Financial Analysis

Note 15. Business Combinations Bako Business Combination On March 17, 2026 , or the Bako acquisition date, Inform Diagnostics, Inc., a wholly owned subsidiary of the Company, completed an acquisition of substantially all of the assets and certain specified liabilities of Bako Diagnostics, a premier pathology laboratory, or Bako, and 100 % of the issued and outstanding equity of StrataDx, a premier dermatopathology laboratory. Under the terms of the asset purchase agreement, as well as the purchase and sale agreement, both dated December 20, 2025, the total purchase price was approximately $ 55.7 million, net of cash received. These acquisitions, or collectively, the Bako Acquisition, enable the Company to further strengthen its laboratory services business by adding new products and services and further expand its national client base, national sales team, and team of expert pathologists. The financial results of the Bako Acquisition are included in the condensed consolidated financial statements from the date of acquisition. The Company accounted for the acquisitions as a business combination under Accounting Standards Codification Topic 805, Business Combinations , or ASC 805. Accordingly, the total consideration transferred has been allocated to the tangible assets and identified intangible assets acquired and liabilities assumed based on their estimated fair values as of the Bako acquisition date. The excess of the consideration transferred over the fair value of net iden …

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Note 13. Retirement Plans The Company offers a 401(k) retirement savings plan, or the 401(k) Plan, for its employees, including its executive officers, who satisfy certain eligibility requirements. The Internal Revenue Code of 1986, as amended, allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) Plan. The Company matches contributions to the 401(k) Plan based on the amount of salary deferral contributions the participant makes to the 401(k) Plan. The Company will match up to 4 % of an employees compensation that the employee contributes to their 401(k) Plan account. Total Company matching contributions to the 401(k) Plan were $ 1.4 million and $ 2.8 million for the three and six months ended June 30, 2026, respectively, and $ 1.0 million and $ 2.2 million for the three and six months ended June 30, 2025 , respectively. …

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"Note 10. Equity-Based Compensation On May 14, 2026, at the Company's 2026 Annual Meeting of Stockholders, the Company's stockholders approved the Fulgent Genetics, Inc. 2026 Equity Incentive Plan (the ""2026 Plan""), which replaced the Company's Amended and Restated 2016 Omnibus Incentive Plan (the ""Prior Plan""), and awards made under the 2026 Plan will be made consistent with the terms of the 2026 plan. No additional awards were granted under the Prior Plan on or after May 14, 2026 (the ""Effective Date""). Awards outstanding under the Prior Plan as of the Effective Date remain outstanding and continue to be governed by their existing terms. The 2026 Plan authorizes the issuance of 2,000,000 new shares of the Company's common stock, plus up to an additional 1,500,000 shares of common stock to the extent awards outstanding under the Prior Plan are forfeited, expire, or are cancelled without delivery of shares on or after the Effective Date. Shares of common stock withheld or repurchased by the Company to satisfy an award's exercise price or tax withholding obligations are not added back to the shares of common stock available for future issuance. The 2026 Plan permits the grant of incentive stock options, non-qualified stock options, stock grants, and other stock-based awards (including RSUs and stock appreciation rights) to employees, directors, and consultants, and will terminate on March 31, 2036 unless terminated earlier. The Company has included equity-based compensat …

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"Note 17. Goodwill and Intangible Assets The Company has identified its laboratory services business and its therapeutic development business as its two operating segments, and the Company determined that the operating segments represented the two reporting units. The changes in the carrying amounts of goodwill for the laboratory services segment and the therapeutic development segment in the six months ended June 30, 2026 were as follows: Laboratory Services Therapeutic Development (in thousands) Balance at December 31, 2025 $ $ 25,080 Acquisition 31,379 Measurement period adjustment 130 ( 2,728 ) Balance at June 30, 2026 $ 31,509 $ 22,352 As of June 30, 2026, the Company identified indicators requiring an interim goodwill impairment assessment for its Therapeutic Development and Laboratory Services reporting units, including the loss of a significant customer within its ANP business and a sustained disconnect between the Company's market capitalization and its tangible net asset value. As a result, the Company engaged a third-party valuation specialist and performed an interim quantitative goodwill impairment test for both reporting units, and a corresponding quantitative recoverability test for its indefinite-lived in-process research and development (""IPR&D""). Laboratory Services The change in goodwill for the laboratory services segment reflects goodwill arising from the Bako Acquisition, including a post-closing purchase price adjustment. The newly acquired entity …

