OraSure Technologies(OSUR) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) OraSure Technologies reported a significant Q1 2024 net revenue decrease and net loss, primarily due to declining COVID-19 test sales Consolidated Balance Sheets Total assets decreased to $467.6 million by March 31, 2024, primarily due to reduced cash and a new $28.3 million equity investment Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $247,145 | $290,407 | | Total current assets | $348,505 | $386,459 | | Investment in equity method investee | $28,333 | $0 | | Total Assets | $467,558 | $482,845 | | Liabilities & Equity | | | | Total current liabilities | $29,105 | $39,536 | | Total Liabilities | $41,307 | $52,174 | | Total stockholders' equity | $426,251 | $430,671 | Consolidated Statements of Operations Q1 2024 saw a net loss of $3.6 million, a reversal from prior year's net income, driven by a 65% revenue decline from COVID-19 product sales Q1 2024 vs Q1 2023 Performance (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Revenues | $54,132 | $154,963 | | Gross Profit | $24,065 | $65,815 | | Operating Income (Loss) | ($7,093) | $24,321 | | Net Income (Loss) | ($3,584) | $27,219 | | Diluted EPS | ($0.05) | $0.37 | Consolidated Statements of Cash Flows Operating activities generated $6.7 million, but significant investing activities, including a $28.3 million equity investment, led to a $43.3 million cash decrease Cash Flow Summary (in thousands) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | 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 (Decrease) in Cash | ($43,262) | $6,214 | Notes to the Consolidated Financial Statements Notes detail a $28.3 million Sapphiros investment, $3.3 million impairment charges, workforce reductions, an 80% decline in COVID-19 sales, and ongoing patent litigation - In January 2024, the company invested $28.3 million in Sapphiros, a privately held consumer diagnostics company, as part of a strategic distribution agreement. This investment is accounted for using the equity method[33][69] - The company recorded pre-tax asset impairment charges of $1.8 million for property, plant, and equipment and $1.5 million for right-of-use assets in Q1 2024. These charges are a result of the strategic decision to exit the microbiome molecular sequencing services business (Diversigen) and close its Belgian operations (Novosanis)[37][45] - A reduction in workforce was executed in Q1 2024, largely affecting COVID-19 manufacturing, resulting in $0.4 million of termination benefit charges[50] - A single non-commercial customer accounted for 40% of net consolidated revenues for the three months ended March 31, 2024, down from 78% in the prior year period[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 65% revenue decline to reduced COVID-19 sales, resulting in a $7.1 million operating loss despite improved gross margin and reduced operating expenses Recent Developments Recent developments include winding down Novosanis and Diversigen operations, alongside a strategic investment and distribution agreement with Sapphiros - The company is winding down operations at its Novosanis subsidiary in Belgium and exiting the molecular services business offered by its Diversigen subsidiary[68] - Announced a strategic investment and distribution agreement with Sapphiros, a consumer diagnostics company, with a commitment of up to $30.0 million[69][70] Results of Operations Net revenues declined 65% to $54.1 million, primarily due to an 80% drop in COVID-19 Diagnostics sales, leading to a $7.1 million operating loss Net Revenues by Category (in thousands) | Category | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | COVID-19 Diagnostics | $23,097 | $118,254 | (80)% | | Diagnostics (HIV, HCV) | $16,380 | $17,090 | (4)% | | Molecular Sample Management Solutions | $10,822 | $12,942 | (16)% | | Total Net Revenues | $54,132 | $154,963 | (65)% | - The 80% decrease in COVID-19 Diagnostics revenue was due to decreased sales through U.S. government procurement contracts, a decline expected to continue through 2024[74] - Consolidated gross profit margin increased to 44.5% from 42.5% year-over-year, driven by higher average selling prices on InteliSwab® sales and lower scrap expense[80] - Operating expenses, excluding impairment charges, decreased by $12.6 million compared to Q1 2023, reflecting the impact of cost-saving measures and headcount reductions[82] Liquidity and Capital Resources Cash and short-term investments decreased to $263.8 million, mainly due to a $28.3 million investment in Sapphiros, though operating activities generated $6.7 million Liquidity Position (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $247,145 | $290,407 | | Short-term investments | $16,627 | $0 | | Working capital | $319,400 | $346,923 | - Cash from operating activities was $6.7 million, driven by positive non-cash adjustments (depreciation, stock compensation, impairments) and favorable changes in accounts receivable and inventory, offset by payments for accrued year-end bonuses[93] - Net cash used in investing activities was $46.5 million, reflecting the $28.3 million investment in Sapphiros and net purchases of short-term investments[94] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to the company's market risk assessment have occurred since the 2023 Annual Report on Form 10-K - There have been no material changes to the company's market risk disclosures since its 2023 Form 10-K[100] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2024[101] - No material changes to internal control over financial reporting occurred during the first quarter of 2024[102] PART II. OTHER INFORMATION Item 1. Legal Proceedings Ongoing patent litigation with Spectrum Solutions includes an appealed noninfringement ruling and unfavorable PTO decisions, with no expected material adverse financial impact - The company is appealing a District Court's summary judgment of noninfringement in its patent litigation against Spectrum Solutions, with oral arguments expected in the second half of 2024[105] - The Patent and Trademark Office (PTO) has issued an unfavorable decision on one patent in the litigation and has instituted a review of a third related patent[105] Item 1A. Risk Factors No material changes to the company's risk factors have been reported since the 2023 Annual Report on Form 10-K - No material changes to the risk factors from the 2023 Annual Report on Form 10-K have been reported[106] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 193,478 shares in Q1 2024, primarily to satisfy tax withholding obligations for employee stock awards, not as part of a public program Share Repurchases in Q1 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2024 | 59,151 | $8.19 | | Feb 2024 | 55,620 | $7.40 | | Mar 2024 | 78,707 | $7.18 | | Total | 193,478 | | - The repurchased shares were retired to satisfy minimum tax withholdings for employees upon the vesting of stock awards and were not part of the company's publicly announced share repurchase program[111] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - The company reports no defaults upon senior securities[112] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[112] Item 5. Other Information The company reports no other information under this item - The company reports no other information under this item[112] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents - The exhibits filed include required certifications from the CEO and CFO, as well as Interactive Data Files (XBRL)[113]