OSUR OraSure Technologies Inc

OraSure Technologies, Inc. (NASDAQ: OSUR), a market leader in oral fluid diagnostics, today announced revenues of $17.6 million for the quarter ended September 30, 2006, compared to $18.1 million in revenues recorded for the comparable period in 2005. The Company�s net income was $2.1 million, or $0.05 per share on a basic and fully-diluted basis, for the third quarter of 2006, which includes charges for stock option expense and a provision for income taxes, neither of which were included in the Company�s 2005 results. Excluding these two charges, net income for the third quarter of 2006 would have been $4.3 million, or $0.09 per share on a fully-diluted basis. These results compare to net income of $3.8 million, or $0.08 per share on a basic and fully-diluted basis, during the third quarter of 2005. For the nine months ended September 30, 2006, the Company had revenues of $50.4 million compared to revenues of $51.3 million for the nine months ended September 30, 2005. The Company recorded net income of $4.2 million, or $0.09 per share on a basic and fully-diluted basis, for the nine months ended September 30, 2006, which includes charges for stock option expense and a provision for income taxes. Excluding these two charges, net income for the nine months ended September 30, 2006 would have been $10.0 million, or $0.21 per share on a fully-diluted basis. These results compare to net income of $6.8 million, or $0.15 per share on a basic and fully-diluted basis, during the nine months ended September 30, 2005, which excluded costs related to stock options and a provision for income taxes. �We are pleased with the Company�s financial performance for the third quarter,� said Douglas A. Michels, President and Chief Executive Officer of OraSure Technologies. �Our financial results exceeded our expectations and were driven primarily by continued strong performance of our infectious disease testing business along with the increased sales of our substance abuse testing and insurance risk assessment products. Offsetting these increases was a reduction in our cryosurgical systems sales.� Gross margin in both the third quarters of 2006 and 2005 was 64%. Operating expenses for the third quarter of 2006 increased to $8.8 million from $8.4 million in the comparable period in 2005. This increase was primarily attributable to stock option expense, increased research and development expenses and costs related to the implementation of a new enterprise resource planning system, offset by lower legal and advertising costs. Operating expenses for the nine months ended September 30, 2006 were $27.3 million, compared to $25.2 million for the comparable period in 2005. Cash, cash equivalents and short-term investments totaled $89.5 million and working capital was $98.1 million at September 30, 2006, compared to $77.6 million and $90.7 million, respectively, at December 31, 2005. Cash flow from operations was $5.9 million for the third quarter of 2006, up from the $3.6 million reported for the third quarter of 2005. Cash flow from operations for the nine months ended September 30, 2006 was $14.1 million, compared to $8.5 million for the comparable period in 2005. Due to the better than expected financial performance in the third quarter of 2006, the Company is raising its 2006 full year, fully-diluted earnings per share guidance to between $0.10 - $0.11 per share as a result of an additional expected $0.01 - $0.02 per share of earnings in the fourth quarter of 2006. The fourth quarter earnings projection is based on attainment of projected revenues of between $17.0 million and $17.5 million for the quarter, resulting in 2006 full-year projected revenues of between approximately $67.5 million and $68.0 million. Condensed Financial Data (In thousands, except per-share data and percentages) Unaudited � Three months endedSeptember 30, Nine months endedSeptember 30, 2006� 2005� 2006� 2005� Results of Operations Revenues $ 17,639� $ 18,077� $ 50,421� $ 51,335� Cost of products sold � 6,365� � 6,432� � 18,516� � 20,773� Gross profit 11,274� 11,645� 31,905� 30,562� Operating expenses: Research and development 1,753� 1,298� 5,150� 3,750� Acquired in-process technology �� �� 600� �� Sales and marketing 3,632� 3,965� 11,977� 12,289� General and administrative � 3,445� � 3,168� � 9,545� � 9,132� Total operating expenses � 8,830� � 8,431� � 27,272� � 25,171� Operating income 2,444� 3,214� 4,633� 5,391� Other income, net 955� 594� 2,642� 1,421� Income