Earnings Call: Q1 2021

May 6, 2021

Good day, and welcome to the First Quarter 2021 Fulgent Genetics Earnings Call. At this time, I would like to turn the conference over to Nicole Borscha with Investor Relations. Please go ahead. Great, thanks. Good afternoon, and welcome to the Fulgent Genetics First Quarter 2021 Financial Results Conference Call. On the call today are Ming Hsieh, Chief Executive Paul Kim, Chief Financial Officer and Brandon Purthous, Chief Commercial Officer. The company's press release discussing its financial results is available in the Investor Relations section of 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 The company assumes no obligation to update any of the forward looking statements it 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 listen 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 discussions of some of the risk factors that may cause results 2020, which is available on the company's IR website. Management's prepared remarks, including discussions of earnings and earnings per share, contain financial measures not Thank you, Nicole. Good afternoon, and thank you for joining our call today to discuss our Q1 2021 results. I will provide some operating remarks Before handing over to our Chief Commercial Officer, Brandon Perdue, to provide updates on our commercial success. And finally, Paul will discuss our financial results and outlook in detail. The Q1 marked a meaningful milestone in our fight against COVID-nineteen. It has been adjusted over a year ago since the lockdown began and our lives were disrupted in many ways by the pandemic. While it appears that the vaccine rollout in progressing and life slowly reaching to the same phenomenon, Our results remain with those who have been impacted by this pandemic. Our team has worked tirelessly over the last 12 months to provide testing solutions to customers across the country. And while our COVID-nineteen testing business has been sustained demand, We are turning our focus on how we can support the recovery from the virus Going forward and drive growth across our core NGS business. I will elaborate On these areas of the focus in a moment, but we'll first touch on the highlights from the Q1. We had a record start for the year with Q1 revenue totaling $359,000,000 More than 46 times of the revenue in Q1 last year and the increase of almost 22% compared The Q1. We delivered approximately 3,800,000 tests in the quarter, an increase of roughly 19% compared to What's most exciting is the growth with events in our NGS revenue, which Exceed our expectations and grow 115% year over year in the Q1. We'll continue to drive substantial leverage generating more than $6.59 Per share in the non GAAP income in the Q1 and almost $222,000,000 in free cash flow. Our team has continued to file on all cylinders with great execution from our Lab III operations to our sales organization. The growth we accomplished in the last year wouldn't have been possible without our support And we're looking forward to grow our team and expanding our momentum in the year ahead. We have built a genetic testing business on a strong technology foundation and that is scalable into New areas with minimum overhead and investment, and we believe this position us extremely well for substantial growth and allow us to become a leader in the very broad genomic Diagnostic Market. On that note, one of the recent developments I'm most excited about this announcement of Doctor. Larry Weiss As our new Chief Medical Officer, Doctor. Wise has an extensive background and expertise in pathology and molecular science and has a successful track record in building in Healthcare Business for Sustainability and Scale. Doctor. White is joining us from the NeoGenomics, where he oversaw company's medical and R and D teams and helped expand their businesses during his tenure. We are very excited about Doctor. Weiss' commitment to Fulgent and look forward to expand our presence in the molecular diagnosis market under his expert oversight. We see a number of opportunities in oncology testing, which we have just begun to scratch the surface. And we believe that with our scalable technology platform And a track record for execution, we are extremely well positioned to capitalize on the large opportunities in this area. Moving on our COVID-nineteen testing business. While our RT PCR based testing For COVID-nineteen, it has continued to drive sustainable testing volume and the cash flow for our business. We are focusing leveraging our success in RT PCR testing into other areas For COVID-nineteen and the research, in particular, we have been working on various large scale opportunities for NGINX based testing for COVID-nineteen. Evidenced by the large contract we announced with the CDC in March, Fulgent's differentiation and the success in this contract, it is clear. We were one of the top recipients By award, the value and the contract duration compared to other labs that were also selected by the CTC for this contract. Brandon will elaborate on this win in more detail, We believe this contract award represents a accumulation