ORASURE TECHNOLOGIES INC 10-Q

Item 1. FINANCIAL STATEMENTS 3 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except per share amounts) June 30, 2023 December 31, 2022 ASSETS Current Assets: Cash and cash equivalents $ 185,936 $ 83,980 Short-term investments — 26,867 Accounts receivable, net of allowance of $ 1,908 and $ 2,365 52,750 70,797 Inventories 73,284 95,704 Prepaid expenses 5,248 6,273 Other current assets 24,349 41,569 Total current assets 341,567 325,190 Noncurrent Assets: Property, plant and equipment, net of accumulated depreciation of $ 84,423 and $ 69,881 49,282 59,413 Operating right-of-use assets, net 13,443 10,399 Finance right-of-use assets, net 803 1,293 Intangible assets, net of accumulated amortization of $ 32,737 and $ 31,077 10,665 11,694 Goodwill 35,606 35,104 Deferred tax asset 1,230 — Other noncurrent assets 998 1,087 Total noncurrent assets 112,027 118,990 TOTAL ASSETS $ 453,594 $ 444,180 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 17,753 $ 38,020 Deferred revenue 1,841 2,273 Accrued expenses and other current liabilities 23,811 25,762 Finance lease liability 1,080 1,179 Operating lease liability 1,895 1,764 Acquisition-related contingent consideration obligation 40 65 Total current liabilities 46,420 69,063 Noncurrent Liabilities: Finance lease liability 436 503 Operating lease liability 12,013 9,101 Acquisition-related contingent consideration obligation — 99 Other noncurrent liabilities 586 581 Deferred income taxes — 408 Total noncurrent liabilities 13,035 10,692 TOTAL LIABILITIES 59,455 79,755 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, 73,413 and 72,734 shares issued and outstanding — — Additional paid-in capital 523,861 520,446 Accumulated other comprehensive loss ( 14,559 ) ( 18,435 ) Accumulated deficit ( 115,163 ) ( 137,586 ) Total stockholders' equity 394,139 364,425 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 453,594 $ 444,180 See accompanying notes to the consolidated financial statements. 4 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 NET REVENUES: Products and services $ 84,738 $ 79,167 $ 237,652 $ 144,403 Other 703 1,064 2,752 3,535 85,441 80,231 240,404 147,938 COST OF PRODUCTS AND SERVICES SOLD 59,070 52,434 148,218 95,842 Gross profit 26,371 27,797 92,186 52,096 OPERATING EXPENSES: Research and development 7,661 9,463 18,221 18,097 Sales and marketing 8,535 11,684 20,677 24,401 General and administrative 16,424 17,579 34,135 36,735 Loss on impairments 215 10,542 1,320 10,542 Change in the estimated fair value of acquisition-related contingent consideration ( 35 ) — ( 59 ) ( 36 ) 32,800 49,268 74,294 89,739 Operating income (loss) ( 6,429 ) ( 21,471 ) 17,892 ( 37,643 ) OTHER INCOME 1,467 1,713 4,140 1,881 Income (loss) before income taxes ( 4,962 ) ( 19,758 ) 22,032 ( 35,762 ) INCOME TAX (BENEFIT) EXPENSE ( 166 ) ( 1,169 ) ( 391 ) 2,767 NET INCOME (LOSS) $ ( 4,796 ) $ ( 18,589 ) $ 22,423 $ ( 38,529 ) INCOME (LOSS) PER SHARE: BASIC $ ( 0.07 ) $ ( 0.26 ) $ 0.31 $ ( 0.53 ) DILUTED $ ( 0.07 ) $ ( 0.26 ) $ 0.30 $ ( 0.53 ) WEIGHTED-AVERAGE SHARES OUTSTANDING: BASIC 73,324 72,496 73,219 72,361 DILUTED 73,324 72,496 74,115 72,361 See accompanying notes to the consolidated financial statements. 5 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 NET INCOME (LOSS) $ ( 4,796 ) $ ( 18,589 ) $ 22,423 $ ( 38,529 ) OTHER COMPREHENSIVE INCOME Currency translation adjustments 2,859 ( 4,349 ) 3,656 ( 2,593 ) Unrealized gain on marketable securities — 82 220 156 COMPREHENSIVE INCOME (LOSS) $ ( 1,937 ) $ ( 22,856 ) $ 26,299 $ ( 40,966 ) See accompanying notes to the consolidated financial statements. 6 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 2023 2022 OPERATING ACTIVITIES: Net income (loss) $ 22,423 $ ( 38,529 ) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Stock-based compensation 5,012 6,804 Depreciation and amortization 14,011 7,464 Loss on impairments 1,320 10,542 Other non-cash amortization 1 313 Provision for credit losses ( 478 ) ( 152 ) Unrealized foreign currency gain (loss) 106 ( 62 ) Interest expense on finance leases 28 55 Deferred income taxes ( 1,815 ) 361 Loss on sale of fixed assets — 718 Change in the estimated fair value of acquisition-related contingent consideration ( 59 ) ( 36 ) Payment of acquisition-related contingent consideration ( 19 ) — Changes in assets and liabilities: Accounts receivable 18,652 ( 18,646 ) Inventories 22,556 ( 18,179 ) Prepaid expenses and other assets 5,495 ( 4,416 ) Accounts payable ( 22,187 ) 11,485 Deferred revenue ( 450 ) ( 252 ) Accrued expenses and other liabilities ( 1,326 ) ( 2,959 ) Net cash provided by (used in) operating activities 63,270 ( 45,489 ) INVESTING ACTIVITIES: Proceeds from maturities and redemptions of investments 27,305 23,017 Purchases of property and equipment ( 2,893 ) ( 25,440 ) Purchase