ORASURE TECHNOLOGIES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with (i) the Company's unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (ii) the Company's audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission on March 9, 2026. 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, 2025 and the “Risk Factors” section of subsequent Quarterly Reports on Form 10-Q, the Company'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. Business Overview The Company's business consists of the development, manufacture, marketing, sale and distribution of simple, easy to use diagnostic products and specimen collection devices using its proprietary technologies, as well as other diagnostic products including immunoassays and other in vitro diagnostic tests that are used on other specimen types. The Company's diagnostic products include tests for diseases including HIV, Hepatitis C, Syphilis, Sickle Cell and COVID-19 that are performed on a rapid basis at the point of care. These products are sold in the United States and internationally to various clinical laboratories, hospitals, clinics, community-based organizations, and other public health organizations, distributors, government agencies, physicians’ offices, and commercial and industrial entities. The Company's HIV and COVID-19 products are also sold in a consumer-friendly format in the over-the-counter ("OTC") market in the U.S. and, in the case of the HIV and HCV products, as a self-test to individuals in a number of other countries, including, for the HIV products, as an oral swab in-home test for HIV-1 and HIV-2 in Europe, and for the HCV products, as an OTC test. In December 2025, 20 Table of Contents the Company submitted a 510(k) to the FDA for clearance of its rapid molecular self-test for CT/NG, which is currently under review. The Company's business also includes sample management solutions and services that are used by clinical laboratories, direct-to-consumer laboratories, researchers, pharmaceutical companies, and animal health service and product providers. The revenues from sample management solutions are derived from product sales to commercial customers and sales into the academic and research markets. Customers span the disease risk management, diagnostics, pharmaceutical, biotech, and companion animal market segments. The Company has also developed collection devices for the emerging microbiome market, which focuses 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. Initial sales of this product for research use only are occurring primarily through distributors and collaborations in the liquid biopsy and sexually transmitted disease markets. In December 2025, the Company also submitted a 510(k) to the FDA for clearance of its Colli-Pee ® at-home urine collection device for sexually transmitted infections, which is currently under review. Risk Assessment Testing During the third quarter of 2024, the Company announced the discontinuance of sales of its risk assessment product line, which was completed in the second quarter of 2025. Sales of its risk assessment products did not contribute to revenues during the three months ended March 31, 2026. Sales of its risk assessment products contributed $1.4 million to revenues during the three months ended March 31, 2025. During the first quarter of 2025, the Company sold certain assets that made up the risk assessment product line including certain intellectual property, contracts, permits, and equipment. 21 Table of Contents Results of Operations (all dollar amounts in tables are presented in thousands) For the three months ended March 31, 2026 compared to March 31, 2025. CONSOLIDATED NET REVENUES The table below shows total consolidated net revenues for the three months ended March 31, 2026 and 2025: For the Three Months Ended March 31, Dollars % Change Percentage of Total Net Revenues 2026 2025 2026 2025 Diagnostics (1) $ 16,866 $ 17,689 (5) % 60 % 59 % Sample Management Solutions (2) 9,058 9,110 (1) 32 30 Other products and services (3) 434 321 35 2 1 COVID-19 Diagnostics 18 457 (96) — 2 Risk Assessment Testing (4) — 1,420 (100) — 5 Net product and services revenues 26,376 28,997 (9) 94 97 Non-product and services revenues (5) 1,549 934 66 6 3 Net revenues $ 27,925 $ 29,931 (7) % 100 % 100 % (1) Includes HIV, HCV, Syphilis, SickleSCAN ® and SureQuick ® product revenues. (2) Includes Genomics, Microbiome, and Colli-Pee ® product revenues. (3) Includes COVID-19 Sample Management Solutions product revenues. (4) Includes substance abuse testing product revenues. (5) Includes funded research and development contracts, royalty income and grant revenues. Product and Services Revenues Consolidated net revenues decreased 7% to $27.9 million for the three months ended March 31, 2026 from $29.9 million for the three months ended March 31, 2025. Sales of the Company's Diagnostics products decreased 5% to $16.9 million for the three months ended March 31, 2026 from $17.7 million for the three months ended March 31, 2025. This decrease in revenues is largely due to lower international HCV revenues driven by customer ordering patterns and funding constraints. This decline in revenues was offset by an increase in Company's Syphilis product sales to new customers in the women's health market. Sample Management Solutions revenues remained largely flat at $9.1 million for the three months ended March 31, 2026 and 2025. COVID-19 Diagnostics sales decreased 96% to $18.0 thousand for the three months ended March 31, 2026 from $0.5 million for the three months ended March 31, 2025, due to completion of the Company's InteliSwab® tests contract with the U.S. government and lower overall demand for COVID-19 testing. Risk Assessment Testing revenues are $0 in 2026 as the product line was discontinued and wound down in early 2025. Non-Product and Services Revenues Non-product and services revenues increased 66% to $1.5 million for the three months ended March 31, 2026 from $0.9 million for the three months ended March 31, 2025 primarily due to the recognition of revenue under various funded R&D contracts. CONSOLIDATED OPERATING RESULTS Consolidated gross profit margin increased to 42.3% for the three months ended March 31, 2026 compared to 41.1% for the three months ended March 31, 2025. The drivers of the margin increase were better absorption of fixed overhead costs 22 Table of Contents due to operational efficiencies, improved product mix, and higher non-product revenues which