ORASURE TECHNOLOGIES INC 10-Q

Item 1. FINANCIAL STATEMENTS ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except per share amounts) 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 See accompanying notes to the consolidated financial statements. 3 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts) 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 See accompanying notes to the consolidated financial statements. 4 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (in thousands) 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 See accompanying notes to the consolidated financial statements. 5 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) 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 See accompanying notes to the consolidated financial statements. 6 Table of Contents ORASURE TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements (Unaudited) 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, 2023. Results of operations for the three months ended March 31, 2024 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, 2023 that have had a material impact on the consolidated financial statements and related notes except as discussed herein. Cash Equivalents & Short-Term Investments The Company considers all investments in debt securities to be available-for-sale securities. These securities consist of guaranteed investment certificates purchased with maturities greater than ninety days. Securities with maturities ninety days or less are considered cash equivalents. 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 following is a summary of the Company's available-for-sale securities (in thousands): 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 $ — $ — $ — $ — The Company had no available-for-sale securities as of December 31, 2023. Fair Value of Financial Instruments As of March 31, 2024 and December 31, 2023, 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. 7 Table of Contents 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 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 guaranteed investment certificates are measured as Level 1 instruments as of March 31, 2024. Included in cash and cash equivalents at March 31, 2024 and December 31, 2023 was $ 114.1 million and $ 112.7 million, respectively, invested in money market funds. These money market funds have investments in U.S. government securities and are measured as Level 1 instruments. 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 January 2024, the Company lead the Series B financing and have entered wide-ranging strategic distribution agreements with KKR Sapphiros L.P. ("Sapphiros"), a privately held consumer diagnostic portfolio company and certain of its related entities. Through this relationship, the Company expects to be able to offer a more comprehensive range of low-cost diagnostic test and molecular sample management solutions to the Company's customers globally. The Company has funded $ 28.3 million for an interest in Sapphiros, with an aggregate commitment of up to $ 30.0 million to be funded by June 2024, contingent on certain terms and conditions being met. The Company has recorded the investment using the equity method in accordance with Accounting Standards Codification Topic 323, Investments-Equity Method and Joint Ventures - Overall. The investment in Sapphiros L.P. of $ 28.3 million as of March 31, 2024 is included in the equity method investee line of the Company's balance sheet and is measured as Level 3 investments. There is no similar investment as of December 31, 2023. 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 both March 31, 2024 and December 31, 2023 was $ 0.8 million 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 Transactions 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 $ 0.2 million and $( 0.05 ) million for the three months ended March 31, 2024 and 2023, respectively. Impairment of Long-Lived Assets Long-lived assets, which include property, plant and equipment, definite-lived intangible assets, as well as right-of-use assets (ROU assets) of operating and finance leases, are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company assesses the recoverability of the Company's long-lived assets by determining whether the carrying value of such assets can be recovered through the sum of the undiscounted future cash flows expected to be generated from the use and eventual disposition of the asset. If indicators of impairment exist, the Company measures the amount of such impairment by comparing the carrying value of the assets to the fair value of these assets, which is generally determined based on the present value of the expected future cash flows associated with the use of the assets. Expected future cash flows reflect the Company's assumptions about selling prices, volumes, costs and market conditions over a reasonable period of time. 8 Table of Contents The Company identified a triggering event to test for the recoverability of all the property, plant, and equipment and ROU assets of both the Diversigen and Novosanis subsidiaries during the three months ended March 31, 2024, given the Company's decision to initiate a strategic plan to transition away from the microbiome molecular sequencing services business and close its Belgian operations. The Company performed an undiscounted cash flow analysis and determined the carrying values of the property, plant and equipment and ROU assets could not be recovered through the sum of the undiscounted future cash flows and were 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 reported in the Company's consolidated statement of operations. The impact of the impairments on the Company's property, plant, equipment for the three months ended March 31, 2024 is discussed further in Note 4. Accumulated Other Comprehensive Loss Change in accumulated other comprehensive loss by component is listed below (in thousands): 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 ) Recent Accounting Pronouncements In March 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update ("ASU") No. 2024-01, Topic 718, Compensation-Stock Compensation . The purpose of this update was to provide illustrative examples to demonstrate how an entity should apply guidance to determine whether profits interests and similar awards should be accounted for in accordance with Topic 718. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal periods. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. Management is evaluating the impact on the Company's consolidated financial statements. 2. Government Capital Contracts In September 2021, the Company entered into an agreement for $ 109.0 million in funding from the U.S. Department of Defense (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. In accordance with the milestone payment schedule, 15 % of the total was not billed and funded until the completion of the final validation testing, which occurred in October 2023. The Company began receiving funds from the DOD in January 2022 and has received $ 109.0 million as of December 31, 2023. In connection with the completion of the contract in the fourth quarter of 2023, all funds were received. Activity for these capital contracts is accounted for pursuant to International Accounting Standards ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance, as there is not direct US GAAP guidance for this type of transaction. 