of our efforts in both NGS testing and the COVID-nineteen expertise, we see an additional opportunity of this nature that we are being considered for an ongoing basis. We also have continued to support vaccine rollout with our vaccine management platform as well as community software platform. As we look ahead, we expect to continue to invest in our technology platform, our team and our testing offering to expand our reach into new markets in the geographic area. In particular, We intend to expand our investment in our China JV in the coming months. We have had a President in China Through our JV venture in 2017 in the genetic rare disease market, And we see a significant opportunity with additional investment to meaningfully grow our presence in this large and growing Extensive test menu and the efficiency lab management system as our infrastructure in the U. S. We are also continuing to evaluate M and A opportunities that will be a natural expansion for our existing business to fuel our expansion. I remain very optimistic about our future opportunities in NGS testing and other areas that we are just getting our feet wet in, We have pulled our agility to rightly scale up our business with our COVID-nineteen testing initiatives And we see opportunities that will underpin our momentum more broadly going forward. We look forward to discuss our progress in the coming quarters ahead. With that, I would like to turn over the call to Brandon to dive in more on the customer dynamics we saw in this quarter. Brendan? Thanks Ming. We are proud of what we accomplished in the Q1, setting numerous new financial records for our company, and we are equally proud of our company's efforts to fight the pandemic. In the Q1, we processed over 3,000,000 RT PCR tests. This is roughly 2 84 times the total volume we processed the same time same quarter of last year. Since the first signs of the virus, testing has been one of the best tools in the fight against SARS CoV-two. With a number of new cases down, We'd like to thank the Fulgent Lab team's relentless efforts to scale, meet turnaround time and deliver quality results played a small but meaningful role in our country's improvement. That said, cases appear to have plateaued at a high level and some states are still dealing with surges as we continue to deploy our testing resources across the United States. And while we demonstrated very strong performance in COVID-nineteen testing in the Q1, We also saw a record in terms of our next generation sequencing business. Our NGS volume grew 185% year over year from 13,000 to 38,000 tests, representing sales of $16,700,000 compared to $7,800,000 In the Q1 of last year, an increase of 115%. This growth was driven by our clients beginning to return to a more normal run rate, Continued traction in our biopharma business and our new strategic partnerships with commercial organizations. The investments we made in R and D to launch new tests in new diseases and markets has continued to create opportunities for our company, Meaning, most of the growth has been outside our traditional pediatric rare disease menu and includes adult neurogenetics, With the number of new COVID-nineteen cases decreasing, we are seeing a bit of a paradigm shift. As people begin to return to the office, Travel, attend events, etcetera, we are seeing testing shift to return to normalcy testing. We believe Our history of delivering gold standard RT PCR testing at scale with rapid turnaround time positions us perfectly To address this demand, many of the screening programs are not allowing less sensitive antigen tests or rapid molecular tests to be used As the evidence shows, sensitivity in asymptomatic populations to be less than RT PCR. Several of our larger testing operations now include schools and employers. We have talked about New York City Schools and Las Vegas Schools on previous calls. We continue to screen students there and have been successful in detecting many positives, enabling effective isolation to minimize spread. We have also seen our Pitcher at home test play a meaningful role as we are able to send families kits to their home for continued test monitoring. Regarding New York City specifically, we are now processing thousands of students per day across many hundreds of schools and plans call for even more testing in the future As additional students return to in person learning, in mid March, it was announced as part of President Biden's national strategy For the COVID-nineteen response and pandemic preparedness, the U. S. Department of Health and Human Services will invest $10,000,000,000 from the American Rescue Plan to ramp up testing to help schools reopen. It is estimated that over 1,000,000 tests per day will be needed with this new program. At this time, we are actively onboarding new schools and have additional schools in our sales pipeline as we await to hear how the new HHS National School Testing Program will be rolled out. During our Q4 earnings call, We mentioned next generation sequencing entering the spotlight of this pandemic due to its ability to identify strains and mutations and