of property and equipment under government contracts ( 4,034 ) ( 33,803 ) Proceeds from funding under government contract 17,793 33,962 Net cash provided by (used in) investing activities 38,171 ( 2,264 ) FINANCING ACTIVITIES: Cash payments for lease liabilities ( 320 ) ( 392 ) Proceeds from exercise of stock options 66 15 Payment of acquisition-related contingent consideration ( 46 ) ( 208 ) Repurchase of common stock ( 1,663 ) ( 1,954 ) Net cash used in financing activities ( 1,963 ) ( 2,539 ) EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 2,478 ( 311 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 101,956 ( 50,603 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 83,980 116,762 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 185,936 $ 66,159 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for income taxes $ 623 $ 9,107 Non-cash investing and financing activities Accrued property and equipment purchases $ 314 $ 1,900 Accrued property and equipment purchases under government contracts $ — $ 2,023 Unrealized gain on marketable securities $ — $ 156 See accompanying notes to the consolidated financial statements. 7 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (Unaudited) (in thousands, except per share amounts, unless otherwise indicated) 1. Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation . The accompanying interim unaudited consolidated financial statements include the accounts of OraSure Technologies, Inc. (“OraSure”) and its wholly-owned subsidiaries, DNA Genotek Inc. (“DNAG”), Diversigen, Inc. (“Diversigen”), and Novosanis NV (“Novosanis”). All intercompany transactions and balances have been eliminated. References herein to “we,” “us,” “our,” or the “Company” mean OraSure and its consolidated subsidiaries, unless otherwise indicated. The unaudited financial statements, in the opinion of management, include all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the 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 the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations expected for the full year. Summary of Significant Accounting Policies . There have been no changes to the Company's significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 that have had a material impact on the consolidated financial statements and related notes except as discussed herein. See Note 11 for the discussion regarding the change in business segments. Cash Equivalents & Investments . The Company considers all investments in debt securities to be available-for-sale securities. These securities consist of guaranteed investment certificates and corporate bonds purchased with maturities greater than ninety days. Available-for-sale securities are carried at fair value, based upon quoted market prices, with unrealized gains and losses, if any, reported in stockholders’ equity as a component of accumulated other comprehensive loss. The Company records an allowance for credit loss for its available-for-sale securities when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. The following is a summary of the Company's available-for-sale securities: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31, 2022 Guaranteed investment certificates $ 22,109 $ — $ — $ 22,109 Corporate bonds 4,978 — ( 220 ) 4,758 Total $ 27,087 $ — $ ( 220 ) $ 26,867 Fair Value of Financial Instruments . As of June 30, 2023 and December 31, 2022, the carrying values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their respective fair values based on their short-term nature. Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and 8 Table of Contents Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). All of the Company's available-for-sale corporate bonds are measured as Level 2 instruments and the Company's available-for-sale guaranteed investment certificates are measured as Level 1 instruments as of December 31, 2022. Included in cash and cash equivalents at June 30, 2023 and December 31, 2022, was $ 6,928 and $ 1,730 invested in money market funds. These money market funds have investments in government securities and are measured as Level 1 instruments. Included in cash and cash equivalents at June 30, 2023 was $ 22,642 of guaranteed investment certificates which are also measured as Level 1 instruments. The Company offers a nonqualified deferred compensation plan for certain eligible employees and members of its Board of Directors. The assets of the plan are held in the name of the Company at a third-party financial institution. Separate accounts are maintained for each participant to reflect the amounts deferred by the participant and all earnings and losses on those deferred amounts. The assets of the plan are held in mutual funds and company stock. The fair value of the plan assets as of June 30, 2023 and December 31, 2022 