x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2024.
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 36-4370966 | |||||
(State or Other Jurisdiction of
| (IRS Employer Identification No.) |
220 East First Street, Bethlehem, Pennsylvania | 18015 | |||||
(Address of Principal Executive Offices) | (Zip code) |
(Registrant’s Telephone Number, Including Area Code)
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Stock, $0.000001 par value per share | OSUR | The NASDAQ Stock Market LLC |
Large accelerated filer | o | Accelerated filer | ||||||||||||||
Non-accelerated filer | o | Smaller reporting company | ||||||||||||||
Emerging growth company |
Number
the date of this report and the Company undertakes no duty to update these statements, unless it is required to do so by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make updates with respect to other forward-looking statements or that it will make any further updates to those forward-looking statements at any future time.
PART I. FINANCIAL INFORMATION
Page No. | |||||||||
-2-
September 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 76,770 | $ | 107,959 | ||||
Restricted cash | 1,840 | 1,831 | ||||||
Short-term investments | 83,372 | 11,160 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $494 and $484 | 28,099 | 19,827 | ||||||
Inventories | 16,859 | 11,799 | ||||||
Prepaid expenses | 1,189 | 1,722 | ||||||
Other current assets | 1,206 | 2,143 | ||||||
|
|
|
| |||||
Total current assets | 209,335 | 156,441 | ||||||
PROPERTY AND EQUIPMENT, net | 21,496 | 20,033 | ||||||
INTANGIBLE ASSETS, net | 8,972 | 10,337 | ||||||
GOODWILL | 20,257 | 18,793 | ||||||
LONG TERM INVESTMENTS | 18,290 | — | ||||||
OTHER ASSETS | 3,909 | 2,331 | ||||||
|
|
|
| |||||
$ | 282,259 | $ | 207,935 | |||||
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 9,624 | $ | 4,633 | ||||
Deferred revenue | 1,186 | 1,388 | ||||||
Accrued expenses | 15,813 | 11,314 | ||||||
|
|
|
| |||||
Total current liabilities | 26,623 | 17,335 | ||||||
|
|
|
| |||||
OTHER LIABILITIES | 3,928 | 2,304 | ||||||
|
|
|
| |||||
DEFERRED INCOME TAXES | 2,194 | 2,446 | ||||||
|
|
|
| |||||
COMMITMENTS AND CONTINGENCIES (Note 7) | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Preferred stock, par value $.000001, 25,000 shares authorized, none issued | — | — | ||||||
Common stock, par value $.000001, 120,000 shares authorized, 60,631 and 56,001 shares issued and outstanding | — | — | ||||||
Additional paid-in capital | 385,978 | 350,528 | ||||||
Accumulated other comprehensive loss | (9,638 | ) | (14,220 | ) | ||||
Accumulated deficit | (126,826 | ) | (150,458 | ) | ||||
|
|
|
| |||||
Total stockholders’ equity | 249,514 | 185,850 | ||||||
|
|
|
| |||||
$ | 282,259 | $ | 207,935 | |||||
|
|
|
|
March 31, 2024 | December 31, 2023 | ||||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 247,145 | $ | 290,407 | |||||||
Short-term investments | 16,627 | — | |||||||||
Accounts receivable, net of allowance of $1,065 and $1,216 | 34,037 | 40,171 | |||||||||
Inventories | 43,180 | 47,614 | |||||||||
Prepaid expenses | 4,691 | 6,041 | |||||||||
Other current assets | 2,825 | 2,226 | |||||||||
Total current assets | 348,505 | 386,459 | |||||||||
Noncurrent Assets: | |||||||||||
Property, plant and equipment, net of accumulated depreciation of $86,332 and $85,143 | 42,597 | 45,420 | |||||||||
Operating right-of-use assets, net | 10,570 | 12,270 | |||||||||
Finance right-of-use assets, net | 158 | 576 | |||||||||
Intangible assets, net of accumulated amortization of $33,261 and $33,649 | 1,010 | 1,206 | |||||||||
Goodwill | 35,172 | 35,696 | |||||||||
Investment in equity method investee | 28,333 | — | |||||||||
Other noncurrent assets | 1,213 | 1,218 | |||||||||
Total noncurrent assets | 119,053 | 96,386 | |||||||||
TOTAL ASSETS | $ | 467,558 | $ | 482,845 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Accounts payable | $ | 12,683 | $ | 13,151 | |||||||
Deferred revenue | 1,597 | 1,559 | |||||||||
Accrued expenses and other current liabilities | 12,715 | 22,710 | |||||||||
Finance lease liability | 517 | 539 | |||||||||
Operating lease liability | 1,593 | 1,577 | |||||||||
Total current liabilities | 29,105 | 39,536 | |||||||||
Noncurrent Liabilities: | |||||||||||
Finance lease liability | 204 | 226 | |||||||||
Operating lease liability | 10,676 | 11,162 | |||||||||
Other noncurrent liabilities | 727 | 696 | |||||||||
Deferred income taxes | 595 | 554 | |||||||||
Total noncurrent liabilities | 12,202 | 12,638 | |||||||||
TOTAL LIABILITIES | 41,307 | 52,174 | |||||||||
Commitments and contingencies (Note 12) | |||||||||||
STOCKHOLDERS' EQUITY | |||||||||||
Preferred stock, par value $0.000001, 25,000 shares authorized, none issued | — | — | |||||||||
Common stock, par value $0.000001, 120,000 shares authorized, 73,959 and 73,528 shares issued and outstanding | — | — | |||||||||
Additional paid-in capital | 531,263 | 529,543 | |||||||||
Accumulated other comprehensive loss | (17,497) | (14,941) | |||||||||
Accumulated deficit | (87,515) | (83,931) | |||||||||
Total stockholders' equity | 426,251 | 430,671 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 467,558 | $ | 482,845 |
-3-
OPERATIONS
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
NET REVENUES: | ||||||||||||||||
Product | $ | 41,157 | $ | 25,460 | $ | 111,771 | $ | 78,286 | ||||||||
Other | 1,157 | 6,791 | 3,265 | 14,413 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
42,314 | 32,251 | 115,036 | 92,699 | |||||||||||||
COST OF PRODUCTS SOLD | 17,670 | 9,576 | 44,605 | 28,626 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | 24,644 | 22,675 | 70,431 | 64,073 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
OPERATING EXPENSES: | ||||||||||||||||
Research and development | 3,228 | 3,196 | 9,536 | 8,547 | ||||||||||||
Sales and marketing | 7,162 | 6,428 | 21,541 | 22,531 | ||||||||||||
General and administrative | 6,935 | 6,907 | 21,777 | 19,803 | ||||||||||||
Gain on litigation settlement | — | — | (12,500 | ) | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
17,325 | 16,531 | 40,354 | 50,881 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income | 7,319 | 6,144 | 30,077 | 13,192 | ||||||||||||
OTHER INCOME (EXPENSE) | 113 | 498 | 676 | (34 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 7,432 | 6,642 | 30,753 | 13,158 | ||||||||||||
INCOME TAX EXPENSE | 1,669 | 400 | 7,121 | 634 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
NET INCOME | $ | 5,763 | $ | 6,242 | $ | 23,632 | $ | 12,524 | ||||||||
|
|
|
|
|
|
|
| |||||||||
EARNINGS PER SHARE: | ||||||||||||||||
BASIC | $ | 0.10 | $ | 0.11 | $ | 0.40 | $ | 0.23 | ||||||||
|
|
|
|
|
|
|
| |||||||||
DILUTED | $ | 0.09 | $ | 0.11 | $ | 0.39 | $ | 0.22 | ||||||||
|
|
|
|
|
|
|
| |||||||||
SHARES USED IN COMPUTING EARNINGS PER SHARE: | ||||||||||||||||
BASIC | 60,090 | 55,653 | 58,511 | 55,549 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
DILUTED | 62,172 | 56,530 | 60,569 | 56,273 | ||||||||||||
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
NET REVENUES: | |||||||||||||||||||||||
Products and services | $ | 53,779 | $ | 152,914 | |||||||||||||||||||
Other | 353 | 2,049 | |||||||||||||||||||||
54,132 | 154,963 | ||||||||||||||||||||||
COST OF PRODUCTS AND SERVICES SOLD | 30,067 | 89,148 | |||||||||||||||||||||
Gross profit | 24,065 | 65,815 | |||||||||||||||||||||
OPERATING EXPENSES: | |||||||||||||||||||||||
Research and development | 7,738 | 10,560 | |||||||||||||||||||||
Sales and marketing | 8,448 | 12,142 | |||||||||||||||||||||
General and administrative | 11,634 | 17,711 | |||||||||||||||||||||
Loss on impairments | 3,338 | 1,105 | |||||||||||||||||||||
Change in the estimated fair value of acquisition-related contingent consideration | — | (24) | |||||||||||||||||||||
31,158 | 41,494 | ||||||||||||||||||||||
Operating income (loss) | (7,093) | 24,321 | |||||||||||||||||||||
OTHER INCOME | 3,491 | 2,673 | |||||||||||||||||||||
Income (loss) before income taxes | (3,602) | 26,994 | |||||||||||||||||||||
INCOME TAX BENEFIT | (18) | (225) | |||||||||||||||||||||
NET INCOME (LOSS) | $ | (3,584) | $ | 27,219 | |||||||||||||||||||
INCOME (LOSS) PER SHARE: | |||||||||||||||||||||||
BASIC | $ | (0.05) | $ | 0.37 | |||||||||||||||||||
DILUTED | $ | (0.05) | $ | 0.37 | |||||||||||||||||||
WEIGHTED-AVERAGE SHARES OUTSTANDING: | |||||||||||||||||||||||
BASIC | 73,947 | 73,112 | |||||||||||||||||||||
DILUTED | 73,947 | 73,966 |
-4-
(LOSS)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
NET INCOME | $ | 5,763 | $ | 6,242 | $ | 23,632 | $ | 12,524 | ||||||||
OTHER COMPREHENSIVE INCOME | ||||||||||||||||
Currency translation adjustments | 2,570 | (729 | ) | 4,882 | 2,501 | |||||||||||
Unrealized loss on marketable securities | (245 | ) | — | (300 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
COMPREHENSIVE INCOME | $ | 8,088 | $ | 5,513 | $ | 28,214 | $ | 15,025 | ||||||||
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
NET INCOME (LOSS) | $ | (3,584) | $ | 27,219 | |||||||||||||||||||
OTHER COMPREHENSIVE INCOME | |||||||||||||||||||||||
Currency translation adjustments | (2,556) | 797 | |||||||||||||||||||||
Unrealized gain on marketable securities | — | 220 | |||||||||||||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | (6,140) | $ | 28,236 |
-5-
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 23,632 | $ | 12,524 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Stock-based compensation | 5,213 | 4,438 | ||||||
Depreciation and amortization | 4,589 | 4,152 | ||||||
Unrealized foreign currency loss | (246 | ) | 75 | |||||
Deferred income taxes | (425 | ) | (205 | ) | ||||
Changes in assets and liabilities | ||||||||
Accounts receivable | (7,706 | ) | 3,818 | |||||
Inventories | (4,886 | ) | 1,236 | |||||
Prepaid expenses and other assets | 1,616 | 1,186 | ||||||
Accounts payable | 4,593 | (125 | ) | |||||
Deferred revenue | (212 | ) | (1,829 | ) | ||||
Accrued expenses and other liabilities | 4,193 | (90 | ) | |||||
|
|
|
| |||||
Net cash provided by operating activities | 30,361 | 25,180 | ||||||
|
|
|
| |||||
INVESTING ACTIVITIES: | ||||||||
Purchases of investments | (132,177 | ) | (22,966 | ) | ||||
Proceeds from maturities and redemptions of investments | 42,613 | 22,966 | ||||||
Purchases of property and equipment | (3,462 | ) | (3,512 | ) | ||||
|
|
|
| |||||
Net cash used in investing activities | (93,026 | ) | (3,512 | ) | ||||
|
|
|
| |||||
FINANCING ACTIVITIES: | ||||||||
Payments for debt issue costs | — | (367 | ) | |||||
Proceeds from exercise of stock options | 31,402 | 894 | ||||||
Repurchase of common stock | (1,234 | ) | (3,311 | ) | ||||
|
|
|
| |||||
Net cash provided by (used in) financing activities | 30,168 | (2,784 | ) | |||||
|
|
|
| |||||
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH | 1,317 | 558 | ||||||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (31,180 | ) | 19,442 | |||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD | 109,790 | 94,094 | ||||||
|
|
|
| |||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $ | 78,610 | $ | 113,536 | ||||
|
|
|
| |||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid for income taxes | $ | 4,317 | $ | 812 | ||||
|
|
|
| |||||
Noncash investing activities (accrued property and equipment purchases) | $ | 437 | $ | 241 | ||||
|
|
|
| |||||
Noncash unrealized losses on marketable securities | $ | (300 | ) | $ | — | |||
|
|
|