screen for potential new mutations and that we hit a perfect intersection of Fulgent's core competencies and we were primed and ready to take on massive NGS testing volume. Along these lines in the Q1, we had the privilege to announce a monumental new contract with the CDC for COVID-nineteen genomic studies to track to support the national COVID-nineteen surveillance program for SARS CoV-two. Such large scale viral genomic surveys have played an important role to provide essential baseline information for national and state level surveillance, defining important changes in transmission, Identifying unusual or emerging variants and ultimately improving public health responses and decision making with better laboratory data. Before the award in early February, we had already initiated a pilot surveillance program partnering with public health laboratories in California. Important discoveries such as the 2 emerging West Coast variants B. 1.426 and B. 1.429 We're also confirmed in our pilot studies. These two variants were quickly identified as variants of concerns by the CDC. Our pilot study set a good baseline for the surveillance on the West Coast and helped the public health laboratories overcome issues With the complexity of sequencing and bioinformatics workflows and limited access to timely remnant samples for sequencing and analysis. With the CDC partnership, we have successfully identified the first B. 1.315 in Santa Clara, The first P. 1 in San Bernardino, the outbreak of P. 1 in Colorado and many more. Genomic data has proven its value to prioritize contact tracing efforts so that effective measures are deployed to control transmission. Moreover, this enables the epidemiologist to access the resources of exposure either through travel, workplace or other community transmission. At this point, we are sequencing thousands of positives per week from our lab and collaborator labs across the United States. In mid April, it was announced that the Biden administration would be dedicating $1,700,000,000 in funding of the American Rescue Plan to fight COVID-nineteen variants, helping the CDC and governors monitor, track and defeat emerging variants. We look forward to fulfilling our part of the existing contract with the CDC and any additional opportunities we can help with. Turning to capacity. We continue to increase our testing capacity with very little investment. At this point, by continuing to improve workflows and efficiencies Between our two laboratory locations, we can handle north of a quarter of a 1000000 tests per day. Considering the size of some of the return to normalcy opportunities, Such as the National K-eight program, we think our capacity, turnaround time, mobile applications will allow us We'll allow Fulgent to compete at a high level for these contracts. During the Q1, Fulgent obtained authorization from the State of California to aid in the distribution of vaccines. Starting in March, we deployed our mobile vaccination fleet and have since serviced 40 plus locations, Primarily underrepresented communities and have administered tens of thousands of doses in partnership with Los Angeles County. We are using the newly launched Fulgent vaccine management platform to allow patients to find a location, schedule their appointment, receive reminders and track their vaccination. This platform is fully integrated with our test management system, allowing existing clients to expand their present operations and new clients to take advantage of the full suite of services at program outset. Combined with the rapid deployability of our mobile fleet, Fulgent managed vaccination efforts usually see a turnaround of 1 week from site request to execution. While we continue to run one of the largest COVID-nineteen operations in the United States, we also continue to invest in new areas of genomics. As Ming mentioned, we are very excited to have Doctor. Larry Weiss join the Fulgent team. Doctor. Weiss is a renowned pathologist and will help lead our oncology product development and strategy, including strategic partnerships. We believe combining Doctor. Weiss' expertise with our capabilities and technology platform, we can make significant progress in areas such as liquid biopsy, minimal residual disease, companion diagnostics and traditional cancer testing such as FISH, Full cytometry and immunohistochemistry. Over the last couple of years, the Fulgent test menu has exploded to include over 18,000 genetic tests, all of which have been germline testing. With Doctor. Weiss on board, we intend to expand our somatic test menu and do so quickly. A question we often receive is, how does Fulgent plan to invest in the business going forward? It's a fairly straightforward answer. We are believers in our market And we believe we can continue to be a disruptive force. With our scale, cost structure, test menu and underlying technology platform, We believe we can continue to launch new services in new markets at record pace, investing in continued organic growth. Since the founding of this company, we have built everything organically, the hard way we like to say. By doing