contribute 100% to gross margin. An increase in scrap expense in the quarter partially offset the increases in gross margin. Consolidated operating loss for the three months ended March 31, 2026 was $23.3 million compared to $17.8 million for the three months ended March 31, 2025. The higher operating loss reported in 2026 was largely a result of lower revenues coupled with increased research and development spend. Research and development expenses increased 42% to $13.7 million for the three months ended March 31, 2026 from $9.6 million for the three months ended March 31, 2025 largely due to higher spend incurred for clinical trials associated with the Chlamydia Trachomatis (CT) and Neisseria Gonorrhoeae (NG) device and the Colli-Pee ® device. The increase in research and development expenses is also due to additional severance charges associated with the Company's reduction in its workforce in February 2026. Sales and marketing expenses decreased 1% to $6.8 million for the three months ended March 31, 2026 from $6.9 million for the three months ended March 31, 2025. General and administrative expenses increased 3% to $14.6 million for the three months ended March 31, 2026 from $14.1 million for the three months ended March 31, 2025 largely due to an increase in professional services and severance charges. The Company recorded non-cash adjustments of $0.1 million for the three months ended March 31, 2026, reflecting the change in the estimated fair value of the Sherlock acquisition-related contingent consideration. All of the above contributed to the Company's operating loss of $23.3 million for the three months ended March 31, 2026, which included non-cash charges of $2.8 million for stock-based compensation, $2.3 million for depreciation and amortization, and $0.1 million for the change in the estimated fair value of acquisition-related contingent consideration. The Company's operating loss of $17.8 million for the three months ended March 31, 2025 included non-cash charges of $2.7 million for stock-based compensation, $2.8 million for depreciation and amortization, and $0.5 million for the change in the estimated fair value of acquisition-related contingent consideration. OTHER INCOME Other income for the three months ended March 31, 2026 was $1.5 million compared to $1.8 million for the three months ended March 31, 2025. The decrease in other income is due to lower interest income and increased foreign currency losses. CONSOLIDATED INCOME TAXES The Company continues to believe the full valuation allowance established against its total U.S. and U.K. deferred tax asset is appropriate as the facts and circumstances necessitating the allowance have not changed. For the three months ended March 31, 2026 and 2025, the Company recorded income tax benefits of $0.4 million and $0.5 million, respectively. Liquidity and Capital Resources March 31, 2026 December 31, 2025 (in thousands) Cash and cash equivalents $ 176,964 $ 199,278 Working capital 196,697 222,113 The Company's cash and cash equivalents decreased to $177.0 million at March 31, 2026 from $199.3 million at December 31, 2025. The Company has $84.9 million, or 48%, of its $177.0 million of cash and cash equivalents held by DNAG, the Company's Canadian subsidiary. The Company's working capital decreased to $196.7 million at March 31, 2026 from $222.1 million at December 31, 2025. Working capital is primarily a function of sales, purchase volumes, inventory requirements, and vendor payment terms. Analysis of the Company's Cash Flows Operating Activities 23 Table of Contents During the three months ended March 31, 2026, net cash used in operating activities was $13.9 million. Cash flows from operations can be significantly impacted by factors such as timing of receipts from customers, inventory purchases, and payments to vendors. The Company's net loss of $22.4 million included non-cash charges of stock-based compensation expense of $2.8 million, depreciation and amortization expense of $2.3 million, a loss on equity investment of $1.1 million, and other non-cash charges aggregating to $0.4 million. Changes in the Company's working capital accounts contributed to cash and included an increase of $4.1 million in accounts payable associated with the timing of spend on consulting services and inventory purchases, a decrease in overall inventory balances of $0.7 million due to maintaining lower COVID-19 inventory levels attributable to decreased demand, a decrease in prepaid expenses and other assets of $0.6 million, and an increase in accrued expenses and other liabilities of $0.6 million. These contributions to cash were offset by an increase in accounts receivable of $2.6 million due to timing of shipments and invoicing and a decrease in deferred revenue of $0.6 million as work on grant projects is completed and earned. Investing Activities Net cash used in investing activities was $0.9 million for the three months ended March 31, 2026, for purchases of property and equipment . Financing Activities Net cash used in financing activities was $6.3 million for the three months ended March 31, 2026, which was largely comprised of $5.0 million to repurchase common stock pursuant to the Company's stock repurchase plan and $1.3 million used for the repurchase of common stock to satisfy withholding taxes related to the vesting of restricted stock awarded to the Company's employees. Resources The Company's contractual obligations are included in Note 12 of its consolidated financial statements. The Company expects existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements over the next 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 its 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 involved in obtaining and enforcing patents, proprietary rights and any necessary licenses, the cost and timing of expansion of sales and marketing activities, market acceptance of new products, competing technological and market developments, the impact of the current economic environment and other factors. Critical Accounting Policies and Estimates A more detailed review of the Company's critical accounting policies is contained in its Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC. No material changes have been made to such critical accounting policies during the three months ended March 31, 2026. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in the Company'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 year ended December 31, 2025.