turning to the balance sheet. We ended the first quarter with approximately $846.2 million in cash, cash equivalents and marketable securities. We are reiterating our outlook for 2024 provided in February. With minimal revenue from COVID-19 testing expected, we're guiding to core revenue, which is total laboratory services revenue for the company without COVID-19 testing revenue. We continue to expect total core revenues to be approximately $280 million for 2024, representing core growth of 7% year-over-year. There's no revenues from our therapeutics development business anticipated in our 2024 guidance. Turning to expected margins for 2024, excluding COVID-19 revenue and stock-based compensation, we expect non-GAAP gross margins to continue to improve as the efficiencies of our integration efforts take effect, increasing from the mid-30% range we saw in Q1 to our target of 40% or slightly above 40% by end of year. We expect to see slightly lower non-GAAP operating margins in the quarters ahead as we further invest resources to grow our business with operating margins approximately at minus 18% for the year. We remain focused on managing our spend and continue to believe that our foundational technology platform supports a strong margin profile longer term. We expect associated cash burn for therapeutics development business of approximately $15 million to $17 million this year, which is contemplated in our EPS and cash guidance. Utilizing a non-GAAP tax provision and average share count of 31 million, we reiterate our full year 2024 net non-GAAP loss of approximately $1.05 per share for our shareholders, excluding stock-based compensation and amortization of intangible assets as well as any one-time charges. Moving on to cash. Cash position remains strong. Excluding any stock repurchases or other expenditures outside of ordinary course, we would anticipate ending 2024 cash with approximately $800 million of cash, cash equivalents and investments and marketable securities. Overall, we see strength in our core business, which has grown organically through our strategic acquisitions and see good momentum ahead. Thank you for joining the call today. Operator, now you may open it up for questions.
Operator: [Operator Instructions] Our first question comes from the line of Dan Leonard with UBS. Please proceed with your question.
Dan Leonard: Great. Good morning and thanks for the time. My first question, perhaps for you, Brandon. What gives you comfort on the revenue ramp required to hit that $280 million sales target for the year? And I think you gave a second quarter target, that 10% sequential growth, but it wasn't clear to me if that was just precision diagnostics or if that was the entire lab services business.
Brandon Perthuis: Thanks for the question, Dan. That would be for the entire lab services business. So what's giving us the confidence in the guide and the momentum, it's what we're seeing come through the front door, right? We're winning new opportunities. We're gaining market share in reproductive health. We're gaining market share in oncology. Our anatomic pathology business is beginning to stabilize. We had contracts in place for biopharma services that were not delivered in Q1. I mentioned a timing issue. Those contracts are in place, they will roll into Q2. So really across the -- those revenue streams, we see that momentum. And that gives us, like I said, the confidence in the annual guide, but also the double-digit growth we expect in Q2.
Dan Leonard: Appreciate that. And then my follow-up question, I was hoping you could touch on the implications of those finalized lab-developed test regulations that were issued earlier in the week, the implications for Fulgent.
Brandon Perthuis: Yeah, certainly. I mean, obviously, a big development and new development. We're still digesting some of that information. But our initial read on that, Dan, we believe it bodes well for Fulgent. There are -- appears to be some exceptions that are made for products that are already marketed that may not have to go through a full PMA process. I mean, obviously, Fulgent has large test menu already on the market. So that seems to bode well for Fulgent. In addition, there seems to be some exceptions for New York State approved test, which we have several of. So our read on it is we're in a good place with what we've learned so far. Obviously, we will still be under those regulations, just perhaps not a big need for PMAs. And we believe we have the quality systems, expertise and ability to adhere to these guidelines. So it's likely to perhaps even strengthen our position in this marketplace. Perhaps increasing the bar and barrier for entry for new laboratories. So we'll obviously be monitoring this very closely, and we look forward to working with the FDA closely on these new regulations.
Dan Leonard: Appreciate the thoughts. Thanks, Brandon.
Brandon Perthuis: Thank you.
Operator: Thank you. Our next question comes from the line of David Westenberg with Piper Sandler. Please proeed with your question.
David Westenberg: Hi, thank you. I'm actually -- my questions actually are going to be kind of continuation of some of Dan's question. I did love the 10% growth sequentially. Can you maybe run us through some of the things that you saw in March that give you confidence? Do you think maybe January, February might have been maybe more weather impacted? Or was there a big customer win? Just kind of run us through why March might have been so much better than January and February? Thanks.
Brandon Perthuis: Yeah. I think it's safe to say it was a big customer win, but not just one big customer win. There were multiple customer wins that happened late in the quarter. In addition, as I mentioned, there was some biopharma business that we were able to close in the quarter contractually, but not deliver in the quarter, but I would say that most of our confidence is coming from that precision diagnostics momentum, which was Fulgent gaining market share late in the quarter that we believe is going to continue throughout the rest of the year.
David Westenberg: Got you. Okay. And I wanted to also hit on the FDA changes. Do you think any of those, for example, the new NIPT offering is going to go -- have to go to the FDA for a 510(k)s, and I mean you do have a very big rare disease portfolio. Any thoughts to cost on getting into compliance as we look at the years? I know maybe you're not ready to -- or it still requires a look given the fact that this was all just this week?
Brandon Perthuis: Yeah, thanks for the question. You're right. It's hot off the press. We certainly haven't been able to model what the cost could look like. But again, our read on it is tests that are currently on the market would be exempted from a PMA process, not exempted from regulation. We would still have to adhere to FDA quality standards and quality guidelines and reporting, and we believe we have those systems in place, and we've been working on something similar for the IVDR stuff in Europe. So I think we're in a good place to adhere those guidelines. And certainly, there's no disruption to our product offering. We can continue to offer these products. So we'll see how that PMA exemption continues to play out for products that are already on the market. But again, we think that's a big part of this that bodes well for Fulgent considering the amount of products we currently offer.