so, we've been able to build a lab with systems that are seamlessly integrated and not a series of acquired platforms stitched together or even more inefficient relying on third party for technology. With our operational capabilities, we believe we can be a consolidator in this market and we continue to actively look for acquisitions and other strategic opportunities. In addition, as we expand our go to market capabilities, we believe we can recruit elite sales talent to build out a national sales force, something we have not done to date. It continues to be a dynamic time at Fulgent as we navigate this hyper growth path. We believe we are in a strong position to continue to execute on our growth strategy and scale our business, and we look forward to keeping our investors updated as we make additional progress. With that, I would like to turn the call over to our Chief Financial Officer, Paul Kim. Paul? Thanks, Brandon. We again achieved record results in the Q1 with revenues totaling $359,000,000 an increase of more than 4,500 percent compared to the Q1 of 2020. Billable tests in the quarter totaled almost $3,800,000 growing Almost 290x the volume of Q1 last year. The vast majority of this volume was from our business related to COVID-nineteen. As the country began to reopen and people have begun returning to a more regular way of life, we have seen ongoing momentum in our traditional genetic testing business. Our NGS revenues in Q1 was up 115% year over year and 39% sequentially from Q4. Overall, we're very pleased with our Q1 results, which saw ongoing momentum with RT PCR testing for COVID-nineteen complemented by our NGS testing for both COVID-nineteen and our core genetic testing business. Our ASP in the Q1 was $95 slightly higher than the 93 we saw in the Q4. While our ASP has largely remained stable over the last few quarters, The modest mix of NGS tests we saw in this quarter. Cost per test in the quarter was $20 slightly higher to even versus the 4th quarter, also due to the increased mix of NGS testing. Gross margins were comparable with the 4th quarter at 79.4%. Turning over to operating expenses. Total GAAP operating expenses were $18,400,000 in the Q1, up from $17,300,000 In the Q4, non GAAP operating expenses totaled $16,100,000 up from $14,800,000 last quarter. Non GAAP operating margin declined 252 basis points from the 4th quarter to 75.1%. As Ming discussed, Adjusted EBITDA in the Q1 was $271,900,000 compared to a negative $506,000 in the Q1 of 2020. On a non GAAP basis and excluding equity based compensation, income in the quarter was 202,900,000 or $6.59 per share based on 30,800,000 weighted average diluted shares outstanding. This takes into account the tax effect for stock based compensation in the quarter. Turning over to the balance sheet, we ended the Q1 with $697,400,000 in cash, cash equivalents and marketable securities. We generated over $233,000,000 of Cash from operations in the quarter fueling our cash balance. We did not take any action on our equity issuance programs in place in the quarter to minimize dilution to our shareholder base. On the other side of the balance sheet, contract liability stood at 14,000,000 Now moving on to outlook. We remain very excited about our positioning and we see an ongoing opportunity to extend our leadership In COVID-nineteen testing, while our traditional genetic testing business should continue to expand, our revenue guidance for the 2 primary buckets, RT PCR testing for COVID-nineteen and NGS testing, which includes NGS testing for COVID plus our core genetic testing business We feel confident in our ability to be able to be more sure of the RT PCR market. We're cognizant of the impact of the changing landscape in RT PCR by vaccine administration, asymptomatic versus symptomatic testing and timing and size of testing policies by various organizations with reopening. On the flip side, We see tremendous growth in our expanded capabilities as a whole demonstrated by our diverse menu, operating experience, Traction with reimbursement, reputation with customers and quality of service to name a few. We see durability in our NGS business and we see additional opportunities for further growth. As such, we're raising our revenue guidance from NGS testing from $70,000,000 previously to Over $100,000,000 in 2021, this represents organic growth of over 200% in our NGS business or more than triple Based on our raised outlook for NGS revenues, we're raising our full year revenue guidance to $830,000,000 from $800,000,000 previously. We expect our test volume for 2021 to be between $8,500,000 $9,000,000 representing a growth of 93% year over year. In the Q2 of 2021, we expect revenues to be approximately $200,000,000 From a profitability standpoint, we continue to expect to show We continue to rely on our foundational technology from Operating our business, which is producing gross margins of about 80% and operating margins above 70%. Even with aggressive hiring and investments we're making in our business, we anticipate growth in operating margins will remain extremely strong. As such, for full year 