was $ 644 and $ 747 , respectively, and was calculated using the quoted market prices of the assets as of those dates. All investments in the plan are classified as trading securities and measured as Level 1 instruments. The fair value of plan assets is included in both current assets and noncurrent assets with the same amount included in accrued expenses and other noncurrent liabilities in the accompanying consolidated balance sheets. Foreign Currency Translation . Net foreign exchange gains and (losses) resulting from foreign currency transactions that are included in other income in the Company's consolidated statements of operations were $( 492 ) and $ 783 for the three months ended June 30, 2023 and 2022, respectively. Net foreign exchange gains and (losses) resulting from foreign currency transactions for the six months ended June 30, 2023 and 2022 were $( 542 ) and $ 54 , respectively. Accumulated Other Comprehensive Loss . Changes in accumulated other comprehensive loss by component is listed below. Foreign Currency Marketable Securities Total Balance at December 31, 2022 $ ( 18,215 ) $ ( 220 ) $ ( 18,435 ) Other comprehensive gain 3,656 220 3,876 Balance at June 30, 2023 $ ( 14,559 ) $ — $ ( 14,559 ) Immaterial Correction of Errors. Inventories, accounts payable and cost of products and services were reduced by $ 528 , $ 1,329 and $ 801 , respectively, as of and for the year ended December 31, 2022 to correct for the accounting of a vendor rebate earned in 2022. The tax impact of the vendor rebate was negligible. This correction was deemed to be immaterial to the consolidated financial statements as of and for the year ended December 31, 2022. For the three and six months ended June 30, 2022, cost of products and services sold was reduced by $ 213 and $ 240 , respectively. The respective operating activities on the consolidated statement of cash flows for the six months ended June 30, 2022 has also been adjusted. Furthermore, stockholder's equity at June 30, 2022 has been adjusted to reflect the reduction in cost of products and services sold. Reclassification . Certain prior period amounts have been reclassified to conform to current year presentations. For the three and six months ended June 30, 2022, $ 395 and $ 616 of research and development expenses were reclassified to other income in relation to the U.S. Department of Defense (the “DOD”) engineering consulting costs further described in Note 2. This reclassification was made to conform to the presentation in our Annual Report on Form 10-K for the year ended December 31, 2022. Change in Accounting Estimate. During the three months ended June 30, 2023, the Company shortened the useful lives of machinery and equipment utilized for InteliSwab® production in Thailand. This reduction in useful lives resulted in $ 6,900 of accelerated depreciation during the three months ended June 30, 2023, recorded in cost of products and services sold. 2. Government Capital Contracts In September 2021, the Company entered into an agreement for $ 109,000 in funding from the DOD, in coordination with the Department of Health and Human Services, to build additional manufacturing capacity in the United States for its InteliSwab ® COVID-19 Rapid Tests as part of the nation’s pandemic preparedness plan. Funding will be paid to the 9 Table of Contents Company based on achievement of milestones through December 2023 for the design, acquisition, installation, qualification and acceptance of the manufacturing equipment, as set forth in the agreement. In accordance with the milestone payment schedule, 15 % of the total will not be funded until the completion of the final validation testing, which is scheduled to occur in late 2023. The Company began making payments to vendors for the capital project during the fourth quarter of 2021. The Company began receiving funds from the DOD in January 2022 and has received $ 78,124 , as of June 30, 2023. The remaining $ 30,876 is expected to be collected during the remainder of 2023. Activity for these capital contracts is accounted for pursuant to International Accounting Standards ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance . Funding received in relation to capital-related costs incurred for government contracts is recorded as a reduction to the cost of property, plant and equipment and reflected within investing activities in the consolidated statements of cash flows; and associated unpaid liabilities and government proceeds receivable are considered non-cash changes in such balances within the operating section of the consolidated statements of cash flows. Amounts earned for the Company's guaranteed profit which covers project management costs are recognized straight-line in other income over the term of the government contract. Any amount received in excess