|
For the Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
OPERATING ACTIVITIES: | |||||||||||
Net income (loss) | $ | (3,584) | $ | 27,219 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Stock-based compensation | 2,968 | 2,655 | |||||||||
Depreciation and amortization | 2,725 | 3,696 | |||||||||
Loss on impairments | 3,338 | 1,105 | |||||||||
Other non-cash amortization | 6 | — | |||||||||
Provision for credit losses | (85) | (67) | |||||||||
Unrealized foreign currency (gain) loss | (119) | 44 | |||||||||
Interest expense on finance leases | 7 | 15 | |||||||||
Deferred income taxes | 53 | — | |||||||||
Change in the estimated fair value of acquisition-related contingent consideration | — | (24) | |||||||||
Payment of acquisition-related contingent consideration | — | (19) | |||||||||
Changes in assets and liabilities: | |||||||||||
Accounts receivable | 6,199 | (36,613) | |||||||||
Inventories | 4,337 | 18,540 | |||||||||
Prepaid expenses and other assets | 603 | 5,299 | |||||||||
Accounts payable | (68) | (12,097) | |||||||||
Deferred revenue | 47 | (279) | |||||||||
Accrued expenses and other liabilities | (9,688) | (3,472) | |||||||||
Net cash provided by operating activities | 6,738 | 6,002 | |||||||||
INVESTING ACTIVITIES: | |||||||||||
Purchases of short-term investments | (25,850) | (22,330) | |||||||||
Purchase of equity method investee | (28,333) | — | |||||||||
Proceeds from maturities and redemptions of short-term investments | 9,234 | 27,304 | |||||||||
Purchases of property and equipment | (1,579) | (1,191) | |||||||||
Purchase of property and equipment under government contracts | — | (2,767) | |||||||||
Net cash provided by (used in) investing activities | (46,528) | 1,016 | |||||||||
FINANCING ACTIVITIES: | |||||||||||
Cash payments for lease liabilities | (50) | (148) | |||||||||
Proceeds from exercise of stock options | 215 | 66 | |||||||||
Payment of acquisition-related contingent consideration | — | (46) | |||||||||
Repurchase of common stock | (1,462) | (1,203) | |||||||||
Net cash used in financing activities | (1,297) | (1,331) | |||||||||
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH | (2,175) | 527 | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (43,262) | 6,214 | |||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 290,407 | 83,980 | |||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 247,145 | $ | 90,194 | |||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||||||
Cash (refunds) paid for income taxes | $ | 592 | $ | (10) | |||||||
Non-cash investing and financing activities | |||||||||||
Accrued property and equipment purchases | $ | 471 | $ | 733 | |||||||
-6-
(in thousands, except per share amounts, unless otherwise indicated)
We develop, manufacture, market and sell diagnostic products and specimen collection devices using our proprietary technologies, as well as other diagnostic products, including immunoassays and otherin vitro diagnostic tests that are used on other specimen types. Our diagnostic products include tests that are performed on a rapid basis at the point-of-care, tests that are processed in a laboratory, a rapid point-of-care HIV in-home test approved for use in the domestic consumer retail or over-the-counter (“OTC”) market and a rapid point-of-care HIV self-test used in certain international markets. We also manufacture and sell devices used to collect, stabilize, transport and store samples
Significant Accounting Policies
The accompanying consolidatedunaudited financial statements, are unaudited and, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of ourthe Company's financial position and results of operations for these interim periods. These financial statements should be read in conjunction with the financial statements and notes thereto included in ourthe Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2023. Results of operations for the three and nine months ended September 30, 2017March 31, 2024 are not necessarily indicative of the results of operations expected for the full year.
Use
discussed herein.
-7-
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
March 31, 2024 | |||||||||||||||||||||||
Guaranteed investment certificates | $ | 16,627 | $ | — | $ | — | $ | 16,627 | |||||||||||||||
Total | $ | 16,627 | $ | — | $ | — | $ | 16,627 | |||||||||||||||
At March 31, 2024, maturities of the Company's available-for-sale securities were as follows: | |||||||||||||||||||||||
Less than one year | $ | 16,627 | $ | — | $ | — | $ | 16,627 | |||||||||||||||
Greater than one year | $ | — | $ | — | $ | — | $ | — |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
September 30, 2017 | ||||||||||||||||
Guaranteed investment certificates | $ | 16,039 | $ | — | $ | — | $ | 16,039 | ||||||||
Corporate bonds | 85,923 | — | (300 | ) | 85,623 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total available-for-sale securities | $ | 101,962 | $ | — | $ | (300 | ) | $ | 101,662 | |||||||
|
|
|
|
|
|
|
| |||||||||
December 31, 2016 | ||||||||||||||||
Guaranteed investment certificates | $ | 11,160 | $ | — | $ | — | $ | 11,160 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total available-for-sale securities | $ | 11,160 | $ | — | $ | — | $ | 11,160 | ||||||||
|
|
|
|
|
|
|
| |||||||||
At September 30, 2017 maturities of our available-for-sale securities were as follows: | ||||||||||||||||
Less than one year | $ | 83,582 | $ | — | $ | (210 | ) | $ | 83,372 | |||||||
|
|
|
|
|
|
|
| |||||||||
Greater than one year | $ | 18,380 | $ | — | $ | (90 | ) | $ | 18,290 | |||||||
|
|
|
|
|
|
|
|
2023.
2024.
We Included in cash and cash equivalents at March 31, 2024 and December 31, 2023 was $53.6 million and $71.7 million, respectively, of guaranteed investment certificates, which are also measured as Level 1 instruments.
In 2017, we purchased certificates
-8-
approximate their fair value. These CDs serve as collateral for certain standby letters of credit and are reported as restricted cash on the accompanying consolidated balance sheets. Also see Note 7 – Commitments and Contingencies.
Inventories.Inventories are stated at the lower of cost or net realizable value determined on a first-in, first-out basis and are comprised of the following:
September 30, 2017 | December 31, 2016 | |||||||
Raw materials | $ | 8,252 | $ | 5,399 | ||||
Work in process | 1,746 | 1,034 | ||||||
Finished goods | 6,861 | 5,366 | ||||||
|
|
|
| |||||
$ | 16,859 | $ | 11,799 | |||||
|
|
|
|
Property and Equipment.Property and equipment are stated at cost. Additions or improvements are capitalized, while repairs and maintenance are charged to expense. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Buildings are depreciated over twenty to forty years, while computer equipment, machineryproperty, plant and equipment and furnitureROU assets could not be recovered through the sum of the undiscounted future cash flows and fixtureswere impaired. During the three months ended March 31, 2024 the Company recognized aggregate pre-tax impairment charges of $1.2 million and $0.3 million to its operating and finance ROU assets, respectively. These charges are depreciated over two to ten years. Building improvements are amortized over their estimated useful lives. When assets are sold, retired, or discarded, the related property amounts are relieved from the accounts, and any gain or loss is recordedreported in the Company's consolidated statementsstatement of income. Accumulated depreciation of property and equipment as of September 30, 2017 and December 31, 2016 was $38,689 and $36,067, respectively.
Intangible Assets. Intangible assets consist of a customer list, patents and product rights, acquired technology and tradenames. Patents and product rights consist of costs associated with the acquisition of patents, licenses, and product distribution rights. Intangible assets are amortized using the straight-line method over their estimated useful lives of seven to fifteen years. Accumulated amortization of intangible assets as of September 30, 2017 and December 31, 2016 was $18,129 and $15,197, respectively.operations. The change in intangibles from $10,337 as of December 31, 2016 to $8,972 as of September 30, 2017 is a result of $1,984 in amortization expense and $619 in foreign currency translation gains.
Goodwill.Goodwill represents the excessimpact of the purchase price we paid overimpairments on the fair value of the net tangible and identifiable intangible assets acquired and liabilities assumed in our acquisition of DNAG in August 2011. Goodwill is not amortized but rather is tested annually for impairment or more frequently if we believe that indicators of impairment exist. Current U.S. generally accepted accounting principles permit us to make a qualitative evaluation about the likelihood of goodwill impairment. If we conclude that it is more likely than not that the carrying value of a reporting unit is greater than its fair value, then we would be required to recognize an impairment chargeCompany's property, plant, equipment for the amountthree months ended March 31, 2024 is discussed further in Note 4.
Foreign Currency | Total | ||||||||||||||||
Balance at December 31, 2023 | $ | (14,941) | $ | (14,941) | |||||||||||||
Other comprehensive loss | (2,556) | (2,556) | |||||||||||||||
Balance at March 31, 2024 | $ | (17,497) | $ | (17,497) |
We performed our last annual impairment assessment as of July 31, 2017 utilizing a qualitative evaluation and concluded that it was more likely than not that the fair value of our DNAG reporting unit is greater than its carrying value. We believe we have made reasonable estimates and assumptions to calculate the fair value of our reporting unit. If actual future results are not consistent with management’s estimates and assumptions, we may have to take an impairment charge in the future related to our goodwill. Future impairment tests will continue to be performed annually in the fiscal third quarter, or sooner if a triggering event occurs. As of September 30, 2017, we believe no indicators of impairment exist.
The increase in goodwill from $18,793 as of December 31, 2016 to $20,257 as of September 30, 2017 is a result of foreign currency translation.
Revenue Recognition. We recognize product revenues when there is persuasive evidence that an arrangement exists, the price is fixed or determinable, title has passed and collection is reasonably assured. Product revenues are recorded net of allowances for any discounts or rebates. Other than for sales of our OraQuick® In-Home HIV test to the retail trade, we do not grant price protection or product return rights to our customers except for warranty
-9-
returns. Historically, returns arising from warranty issues have been infrequent and immaterial. Accordingly, we expense warranty returns as incurred.
Our net revenues recorded on sales of the OraQuick® In-Home HIV test represent total gross revenues, less an allowance for expected returns, and customer allowances for cooperative advertising, discounts, rebates, and chargebacks. The allowance for expected returns is an estimate established by management, based upon currently available information, and is adjusted to reflect known changes in the factors that impact this estimate. Other customer allowances are at contractual rates and are recorded as a reduction of gross revenue when recognized in our consolidated statements of income.