2021, utilizing a 27% tax rate and a share count of 31,000,000, we expect Net income of approximately $380,000,000 or $12.50 per share for our shareholders, excluding stock based compensation. And looking at the balance sheet, this quarter has once again proven the viability of our business model and the power of our technology platform given Our ability to drive 100 of 1,000,000 of dollars of cash flow in a single quarter. We remain well on our path of having $1,000,000,000 of cash, And our first question comes from Stephen Ma. Please go ahead. Congrats on the quarter. Thank you, Steve. Okay. First question on the NGS business, how much was from the core genetic testing business and how much was from COVID Surveillance. And then on the new revenue guide in NGS, could you help us bridge The $70,000,000 to the $100,000,000 new guide on the NGS side? Sure. So, Stephen, very little came from the CDC NGS less than $1,000,000 The bulk of the NGS business during Q1 came from our traditional genetic testing. We're actually very excited about the prospects of CDC. We see this as a multi year opportunity. And in terms of the guide, the raise from the $70,000,000 to $100,000,000 we anticipate that a and be more successful in posting higher NGS revenues. Okay, got it. All right, thanks for that. And then on the maybe I'm pivoting over to the COVID-nineteen surveillance opportunity. So you mentioned the $1,700,000,000 opportunity for American Rescue Plan. Maybe could you give us some sense how That might transition throughout the year because I know Biden is setting up these 6 centers of excellence for genetic epidemiology studies. Maybe give a sense on your guys' thoughts on the split of that $1,700,000 between those centers and between Send out services such as Fulgent. Hey, Steve, it's Brandon. I think it should be determined. I think what we can say is The initial grant that we received from the CDC is multiple larger than any other grants combined to date, which was I think a real sign of faith in Fulgent's abilities and capabilities. And so far, we performed at a very high level for the CDC. We've doing this for a few weeks now. The collaboration with the CDC has been fantastic. We're turning out results Quickly, a lot of NGS results, making new discoveries. And so I think the working relationship couldn't be stronger. So Hopefully that bodes well for Fulgent in the future as these new programs get rolled out and hopefully we can continue to be included in them. Hey, Stephen, just one other thing. The NGS revenues for Q1, it was a little less than $15,000,000 and less than $1,000,000 of that came from the CDC. Okay, got it. And the balance is from the core genetic traditional genetic testing? That's right. And that actually surpassed our expectations from what we thought that we can achieve when we initially laid out our $70,000,000 guidance, which gives us even more confidence in our ability to achieve more than $100,000,000 this early on in the year. Okay, got it. And then maybe a follow-up on the core genetic testing business. So what drove the strength? I know you guys mentioned Increasing menu and increasing adoption, but has there been any progress on moving into network with the large payers? Hey, Brandon again. Not measurably, Stephen. We're having those conversations. We are now quite visible to those payers. They're seeing the claims from our COVID-nineteen claims. So we're having those conversations, more so than ever, but no meaningful New contracts, so to speak, national contracts, right? So we haven't become in network with United or Cigna or something like that. Had we've done that, we certainly would have updated the investment community. So, no, the growth is not coming from penetrating the direct pay market. It's coming from execution on our traditional business, Taking advantage of our industry leading cost structure, being more aggressive on our pricing, some return to normalcy effect, right? No doubt about that. And some of these partnerships we've established have done well for us and we continue to onboard clients who are taking advantage of our expanded test menu and again At these discounted pricing capitalizing on our cost structure. We actually see that as upside, Stephen, Meaning that should we land even one of those contracts, we'll probably have to adjust our NGS guidance again. And then the same thing for the COVID as well. Since we're on the topic of guidance, I'd like to make a few commentaries about how we established the guidance, the original 800,000,000 The assumptions that went into it and the reason on why we're upping the guidance for our base business now after the Q1. So when we initially formed the guidance, we did take into account a number of things, including aggressive vaccination timeline, which is happening, a drop off in We didn't think that it would be this low in California, a significant shift from symptomatic to asymptomatic testing, all those things that we incorporated, which was conservative when we initially laid out the guidance have taken hold and we're experiencing it today. Well, we're not changing our guidance