of the guaranteed profit discussed above will be recorded in other income at time of payment. The Company recognized $ 561 of such income, which is reported as other income in the Company's consolidated statement of operations for both the three months ended June 30, 2023 and 2022. The Company recognize $ 1,123 of such income, for both the six months ended June 30, 2023 and 2022. The DOD also reimburses the Company for certain engineering consulting costs. These expenses are reflected in research and development as incurred with the corresponding reimbursement presented in other income. For the three months ended June 30, 2023 and 2022, $ 537 and $ 395 , respectively, were recorded in research and development and other income. For the six months ended June 30, 2023 and 2022, $ 1,588 and $ 616 , respectively, were recorded in research and development and other income. The balances corresponding to government contracts included in the Company's consolidated balance sheet are as follows: June 30, 2023 December 31, 2022 Other current assets: Billed receivables $ — $ — Unbilled receivables 15,429 27,013 Total other current assets 15,429 27,013 Accrued expenses and other current liabilities $ ( 118 ) $ ( 318 ) The activity corresponding to the government contracts included in the Company's consolidated statements of cash flows is as follows: June 30, 2023 December 31, 2022 Cost of assets, cumulative $ 87,057 $ 83,359 Reduction for funding earned to date, not yet received ( 8,402 ) ( 22,497 ) Reduction for funding received to date ( 78,655 ) ( 60,862 ) Total property, plant and equipment, net $ — $ — 10 Table of Contents 3. Inventories June 30, December 31, 2023 2022 Raw materials $ 29,647 $ 42,445 Work in process 1,885 2,335 Finished goods 41,752 50,924 $ 73,284 $ 95,704 4. Property, Plant and Equipment, net June 30, December 31, 2023 2022 Land $ 1,118 $ 1,118 Buildings and improvements 35,765 35,582 Machinery and equipment 65,204 60,725 Computer equipment and software 17,065 16,681 Furniture and fixtures 4,100 4,064 Construction in progress 10,453 11,124 133,705 129,294 Accumulated depreciation ( 84,423 ) ( 69,881 ) $ 49,282 $ 59,413 During the six months ended June 30, 2023, the Company determined several manufacturing lines will not be utilized due to changes in forecasted demand for the products the equipment is intended to produce. Additionally, the Company elected not to proceed with certain leasehold improvements to its research and development laboratories. As a result of these decisions, the Company determined that the carrying values of the equipment and leasehold improvements made to date are not recoverable and recorded an aggregate pre-tax asset impairment charge of $ 1,320 during the six months ended June 30, 2023. Due to the extremely specialized nature of the equipment and various market data points, the estimated fair value was zero . These charges are reported within loss on impairments in the consolidated statement of operations. 5. Accrued Expenses and other current liabilities June 30, December 31, 2023 2022 Payroll and related benefits $ 11,028 $ 14,103 Professional fees 7,038 4,685 Sales tax payable 1,321 1,519 Other 4,424 5,455 $ 23,811 $ 25,762 6. Termination Benefits During the first and second quarters of 2023, the Company executed a reduction in workforce. This was accounted for pursuant to Accounting Standards Codification ("ASC") 420, Exit or Disposal Cost Obligations . 11 Table of Contents The expense included in the Company's consolidated statements of operations are as follows: Three Months Ended June 30, 2023 Six months ended June 30, 2023 Cost of products and services sold $ 334 $ 369 Research and development — 566 Sales and marketing 95 1,543 General and administrative 201 787 Total $ 629 $ 3,264 As of June 30, 2023 the Company had $ 1,591 accrued and had paid $ 1,674 related to the reduction in workforce. 7. Revenues Revenues by product line . The following table represents total net revenues by product line: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 COVID-19 (1) $ 47,507 $ 43,378 $ 165,916 $ 74,411 HIV 15,964 10,357 29,868 18,523 Molecular Products (2) 13,050 17,581 25,992 35,514 HCV 3,870 3,691 7,056 6,948 Risk assessment testing 2,358 2,630 4,986 5,191 Molecular Services 1,354 1,204 2,733 2,938 Other product and service revenues 635 326 1,101 878 Net product and services revenues 84,738 79,167 237,652 144,403 Other non-product revenues (3) 703 1,064 2,752 3,535 Net revenues $ 85,441 $ 80,231 $ 240,404 $ 147,938 (1) Includes COVID-19 Diagnostics and COVID-19 Molecular Products. (2) Includes Genomics and Microbiome and Novosanis Products. (3) Other non-product and services revenues include funded research and development contracts, royalty income, and grant revenues. Revenues by geographic area . The following