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Note 11. Income Taxes The effective tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results, except that taxes related to specific events, if any, are recorded in the interim period in which they occur. The annual effective tax rate is based upon several significant estimates and judgments, including the estimated annual pre-tax income of the Company in each tax jurisdiction in which it operates, and the development of tax planning strategies during the year. In addition, the Companys tax expense can be impacted by changes in tax rates or laws and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions. The Company recorded consolidated expense for (benefit from) income taxes of $ 0.03 million and ($ 0.7 ) million for the three and six months ended June 30, 2026, respectively, compared to ($ 2.3 ) million and ($ 2.1 ) million for the three and six months ended June 30, 2025, respectively. The Companys effective tax rates were ( 0.1 %) and 1 % for the three and six months ended June 30, 2026, respectively, compared to 11 % and 6 % for the three and six months ended June 30, 2025, respectively. The change in the effective tax rate compared to prior periods was primarily driven by a one-time tax benefit resulting from an acquisition completed during the quarter, which allowed the Company to recognize a portion of the tax bene …

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Recent Accounting Pronouncements The Company evaluates all Accounting Standards Updates, or ASUs, issued by the Financial Accounting Standards Board, or FASB, for consideration of their applicability. ASUs not included in the Companys disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on the Companys condensed consolidated financial statements. Adopted In July 2025, the FASB issued ASU 2025-05 , Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets . This update provides all entities with a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. Amendments in this update are effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company adopted this ASU in the first quarter of 2026 , and the impact is not material for the consolidated financial statements and related disclosures. Issued In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . This update requires disclosure in the notes to financial statements of specified information about certain costs and expenses. Ame …

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Note 14. Related Party Prior to April 25, 2025, Ming Hsieh, the Chief Executive Officer and Chairperson of the board of directors, was on the board of directors and an approximately 20 % owner of ANP, with which the Company entered into certain drug-related licensing and development service agreements. The President and Chief Scientific Officer of Fulgent Pharma, Ray Yin, is the Founder, President, and Chief Technology Officer of ANP. Prior to April 25, 2025, the Company incurred $ 0.1 million and $ 0.6 million related to the licensing and development services and the purchase of equipment in the three and six months ended June 30, 2025, respectively The Company also entered into an employee service agreement with ANP in April 2023, an insignificant amount was recognized in revenue in the three and six months ended June 30, 2025 .

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Note 7. Reportable Segments and Geographic Information The Company has two distinct reportable segments. The laboratory services operating segment offers technical laboratory and testing services and professional interpretation of laboratory results by licensed physicians who specialize in pathology and oncology. The therapeutic development operating segment is a pharmaceutical research and development entity. The Companys Chief Executive Officer serves as its CODM. The CODM oversees the Companys operations and evaluates financial data for its two operating segments separately to make resource allocation decisions. The financial information regularly provided to the CODM includes various performance metrics by reportable segment, such as gross profit, operating income or loss, income or loss before income taxes, net income or loss from consolidated operations, and net income or loss attributable to the Company, all presented in accordance with U.S. GAAP. Although multiple financial metrics are provided, the CODM primarily relies on adjusted (non-GAAP) operating income or loss to evaluate segment performance and allocate resources. These adjusted metrics exclude the impact of equity-based compensation expenses, amortization of intangible assets, and acquisition-related costs including acquisition-related severance, if applicable as determined by management. Acquisition-related costs and acquisition-related severance are related to the acquisition of Bako (as defined below), wh …

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Note 2. Summary of Significant Accounting Policies See Note 2. Summary of Significant Accounting Policies , to the Companys Consolidated Financial Statements included in the 2025 Annual Report. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting periods. These estimates, judgments and assumptions are based on historical data and experience available at the date of the accompanying condensed consolidated financial statements, as well as various other factors management believes to be reasonable under the circumstances. The Companys estimates and assumptions may evolve as conditions change. Actual results could differ significantly from these estimates. On an ongoing basis, management evaluates its estimates, primarily those related to: (i) revenue recognition criteria, (ii) accounts receivable and allowances for credit losses, (iii) the useful lives of fixed assets and intangible assets, (iv) estimates of tax liabilities, (v) valuation of goodwill and indefinite-lived intangible assets at the time of acquisition and on a recurring basis, and (vi) valuation of investments. Cash, Cash Equivalents, and Restricted Cash Shown in the Condensed Consolidated Statements of Cash Flows …

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Note 16. Stock Repurchase Program In March 2022, the Companys board of directors 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 six months ended June 30, 2026, the Company repurchased 1.5 million and 4.1 million shares of its common stock, respectively, at an aggregate cost of $ 23.8 million and $ 63.9 million , respectively, under the stock repurchase program. During the three and six months ended June 30, 2025 , the Company repurchased 0.2 million and 0.6 million shares of its common stock, respectively, at an aggregate cost of $ 3.0 million and $ 10.9 million , respectively under the stock repurchase program. As of June 30, 2026, a total of approximately $ 75.8 million remained available for future repurchases of its common stock under the stock repurchase program. …

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