We record shipping and handling charges billed to our customers as product revenue and the related expense as cost of products sold. Taxes assessed by governmental authorities, such as sales or value-added taxes, are excluded from product revenues.
In June 2014, weCompany entered into a Master Program Services and Co-Promotion Agreement with AbbVie Bahamas Ltd., a wholly-owned subsidiary of AbbVie Inc. (“AbbVie”), to co-promote our OraQuick® HCV testan agreement for $109.0 million in the United States. On June 30, 2016, we mutually agreed to terminate our agreement with AbbVie effective December 31, 2016. Accordingly, during the third quarter and first nine months of 2017 we did not record any revenue from this co-promotion agreement. During the third quarter and first nine months of 2016, $6,114 and $12,837, respectively, of exclusivity revenue was recognized and recorded as other revenue in our consolidated statements of income.
In June 2015, we were awarded a grant for up to $10,400 in total funding from the U.S. Department of Defense (the "DOD"), in coordination with the Department of Health and Human Services, (“HHS”) Officeto build additional manufacturing capacity in the United States for its InteliSwab
In August 2016, we were awarded a contract for up to $16,600 in total funding from BARDA related to our rapid Zika test. The six-year, multi-phased contract includes an initial commitment of $7,000 and options for up to an additional $9,600 to fund the evaluation of additional product enhancements, and clinical and regulatory activities. In May 2017, BARDA exercised an option to provide $2,600 in additional funding for our rapid Zika test.transaction. Funding received under this contract is recorded as other revenue in our consolidated statements of income as the activities are being performed and the relatedrelation to capital-related costs are incurred. During the third quarter and first nine months of 2017, $553 and $1,787, respectively, was recognized as other revenue in connection with this grant. During the third quarter and first nine months of 2016, $203 was recognized as other revenue in connection with this grant.
In June 2017, we entered into a four-year Charitable Support Agreement with the Bill & Melinda Gates Foundation (“Gates Foundation”) that will enable us to offer our OraQuick® HIV self-test at an affordable price in 50 developing countries with funding from the Gates Foundation. The funding will consist of support payments tied to volume of product sold by us and reimbursement of certain related costs. The funding from the Gates Foundation will be in an aggregate amount not to exceed $20,000 over the four-year term or $6,000 each year of the agreement. Funding received under this agreement in the form of support paymentsincurred for product purchasesgovernment contracts is recorded as a componentreduction to the cost of product revenue. During the third quarterproperty, plant and first nine months of 2017, $458 of support payments were recognized in product revenue in connection with this agreement. Funding receivedequipment and reflected within investing activities in the form of reimbursement of certain related costs is recorded as other revenue in our consolidated statements of income. Duringcash flows; and associated unpaid liabilities and government proceeds receivable are considered non-cash changes in such balances within the third quarter and first nine monthsoperating section of 2017, $218 was recognized in other revenue in connection with this agreement.
Customer Sales Returns and Allowances. We do not grant return rights to our customers for any product, except for our OraQuick® In-Home HIV test. Accordingly, we have recorded an estimate of expected returns as a reduction of gross OraQuick® In-Home HIV product revenues in ourthe consolidated statements of cash flows.
December 31, | |||||||||||
2023 | |||||||||||
Cost of assets, cumulative | $ | 86,993 | |||||||||
Reduction for funding received to date | (86,993) | ||||||||||
Total property, plant and equipment, net | $ | — |
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
Raw materials | $ | 17,621 | $ | 20,727 | |||||||
Work in process | 1,340 | 1,900 | |||||||||
Finished goods | 24,219 | 24,987 | |||||||||
$ | 43,180 | $ | 47,614 |
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
Land | $ | 1,118 | $ | 1,118 | |||||||
Buildings and improvements | 35,013 | 34,606 | |||||||||
Machinery and equipment | 62,308 | 64,156 | |||||||||
Computer equipment and software | 17,681 | 17,739 | |||||||||
Furniture and fixtures | 3,468 | 3,748 | |||||||||
Construction in progress | 9,341 | 9,196 | |||||||||
128,929 | 130,563 | ||||||||||
Accumulated depreciation | (86,332) | (85,143) | |||||||||
$ | 42,597 | $ | 45,420 |
March 31, | December 31, | ||||||||||
2024 | 2023 | ||||||||||
Payroll and related benefits | $ | 5,475 | $ | 14,654 | |||||||
Professional fees | 1,980 | 2,827 | |||||||||
Sales tax payable | 1,268 | 1,245 | |||||||||
Other | 3,992 | 3,984 | |||||||||
$ | 12,715 | $ | 22,710 |
-10-
ensure that it reflects potential product returns. follows (in thousands):
For the Three Months Ended March 31, | |||||||||||
2024 | 2023 | ||||||||||
Cost of products and services sold | $ | — | $ | 35 | |||||||
Research and development | — | 566 | |||||||||
Sales and marketing | — | 1,448 | |||||||||
General and administrative | — | 586 | |||||||||
$ | — | $ | 2,635 |
For the Three Months Ended March 31, | |||||
2024 | |||||
Cost of products and services sold | $ | 231 | |||
Research and development | 87 | ||||
Sales and marketing | 69 | ||||
General and administrative | 17 | ||||
Total | $ | 404 |
Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
COVID-19 (1) | $ | 23,128 | $ | 118,409 | |||||||||||||||||||
HIV | 13,380 | 13,904 | |||||||||||||||||||||
Molecular Sample Management Solutions (2) | 10,822 | 12,942 | |||||||||||||||||||||
HCV | 3,000 | 3,186 | |||||||||||||||||||||
Risk assessment testing (3) | 2,080 | 2,628 | |||||||||||||||||||||
Molecular Services | 873 | 1,379 | |||||||||||||||||||||
Other product and service revenues | 496 | 466 | |||||||||||||||||||||
Net product and services revenues | 53,779 | 152,914 | |||||||||||||||||||||
Non-product and services revenues (4) | 353 | 2,049 | |||||||||||||||||||||
Net revenues | $ | 54,132 | $ | 154,963 |
Deferred Revenue. We record deferred revenue when funds are received prior to the recognitionlocation of the associated revenue. Deferred revenue as of September 30, 2017 and December 31, 2016 was comprised of customer prepayments of $1,186 and $1,388, respectively.
(in thousands):
Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
United States | $ | 45,211 | $ | 145,019 | |||||||||||||||||||
Europe | 1,602 | 1,852 | |||||||||||||||||||||
Other regions | 7,319 | 8,092 | |||||||||||||||||||||
$ | 54,132 | $ | 154,963 |
We
Earnings
Three Months Ended March 31, | |||||||||||||||||||||||
2024 | 2023 | ||||||||||||||||||||||
State income tax expense (benefit) | $ | (230) | $ | (225) | |||||||||||||||||||
Foreign income tax expense (benefit) | 212 | — | |||||||||||||||||||||
Foreign withholding tax | — | — | |||||||||||||||||||||
$ | (18) | $ | (225) |
The Basic and dilutive computations of basic and diluted earningsnet loss per share are the same in periods in which a net loss exists as follows:
Three Months | Nine Months | |||||||||||||||
Ended September 30, | Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income | $ | 5,763 | $ | 6,242 | $ | 23,632 | $ | 12,524 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Weighted average shares of common stock outstanding: | ||||||||||||||||
Basic | 60,090 | 55,653 | 58,511 | 55,549 | ||||||||||||
Dilutive effect of stock options, restricted stock, and performance units | 2,082 | 877 | 2,058 | 724 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | 62,172 | 56,530 | 60,569 | 56,273 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.10 | $ | 0.11 | $ | 0.40 | $ | 0.23 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | $ | 0.09 | $ | 0.11 | $ | 0.39 | $ | 0.22 | ||||||||
|
|
|
|
|
|
|
|
-11-
the dilutive effects of excluded items would be anti-dilutive.
Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than functional currency are included in our consolidated statements of income in the period in which the change occurs. Net foreign exchange (losses) gains resulting from foreign currency transactions that are included in other income (expense) in our consolidated statements of income were $(638) and $84 for the
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2023 | 73,528 | $ | — | $ | 529,543 | $ | (14,941) | $ | (83,931) | $ | 430,671 | ||||||||||||||||||||||||
Common stock issued upon exercise of options | 32 | — | 214 | — | — | 214 | |||||||||||||||||||||||||||||
Vesting of restricted stock and performance stock units | 593 | — | — | — | — | — | |||||||||||||||||||||||||||||
Purchase and retirement of common shares | (194) | — | (1,462) | — | — | (1,462) | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 2,968 | — | — | 2,968 | |||||||||||||||||||||||||||||
Net loss | — | — | — | — | (3,584) | (3,584) | |||||||||||||||||||||||||||||
Currency translation adjustments | — | — | — | (2,556) | — | (2,556) | |||||||||||||||||||||||||||||
Unrealized gain on marketable securities | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Balance at March 31, 2024 | 73,959 | $ | — | $ | 531,263 | $ | (17,497) | $ | (87,515) | $ | 426,251 | ||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total | |||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2022 | 72,734 | $ | — | $ | 520,446 | $ | (18,435) | $ | (137,586) | $ | 364,425 | ||||||||||||||||||||||||
Common stock issued upon exercise of options | 12 | — | 66 | — | — | 66 | |||||||||||||||||||||||||||||
Vesting of restricted stock and performance stock units | 737 | — | — | — | — | — | |||||||||||||||||||||||||||||
Purchase and retirement of common shares | (229) | — | (1,203) | — | — | (1,203) | |||||||||||||||||||||||||||||
Stock-based compensation | — | — | 2,655 | — | — | 2,655 | |||||||||||||||||||||||||||||
Net income | — | — | — | — | 27,219 | 27,219 | |||||||||||||||||||||||||||||
Currency translation adjustments | — | — | — | 797 | — | 797 | |||||||||||||||||||||||||||||
Unrealized gain on marketable securities | — | — | — | 220 | — | 220 | |||||||||||||||||||||||||||||
Balance at March 31, 2023 | 73,254 | $ | — | $ | 521,964 | $ | (17,418) | $ | (110,367) | $ | 394,179 | ||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss). We classify items of other comprehensive income (loss) by their nature and disclose the accumulated balance of other comprehensive loss separately from accumulated deficit and additional paid-in capital in the stockholders’ equity section of our consolidated balance sheet.
We have defined the Canadian dollar as the functional currency of our Canadian subsidiary, DNAG, and as such, the results of its operations are translated into U.S. dollars, which is the reporting currency of the Company. Accumulated other comprehensive loss at September 30, 2017 consists of $9,338 of currency translation adjustments and $300 of net unrealized losses on marketable securities.
Recent Accounting Pronouncements.In May 2014, the Financial Accounting Standards Board (“FASB”) issued converged guidance on recognizing revenue in contracts with customers, ASU 2014-09,Revenue from Contracts with Customers. The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2017, at which point we plan to adopt the standard.
The FASB allows two adoption methods under ASU 2014-09. We plan to adopt the standard using the “modified retrospective method.” Under that method, we will apply the rules to all contracts existing as of January 1, 2018, recognizing in beginning retained earnings an adjustment for the cumulative effective of the change and providing additional disclosures comparing results to those under the previous accounting standard.
Upon initial evaluation, we believe the key changes in the standard that impact our revenue recognition relate to the allocation of the transaction price to performance obligations related to our drug testing kits. This revenue stream amounts to less than 1% of total consolidated revenues. We will continue to evaluate the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and related disclosures, but do not anticipate the adoption will have a material impact on our financial results.