table represents total net revenues by geographic area, based on the location of the customer: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 United States $ 73,871 $ 70,320 $ 218,890 $ 128,307 Europe 2,453 2,436 4,305 6,722 Other regions 9,117 7,475 17,209 12,909 $ 85,441 $ 80,231 $ 240,404 $ 147,938 Customer and Vendor Concentrations . At June 30, 2023, one non-commercial customer accounted for 47 % of the Company's consolidated accounts receivable. The same non-commercial customer accounted for more than 57 % of the Company's consolidated accounts receivable as of December 31, 2022. The same non-commercial customer also accounted for 56 % of net consolidated revenues for both the three months ended June 30, 2023 and 2022, respectively. The same non-commercial customer also accounted for 70 % and 39 % of net consolidated revenues for the six months ended June 30, 2023 and 2022, respectively. 12 Table of Contents The Company currently purchases certain products and critical components of its products from sole-supply vendors. If these vendors are unable or unwilling to supply the required components and products, the Company could be subject to increased costs and substantial delays in the delivery of its products to its customers. Third-party suppliers also manufacture certain products. The Company's inability to have a timely supply of any of these components and products could have a material adverse effect on its business, as well as its financial condition and results of operations. Deferred Revenue . The Company records deferred revenue when funds are received prior to the recognition of the associated revenue. Deferred revenue as of June 30, 2023 and December 31, 2022 included customer prepayments of $ 1,285 and $ 1,533 , respectively. Deferred revenue as of June 30, 2023 and December 31, 2022 also included $ 556 and $ 740 , respectively, associated with a long-term contract that has variable pricing based on volume. The average price over the life of the contract was determined and revenue is recognized at that average price. 8. Income Taxes The components of income tax expense (benefits) are as follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 State income tax expense (benefit) $ 1,481 $ 183 $ 1,257 $ 400 Foreign income tax expense (benefit) ( 1,648 ) ( 1,352 ) ( 1,648 ) 665 Foreign withholding tax — — — 1,702 $ ( 166 ) $ ( 1,169 ) $ ( 391 ) $ 2,767 Income taxes for the first six months of 2022 includes $ 1,702 of Canadian withholding tax on the repatriation of $ 65,000 of unremitted earnings from Canada to the United States. The increase in state tax expense in 2023 compared to 2022 is a result of the increase in projected income before taxes to be generated by the Company's U.S. operations. Conversely, the increase in foreign tax benefit in 2023 compared to 2022 is a result of the decrease in projected income before taxes expected to be generated by the Company's Canadian subsidiary. Tax expense reflects taxes due to the 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 the Company's total deferred tax asset as of June 30, 2023 relate to foreign net operating losses. The significant components of the Company's total deferred tax liability at December 31, 2022 relate to the tax effects of the basis difference between the intangible assets acquired in its acquisitions for financial reporting and for tax purposes along with basis differences arising from accelerated tax depreciation of fixed assets. A valuation allowance is recorded to the extent it is more likely than not that some portion or all of the deferred tax assets will not be realized. A full valuation allowance was recorded on the Company’s U.S. deferred tax assets as of June 30, 2023 and December 31, 2022. 9. Income (Loss) Per Share Basic income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed in a manner similar to basic earnings (loss) per share except that the weighted-average number of shares outstanding is increased to include incremental shares from the assumed vesting or exercise of dilutive securities, such as common stock options, unvested restricted stock or performance stock units, unless the impact is antidilutive. The number of incremental shares is calculated by assuming that outstanding stock options were exercised and unvested restricted shares and performance stock units were vested, and the proceeds from such exercises or vesting were used to acquire shares of common stock at the average market price during the reporting period. Basic and dilutive computations of net loss per share are the same in periods in which a net loss exists as the dilutive effects of excluded items would be anti-dilutive. For the three months ended June 30, 2023 outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 966 shares were excluded from the computation of diluted loss per share. For the six months ended June 30, 2023, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 2,030 shares were excluded from the computation of diluted earnings per share as their inclusion 13 Table of Contents would have been anti-dilutive. For the three and six months ended June 30, 2022, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 226 and 381 shares, respectively, were excluded from the computation of diluted loss per share. 