OraSure Technologies(OSUR) - 2024 Q1 - Quarterly Results

Q1 2024 Financial Highlights and Strategic Overview The company reported a significant revenue decline due to lower COVID-19 sales but is implementing major restructuring initiatives to achieve cost savings and breakeven Executive Summary OraSure reported Q1 2024 revenue of $54.1 million and is undergoing restructuring to achieve $15 million in annualized cost reductions Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | % Change | | :----- | :------ | :------ | :------- | | Total Net Revenue | $54.1M | $155.0M | (65)% | | Core Business Revenue | $31.0M | $36.6M | (15)% | | COVID-19 Revenue | $23.1M | $118.4M | (80)% | | GAAP EPS | $(0.05) | $0.37 | NM | | Non-GAAP EPS | $0.04 | $0.47 | (91)% | - Restructuring initiatives are expected to result in $15 million of annualized expense reductions and position OraSure to achieve cash flow breakeven for the core business by the end of 2024[1][3] - Initial orders for Syphilis Health Check were delivered as part of a distribution agreement with Diagnostics Direct[2] Recent Business Developments and Strategic Initiatives The company initiated several strategic actions, including business exits and insourcing, to streamline operations and enhance efficiency - Initiated steps to wind down and exit the Diversigen microbiome laboratory and analytical sequencing services business by end of Q3 2024, expected to result in over $10 million in annualized cost savings; Diversigen generated $4 million in revenue over the last 12 months[7][8] - Commenced projects to insource production of certain sample management products, expected to yield $5 million in annual cost savings upon completion within 18 months[9] - Initiated steps to close the Novosanis site in Belgium by the end of 2024 for further integration, while continuing to develop and sell the Colli-Pee® device[9] - Successfully launched sales and distribution partnerships with Diagnostics Direct and Anaerobe Systems to enter new market segments[9] - Remains on track to achieve operating cash flow break-even for the core business by the end of 2024[9] Detailed Financial Results The company's financials show a steep revenue decline from reduced COVID-19 sales, though gross margins improved, alongside a stable balance sheet Consolidated Statements of Operations (Income Statement) A significant drop in COVID-19 related revenue led to a net loss, although gross margin percentage improved year-over-year Consolidated Operations Summary | Metric | Q1 2024 ($000s) | Q1 2023 ($000s) | % Change | | :----------------------- | :-------------- | :-------------- | :------- | | Net revenues | $54,132 | $154,963 | (65)% | | Gross profit | $24,065 | $65,815 | (63)% | | Gross margin | 44.5% | 42.5% | 2.0 pp | | Non-GAAP gross profit | $24,447 | $66,277 | (63)% | | Non-GAAP gross margin | 45.2% | 42.8% | 2.4 pp | | Operating income (loss) | $(7,093) | $24,321 | NM | | Non-GAAP operating income (loss) | $(325) | $32,658 | NM | | Net income (loss) | $(3,584) | $27,219 | NM | | Non-GAAP net income (loss) | $3,086 | $34,556 | (91)% | Revenue Performance by Segment Revenue declined across all segments, driven by a sharp 80% drop in COVID-19 related sales Revenue by Segment | Revenue Segment | Q1 2024 ($000s) | Q1 2023 ($000s) | % Change | | :-------------------------- | :-------------- | :-------------- | :------- | | Core Business | $31,004 | $36,554 | (15)% | | COVID-19 | $23,128 | $118,409 | (80)% | | Total Net Revenue | $54,132 | $154,963 | (65)% | | COVID-19 Diagnostics | $23,097 | $118,254 | (80)% | | Diagnostics | $16,380 | $17,090 | (4)% | | Molecular Sample Management Solutions | $10,822 | $12,942 | (16)% | | Other products and services | $2,576 | $3,094 | (17)% | | Molecular Services | $873 | $1,379 | (37)% | | COVID-19 Molecular Products | $31 | $155 | (80)% | | Net product and services revenues | $53,779 | $152,914 | (65)% | | Non-product and services revenues | $353 | $2,049 | (83)% | - Core revenue decreased 15% year-over-year, with Diagnostics revenue down 4% and Molecular Sample Management Solutions revenue down 16%[7] - COVID-19 revenue decreased 80% year-over-year, consistent with expectations as government contract volumes tapered[7] Profitability