In July 2015, the FASB issued ASU 2015-11,Simplifying the Measurement of Inventory, which requires an entity that uses the first-in, first-out method for inventory measurement to report inventory cost at the lower of cost and net realizable value versus the current measurement principle of lower of cost or market. The ASU requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016. We adopted ASU 2015-11 on January 1, 2017. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02,Leases, which requires entities to begin recording assets and liabilities from leases on the balance sheet. The new guidance will also require significant additional disclosures about the amount, timing and uncertainty of cash flows from leases. The standard will be effective for the first
-12-
interim period within annual reporting periods beginning after December 15, 2018, using a modified retrospective approach. Early adoption is permitted. We are evaluating the effect that ASU 2016-02 may have on our consolidated financial statements and related disclosures.
In March 2016, the FASB issued authoritative guidance under ASU 2016-09,Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 provides for simplification of several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted ASU 2016-09 on January 1, 2017. Since we have a full valuation allowance against our U.S. net deferred tax assets, the adoption of this standard for recognition of the tax effect of deductions for employee share awards in excess of compensation costs (“windfall”) did not have a material impact on our consolidated financial statements and related disclosures. See Note 6 – Income Taxes, for additional information. Should our full valuation allowance be reversed in future periods, the adoption of this new guidance will introduce more volatility in the calculation of our effective tax rate, depending on the Company’s share price at exercise or vesting of share-based awards as compared to grant date. The other provisions of ASU 2016-09 did not have a material impact on our consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance related to cash flows presentation and is effective for annual reporting periods beginning after December 15, 2017, subject to early adoption. The majority of the guidance in ASU 2016-15 is consistent with our current cash flow classifications and we do not expect the adoption of this standard will have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04,Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This update will be effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. We adopted ASU 2017-04 in the second quarter of 2017. The adoption of this standard did not have a material impact on our consolidated financial statements and related disclosures.
In March 2017, the FASB issued ASU 2017-08,Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which shortens the premium amortization period for purchased non-contingently callable debt securities. Shortening the amortization period is generally expected to more closely align the interest income recognition with the expectations incorporated in the market pricing on the underlying securities. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. We are evaluating the effect that ASU 2017-08 may have on our consolidated financial statements and related disclosures.
September 30, 2017 | December 31, 2016 | |||||||
Payroll and related benefits | $ | 8,684 | $ | 7,685 | ||||
Income taxes payable (receivable) | 3,303 | (39 | ) | |||||
Professional fees | 688 | 982 | ||||||
Royalties | 659 | 715 | ||||||
Other | 2,479 | 1,971 | ||||||
|
|
|
| |||||
$ | 15,813 | $ | 11,314 | |||||
|
|
|
|
On September 30, 2016, we entered into a credit agreement (the “Credit Agreement”) with a commercial bank. The Credit Agreement provides for revolving extensions of credit in an initial aggregate amount of up to $10,000 (inclusive of a letter of credit subfacility of $2,500), with an option to request, prior to the second anniversary of the
-13-
closing date, that the lender, at its election, provide up to $5,000 of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets. There were no borrowings outstanding under the Credit Agreement at September 30, 2017 and December 31, 2016.
Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three or six-month loans, as selected by the Company, plus 2.50% per year. The Credit Agreement is subject to an unused line fee of 0.375% per year on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September 30, 2019.
In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date. As of September 30, 2017 and December 31, 2016, we were in compliance with all applicable covenants in the Credit Agreement.
Stock-Based Awards
We grant stock-based awards under the OraSure Technologies, Inc. Stock Award Plan, as amended (the “Stock Plan”). The Stock Plan permits stock-based awards to employees, outside directors and consultants or other third-party advisors. Awards which may be granted under the Stock Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards. We recognize compensation expense for stock option and restricted stock awards issued to employees and directors on a straight-line basis over the requisite service period of the award. We recognize compensation expense related to performance-based restricted stock units based on assumptions as to what percentage of each performance target will be achieved. We evaluate these target assumptions on a quarterly basis and adjust compensation expense related to these awards, as appropriate. To satisfy the exercise of options or to issue restricted stock, or redeem performance-based restricted stock units, we issue new shares rather than purchase shares on the open market.
Total compensation cost related to stock options for the three months ended September 30, 2017 and 2016 was $547 and $646, respectively. Total compensation cost related to stock options for the nine months ended September 30, 2017 and 2016 was $1,554 and $2,033, respectively. Net cash proceeds from the exercise of stock options were $31,402 and $894 for the nine months ended September 30, 2017 and 2016, respectively. As a result of the Company’s net operating loss carryforward position, no actual income tax benefit was recognized in the consolidated statements of income from stock option exercises during these periods.
Compensation cost of $667 and $736 related to restricted shares was recognized during the three months ended September 30, 2017 and 2016, respectively. Compensation cost of $2,022 and $2,137 related to restricted shares was recognized during the nine months ended September 30, 2017 and 2016, respectively. In connection with the vesting of restricted shares during the nine months ended September 30, 2017 and 2016, we purchased and immediately retired 122 and 117 shares with aggregate values of $1,234 and $651, respectively, in satisfaction of minimum tax withholding obligations.
Commencing in 2016, we granted performance-based restricted stock units (“PSUs”) to certain executives. Vesting of these PSUs is dependent upon achievement of performance-based metrics during a one-year or three-year period, from the date of grant. Assuming achievement of each performance-based metric, the executive must also remain in our service for three years from the grant date. Performance during the one-year period will be based on a one-year earnings per share target. If the one-year target is achieved, the PSUs will then vest three years from grant date. Performance during the three-year period will be based on achievement of a three-year compound annual growth rate for consolidated product revenues. If the three-year target is achieved, the corresponding PSUs will then vest three years from grant date. PSUs are converted into shares of our common stock once vested. Upon grant of the PSUs, we recognize compensation expense related to these awards based on assumptions as to what percentage of each target will be achieved. The Company evaluates these assumptions on a quarterly basis and adjusts compensation expense related to these awards, as appropriate. Compensation cost of $368 and $114 related to PSUs
-14-
was recognized during the three months ended September 30, 2017 and 2016, respectively. Compensation cost of $1,637 and $268 related to PSUs was recognized during the nine months ended September 30, 2017 and 2016, respectively.
Stock Repurchase Program
On August 5, 2008, our Board of Directors approved a share repurchase program pursuant to which we are permitted to acquire up to $25,000 of our outstanding common shares. No shares were purchased and retired during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, we purchased and retired 423 shares of common stock at an average price of $6.29 per share for a total cost of $2,660 under this share purchase agreement.
During the three and nine months ended September 30, 2017, we recorded tax expense of $1,669 and $7,121, respectively. During the three and nine months ended September 30, 2016, we recorded tax expense of $400 and $634, respectively.
Tax expense reflects taxes due to state and Canadian taxing authorities and the tax effects of temporary differences between the basis of assets and liabilities recognized for financial reporting and tax purposes, and net operating loss and tax credit carryforwards. The significant components of our total deferred tax liability as of September 30, 2017 relate to the tax effects of the basis difference between the intangible assets acquired in the DNAG acquisition for financial reporting and tax purposes. Tax expense in the first nine months of 2017 reflects an increase in earnings and additional Canadian taxes due as a result of the $12,500 gain from the settlement of our patent infringement and breach of contract litigation against Ancestry.com DNA LLC and its contract manufacturer.
In 2008, we established a full valuation allowance against our U.S. deferred tax asset. Management believes the full valuation allowance is still appropriate as of both September 30, 2017 and December 31, 2016 since the facts and circumstances necessitating the allowance have not changed. As a result, no U.S. federal or state deferred income tax expense or benefit was recorded for the three and nine-month periods ended September 30, 2017 and 2016.
The new accounting guidance under ASU 2016-09 allows for the recognition of excess tax benefits regardless of whether the deduction reduces taxes payable. On January 1, 2017, we recorded a cumulative-effect adjustment to retained earnings of $3,391 to recognize the increase in our net operating loss carryforwards from the cumulative excess tax benefits not recognized in periods prior to January 1, 2017. A corresponding $3,391 increase to our valuation allowance associated with this tax benefit was also recorded to retained earnings thereby resulting in a net impact to retained earnings of $0.
Standby Letters of Credit
We established standby letters of credit in the aggregate amount of $1,840, naming international customers as the beneficiaries. These letters of credit were required as a performance guarantee of our obligations under our product supply contracts with those customers and are collateralized by certificates of deposit maintained at a commercial bank.
