Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- OraSure Technologies Inc (OSUR, Financial) delivered Q2 revenue near the top of their guidance ranges for both core revenue and COVID-19 products.
- The company achieved the World Health Organization's pre-qualification for their OraQuick HCV self-test, marking a significant milestone.
- OraSure launched new FDA-cleared packaging and labeling for their OraQuick HIV self-test, expected to increase shipping efficiencies and reduce plastic usage.
- The company broadened relationships with leading oncology companies, expanding the use of their saliva collection devices in precision oncology.
- OraSure has a strong balance sheet with zero debt and $267 million in cash, cash equivalents, and short-term investments, allowing continued investment in innovation.
Negative Points
- Core revenue declined 7% year-over-year in Q2, impacted by a 40% decrease in revenues from the Diversigen molecular sequencing services business.
- Sample management revenue decreased 3% year-over-year in Q2.
- The company is exiting the Diversigen molecular sequencing services business, which has been a drag on revenue and gross margins.
- Gross margin in Q3 is expected to be in the low 40% range, impacted by lower-margin international diagnostic revenue and wind-down costs from exiting Diversigen.
- Q4 core revenue is expected to moderate compared to Q3, consistent with seasonal ordering patterns observed in previous years.
Q & A Highlights
Q: Can you elaborate on the margin progression in Q3 and expectations for Q4 and into 2025?
A: Kenneth McGrath, CFO: In Q3, we expect margins in the low 40% range due to a higher percentage of international revenue and remaining Diversigen expenses. By Q4, we anticipate margins to return to the mid-40% range as we eliminate Diversigen expenses and continue operational efficiencies.
Q: Can you highlight any particular areas of strength and weakness in your end markets?
A: Carrie Eglinton Manner, CEO: In sample management, we see strong volume from new customer entities, particularly in liquid biopsy and animal health applications. We believe we are well-positioned to grow with these new customers as their markets expand.
Q: What is the opportunity presented by the WHO pre-qualification for the HCV self-test?
A: Carrie Eglinton Manner, CEO: The WHO pre-qualification opens up future procurement by UN agencies and donor funding, which can take 12 to 24 months. This designation is significant for market access expansion, targeting the 50 million individuals living with HCV globally.
Q: Can you provide more details on the international revenue step-up in the back half of the year?
A: Kenneth McGrath, CFO: The step-up is driven by timing of large orders, particularly in HIV testing. We expect a strong Q3 similar to previous years, with international revenue making up a higher percentage of total core revenue.
Q: What are your expectations for revenue contribution from the Syphilis test in Q3?
A: Carrie Eglinton Manner, CEO: While we are not calling out specific segments yet, we are seeing a strong launch for the Syphilis test, which complements our HIV and HCV tests. It is an important part of our diagnostics portfolio.
Q: Can you update us on the progress with the Sapphiros partnership and new products?
A: Carrie Eglinton Manner, CEO: The partnership is off to a good start with co-development opportunities in diagnostics and sample management. We expect modest revenue contribution in 2025, with the first product being a small volume, self-collected blood sample management device.
Q: How much of the Q3 margin headwind is due to Diversigen?
A: Kenneth McGrath, CFO: Diversigen expenses contribute about 100 basis points to the gross margin headwind. Once these are eliminated and operational efficiencies are realized, we expect margins to improve to the mid-40s in Q4 and aim for the 50s long-term.
Q: Was there any impact on Q3 margins from the drop-off in COVID revenues?
A: Kenneth McGrath, CFO: The drop-off in InteliSwab revenue has been planned for several quarters, and we have been driving operational efficiencies to mitigate its impact. Therefore, it has a minimal effect on Q3 margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