and Margins Analysis Both GAAP and Non-GAAP gross margins improved, while operating margins declined significantly due to lower revenues Key Margin Metrics | Metric | Q1 2024 | Q1 2023 | Change (pp) | | :-------------------- | :------ | :------ | :---------- | | GAAP Gross Margin | 44.5% | 42.5% | 2.0 | | Non-GAAP Gross Margin | 45.2% | 42.8% | 2.4 | | GAAP Operating Margin | (13.1)% | 15.7% | (28.8) | | Non-GAAP Operating Margin | (0.6)% | 21.1% | (21.7) | - Gross margin benefited from increased average selling price on InteliSwab® and lower manufacturing scrap expense year-over-year[7] Earnings Per Share (EPS) Performance The company reported a GAAP net loss per share and a significant decline in Non-GAAP earnings per share compared to the prior year EPS Comparison | Metric | Q1 2024 | Q1 2023 | % Change | | :----------- | :------ | :------ | :------- | | GAAP EPS | $(0.05) | $0.37 | NM | | Non-GAAP EPS | $0.04 | $0.47 | (91)% | Condensed Consolidated Balance Sheets The company maintained a strong cash position of $263.8 million, with a slight decrease in total assets from year-end 2023 Key Balance Sheet Items | Balance Sheet Item | March 31, 2024 ($000s) | December 31, 2023 ($000s) | | :------------------------- | :--------------------- | :----------------------- | | Cash and cash equivalents | $247,145 | $290,407 | | Short-term investments | $16,627 | — | | Total Assets | $467,558 | $482,845 | | Total Liabilities | $41,307 | $52,174 | | Stockholders' Equity | $426,251 | $430,671 | | Investment in equity method investee | $28,333 | — | - Cash, cash equivalents, and short-term investments totaled $263.8 million as of March 31, 2024, a $26.6 million decrease from the prior quarter, primarily due to a $28.3 million investment in Sapphiros[7] Consolidated Statement of Cash Flows Operating activities provided positive cash flow, but investing activities led to a net cash outflow due to strategic investments Summary of Cash Flows | Cash Flow Activity | Q1 2024 ($000s) | Q1 2023 ($000s) | | :-------------------------- | :-------------- | :-------------- | | Net cash provided by operating activities | $6,738 | $6,002 | | Net cash provided by (used in) investing activities | $(46,528) | $1,016 | | Net cash used in financing activities | $(1,297) | $(1,331) | | Net increase (decrease) in cash and cash equivalents | $(43,262) | $6,214 | - The $28.3 million investment in Sapphiros was a primary driver of the decrease in the cash balance during the first quarter[7] Financial Guidance and Outlook The company provides its revenue outlook for the second quarter of 2024, detailing expectations for core and InteliSwab® sales Q2 2024 Revenue Guidance OraSure projects Q2 2024 revenue between $50 million and $55 million, including contributions from its core and InteliSwab® businesses Q2 2024 Guidance | Q2 2024 Guidance | Range ($M) | | :----------------- | :--------- | | Total Revenue | $50 - $55 | | Core Revenue | $33 - $36 | | InteliSwab® Revenue | $17 - $19 | - Q2 2024 guidance includes approximately $650 thousand of revenue from the Diversigen business that the company plans to exit[9] Company and Product Information This section details the company's business focus on diagnostic tests and sample management, and provides information on its InteliSwab® product About OraSure Technologies OraSure Technologies is a leader in point-of-care diagnostics and sample management solutions for various global markets - OraSure Technologies provides access to accurate, essential information through effortless tests, collection kits, and services to improve global health and wellness[18] - The company's portfolio includes rapid diagnostic tests, sample collection and stabilization devices, and molecular services solutions[18] - Products are sold globally to clinical laboratories, hospitals, physician's offices, clinics, public health organizations, research institutions, government agencies, pharmaceutical companies, commercial entities, and direct to consumers[18] About InteliSwab® InteliSwab® is an FDA-authorized, user-friendly COVID-19 rapid test designed for over-the-counter and professional use - InteliSwab® COVID-19 rapid tests have received Emergency Use Authorizations (EUA) from the FDA for