Contingencies
-15-
We operate our business within two reportable segments: our “OSUR” business, which consists of
We organized our operating segments accordingby Spectrum infringe a patent held by DNAG. Spectrum filed an answer to the natureinitial complaint, asserting that its device does not infringe the Company's patent and that the Company's patent is invalid. In August 2021, the Company amended its complaint to add a second patent to this litigation. Spectrum responded to the Company's amended complaint and asserted counterclaims for inequitable conduct and antitrust violations with respect to one of the products includedpatents in those segments. The accounting policiesthe litigation and subsequently filed a request for review of the segmentssecond patent at the Patent and Trademark Office ("PTO"), which was granted by the PTO. The District Court issued multiple pretrial orders, resolving the infringement, antitrust, and inequitable conduct claims without trial. First, the District Court granted Spectrum’s motion for summary judgment of noninfringement, holding that Spectrum’s saliva collection devices are not “kits for collecting and preserving a biological sample,” among other rulings. The Company appealed the same as those describedgrant of summary judgment to the Court of Appeals on June 8, 2023. The appeal is pending, with oral argument expected in the second half of 2024. Second, the Court denied Spectrum’s motion to supplement its allegations of alleged antitrust violations, finding that if such an amendment were allowed,
The following table summarizes operating segment informationU.S. Patent No. 11,002,646 B2 are unpatentable. On March 8, 2024, the Company filed a Request for Rehearing by the three and nine months ended September 30, 2017 and 2016, and asset information as of September 30, 2017 and December 31, 2016:
-16-
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenues: | ||||||||||||||||
OSUR | $ | 23,762 | $ | 23,924 | $ | 69,720 | $ | 69,050 | ||||||||
DNAG | 18,552 | 8,327 | 45,316 | 23,649 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 42,314 | $ | 32,251 | $ | 115,036 | $ | 92,699 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income (loss): | ||||||||||||||||
OSUR | $ | (453 | ) | $ | 4,571 | $ | (235 | ) | $ | 9,098 | ||||||
DNAG | 7,772 | 1,573 | 30,312 | 4,094 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 7,319 | $ | 6,144 | $ | 30,077 | $ | 13,192 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Depreciation and amortization: | ||||||||||||||||
OSUR | $ | 855 | $ | 688 | $ | 2,189 | $ | 2,003 | ||||||||
DNAG | 843 | 726 | 2,400 | 2,149 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,698 | $ | 1,414 | $ | 4,589 | $ | 4,152 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Capital expenditures: | ||||||||||||||||
OSUR | $ | 1,156 | $ | 283 | $ | 2,493 | $ | 1,406 | ||||||||
DNAG | 739 | 500 | 969 | 2,106 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,895 | $ | 783 | $ | 3,462 | $ | 3,512 | ||||||||
|
|
|
|
|
|
|
| |||||||||
September 30, 2017 | December 31, 2016 | |||||||||||||||
Total assets: | ||||||||||||||||
OSUR | $ | 192,298 | $ | 151,719 | ||||||||||||
DNAG | 89,961 | 56,216 | ||||||||||||||
|
|
|
| |||||||||||||
Total | $ | 282,259 | $ | 207,935 | ||||||||||||
|
|
|
|
The following table represents total net revenues by geographic area, based on the locationDirector of the customer:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
United States | $ | 29,063 | $ | 26,302 | $ | 78,871 | $ | 72,493 | ||||||||
Europe | 3,204 | 2,171 | 8,765 | 9,006 | ||||||||||||
Other regions | 10,047 | 3,778 | 27,400 | 11,200 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 42,314 | $ | 32,251 | $ | 115,036 | $ | 92,699 | |||||||||
|
|
|
|
|
|
|
|
-17-
PTO of the Final Written Decision. On March 27, 2024, the Company's Request for Rehearing was denied. The following table represents total long-lived assets by geographic area:
September 30, 2017 | December 31, 2016 | |||||||
United States | $ | 16,644 | $ | 15,737 | ||||
Canada | 4,767 | 4,286 | ||||||
Other regions | 85 | 10 | ||||||
|
|
|
| |||||
$ | 21,496 | $ | 20,033 | |||||
|
|
|
|
-18-
Company is considering its appellate options. On September 15, 2023, Spectrum filed a separate petition for
inter partes review of a third patent, which DNAG did not assert in the District Court. On March 26, 2024, the PTO issued a Decision Granting Institution of Inter Partes Review and scheduled oral argument for January 14, 2025.manufacture its Colli-Pee® product under the DNAG product line of collection devices. In addition, during the three months ended March 31, 2024, the Company initiated steps to wind down and exit the molecular services business offered by its Diversigen subsidiary while providing transition continuity for clients. This business contributed $0.9 million to revenues during the three months ended March 31, 2024 and contributed $4.5 million for the full year of 2023. March 31, 2023. OSUR DNAG Net product revenues Other Net revenues Market Infectious disease testing Risk assessment testing Cryosurgical Net product revenues Other Net revenues Market Domestic HIV International HIV Domestic OTC HIV Net HIV revenues Domestic HCV International HCV Net HCV revenues Net OraQuick® HIV and HCV product revenues Market Domestic professional International professional Domestic OTC International OTC Net cryosurgical revenues headcount. OSUR DNAG Net product revenues Other Net revenues Market Infectious disease testing Risk assessment testing Cryosurgical systems Net product revenues Other Net revenues Market Domestic HIV International HIV Domestic OTC HIV Net HIV revenues Domestic HCV International HCV Net HCV revenues Net OraQuick® revenues Market Domestic professional International professional Domestic OTC International OTC Net cryosurgical systems revenues Cash, cash equivalents and restricted cash Available-for-sale securities Working capital March 2024. the business. information.Statements below regarding future events or performance are “forward-looking statements” within the meaningFederal securities laws. These may include statements about our expected revenues, earnings/loss per share, net income (loss), expenses, cash flow or otherCompany's financial performance or developments, clinical trial or development activities, expected regulatory filingscondition and approvals, planned business transactions, views of future industry, competitive or market conditions, and other factors that could affect our future operations, results of operations orshould be read in conjunction with (i) the Company's unaudited condensed consolidated financial position. These statements often includeand related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “will,” “should,” “could,” or similar expressions. Forward-lookingCompany's audited consolidated financial statements are not guaranteesand related notes and management’s discussion and analysis of future performance or results. Knownfinancial condition and unknown factors that could cause actual performance or results to be materially different from those expressed or impliedof operations included in these statements include, but are not limited to: ability to market and sell products, whether through our internal, direct sales force or third parties; ability to manufacture products in accordance with applicable specifications, performance standards and quality requirements; ability to obtain, and timing and cost of obtaining, necessary regulatory approvals for new products or new indications or applications for existing products; ability to comply with applicable regulatory requirements; ability to effectively resolve warning letters, audit observations and other findings or comments from the U.S. Food and Drug Administration (“FDA”) or other regulators; changes in relationships, including disputes or disagreements, with strategic partners or other parties and reliance on strategic partners for the performance of critical activities under collaborative arrangements; ability to meet increased demand for our products; impact of increased reliance on U.S. government contracts; failure of distributors or other customers to meet purchase forecasts, historic purchase levels or minimum purchase requirements for our products; impact of replacing distributors; inventory levels at distributors and other customers; ability of the Company to achieve its financial and strategic objectives and continue to increase its revenues, including the ability to expand international sales; ability to identify, complete, integrate and realize the full benefits of future acquisitions; impact of competitors, competing products and technology changes; impact of negative economic conditions, high unemployment levels and poor credit conditions; reduction or deferral of public funding available to customers; competition from new or better technology or lower cost products; ability to develop, commercialize and market new products; market acceptance of oral fluid testing or other products; changes in market acceptance of products based on product performance or other factors, including changes in testing guidelines, algorithms or other recommendations by the Centers for Disease Control and Prevention (“CDC”) or other agencies; ability to fund research and development and other products and operations; ability to obtain and maintain new or existing product distribution channels; reliance on sole supply sources for critical products and components; availability of related products produced by third parties or products required for use of our products; history of losses and ability to achieve sustained profitability; ability to utilize net operating loss carry forwards or other deferred tax assets; volatility of the Company’s stock price; uncertainty relating to patent protection and potential patent infringement claims; uncertainty and costs of litigation relating to patents and other intellectual property; availability of licenses to patents or other technology; ability to enter into international manufacturing agreements; obstacles to international marketing and manufacturing of products; ability to sell products internationally, including the impact of changes in international funding sources and testing algorithms; ability to successfully renew contracts or enter into new contracts with existing customers; adverse movements in foreign currency exchange rates; loss or impairment of sources of capital; ability to meet financial covenants in credit agreements; ability to attract and retain qualified personnel; exposure to product liability and other types of litigation; changes in international, federal or state laws and regulations; customer consolidations and inventory practices; equipment failures and ability to obtain needed raw materials and components; the impact of terrorist attacks and civil unrest; and general political, business and economic conditions. These and other factors are discussed more fully in our Securities and Exchange Commission (“SEC”) filings, including our registration statements,Company's Annual Report on Form 10-K for the year ended December 31, 2016,2023 filed with the Securities and Exchange Commission on March 11, 2024. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to the Company's plans and strategy for its business and impact and potential impacts on its business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including, without limitation, those factors set forth in the “Risk Factors” section of the Company's Annual Report on Form 10-K for the year ended December 31, 2023 and the “Risk Factors” section of subsequent Quarterly Reports on Form 10-Q, and other filings with the SEC. AlthoughCompany's actual results or timing of certain events could differ materially from the results or timing described in, or implied by, these forward-looking statements help to provide information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. statements.forward-looking statements are made asCompany's business consists of the datedevelopment, manufacture, marketing and sale of this Report, and we undertake no dutysimple, easy to update these statements.Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming-19-financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of OraSure.The following discussion should be read in conjunction with our consolidated financial statements contained herein and the notes thereto, along with the Section entitled “Critical Accounting Policies and Estimates,” set forth below.OverviewWe develop, manufacture, market and selluse diagnostic products and specimen collection devices using ourthe Company's proprietary technologies, as well as other diagnostic products including immunoassays and otherin vitro diagnostic tests that are used on other specimen types. Our diagnosticThese products include tests for diseases including COVID-19, HIV and Hepatitis C that are performed on a rapid basis at the point-of-care,point of care, and tests for drugs of abuse that are processed in a laboratory, a rapid point-of-care HIV test approved for use in the domestic consumer retail or over-the-counter (“OTC”) market and a rapid point-of-care HIV self-test used in certain international markets. We also manufacture and sell collection devices used to collect, stabilize, transport and store samples of genetic material for molecular testing in the consumer genetic, clinical genetic, academic, research, pharmacogenomic, personalized medicine, microbiome and animal genetic markets. Lastly, we manufacture and sell medical devices used for the removal of benign skin lesions by cryosurgery, or freezing. Ourlaboratory. These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, public health organizations, research and academic institutions, distributors, government agencies, physicians’ offices, commercial and industrial entities, retail pharmacies and mass merchandisers, and to consumers over the internet.Recent DevelopmentsIn 2016, we entered into a contract to supply a foreign government with $18 million of product, primarily to support a nationwide HCV testing and treatment program. To date, we have supplied $14.0 million of product to this customer under the contract. The contract includes a renewal option under which the government may purchase up to 100% of the original quantities of product on the same terms and conditions contained in the contract. During the past several months, we have engaged in renewal discussions with this customer, including with respect to specific quantities of product to be supplied. During these discussions, we were advised that the contract would likely be renewed at quantities substantially in excess of the original quantities under the contract. However, we were recently