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 covered project management costs were recognized straight-line in other income over the term of the government contract. The Company recognized no such income during the three months ended March 31, 2024 and $ 0.6 million during the three months ended March 31, 2023. The DOD also reimbursed the Company for certain engineering consulting costs. These expenses are reflected in research and development expenses as incurred with the corresponding amount presented in other income. The Company 9 Table of Contents recognized no such costs during the three months ended March 31, 2024 and $ 1.1 million during the three months ended March 31, 2023. The activity corresponding to the government contracts included in the Company's consolidated statements of cash flows for the cumulative period ended December 31, 2023 is as follows (in thousands): December 31, 2023 Cost of assets, cumulative $ 86,993 Reduction for funding received to date ( 86,993 ) Total property, plant and equipment, net $ — 3. Inventories (in thousands) 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 4. Property, Plant and Equipment, net (in thousands) 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 During the three months ended March 31, 2024, the Company initiated a strategic plan to transition away from the microbiome molecular sequencing services business and to exit operations at its Belgium location. As a result of these decisions, the Company determined that the carrying values of all the property, plant, and equipment of its Diversigen and Novosanis subsidiaries were not recoverable and recorded an aggregate pre-tax asset impairment charge of $ 1.8 million during the three months ended March 31, 2024. During the three months ended March 31, 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. As a result of this decision, the Company determined that the carrying value of the equipment was not recoverable and recorded an aggregate pre-tax asset impairment charge of $ 1.1 million during the three months ended March 31, 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 statements of operations. 10 Table of Contents 5. Accrued Expenses and Other Current Liabilities (in thousands) 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 11 Table of Contents 6. Termination Benefits 2023 Reduction in Workforce 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 . The charges for termination benefits included in the Company's consolidated statements of operations are as 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 As of March 31, 2024 the Company had $ 0.1 million accrued and had paid $ 3.2 million related to the reduction in workforce. No additional expense was incurred during the three months ended March 31, 2024. The Company expects this plan to be completed by September 30, 2024. Q1 2024 Reduction in Workforce During the three months ended March 31, 2024, the Company executed a reduction in workforce largely affect its COVID-19 manufacturing workforce. This was accounted for pursuant to Accounting Standards Codification ("ASC") 420, Exit or Disposal Cost Obligations . The charges for termination benefits included in the Company's consolidated statements of operations are as follows (in thousands): 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 As of March 31, 2024 the Company had $0.3 million accrued and had paid $ 0.1 million related to the reduction in workforce. The Company expects this plan to be completed by December 31, 2024. 12 Table of Contents 7. Revenues Revenues by product line . The following table represents total net revenues by product line (in thousands): 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 (1) Includes COVID-19 Diagnostics and COVID-19 Molecular Products. (2) Includes Genomics, Microbiome and Novosanis product revenues. (3) Includes substance abuse testing products. (4) 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 (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 Customer and Vendor Concentrations . At March 31, 2024, one non-commercial customer accounted for 29 % of the Company's consolidated accounts receivable. The same non-commercial customer accounted for 40 % of the Company's consolidated accounts receivable as of December 31, 2023. The same non-commercial customer also accounted for 40 % and 78 % of net consolidated revenues for the three months ended March 31, 2024 and 2023, respectively. 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 March 31, 2024 and December 31, 2023 included customer prepayments of $ 1.3 million and $ 1.2 million, respectively. Deferred revenue as of March 31, 2024 and December 31, 2023 also included $ 0.3 million and $ 0.4 million, 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. Deferred revenue recognized for the three months ended March 31, 2024, and 2023, was $ 0.7 million and $ 0.9 million , respectively. 13 Table of Contents 8. Income Taxes The components of income tax expense (benefit) are as follows (in thousands): 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 ) During the three months ended March 31, 2024 and 2023, the Company recorded an income tax benefit of $ 0.0 million and $ 0.2 million, respectively. The income tax benefit for the three months ended March 31, 2024 and 2023 is primarily composed of a U.S. state tax benefit. Income 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 liability as of March 31, 2024 and at December 31, 2023 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 March 31, 2024 and December 31, 2023. 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 March 31, 2024, outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 1,697 shares, were excluded from the computation of diluted loss per share. For the three months ended March 31, 2023 outstanding common stock options, unvested restricted stock, and unvested performance stock units representing 2,237 shares, respectively, were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive. 14 Table of Contents 10. Stockholders’ Equity Reconciliation of the changes in stockholders' equity for three months ended March 31, 2024 and 2023 : 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 11. 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 March 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 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 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 grant 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, 15 Table of Contents 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. On February 7, 2024, the PTO issued a Final Written Decision regarding the second patent in the litigation, holding that claims 1, 3-8, 11 and 12 of U.S. Patent No. 11,002,646 B2 are unpatentable. On March 8, 2024, the Company filed a Request for Rehearing by the Director of the PTO of the Final Written Decision. On March 27, 2024, the Company's Request for Rehearing was denied. The 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. 16 Table of Contents