for the COVID because we have plenty of conservatism built in there. We continue to capture market share and should we Land some of these big opportunities that Brandon has mentioned that's coming from the administration, particularly for the schools, The COVID revenues and the RT PCR revenues might have more longevity and upside to it. Now in turning to the NGS portion of the business, We made a lot of comments in the previous quarters about how the strength of the company and the volumes that we're doing, the quality, the reputation What aids our base business and that's exactly what's happening. I mean, we've experienced throughout the course of 2020 as well as in The early part of this year expanded capabilities, homing in an operational protocol validation, validation from the CDC, Lower COGS per test and the COGS per test and our cost structure is probably one of the lowest in the industry, Whether you're looking at the RT PCR or the traditional NGS, so how we're going to be taking the company in terms of our approach For investment, as we're going to get more aggressive this year, particularly in the areas of R and D as well as sales and marketing, And we're going to get more aggressive in terms of our price because we believe that the cost structure that we have for this company is unlike the other companies in the diagnostic space. Okay, great. Thanks. And maybe one last quick one. How much vaccination revenue from your Software as a Service business was in Q1? And How much of vaccine revenues in the new guide? Thank you. Yes. So, if we did this call over a year ago, we probably would Call that out, but because the numbers are just getting so large at the company, it's an immaterial amount, but it's not an insignificant amount, meaning that We continue to record those revenues and it is a driver for our business, not in a meaningful kind of a way, But as they get more traction, we might call those numbers out separately. Okay. Thank you. Thank you. Our next question comes from Kevin DeGeeter. Please go ahead. Hi. This is Susan calling in for Kevin DeGeeter. I have a few questions. So it's no secret we follow your California testing volume and we've noticed a change in the competitive landscape. Can you comment on market share trends that you're seeing and what Other competitors might be offering that would make them more attractive. And then a couple of other questions. Hey, certainly, Susan. So we look at the California market for Fulgent, it was largely driven by drive through operations. And a lot of the patients that are They think they may have the virus and it's no secret that California has done a good job decreasing the amount of cases on the West Coast. So As the number of cases come down, the number of drive through tests that we were doing is coming down. So what we're seeing is as the number of Cases come down, there's sort of an inverse reaction, which is more back to work, back to school. And for whatever reason, we're just particularly strong in those areas outside California. So that's not to say we're not focused on driving more Return to normalcy type opportunities on the West Coast is just kind of the nature of our business and sort of where our business fell in place. We're seeing a lot of these I mentioned as a paradigm shift, right, really seeing more return to normalcy type testing, And we just have a large presence in that type of testing across the United States. It's not so centered in the West Coast as our drive thru testing business was. Okay, great. Glad that I was not totally off. So my follow-up is, I understand California drive thru testing. Where in the U. S. Do you see kind of your market share growing in this back to normal testing? You say it's like New York, just kind of getting at the geography? I think at this point, we do business in every single state, Including Alaska and Hawaii, I know Alaska for sure. So we're national. We've had to show that for some of these large contracts that we've been on. They want to see someone who can handle a national business, National customer base, we're in every single state. It's hard to single out states, but New York has been incredibly important for us, right? Not only from a revenue perspective, but from a credibility perspective. The largest school district in the United States partners with Fulgent to run their testing up there and we've done so in a beautiful way. I mean, we've just done a spectacular job together. Their efforts our efforts have been really, really successful in New York. But we're Midwest, Southeast, South. I mean, we have large customers in many states And there's not a lot of sort of geographical concentration outside of New York, meaning that's probably one of our larger geographies. Just one more question. So the CDC contract for NGS is really big. Do you guys expect to Get any other surveillance NGS type contracts maybe in China or just private companies looking to do research? Well, Susan, this pandemic, it is global. Definitely, we are Getting calls from all over the place to see whether we can play a role in some of those outbreaks. We are