informed that the government has decided to move to an all laboratory testing solution and that another party had been selected to provide that solution based on cost. As a result, it is our expectation that our supply contract with this customer for rapid tests will not be renewed at this time. In light of these developments, it is unclear whether this government will fulfill the remaining purchase obligations under our existing contract.Current Consolidated Financial ResultsDuring the nine months ended September 30, 2017, our consolidated net revenues were $115.0 million, compared to $92.7 million for the nine months ended September 30, 2016. Net product revenues during the nine months ended September 30, 2017 increased 43% when compared to the first nine months of 2016, primarily due to higher sales of our molecular and OraQuick® HCV products and increased international sales of our OraQuick® HIV self-test. Partially offsetting these increases were lower domestic sales of our professional OraQuick® HIV product and lower domestic and OTC sales of our cryosurgical products. Other revenues for the first nine months of 2017 were $3.3 million compared to $14.4 million in the same period of 2016. Other revenues in the first nine months of 2017 largely represent revenue recognized in connection with funding received from the U.S. Department of Health and Human Services Office of the Assistant Secretary for Preparedness and Response’s Biomedical Advanced Research and Development Authority (“BARDA”) related to our Ebola and Zika products. Other revenues in the first nine months of 2016 included $1.6 million of BARDA funding and $12.8 million of exclusivity revenues recognized under our HCV co-promotion agreement with AbbVie, which terminated on December 31, 2016.Our consolidated net income for the nine months ended September 30, 2017 was $23.6 million, or $0.39 per share on a fully-diluted basis, compared to consolidated net income of $12.5 million, or $0.22 per share on a fully-diluted basis for the nine months ended September 30, 2016. Results for the current nine month period include a pre-tax gain of $12.5 million associated with the settlement of our litigation against Ancestry.com DNA LLC and its contract manufacturer in the first quarter of 2017.-20-Cash provided by operating activities for the nine months ended September 30, 2017 was $30.4 million and included the $12.5 million litigation settlement noted above. Cash provided by operating activities during the nine months ended September 30, 2016 was $25.2 million. As of September 30, 2017, we had $180.3 million in cash (including restricted cash), cash equivalents, and available-for-sale securities, compared to $120.9 million at December 31, 2016.Business SegmentsWe operate our business within two reportable segments: our “OSUR” business, which consists of the development, manufacture and sale of diagnostic products, specimen collection devices, and medical devices, and our “DNAG” or molecular collection systems business, which consists primarily of the development, manufacture and sale of oral fluid collection devices that are used to collect, stabilize, transport, and store samples of genetic material for molecular testing. OSUR revenues are derived primarily from products sold into the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations,other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities, retail pharmacies, mass merchandisersentities. The Company's COVID-19 and consumers overHIV products are also sold in a consumer-friendly format in the internet. DNAGover-the-counter (“OTC”) market in the U.S. and, in the case of the HIV product, as a self-test to individuals in a number of other countries, including as an oral swab in-home test for HIV-1 and HIV-2 in Europe.result primarily from products sold into thesample management solutions are derived from product sales to commercial market, which consists of customers engaged in consumer genetics, clinical genetic testing, pharmacogenomics, personalized medicine, microbiome, animal genetic testing and research, as well as products soldsales into the academic and research markets. Customers span the disease risk management, diagnostics, pharmaceutical, biotech, companion animal and environmental markets. The Company has also developed collection devices for the emerging microbiome market, which consistsfocuses on studying microbiomes and their effect on human and animal health. The Company also has a urine collection device which allows for the volumetric collection of first void urine. This product is in its early stages, and initial sales are occurring primarily through distributors and collaborations in the liquid biopsy and sexually transmitted disease markets. Additionally, the Company offers laboratory and bioinformatics services for both genomics and microbiome customers. These services are primarily provided to pharmaceutical, biotech companies, and research laboratories, universitiesinstitutions.hospitals.ThreeSeptember 30, 2017March 31, 2024 compared to September 30, 2016a breakdownan outline of total consolidated net revenues (dollars in thousands) generated by each of our business segments for the three months ended September 30, 2017March 31, 2024 and 2016. Three Months Ended September 30, Dollars Percentage of Total
Net Revenues 2017 2016 %
Change 2017 2016 $ 22,605 $ 17,133 32 % 53 % 53 % 18,552 8,327 123 44 26 41,157 25,460 62 97 79 1,157 6,791 (83 ) 3 21 $ 42,314 $ 32,251 31 % 100 % 100 % Consolidated net product revenues increased 62% to $41.2 million in the third quarter of 2017 from $25.5 million in the comparable period of 2016. Higher sales of our molecular and OraQuick® HCV products and higher international sales of our OraQuick® HIV self-test were partially offset by lower domestic sales of our professional OraQuick® HIV product and lower domestic and OTC sales of our cryosurgical products. In the third quarter of 2017, we recognized $939,000 in other revenues in connection with funding from BARDA related to our Ebola and Zika products and $218,000 in reimbursement of certain costs under our charitable support agreement with the Bill & Melinda Gates Foundation (“Gates Foundation”). Other revenues in the third quarter of 2016 were $6.8 million and included $6.1 million in exclusivity payments received under our HCV co-promotion agreement with AbbVie and $676,000 in BARDA funding. Our co-promotion agreement with AbbVie was terminated effective as of December 31, 2016 and no further revenues were recognized under this agreement after that time.-21-Consolidated net revenues derived from products sold to customers outside of the United States were $13.3 million and $5.9 million, or 31% and 18% of total net revenues, in the third quarters of 2017 and 2016, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.Net Revenues by SegmentOSUR SegmentThe table below shows a breakdown of total net revenues (dollars in thousands) generated by our OSUR segment. Three Months Ended September 30, Dollars Percentage of Total
Net Revenues 2017 2016 %
Change 2017 2016 $ 16,577 $ 10,412 59 % 70 % 43 % 3,149 3,481 (10 ) 13 15 2,879 3,240 (11 ) 12 14 22,605 17,133 32 95 72 1,157 6,791 (83 ) 5 28 $ 23,762 $ 23,924 (1 )% 100 % 100 % Infectious Disease Testing MarketSales to the infectious disease testing market increased 59% to $16.6 million in the third quarter of 2017 from $10.4 million in the third quarter of 2016. This increase resulted from higher sales of our OraQuick® HCV product and higher international sales of our OraQuick® HIV self-test, partially offset by a decline in domestic sales of our professional OraQuick® HIV product.-22-The table below shows a breakdown of our total net OraQuick®2023:Three Months Ended March 31, Dollars % Change Percentage of Total Net Revenues 2024 2023 2024 2023 COVID-19 Diagnostics $ 23,097 $ 118,254 (80) % 43 % 76 % 16,380 17,090 (4) 30 11 10,822 12,942 (16) 20 8 2,576 3,094 (17) 5 2 Molecular Services 873 1,379 (37) 2 1 COVID-19 Molecular Products 31 155 (80) — — Net product and services revenues 53,779 152,914 (65) 99 99 353 2,049 (83) 1 1 Net revenues $ 54,132 $ 154,963 (65) % 100 % 100 % (dollars in thousands) during the third quarters of 2017include funded research and 2016. Three Months Ended September 30, 2017 2016 % Change $ 3,622 $ 4,858 (25 )% 3,069 1,110 176 1,515 1,311 16 8,206 7,279 13 1,889 1,529 24 6,154 1,293 376 8,043 2,822 185 $ 16,249 $ 10,101 61 % Domestic OraQuick® HIV salesdevelopment contracts, royalty income and grant revenues.25%65% to $3.6$54.1 million for the three months ended September 30, 2017March 31, 2024 from $4.9$155.0 million for the three months ended September 30, 2016.March 31, 2023.reductiondecrease in revenues was primarily the result of competitive losses tied to pricing and the Centers for Disease Control and Prevention (“CDC”) testing guidelines recommending the use of competing fourth generation automated HIV immunoassays performed in a laboratory. Sales in the current quarter were also negatively impacteddriven by customer ordering patterns,patterns.governmentconsumer demand for products in which our genomics collection devices are used, economic pressures and reduction on funding for programs in which our collection devices are used, and athe overall decline in orders placed by those customers located in geographic areas severely impacted by recent weather events. We anticipate that future domestic sales of our professional HIV product will continuethe microbiome market.be negatively affected as a result of$2.6 million for the CDC testing guidelines, changes in government funding and continued product and price competition.International sales of our OraQuick® HIV test during the third quarter of 2017 rose 176% tothree months ended March 31, 2024 from $3.1 million for the three months ended September 30, 2017March 31, 2023.September 30, 2016. This increase was largely due to increased sales of our OraQuick® HIV self-test into Africa. The majority of tests shipped into Africa duringMarch 31, 2023. Impairment losses in the current quarter were subject to support payments under our charitable support agreement with the Gates Foundation. Product revenues during the thirdfirst quarter of 2017 included approximately $458,0002024 were comprised of support paymentsthe impairment of Novosanis and Diversigen property plant and equipment, including leased assets while impairment losses in 2023 were associated with this agreement.Sales of our OraQuick® In-Home HIV test duringidle manufacturing lines.thirdfirst quarter of 2017 increased 16%2024, excluding the impairment charge, decreased $12.6 million compared to $1.5 million from $1.3 million in the thirdfirst quarter of 2016 largely as a result of additional shelf placement2023 reflecting the impact of the product inCompany's cost saving measures and headcount reductions.home diagnostic section of certain retail pharmacies.Domestic OraQuick® HCV sales increased 24% to $1.9three months ended March 31, 2024 from $10.6 million infor the third quarter of 2017 from $1.5 million in the third quarter of 2016 primarily due to increased HCV testing by a global nonprofit provider of infectious disease prevention, testing and healthcare services and higher sales to non-acute healthcare offices. International OraQuick® HCV sales increased 376% to $6.1 million in the third quarter of 2017 from $1.3 million in the third quarter of 2016, largely due to continued product shipments to a foreign government to support a nationwide HCV testing and treatment program, partially offset by the loss of a multi-national humanitarian organization customer who switched to a competitive product due to pricing. As discussed above, we were recently notified that our supply contract with the foreign government will not be renewed, which will negatively affect our international HCV sales in future periods.Risk Assessment MarketSales to the risk assessment market decreased 10% to $3.1 million in the third quarter of 2017 compared to $3.5 million in the third quarter of 2016three months ended March 31, 2023 largely due to a changedecrease in inventoryemployee costs associated with a reduction in headcount, decrease in spend on COVID-19 product development, and no related project management by one offees for our larger customers.-23-Cryosurgical MarketSales of our cryosurgical products decreased 11% to $2.9$109 million inmanufacturing expansion contract which ended during the thirdfourth quarter of 2017 from $3.2 million in the third quarter of 2016.The table below shows a breakdown of our total net cryosurgical revenues (dollars in thousands) generated in each market during the third quarters of 2017 and 2016. Three Months Ended September 30, 2017 2016 % Change $ 1,426 $ 1,456 (2 )% 179 162 10 325 339 (4 ) 949 1,283 (26 ) $ 2,879 $ 3,240 (11 )% Third quarter 2017 sales of our domestic and international Histofreezer® product sold to physicians’ offices and our private-label wart removal product sold in the U.S. retail market remained consistent with the level of sales recorded in the third quarter of 2016.Sales of our international OTC cryosurgical products during the third quarter of 2017 decreased 26% to $949,000 compared to $1.3 million in the third quarter of 2016 due to customer ordering patterns in Latin America and Europe.Other revenuesOther revenues in the third quarter of 2017 decreased 83% to $1.2 million from $6.8 million in the third quarter of 2016. Other revenues in the third quarter of 2016 included $6.1 million of AbbVie exclusivity revenues. There are no similar revenues in the third quarter of 2017 due to the termination of the AbbVie co-promotion agreement on December 31, 2016. Revenue from BARDA funding increased to $939,000 in the third quarter of 2017 compared to $676,000 in the third quarter of 2016. Other revenues in the third quarter of 2017 also included $218,000 in reimbursement of certain costs under our charitable support agreement with the Gates Foundation.DNAG SegmentMolecular MarketNet molecular revenues increased 123% to $18.6 million in the third quarter of 2017 from $8.3 million in the third quarter of 2016. Sales of our Oragene® product in the commercial market rose 157% in the third quarter of 2017 compared to the third quarter of 2016, largely as a result of higher customer demand, primarily from a large customer in the consumer genetics market. Sales of our Oragene® product in the academic market increased 46% in the third quarter of 2017 compared to the third quarter of 2016 largely due to higher customer demand and customer ordering patterns. The higher revenues in the third quarter of 2017 also included $776,000 in sales of our microbiome product compared to $362,000 in the same period of 2016. We believe interest in our microbiome product offering continues to grow with both new and existing customers.CONSOLIDATED OPERATING RESULTSConsolidated gross margin was 58% for the third quarter of 2017 compared to 70% for the third quarter of 2016. Gross margin in the third quarter of 2017 was negatively impacted by the absence of exclusivity revenues under our HCV co-promotion agreement with AbbVie, an increase in lower margin product sales and higher scrap and spoilage costs.