OTC, professional, and prescription home use[19] - The test features a unique design with a built-in swab for lower nostril self-collection, providing results within 30 minutes with minimal "hands-on time" and no instruments required[19] - Development and manufacturing expansion for InteliSwab® were funded in whole or in part with federal funds from the Department of Health and Human Services and the American Rescue Plan Act[20] Investor Information and Disclosures This section provides details on the investor conference call, forward-looking statements, and the use of non-GAAP financial measures Conference Call Information The company hosted a conference call and webcast on May 8, 2024, to discuss its Q1 2024 financial results - A conference call and audio webcast were held on May 8, 2024, at 4:45 p.m. Eastern Time to discuss Q1 2024 results and business developments[16] - The webcast is available on OraSure's investor relations page and will be archived for approximately 90 days[17] Forward-Looking Statements This section outlines forward-looking statements and associated risks that could cause actual results to differ materially - The press release contains forward-looking statements concerning products, product development, regulatory submissions, revenue guidance, cost savings, and cash flow[21] - Actual performance or results could differ materially due to factors such as ability to satisfy customer demand, regulatory approvals, competition, economic conditions, and supply chain stability[21][22] - Readers are cautioned not to place undue reliance on these statements, which are made as of the date of the press release, and the company undertakes no duty to update them[22] Non-GAAP Financial Measures and Reconciliation The company utilizes non-GAAP measures to provide supplemental information for analyzing core operating performance - Non-GAAP financial measures (gross margin, operating income/loss, EPS) are provided to supplement GAAP results, offering useful information for analyzing core operating results and comparisons[23] - Management uses non-GAAP measures for financial and operational decision-making, budgeting, and to help investors analyze the business's health[23] - Non-GAAP results are not a substitute for GAAP measures and may not be comparable across companies[24] Statement Regarding Use of Non-GAAP Financial Measures Non-GAAP measures are used to supplement GAAP results by excluding certain items to facilitate period-over-period comparisons - Non-GAAP financial measures are used to provide useful supplemental information to investors, facilitate analysis of core operating results, and compare operating results across reporting periods by excluding certain expenses not indicative of recurring core business operations[23] - Management uses non-GAAP measures for financial and operational decision-making and budgeting, and they are utilized by institutional investors and the analysis community[23] - Investors are encouraged to consider GAAP results alongside non-GAAP information, as non-GAAP measures are not a substitute for GAAP and may not be calculated uniformly by all companies[24] GAAP to Non-GAAP Reconciliation Tables This section provides detailed tables reconciling GAAP financial results to the company's non-GAAP measures Reconciliation of GAAP to Non-GAAP Results | Metric | GAAP Q1 2024 ($000s) | Non-GAAP Q1 2024 ($000s) | GAAP Q1 2023 ($000s) | Non-GAAP Q1 2023 ($000s) | | :--------------------------------------- | :------------------- | :--------------------- | :------------------- | :--------------------- | | Cost of products and services sold | $30,067 | $29,685 | $89,148 | $88,686 | | Gross Margin | 44.5% | 45.2% | 42.5% | 42.8% | | Operating Income (Loss) | $(7,093) | $(325) | $24,321 | $32,658 | | Net Income (Loss) | $(3,584) | $3,086 | $27,219 | $34,556 | | Earnings (Loss) Per Share | $(0.05) | $0.04 | $0.37 | $0.47 | - Adjustments to GAAP measures include stock compensation, amortization of acquisition-related intangible assets, reduction in workforce severance, loss on impairment, transformation related expenses, government grant accounting, change in fair value of acquisition-related contingent consideration, and tax effect of non-GAAP adjustments[26][28]