OraSure Technologies(OSUR) - 2023 Q4 - Annual Results

Financial Performance Overview Q4 & Full-Year 2023 Financial Highlights OraSure reported Q4 2023 total net revenue of $75.9 million, a 38% decrease year-over-year, primarily due to a 53% decline in COVID-19 related revenue. Core business revenue remained flat. For the full year 2023, total net revenue increased by 5% to $405.5 million. The company achieved a Q4 GAAP EPS of $0.27 and a Non-GAAP EPS of $0.22, while significantly increasing its cash balance to $290.4 million Q4 & Full-Year 2023 Revenue Breakdown (in thousands) | Revenue Source | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | % Change | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Core Business | $34,217 | $34,084 | 0% | $147,693 | $144,154 | 2% | | COVID-19 | $41,664 | $88,994 | -53% | $257,779 | $243,325 | 6% | | Total Net Revenue | $75,881 | $123,078 | -38% | $405,472 | $387,479 | 5% | Q4 & Full-Year 2023 Key Financial Metrics | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP EPS | $0.27 | $0.22 | $0.72 | $(0.24) | | Non-GAAP EPS | $0.22 | $0.36 | $1.04 | $0.36 | | Gross Margin | 46.3% | 40.5% | 42.3% | 38.3% | | Non-GAAP Gross Margin | 49.7% | 40.9% | 45.5% | 40.1% | | Operating Income (Loss) | $3.9M | $14.6M | $32.7M | $(22.2)M | | Non-GAAP Operating Income | $13.6M | $18.6M | $73.6M | $22.5M | - The company's cash, cash equivalents, and short-term investments balance grew to $290.4 million as of December 31, 2023. The $65.5 million increase during Q4 was driven by improved operational performance and a $24.4 million receipt from a U.S. government contract[1][7] Management Commentary The CEO emphasized significant progress in the company's transformation, highlighting positive operating cash flow and margin expansion in 2023. The company is focused on disciplined execution and innovation to elevate core growth as COVID-19 revenues decline, and is on track to achieve break-even cash flow from operations for its core business by the end of 2024 - The company is on track to achieve its target of break-even in cash flow from operations for the core business by the end of 2024[2] - The strategic focus for 2024 is on elevating core growth to offset the expected tapering of COVID-19 contract volumes[3] - OraSure is investing in its innovation roadmap through both organic development and inorganic partnerships, such as recent agreements with Sapphiros and Diagnostics Direct[3] Business and Strategic Developments Recent Business Highlights OraSure has recently undertaken several strategic initiatives to enhance its product portfolio and operational efficiency. Key developments include a strategic partnership with Sapphiros to broaden its diagnostic test offerings, an agreement with Diagnostics Direct to enter the U.S. syphilis testing market, and the consolidation of a distribution facility to reduce costs - Entered a strategic distribution relationship and made an investment in Sapphiros, a consumer diagnostics company, to offer a more comprehensive range of low-cost diagnostic tests and sample management solutions[7] - Signed a strategic agreement with Diagnostics Direct to distribute Syphilis Health Check, the first CLIA-waived, 10-minute point-of-care syphilis test, marking the company's entry into this market[8] - Consolidated one of its distribution facilities into its Opus Way facility to drive additional operating efficiencies and cost savings[8] Financial Guidance Q1 2024 Outlook For the first quarter of 2024, OraSure anticipates total revenue to be in the range of $50 million to $54 million. This forecast is composed of $29 to $31 million from its core business and $21 to $23 million from its InteliSwab® product Q1 2024 Revenue Guidance (in millions) | Revenue Category | Guidance Range | | :--- | :--- | | Core Revenue | $29 - $31 | | InteliSwab® Revenue | $21 - $23 | | Total Revenue | $50 - $54 | Detailed Financial Statements Consolidated Results of Operations For the full year 2023, OraSure reported a net income of $53.7 million, a significant turnaround from a net loss of $17.1 million in 2022. This improvement was driven by a 5% increase in total net revenues to $405.5 million and a 16% rise in gross profit. The Diagnostics segment was a key growth driver with a 41% revenue increase, while Molecular Sample Management Solutions and Molecular Services saw declines Full-Year Results of Operations (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Net revenues | $405,472 | $387,479 | | Gross profit | $171,652 | $148,438 | | Operating income (loss) | $32,684 | $(22,156) | | Net income (loss) | $53,655 | $(17,133) | | Diluted EPS | $0.72 | $(0.24) | Full-Year Revenue by Category (in thousands) | Category | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | COVID-19 Diagnostics | $257,493 | $233,666 | 10% | | Diagnostics | $73,694 | $52,181 | 41% | | Molecular Sample Management Solutions | $54,274 | $63,342 | -14% | | Molecular Services | $4,474 | $7,296 | -39% | | COVID-19 Molecular Products | $286 | $9,659 | -97% | Consolidated Balance Sheets As of December 31, 2023, OraSure's balance sheet showed total assets of $482.8 million, up from $444.2 million at year-end 2022. The most significant change was the increase in cash and cash equivalents to $290.4 million from $84.0 million. Concurrently, inventories were nearly halved to $47.6 million, and accounts receivable decreased to $40.2 million, reflecting improved working capital management Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $290,407 | $83,980 | | Accounts receivable, net | $40,171 | $70,797 | | Inventories | $47,614 | $95,704 | | Total assets | $482,845 | $444,180 | | Liabilities & Equity | | | | Total liabilities | $52,174 | $79,755 | | Stockholders' equity | $430,671 | $364,425 | | Total liabilities and stockholders' equity | $482,845 | $444,180 | Consolidated Statement of Cash Flows For the full year 2023, the company generated $141.6 million in cash from operating activities, a stark contrast to the $47.2 million used in 2022. This positive swing was primarily driven by the return to profitability and significant positive changes in working capital, including a $48.2 million reduction in inventories and a $31.1 million decrease in accounts receivable. Net cash from investing activities was $66.2 million, largely from maturities of short-term investments and government contract proceeds Full-Year Cash Flow Summary (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $141,583 | $(47,202) | | Net cash provided by investing activities | $66,154 | $21,085 | | Net cash used in financing activities | $(3,023) | $(3,828) | | Net increase (decrease) in cash | $206,427 | $(32,782) | - The turnaround in operating cash flow was driven by a net income of $53.7 million and favorable working capital changes, including a $48.2 million decrease in inventories and a $31.1 million decrease in accounts receivable[12] Non-GAAP Financial Measures GAAP to Non-GAAP Reconciliation The company uses non-GAAP financial measures to provide investors with supplemental information by excluding items that may not be indicative of recurring core business operations. For the full year 2023, Non-GAAP net income was $77.6 million ($1.04 per share), compared to GAAP net income of $53.7 million ($0.72 per share). Major adjustments included stock compensation, impairment losses, accelerated depreciation, and transformation-related expenses - Management believes non-GAAP measures provide useful supplemental information, facilitate analysis of core operating results, and allow for greater transparency with key metrics used in decision-making[22] Full-Year 2023 GAAP to Non-GAAP Net Income Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | GAAP Net Income | $53,655 | | Stock compensation | $10,729 | | Loss on impairment | $10,829 | | Accelerated depreciation | $7,466 | | Inventory reserve for excess levels | $3,761 | | Reduction in workforce severance | $3,264 | | Additional profit from government contract | $(12,802) | | Other adjustments (net) | $2,807 | | Tax effect of Non-GAAP adjustments | $(2,124) | | Non-GAAP Net Income | $77,585 | - Key adjustments to reconcile GAAP to Non-GAAP operating income for FY2023 include $10.8 million in impairment losses, $10.7 million in stock compensation, and $7.5 million in accelerated depreciation[24]