-24-Consolidated operating income for the third quarter of 2017 was $7.3 million, a $1.2 million improvement from the $6.1 million of operating income reported in the third quarter of 2016. Operating income for the third quarter of 2017 benefited from higher product revenues as compared to the same period last year, partially offset by higher sales and marketing expense in the current period and the absence of AbbVie revenues from the prior year.OPERATING INCOME (LOSS) BY SEGMENTOSUR SegmentOSUR’s gross margin was 55% in the third quarter of 2017 compared to 71% in the third quarter of 2016. OSUR’s gross margin in the third quarter of 2017 was negatively impacted by the absence of exclusivity revenues under our AbbVie co-promotion agreement ($6.1 million was recorded in the third quarter of 2016 versus none in 2017), an increase in lower margin product revenues as a result of higher international sales, and higher scrap and spoilage costs incurred during the quarter.Research and development expenses increased 12% to $2.5 million in the third quarter of 2017 from $2.3 million in the third quarter of 2016, largely due to increased staffing and product registration costs. 2023.grew 3%decreased 30% to $4.8$8.4 million infor the third quarter of 2017three months ended March 31, 2024 from $4.7$12.1 million infor the third quarter of 2016 largelythree months ended March 31, 2023 due to increased external commissions to be paid to our international distributors partially offset by lower call centeremployee costs associated with our OraQuick® In-Home HIV test. a decrease in headcount, and decreased spend on advertising and consulting fees.increased 14%decreased 34% to $6.2$11.6 million infor the third quarter of 2017three months ended March 31, 2024 from $5.5$17.7 million infor the third quarter of 2016three months ended March 31, 2023 largely due to higherlower legal fees and lower staffing costs which includes an increasedue to a reduction in accrued bonuses as a result of Company performance partially offset by lower consulting costs.OSUR’s third quarter 2017the Company's operating loss of $453,000,$7.1 million for the three months ended March 31, 2024, which included a non-cash impairment charge of $3.3 million, non-cash charges of $855,000$2.7 million for depreciation and amortization, and $1.4non-cash charges of $3.0 million for stock-based compensation.DNAG SegmentDNAG’s gross margin was 62% in the third quarter of 2017 compared to 69% in the third quarter of 2016. This decline was attributable to an increase in lower margin product sales in the third quarter of 2017 compared to the third quarter of 2016.Research and development expenses decreased 26% to $681,000 in the third quarter of 2017 from $924,000 in the third quarter of 2016. Research and development expenses in the third quarter of 2016 included costs associated with field studies required to achieve World Health Organization (“WHO”) endorsement of our OMNIgene® • Sputum product for tuberculosis. There were no similar expenses in the third quarter of 2017. Sales and marketing expenses rose 33% to $2.3 million in the third quarter of 2017 from $1.8 million in the third quarter of 2016 due to an increase in our allowance for uncollectible accounts and higher staffing costs. General and administrative expenses decreased 52% to $696,000 in the third quarter of 2017 compared to $1.4 million in the third quarter of 2016 primarily due to lower legal and staffing expenses.All of the above contributed to DNAG’s third quarter 2017 The Company's operating income of $7.8$24.3 million whichfor the three months ended March 31, 2023 included a non-cash impairment charge of $1.1 million, non-cash charges of $843,000$3.7 million for depreciation and amortization, and $170,000$2.7 million for stock-based compensation.We continuein 2008 against OSUR’sits total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the three months ended September 30, 2017, noMarch 31, 2024 and 2023, the Company recorded a U.S. state income tax expense was recorded as compared to $200,000 inbenefit of $0.2 million. For the three months ended September 30, 2016. Canadian incomeMarch 31, 2024 the state tax benefit was partially offset by foreign tax expense of $1.7 million and $200,000 was$0.2 million. No foreign taxes were recorded infor the third quarters of 2017 and 2016, respectively.-25-Ninethree months ended September 30, 2017 comparedMarch 31, 2023 due to September 30, 2016CONSOLIDATED NET REVENUESThe table below showsit being more likely than not that the Canadian subsidiary would not produce sufficient income to receive a breakdown of total consolidated net revenues (dollars in thousands) generated by each of our business segmentstax benefit for the nine months ended September 30, 2017year to date loss.2016. Nine Months Ended September 30, Dollars Percentage of Total
Net Revenues 2017 2016 %
Change 2017 2016 $ 66,455 $ 54,637 22 % 58 % 59 % 45,316 23,649 92 39 25 111,771 78,286 43 97 84 3,265 14,413 (77 ) 3 16 $ 115,036 $ 92,699 24 % 100 % 100 % Consolidated net product revenues increased 43%Capital ResourcesMarch 31, 2024 December 31, 2023 (in thousands) Cash and cash equivalents $ 247,145 $ 290,407 Short-term investments 16,627 — Working capital 319,400 346,923 $111.8$263.8 million at March 31, 2024 from $290.4 million at December 31, 2023. $84.5 million or 32% of the $263.8 million in cash and cash equivalents and short-term investments is held by DNAG, the first nine months of 2017Company's Canadian subsidiary.$78.3$346.9 million in the comparable period of 2016. Higher sales of our molecular and OraQuick® HCV products and higher international sales of our OraQuick® HIV self-test were partially offset by lower domestic sales of our professional OraQuick® HIV product and lower domestic and OTC sales of our cryosurgical products. In the first nine months of 2017, we recognized $3.3 million as other revenues largely in connection with funding from BARDA related to our Ebola and Zika products. Other revenues in the first nine months of 2016 were $14.4 million and included $12.8 million in exclusivity payments received under our AbbVie co-promotion agreement and $1.6 million in BARDA funding. Our co-promotion agreement with AbbVie was terminated onat December 31, 2016 and no further revenues were recognized under this agreement.Consolidated net revenues derived from products sold to customers outside of the United States were $36.2 million and $20.2 million, or 31% and 22% of total net revenues, during the nine months ended September 30, 2017 and 2016, respectively. Because the majority of our international sales are denominated in U.S. dollars, the impact of fluctuating foreign currency exchange rates was not material to our total consolidated net revenues.Net Revenues by SegmentOSUR SegmentThe table below shows a breakdown of total net revenues (dollars in thousands) generated by our OSUR segment.-26- Nine Months Ended September 30, Dollars Percentage of Total
Net Revenues 2017 2016 %
Change 2017 2016 $ 47,822 $ 34,729 38 % 68 % 50 % 9,517 9,746 (2 ) 14 14 9,116 10,162 (10 ) 13 15 66,455 54,637 22 95 79 3,265 14,413 (77 ) 5 21 $ 69,720 $ 69,050 1 % 100 % 100 % Infectious Disease Testing MarketSales to the infectious disease testing market increased 38% to $47.8 million in the first nine months of 2017 from $34.7 million in the first nine months of 2016. This increase resulted from higher sales of our OraQuick® HCV product and higher international sales of our OraQuick® HIV self-test, partially offset by a decline in domestic sales of our professional OraQuick® HIV product.The table below shows a breakdown of our total net OraQuick® HIV and HCV product revenues (dollars in thousands) during the nine months ended September 30, 2017 and 2016. Nine Months Ended September 30, 2017 2016 %
Change $ 12,401 $ 16,446 (25 )% 7,738 3,934 97 4,951 4,574 8 25,090 24,954 1 5,980 5,218 15 15,817 3,722 325 21,797 8,940 144 $ 46,887 $ 33,894 38 % Domestic OraQuick® HIV sales2023. Working capital decreased 25% to $12.4 million for the nine months ended September 30, 2017 from $16.4 million for the nine months ended September 30, 2016. This reduction was primarily the result of competitive losses tied to pricing and the CDC’s testing guidelines recommending the use of competing fourth generation automated HIV immunoassays performed in a laboratory, reduced government funding and customer ordering patterns. We anticipate that future domestic sales of our professional HIV product will continue to be negatively affected by the CDC testing guidelines, changes in government funding, and continued product and price competition.International sales of our OraQuick® HIV products during the first nine months of 2017 rose 97% to $7.7 million from $3.9 million in the first nine months of 2016. This increase was largely due to the continued shipment of product in support of a HIV self-testing program in Africa and higher sales into the Middle East and Asia. Funding under the charitable support agreement with the Gates Foundation began in the third quarter of 2017. Sales to certain-27-regions in Africa during the quarter were subject to support payments under this agreement. Product revenues during the third quarter of 2017 included approximately $458,000 of such support payments.Sales of our OraQuick® In-Home HIV test during the first nine months of 2017 of $4.9 million increased 8% compared to $4.6 million in the first nine months of 2016 largely due to expansion of public health programs that use our In-Home test and additional shelf placement of the product in the home diagnostic section of certain retail pharmacies.Domestic OraQuick® HCV sales increased 15% to $6.0 million in the first nine months of 2017 from $5.2 million in the first nine months of 2016 primarily due to an increase in sales to our U.S. public health customers related to HCV testing program expansion and higher sales to non-acute healthcare offices, partially offset by customer ordering patterns. International OraQuick® HCV sales increased 325% to $15.8 million in the first nine months of 2017 from $3.7 million in the first nine months of 2016, largely due to continued product shipments to a foreign government to support a nationwide HCV testing and treatment program and increased sales in Asia and Africa partially offset by the loss of a multi-national humanitarian organization customer who switched to a competitive product due to pricing. As discussed above, we were recently notified that our supply contract with the foreign government will not be renewed, which will negatively affect our international HCV sales in future periods.Risk Assessment MarketSales to the risk assessment market decreased slightly to $9.5 million in the first nine months of 2017 compared to $9.7 million in the first nine months of 2016.Cryosurgical MarketSales of our cryosurgical products decreased 10% to $9.1 million in the first nine months of 2017 from $10.2 million in the first nine months of 2016.The table below shows a breakdown of our total net cryosurgical revenues (dollars in thousands) generated in each market during the nine months ended September 30, 2017 and 2016. Nine Months Ended
September 30, 2017 2016 %
Change $ 4,368 $ 4,155 5 % 552 607 (9 ) 957 1,062 (10 ) 3,239 4,338 (25 ) $ 9,116 $ 10,162 (10 )% Sales of our Histofreezer® product to physicians’ offices in the United States increased 5% to $4.4 million in the first nine months of 2017 from $4.2 million in the first nine months of 2016, primarily due to the continued recoverydecrease in cash and cash equivalents. Working capital is primarily a function of business previously lost to competition. International sales, of our Histofreezer® product decreased to $552,000 in the first nine months of 2017 from $607,000 in the first nine months of 2016.Sales of our private-label wart removal product in the U.S. retail market decreased to $957,000 in the first nine months of 2017 from $1.1 million in the first nine months of 2016. Sales volume in 2016 was higher as a result of initial stocking orders for a new large pharmacy customer during that period.Sales of our international OTC cryosurgical products during the first nine months of 2017 decreased 25% to $3.2 million compared to $4.3 million in the first nine months of 2016, largely due to lower sales into Europe as a result-28-of customer ordering patternspurchase volumes, inventory requirements, and competitive pressures and lower sales in Latin America due to customer ordering patterns and the economic instabilityvendor payment terms.countries into which we sell.Other revenuesOther revenues inCompany's Cash Flowsfirst ninththree months of 2017 decreased 77% to $3.3 millionended March 31, 2024, net cash provided by operating activities was $6.7 million. Cash flows from $14.4 million in the first nine months of 2016. Other revenues in 2016 included AbbVie exclusivity revenues of $12.8 million. There are no similar revenues in 2017 due to the termination of our AbbVie co-promotion agreement on December 31, 2016. Revenues related to funding from BARDA increased to $3.1 million in the first nine months of 2017 compared to $1.6 million in the first nine months of 2016. Revenues in the first nine months of 2017 also include $218,000 in reimbursement of certain costs under our charitable support agreement with the Gates Foundation.DNAG SegmentMolecular MarketNet molecular revenues increased 92% to $45.3 million in the first nine months of 2017 from $23.6 million in the first nine months of 2016. Sales of our Oragene® product in the commercial market rose 134% in the first nine months of 2017 compared to the first nine months of 2016, largely as a result of higher customer demand primarily from a large customer in the consumer genetics market. Sales of our Oragene® product in the academic market increased 5% in the first nine months of 2017 compared to the first nine months of 2016 largely due to higher customer demand and customer ordering patterns. The higher revenues in the first nine months of 2017 also included $2.4 million in sales of our microbiome product compared to $742,000 in the same period of 2016. We believe interest in our microbiome product offering continues to grow with both new and existing customers.CONSOLIDATED OPERATING RESULTSConsolidated gross margin was 61% for the first nine months