OraSure Technologies(OSUR) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q3 2021 was $53.9 million, up from $48 million in the prior year, representing a year-over-year growth of 12% [39] - Core business revenue, excluding COVID-19 revenue, grew 37% year-over-year to over $40 million [39] - Diagnostic revenue reached a record $23.5 million, reflecting a 44% increase from $16.3 million in the previous year [40] - Gross margin percentage decreased to 39.8% from 63.1% in the same period last year, primarily due to production scale-up inefficiencies and higher shipping costs [48] Business Line Data and Key Metrics Changes - InteliSwab revenue for the quarter was $7.7 million, driven by strong customer demand [43] - Molecular Solutions revenue was $30.4 million, a decline of 4% year-over-year, primarily due to lower sales of molecular collection kits for COVID-19 [45] - Excluding COVID-19 testing, Molecular Solutions revenue grew 87% year-over-year [46] - Microbiome services revenue was $2.4 million, growing 6% year-over-year, but was negatively impacted by the timing of pharmaceutical partner contracts [47] Market Data and Key Metrics Changes - The company received over $400 million in customer orders, including from major retailers and Fortune 500 companies, which had to be turned away due to manufacturing constraints [11] - The global testing market is projected to reach approximately 1.1 billion rapid antigen tests by 2025 [10] - The company anticipates generating approximately $30 million in total InteliSwab revenue for the year [22] Company Strategy and Development Direction - The company is focused on capitalizing on COVID-19 testing opportunities and expanding its sample collection and molecular services businesses [8] - Plans to invest in automation and efficiency to enhance operational profile and competitive positioning [7] - The company aims to emerge from the pandemic as a larger and faster-growing organization, with a focus on effortless diagnostics [59] Management's Comments on Operating Environment and Future Outlook - Management believes that COVID-19 testing will remain integral to the business long-term, with a durable demand for InteliSwab [9] - The company is optimistic about the future, citing the importance of rapid antigen tests in addressing public health challenges [10] - Management expects to transition to a meaningful operating profit in fiscal year 2022 despite current production inefficiencies [54] Other Important Information - The company signed three major U.S. government contracts, including a $205 million procurement contract for InteliSwab [12] - The company is working to resolve manufacturing challenges related to raw material variability and processing steps [72] - The company plans to launch a new GUT metatranscriptome collection kit and related services in the first quarter of next year [24] Q&A Session Summary Question: What is causing the decline in base business growth for Q4? - The decline is attributed to changes in ordering patterns from larger consumer-focused customers and a conservative outlook for COVID molecular collection kits [65][66] Question: Can you elaborate on the capacity ramps and challenges? - The challenges are related to raw materials and processing steps, which are not new issues but have been narrowed down to a few critical factors [71][72] Question: What is the durability of the $400 million in orders? - The demand is influenced by the delta variant and back-to-school programs, with expectations for recurring demand due to new testing requirements [90][91] Question: What are the expectations for gross margins moving forward? - Gross margins are expected to be in the mid to high-50s for the core business, with lower margins for InteliSwab impacting overall margins [94][102] Question: What is the status of the GUT microbiome product? - The product is intended for use in clinical trials and is expected to arrive at a point of inflection for commercial use [122][123]