David Westenberg: Okay. Great. And then I'll ask an actual original question here. So just in terms of the go-to-market strategy with the OB-GYN community, how are -- how is that -- I mean, what's the investment going to look like? Are you going to target maybe submarkets first then expand like you would with -- I think when you talked about like Fulgent oncology? Or are you just going to go maybe high-level system wins? I'm just trying to think about the pacing of SG&A over the course of the next couple of years as you add that call point on. So that's really what I'm targeting in there. Thank you.
Brandon Perthuis: Yeah. Thanks for the question. I think what we're currently planning right now is ramping to a new -- net new sales headcount of around 20 people by the end of 2024. Again, this is a novel NIPT product. It's not lost on us that we’re to this market and late to this game. But we've talked about this for a while that we were interested in this market, but we did not want to launch another similar product that was on the market. So I think we were able to develop this product, be a differentiated product. We do expect volume to start slowly. We will be offering this novel product. So there will be some education involved in why this product is different and how this product leads to additional diagnostic yields and we'll be able to detect a significant number of conditions that are currently being missed by products on the market. So, long answer to your question of we will build the sales team gradually throughout the year. In terms of a regionality approach, we believe there's no particular reason to focus in certain regions other than just based on population density and where pregnancies are happening. But other than population density, I don't see any reason that we have to focus on certain regions or states. So I would consider this a national rollout, but again, starting slowly throughout the year.
David Westenberg: Thank you guys.
Brandon Perthuis: Thank you.
Operator: Thank you. Our final question comes from the line of Andrew Cooper with Raymond James. Please proceed with your question.
Andrew Cooper: Hey, guys. Thanks for the time. Maybe just first kind of following up on the OB-GYN launch. Just to make sure we understand the guide, nice beat on the bottom line in 1Q, but some step down in the margins from here. Is part of that in terms of reiterating the guidance layering in incremental costs from this KNOVA ramp and build-out? Or was that already contemplated in the prior guide?
Paul Kim: Yeah. Thank you for that question. The operating expense structure that we have experienced, including the first quarter, we've had benefits from particularly like collection and lower fees from an operating expense perspective. If you take a look at our operating expenses in Q2, Q3 and Q4, that should be more normalized, which is consistent with the original guide that we had. So excluding stock-based compensation, we anticipate the operating expenses to be approximately $43 million in each one of the quarters of Q2, Q3 and Q4. But I think the real highlight of what we wanted to point out was, one, the elevated revenues and the expansion of the business that Brandon indicated. So what we're indicating for the second quarter is core revenues to be approximately or in excess of about $70 million. That already puts us at a $280 million annual core revenue rate, which we're very, very pleased with. The other thing that I want to point out is our gross margin. We've been talking about increasing our gross margins for some period of time. And with the acquisitions that we made a year or two ago, if you take a look at our gross margins excluding stock-based compensation and if you strip out the COVID-19 revenues, in 2023 in the first quarter, we had our gross margins at approximately 28%, and then that increased to about 33%. And then in Q3 and Q4 of 2023, it was approximately 35%. This quarter, that gross margin rate was approximately 36%. But starting in the second quarter of 2024, we anticipate our gross margins excluding stock-based compensation to be approximately 40% or higher. We think that, that will grind even higher than that in Q3 and Q4 to approximately 42%. So what we see is, one, our core revenues being intact because we raised our guidance from $260 million to $280 million, but we see the gross margins continue to grind higher for the business, which we're very proud of.
Andrew Cooper: Okay. That is helpful. Maybe next just on AP. I know precision diagnostics, you spend a lot of time on doing very well. I do want to dive in a little bit just on anything that you've seen on the anatomic pathology side in terms of competitive landscape or any share shift and maybe what you attribute that to and how you can get that business back to a little bit healthier growth there?
Brandon Perthuis: Yeah, certainly. Thanks for the question. I think one of the things we've done there is a revamp of the sort of go-to-market strategy and the sales organization. I don't want to get into the details specifically, but sort of the focus the sales team, their roles and responsibilities, wasn't overly calibrated to hunting and finding new business. So we -- this year, in January this year, we've revamped that and changed that go-to-market strategy. In addition, we've layered on some additional sales leadership and additional sales headcount for that area. So we expect that team to perform better this year. I wouldn't say there's been any macro changes in the competitive landscape or market share. We continue to see consolidation with physician groups. And sometimes that would lead to creation of these super groups and physicians-owned laboratories, so they continue to be a competitor. But our goal there is blocking and tackling and getting back to growing that business. We have the quality turnaround time, the subspecialty trained pathologists, the product menu, to be successful in that space. For some time, we've talked about synergies with the precision diagnostics division and the ability to cross-sell. I would say over the last year or so, we've been sort of more focused on fixing and growing the AP business, but as we're beginning to see that business stabilize, I think we're getting to the point now where we can spend more time and energy on these opportunities to cross sell. For example, perhaps cross-selling the germline hereditary oncology to many of our AP clients, which include GI, GU and derm. So we continue to invest in that business, again, focusing on operations there, improving operational efficiencies. But obviously, importantly, we do want to see that business return to top line growth.
Andrew Cooper: Super helpful. I'll stop there. Thank you.
Operator: Thank you. Ladies and gentlemen, that concludes our Q&A session. And this concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.
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