working on the various opportunities and we'll update to you and the straight once we landed the contracts. Yes. Just kind of speaking back just thinking about real quick on your last question. I had to say some of the surveillance programs we've implemented, Some of these large employers we have, some very large biotech companies and large school districts, and we've detected 100, Hundreds of positives, right, that were otherwise coming to work or going to school either mildly ill or perhaps asymptomatic. So We're seeing these programs work. We're able to identify these hundreds of people, get them isolated, get them home, Test them while they're home and when they're back, bring them back into the workforce or bring them back into school. And we think The isolation of these positives asymptomatically or early symptomatic is going to be really powerful in controlling the spread. Great. Thank you so much. That's all I have. Thank you. Our next question will come from Erin Wright. Please go ahead. Hi, this is Katie Tryhane on for Erin. I just I have a few questions for you here. How are you thinking about the cadence of COVID testing over the balance of the year, particularly As you know, you have some of these back to school, back to life type of testing opportunities. Well, Katie, we hope the number of cases continue to come down, right? This country needs the number of cases to continue to come down. We mentioned it's plateaued at a high level and Certain states are still struggling with it and certainly the globe is still struggling with it, but we want the number of cases to come down. And we think as a number of cases come down, We continue to reopen. We continue to get back to work, back to school, back to travel, back to cruising on cruise lines, things we love to do, right? But We think there's going to be a big role for testing in all of that. So the national school program is certainly unprecedented. It's Estimated to be over 1,000,000 tests per day is going to be needed on a national level to screen the K through a grade. We see the cadence picking up significantly from employers, from travel and other organizations that are going to need to test to enable a safe and successful return to full normalcy. Katie, this is Paul. You talked about the cadence and like I indicated And the commentary about the guidance, when we initially laid out our guidance, we took into account pretty conservative assumptions about the impact of the vaccine and the positivity rates. So if you take a look at what we have incorporated into our business plan, As well as all the analyst models that are out there, I think everyone has our COVID and the RT PCR revenues going down. So that's fully been baked in. I think if you take a look at our business, the diversification of our customers and the strength Where the RT PCR revenues are coming from, we have less customer concentration than we've I mean, LA County has one customer that continues to keep popping up. But as Brandon mentioned, New York, Colorado, Ohio, Florida, Wisconsin, I mean all these are big customers. So based on our positioning, because we do have conservative assumptions built into the RT PCR should the level of testing pick up For various different reasons, we think that those assumptions might have to be reevaluated. But the way things sit Okay, got it. That's helpful. And then maybe on the sales force commentary that you had mentioned. I mean, what does the timing look like for building that out? And what exactly are I mean, how exactly do you expect that to play out? How is that? Yes. Thanks. Yes. It's happening in real time. It's to build a national sales force, it doesn't happen overnight, right? So we don't have a hard deadline and we want to have the positions filled, but it's happening in real time, a bit opportunistic now, So to speak, as we are getting a lot of talent interested in joining Fulgent. We're really happy to have Doctor. Weitz on board. I think he's an amazing talent. And he'll be helpful in building out the commercial side too, right? So it's happening in real time. We think we position our company, our capabilities and our go to market strategy In a way where we will be able to recruit elite salespeople internationally, I think we're going to focus primarily On the United States initially as we've been able to grow internationally, but I think From the international growth perspective, we do have some more strategic type opportunities in international markets that may allow us to penetrate those markets a little bit faster Just building organic sales teams internationally. Yes. Katie, it's not that we don't have sales force. We have very, very effective sales force, But we're not satisfied with we're not stopping there. We'll continue adding the talent Salesforce to broaden our coverage and successfully when we introduce a new test, a new platform. Thank you. And we have no additional questions at this time. All right. Great. Thanks everyone for joining us on our call today. Thank you. Bye bye. And this concludes today's call. Thank you all for your participation. You may now disconnect.