10. Stockholders’ Equity Reconciliation of the changes in stockholder's equity for the three and six months ended June 30, 2023 and 2022. 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 Vesting of restricted stock and performance stock units 241 — — — — — Purchase and retirement of common shares ( 82 ) — ( 460 ) — — ( 460 ) Stock-based compensation — — 2,357 — — 2,357 Net loss — — — — ( 4,796 ) ( 4,796 ) Currency translation adjustments — — — 2,859 — 2,859 Balance at June 30, 2023 73,413 $ — $ 523,861 $ ( 14,559 ) $ ( 115,163 ) $ 394,139 14 Table of Contents Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Shares Amount Balance at December 31, 2021 72,069 $ — $ 511,063 $ ( 10,077 ) $ ( 120,453 ) $ 380,533 Common stock issued upon exercise of options 2 — 15 — — 15 Vesting of restricted stock and performance stock units 352 — — — — — Purchase and retirement of common shares ( 116 ) — ( 1,049 ) — — ( 1,049 ) Stock-based compensation — — 3,524 — — 3,524 Net loss — — — — ( 19,940 ) ( 19,940 ) Currency translation adjustments — — — 1,756 — 1,756 Unrealized gain on marketable securities — — — 74 — 74 Balance at March 31, 2022 72,307 $ — $ 513,553 $ ( 8,247 ) $ ( 140,393 ) $ 364,913 Common stock issued upon exercise of options 407 — — — — — Vesting of restricted stock and performance stock units ( 142 ) — ( 905 ) — — ( 905 ) Stock-based compensation — — 3,280 — — 3,280 Net loss — — — — ( 18,589 ) ( 18,589 ) Currency translation adjustments — — — ( 4,349 ) — ( 4,349 ) Unrealized gain on marketable securities — — — 82 — 82 Balance at June 30, 2022 72,572 $ — $ 515,928 $ ( 12,514 ) $ ( 158,982 ) $ 344,432 11. Business Segments The Company is organized on the basis of products and services under a new organizational structure. All products and services reside under the same reporting hierarchy. Historically there was separate management leading the Company's Diagnostics and Molecular Solutions businesses. In February 2023, the Company announced a corporate restructuring to combine the commercial and innovation teams across the Diagnostics and Molecular Solutions segments into one operating segment with sales, marketing, product development and research teams covering all product lines and reporting to a Chief Product Officer. Resources are allocated and performance is assessed on a consolidated basis by our Chief Executive Officer, whom we have determined to be our Chief Operating Decision Maker ("CODM"). The CODM reviews the business based on individual product success. Therefore, our historical reportable segments, Diagnostics and Molecular Solutions are now considered one reportable segment and there will no longer be a distinction between Diagnostics and Molecular Solutions, only the Company holistically. 12. Commitments and Contingencies Litigation From time to time, the Company is involved in certain legal actions arising in the ordinary course of business. In management’s opinion, the outcomes of such actions, either individually or in the aggregate, are not expected to have a material adverse effect on the Company's future financial position or results of operations. In June 2021, the Company filed a complaint against Spectrum Solutions, LLC ("Spectrum") in the United States District Court for the Southern District of California alleging that certain saliva collection devices manufactured and sold by Spectrum infringe a patent held by DNAG. Spectrum has filed an answer to the initial 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 patents in the litigation and subsequently filed a request for review of the second 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 15 Table of Contents 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 has appealed the grant of summary judgment to the Court of Appeal on June 8, 2023. Second, the District Court denied Spectrum’s motion to amend its allegations of alleged antitrust violations, finding that if such an amendment were allowed, Spectrum’s claims would not survive a motion for summary judgment. Spectrum thereafter withdrew its antitrust and inequitable conduct counterclaims. Spectrum did not appeal the District Court's denial of its motion to amend. Both parties have filed motions seeking sanctions in the District Court. An inter partes review is currently pending before the PTO regarding the second asserted patent. 16 Table of Contents