of 2017 compared to 69% for the first nine months of 2016. Gross margin in the first nine months of 2017 was negativelyoperations can be significantly impacted by the absencefactors such as timing of exclusivity revenues under our HCV co-promotion agreement with AbbVie, an increase in lower margin product sales,receipt from customers, inventory purchases, and higher scrap and spoilage costs.Consolidated operating income for the first nine months of 2017 was $30.1 million, a $16.9 million improvement from $13.2 million of operating income reported in the first nine months of 2016.payments to vendors. The operating income for the first nine months of 2017 benefited from the Ancestry litigation settlement gain, increased product revenues, and lower sales and marketing costs, partially offset by theCompany's net loss of AbbVie exclusivity revenues recorded in the prior year and higher research and development and general and administrative expenses in the current year.OPERATING INCOME (LOSS) BY SEGMENTOSUR SegmentOSUR’s gross margin was 59% in the first nine months of 2017 compared to 69% in the first nine months of 2016. OSUR’s gross margin in the first nine months of 2017 was negatively impacted by the absence of exclusivity revenues under our AbbVie agreement ($12.8$3.6 million was recorded in the first nine months of 2016 versus none in 2017), an increase in lower margin product revenue as a result of higher international sales, and an increase in scrap and spoilage costs.Research and development expenses increased 18% to $7.5 million in the first nine months of 2017 from $6.4 million in the first nine month of 2016, largely due to increased staffing expenses and higher supply costs associated with the development of our Ebola and Zika products. Sales and marketing expenses decreased 9% to $14.7 million in the first nine months of 2017 from $16.1 million in the same period of 2016. This decrease was primarily the result of the termination of our AbbVie agreement on December 31, 2016 and lower staffing costs, partially offset by higher external commissions to be paid to our international distributors. General and administrative expenses increased 20% to $19.3 million in the first nine months of 2017 from $16.0 million in the first nine months of 2016 due to higher staffing costs, which includes an increase in accrued bonuses as a result of Company performance.-29-All of the above contributed to OSUR’s operating loss of $235,000 in the first nine months of 2017, which included non-cash charges of $2.2 million for depreciation and amortization and $4.8 million for stock-based compensation.DNAG SegmentDNAG’s gross margin was 64% in the first nine months of 2017 compared to 70% in the first nine months of 2016. This decline was attributable to an increase in lower margin sales in the first nine months of 2017 compared to the same period of 2016.Research and development expenses decreased 8% to $2.0 million in the first nine months of 2017 from $2.2 million in the first nine months of 2016. Research and development expenses in first nine months of 2016 included costs associated with field studies required to achieve WHO endorsement of our OMNIgene® • Sputum product for tuberculosis. No similar expenses were recorded in 2017. Partially offsetting these cost savings were higher staffing costs in the first nine months of 2017. Sales and marketing expenses increased 7% to $6.9 million in the first nine months of 2017 from $6.4 million in the first nine months of 2016 due to higher staffing costs. General and administrative expenses decreased 35% to $2.5 million in the first nine months of 2017 compared to $3.8 million in the first nine months of 2016 primarily due to lower legal costs. Operating expenses in the first nine months of 2017 were offset by the $12.5 million pre-tax gain associated with the settlement of our litigation with Ancestry.com DNA, LLC and its contract manufacturer.All of the above contributed to DNAG’s operating income of $30.3 million in the first nine months of 2017, which included non-cash charges of $2.4 million for depreciation and amortization and $430,000 for stock-based compensation.CONSOLIDATED INCOME TAXESWe continue to believe the full valuation allowance established in 2008 against OSUR’s total U.S. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the nine months ended September 30, 2017, we recorded state income tax expense of $31,000 compared to $250,000 in the nine months ended September 30, 2016. Canadian income tax expense of $7.1 million and $384,000 was recorded in the first nine months of 2017 and 2016, respectively. Canadian taxes in the first nine months of 2017 included the additional taxes due as a result of the $12.5 million Ancestry litigation settlement gain and DNAG’s increased pre-tax income.Liquidity and Capital Resources September 30,
2017 December 31,
2016 (In thousands) $ 78,610 $ 109,790 101,662 11,160 182,712 139,106 Our cash, cash equivalents, restricted cash and available-for-sale securities increased to $180.3 million at September 30, 2017 from $120.9 million at December 31, 2016. Our working capital increased to $182.7 million at September 30, 2017 from $139.1 million at December 31, 2016.During the first nine months of 2017, we generated $30.4 million in cash from operating activities. Our net income of $23.6 million benefitted from non-cash stock-based compensation expense of $5.2 million and depreciation and amortization expense of $4.6$2.7 million, partially offsetstock-based compensation expense of $3.0 million, and impairment losses of $3.3 million. Cash provided by the working capital accounts included a net reduction of other non-cash charges of $671,000. Additional sources of cash included an increasedecrease in accounts payablereceivable of $4.6$6.2 million largely associated with lower overall sales and collections of balances due, toa decrease in inventory purchases that were invoiced atof $4.3 million as the end of the quarter, an increase in accrued expenses and other liabilities of $4.2 million largely due to an increase in our Canadian income taxes payable,Company fulfilled demand for its InteliSwab® product, and a decrease in prepaid and other assetsaccrued expenses of $1.6 million largely due to the receipt of $1.4$9.7 million as payment of a claim from one of our raw material-30-suppliers. This settlement was recorded as a receivable at December 31, 2016. Uses of cashthe Company paid out year end bonuses in operating activities during the period include an increase in accounts receivable of $7.7 million largely resulting from the increase in orders placed near the end of the current quarter and an increase in inventory balances of $4.9 million required to meet expected demand.$93.0$46.5 million for the ninethree months ended September 30, 2017,March 31, 2024, which reflects $132.2proceeds from the maturities of investments of $9.2 million, used to purchase investmentsoffset by $25.9 million in purchases of investments. Investing activities also include a $28.3 million investment in Sapphiros, and $3.4$1.6 million to acquire property and equipment partially offset by $42.6 million in proceeds fromto support the maturities and redemptionsnormal operations of investments.provided byused in financing activities was $30.2$1.3 million for the ninethree months ended September 30, 2017,March 31, 2024, which resulted from $31.4 million in proceeds received from the exerciseis largely comprised of stock options partially offset by $1.2$1.5 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted shares.On September 30, 2016, we entered into a credit agreement (the “Credit Agreement”) with a commercial bank. The Credit Agreement provides for revolving extensions of credit in an initial aggregate amount of up to $10.0 million (inclusive of a letter of credit subfacility of $2.5 million), with an option to request, priorshares awarded to the second anniversary of the closing date, that lenders, at their election, provide up to $5.0 million of additional revolving commitments. Obligations under the Credit Agreement are secured by a first priority security interest in certain eligible accounts receivable, 65% of the equity of our subsidiary, DNAG, and certain related assets. There were no borrowings outstanding at September 30, 2017 or December 31, 2016.Borrowings under the Credit Agreement are subject to compliance with borrowing base limitations tied to eligibility of accounts receivable. Interest under the Credit Agreement is payable at the London Interbank Offered Rate for one, two, three or six-month loans, as selected by theCompany's employees.plus 2.50% per year. The Credit Agreement will be subject to an unused line fee of 0.375% per annum on the unused portion of the commitment under the Credit Agreement during the revolving period. The maturity date of the Credit Agreement is September 30, 2019.In connection with the Credit Agreement, under certain circumstances, we must comply with a minimum fixed charge coverage ratio of 1.10 to 1.00, measured as of the last day of each fiscal month and for the twelve-fiscal month period ending on such date. As of September 30, 2017 and December 31, 2016, we were in compliance with all applicable covenants under the Credit Agreement.Our current balances ofexpects existing cash and cash equivalents and available-for-sale securities and our available borrowing capacity are expected towill be sufficient to fund our currentits operating expenses and capital needs forexpenditure requirements over the foreseeable future. Ournext twelve months. The Company's cash requirements, however, may vary materially from those now planned due to many factors, including, but not limited to, the scope and timing of future strategic acquisitions, the progress of ourits research and development programs, the scope and results of clinical testing, the cost of any future litigation, the magnitude of capital expenditures, changes in existing and potential relationships with business partners, the timing and cost of obtaining regulatory approvals, the timing and cost of future stock purchases, the costs In addition, $43.3 million or 24% of our $180.3 million in cash, cash equivalents, restricted cash and available-for-sale securities belongs to our Canadian subsidiary and any repatriation of such cash into the United States could have adverse tax consequences.Summary of Contractual Obligationsourthe Company's obligations to make future payments under contracts existing at December 31, 20162023 is included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of ourits Annual Report on Form 10-K for the year ended December 31, 2016.2023. As of September 30, 2017,March 31, 2024, there were no significant changes to this information, including the absence of any off-balance sheet arrangements.This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally-31-accepted in the United States of America. The preparation of these consolidated financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our judgments and estimates, including those related to the valuation of accounts receivable, inventories and intangible assets, as well as calculations related to contingencies accruals and the measurement of performance-based restricted stock expense. We base our judgments and estimates on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.ourthe Company's critical accounting policies is contained in ourits Annual Report on Form 10-K for the year ended December 31, 20162023 filed with the SEC. During the first nine months of 2017, there were noNo material changes in ourhave been made to such critical accounting policies.policies during the three months ended March 31, 2024.Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any amounts of derivative financial instruments or derivative commodity instruments and, accordingly, we have
As of September 30, 2017, we did not have any foreign currency exchange contracts or purchase currency options to hedge local currency cash flows. Sales denominated in foreign currencies comprised 4.1% of our total revenues for the nine months ended September 30, 2017. We do have foreign currency exchange risk related to our operating subsidiary in Canada. While the majority of this subsidiary’s revenues are recorded in U.S. dollars, almost all of this subsidiary’s operating expenses are denominated in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar could affect year-to-year comparability of operating results and cash flows. Our Canadian subsidiary had net assets, subject to translation, of $89.4 million CDN ($71.7 million USD), which are included in the Company’s consolidated balance sheet as of September 30, 2017. A 10% unfavorable change in the Canadian-to-U.S. dollar exchange rate would have decreased our comprehensive income by $7.2 millionCompany's assessment of its sensitivity to market risk since its presentation set forth in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," in its Annual Report on Form 10-K for the nine monthsyear ended September 30, 2017.
-32-
-33-
Period | Total number of shares purchased | Average price paid per Share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares that may yet be repurchased under the plans or programs(1, 2) | ||||||||||||
July 1, 2017 - July 31, 2017 | 1,440 | (3) | $ | 17.75 | N/A | 11,984,720 | ||||||||||
August 1, 2017 - August 31, 2017 | — | — | $ | — | 11,984,720 | |||||||||||
September 1, 2017 - September 30, 2017 | — | — | — | 11,984,720 | ||||||||||||
|
| |||||||||||||||
1,440 | — | |||||||||||||||
|
|
|
|
Period | Total number of shares purchased | Average price paid per Share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares that may yet be repurchased under the plans or programs (1, 2) | |||||||||||||||||||||||||
January 1, 2024 - January 31, 2024 | 59,151 | (3) | $ | 8.19 | — | $ | 11,984,720 | ||||||||||||||||||||||
February 1, 2024 - February 29, 2024 | 55,620 | (3) | $ | 7.40 | — | $ | 11,984,720 | ||||||||||||||||||||||
March 1, 2024 - March 31, 2024 | 78,707 | (3) | $ | 7.18 | — | $ | 11,984,720 | ||||||||||||||||||||||
193,478 | — |
-34-
Exhibit
NumberExhibit ExhibitNumberExhibit31.1* 31.1*31.2* 32.1*+ 32.2*+ 101.INS Inline XBRL Instance Document – the Instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page from Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in exhibits 101). -35-
ORASURE TECHNOLOGIES, INC. /s/ Ronald H. SpairKenneth J. McGrathDate: NovemberMay 9, 20172024Ronald H. SpairKenneth J. McGrathChief Operating Officer andChief Financial Officer (Principal Financial Officer) /s/ Mark L. KunaMichele M. AnthonyDate: NovemberMay 9, 20172024Mark L. KunaMichele M. AnthonySenior Vice President, FinanceController and ControllerChief Accounting Officer(Principal Accounting Officer) -36-