tax provision � 1,264� � �� � 3,033� � �� Net income $ 2,135� $ 3,808� $ 4,242� $ 6,812� Earnings per share Basic $ 0.05� $ 0.08� $ 0.09� $ 0.15� Diluted $ 0.05� $ 0.08� $ 0.09� $ 0.15� Shares used in computing earnings per share: Basic � 45,922� � 45,372� � 45,888� � 44,936� Diluted � 47,247� � 46,676� � 47,712� � 45,850� Reconciliation of Non-GAAP Financial Measures Three months endedSeptember 30, Nine months endedSeptember 30, 2006� 2005� 2006� 2005� Net income � before charges $ 4,344� $ 3,808� $ 9,992� $ 6,812� Stock option expense 945� �� 2,717� �� Income tax provision � 1,264� � �� � 3,033� � �� Net income � GAAP basis $ 2,135� $ 3,808� $ 4,242� $ 6,812� � Diluted earnings per share � before charges $ 0.09� $ 0.08� $ 0.21� $ 0.15� Stock option expense 0.02� �� 0.06� �� Income tax provision � 0.02� � �� � 0.06� � �� Diluted earnings per share � GAAP basis $ 0.05� $ 0.08� $ 0.09� $ 0.15� Three months ended September 30, Dollars Percentage ofTotal Revenues Market Revenues 2006� 2005� %Change� 2006� 2005� � Infectious disease testing $ 7,536� $ 7,037� 7% 42% 39% Substance abuse testing 4,213� 3,595� 17� 24� 20� Cryosurgical systems 4,025� 6,143� (34) 23� 34� Insurance risk assessment � 1,734� � 1,275� 36� 10� 7� Product revenues 17,508� 18,050� (3) 99� 100� Licensing and product development � 131� � 27� 385� 1� �� Total revenues $ 17,639� $ 18,077� (2)% 100% 100% � Nine months ended September 30, Dollars Percentage ofTotal Revenues Market Revenues 2006� 2005� %Change� 2006� 2005� � Infectious disease testing $ 21,239� $ 19,672� 8% 42% 38% Substance abuse testing 11,694� 10,060� 16� 23� 20� Cryosurgical systems 13,063� 16,002� (18) 26� 31� Insurance risk assessment � 4,128� � 5,364� (23) 8� 11� Product revenues 50,124� 51,098� (2) 99� 100� Licensing and product development � 297� � 237� 25� 1� �� Total revenues $ 50,421� $ 51,335� (2)% 100% 100% Balance Sheets September 30,2006 December 31,2005 Assets Cash, cash equivalents and short-term investments $ 89,534� $ 77,620� Accounts receivable, net 10,236� 11,602� Inventories 4,812� 4,128� Current portion of deferred income taxes 3,511� 6,504� Other current assets 1,646� 1,553� Property and equipment, net 16,478� 5,815� Deferred income taxes 20,580� 20,205� Other non-current assets � 2,938� � 3,320� Total assets $ 149,735� $ 130,747� � Liabilities and Stockholders� Equity Current portion of long-term debt $ 636� $ 456� Accounts payable 2,519� 2,547� Accrued expenses 8,526� 7,734� Long-term debt, less current portion 10,303� 884� Other liabilities 375� 207� Stockholders� equity � 127,376� � 118,919� Total liabilities and stockholders� equity $ 149,735� $ 130,747� Non-GAAP Financial Measures Net income - before charges and diluted earnings per share - before charges, each exclude the impact of stock option expensing and income tax provisions. These financial measures should not be considered an alternative to net income or diluted earnings per share, respectively, which are indicators of operating performance determined in accordance with GAAP. OraSure Technologies believes that net income - before charges and diluted earnings per share - before charges, although non-GAAP financial measures, are also useful and meaningful to investors because they provide investors with the Company�s underlying earnings performance as another criterion in making their investment decisions. OraSure�s management also uses these calculations in measuring certain corporate performance goals. Other companies may use different measures to present financial information. Conference Call The Company will host a conference call and audio webcast today to discuss the Company�s third quarter 2006 financial results and to provide an update on major business objectives, beginning at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). On the call will be Douglas A. Michels, President and Chief Executive Officer, and Ronald H. Spair, Chief Financial Officer and Chief Operating Officer. The call will include remarks by management and a question and answer session. In order to listen to the conference call, please either dial 888-742-2024 (Domestic) or 706-643-0033 (International), or go to OraSure Technologies' Web site, www.orasure.com, and click on the Investor Info link. A replay of the call will be archived on OraSure Technologies' web site shortly after the call has ended and will be available for seven days. A replay of the call can also be accessed until November 08, 2006, by dialing 800-642-1687 (Domestic) or 706-645-9291 (International) and entering the Conference ID #8995949. About OraSure Technologies OraSure Technologies develops, manufactures and markets oral fluid specimen collection devices and tests and other diagnostic products using its proprietary technologies, including immunoassays and other in vitro diagnostic tests and other medical devices. These products are sold in the United States and certain foreign countries to clinical laboratories, hospitals, clinics, community-based organizations and other public health organizations, distributors, government agencies, physicians� offices, and commercial and industrial entities. For more information on the Company, please visit www.orasure.com. Important Information This press release contains certain forward-looking statements, including with respect to revenues and earnings per share. Actual results could be significantly different. Factors that could affect results include the ability to market and sell products; changes in relationships with strategic partners and reliance on strategic partners for the performance of critical activities under collaborative arrangements; failure of distributors or other customers to meet purchase forecasts or minimum purchase requirements for our products; impact of competitors, competing products and technology changes; ability to develop, commercialize and market new products; market acceptance of oral fluid testing or other new products or technology; changes in market acceptance based on product performance; continued bulk purchases by customers, including governmental agencies, and the ability to fully deploy those purchases in a timely manner; 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 product components; availability of related products produced by third parties; ability to obtain, and timing and cost of obtaining, necessary regulatory approval for new products or new indications or applications for existing products; ability to comply with applicable regulatory requirements; history of losses and ability to achieve sustained profitability; volatility of our 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; loss or impairment of sources of capital; ability to meet financial covenants in agreements with financial institutions; ability to retain qualified personnel; exposure to product liability, patent infringement, 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; ability to complete consolidation or restructuring activities; ability to identify, complete and realize the full benefits of potential acquisitions; and general political, business and economic conditions. These and other factors are discussed more fully in the Securities and Exchange Commission (�SEC�) filings of OraSure Technologies, including its registration statements, its Annual Report on Form 10-K for the year ended December 31, 2005, its Quarterly Reports on Form 10-Q, and its other filings with the SEC. Although forward-looking statements help to provide complete information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. The forward-looking statements are made as of the date of this press release and OraSure Technologies undertakes no duty to update these statements. OraSure Technologies, Inc. (NASDAQ: OSUR), a market leader in oral fluid diagnostics, today announced revenues of $17.6 million for the quarter ended September 30, 2006, compared to $18.1 million in revenues recorded for the comparable period in 2005. The Company's net income was $2.1 million, or $0.05 per share on a basic and fully-diluted basis, for the third quarter of 2006, which includes charges for stock option expense and a provision for income taxes, neither of which were included in the Company's 2005 results. Excluding these two charges, net income for the third quarter of 2006 would have been $4.3 million, or $0.09 per share on a fully-diluted basis. These results compare to net income of $3.8 million, or $0.08 per share on a basic and fully-diluted basis, during the third quarter of 2005. For the nine months ended September 30, 2006, the Company had revenues of $50.4 million compared to revenues of $51.3 million for the nine months ended September 30, 2005. The Company recorded net income of $4.2 million, or $0.09 per share on a basic and fully-diluted basis, for the nine months ended September 30, 2006, which includes charges for stock option expense and a provision for income taxes. Excluding these two charges, net income for the nine months ended September 30, 2006 would have been $10.0 million, or $0.21 per share on a fully-diluted basis. These results compare to net income of $6.8 million, or $0.15 per share on a basic and fully-diluted basis, during the nine months ended September 30, 2005, which excluded costs related to stock options and a provision for income taxes. "We are pleased with the Company's financial performance for the third quarter," said Douglas A. Michels, President and Chief Executive Officer of OraSure Technologies. "Our financial results exceeded our expectations and were driven primarily by continued strong performance of our infectious disease testing business along with the increased sales of our substance abuse testing and insurance risk assessment products. Offsetting these increases was a reduction in our cryosurgical systems sales." Gross margin in both the third quarters of 2006 and 2005 was 64%. Operating expenses for the third quarter of 2006 increased to $8.8 million from $8.4 million in the comparable period in 2005. This increase was primarily attributable to stock option expense, increased research and development expenses and costs related to the implementation of a new enterprise resource planning system, offset by lower legal and advertising costs. Operating expenses for the nine months ended September 30, 2006 were $27.3 million, compared to $25.2 million for the comparable period in 2005. Cash, cash equivalents and short-term investments totaled $89.5 million and working capital was $98.1 million at September 30, 2006, compared to $77.6 million and $90.7 million, respectively, at December 31, 2005. Cash flow from operations was $5.9 million for the third quarter of 2006, up from the $3.6 million reported for the third quarter of 2005. Cash flow from operations for the nine months ended September 30, 2006 was $14.1 million, compared to $8.5 million for the comparable period in 2005. Due to the better than expected financial performance in the third quarter of 2006, the Company is raising its 2006 full year, fully-diluted earnings per share guidance to between $0.10 - $0.11 per share as a result of an additional expected $0.01 - $0.02 per share of earnings in the fourth quarter of 2006. The fourth quarter earnings projection is based on attainment of projected revenues of between $17.0 million and $17.5 million for the quarter, resulting in 2006 full-year projected revenues of between approximately $67.5 million and $68.0 million. -0- *T Condensed Financial Data (In thousands, except per-share data and percentages) Unaudited Three months ended Nine months ended September 30, September 30, ------------------- ----------------- 2006 2005 2006 2005 ---------- -------- -------- -------- Results of Operations Revenues $17,639 $18,077 $50,421 $51,335 Cost of products sold 6,365 6,432 18,516 20,773 ---------- -------- -------- -------- Gross profit 11,274 11,645 31,905 30,562 Operating expenses: Research and development 1,753 1,298 5,150 3,750 Acquired in-process technology -- -- 600 -- Sales and marketing 3,632 3,965 11,977 12,289 General and administrative 3,445 3,168 9,545 9,132 ---------- -------- -------- -------- Total operating expenses 8,830 8,431 27,272 25,171 ---------- -------- -------- -------- Operating income 2,444 3,214 4,633 5,391 Other income, net 955 594 2,642 1,421 Income tax provision 1,264 -- 3,033 -- ---------- -------- -------- -------- Net income $ 2,135 $ 3,808 $ 4,242 $ 6,812 ========== ======== ======== ======== Earnings per share Basic $ 0.05 $ 0.08 $ 0.09 $ 0.15 ========== ======== ======== ======== Diluted $ 0.05 $ 0.08 $ 0.09 $ 0.15 ========== ======== ======== ======== Shares used in computing earnings per share: Basic 45,922 45,372 45,888 44,936 ========== ======== ======== ======== Diluted 47,247 46,676 47,712 45,850 ========== ======== ======== ======== *T -0- *T Reconciliation of Non-GAAP Three months ended Nine months ended Financial Measures September 30, September 30, ------------------ ----------------- 2006 2005 2006 2005 ---------- ------- --------- ------- Net income - before charges $ 4,344 $3,808 $ 9,992 $6,812 Stock option expense 945 -- 2,717 -- Income tax provision 1,264 -- 3,033 -- ---------- ------- --------- ------- Net income - GAAP basis $ 2,135 $3,808 $ 4,242 $6,812 ========== ======= ========= ======= Diluted earnings per share - before charges $ 0.09 $ 0.08 $ 0.21 $ 0.15 Stock option expense 0.02 -- 0.06 -- Income tax provision 0.02 -- 0.06 -- ---------- ------- --------- ------- Diluted earnings per share - GAAP basis $ 0.05 $ 0.08 $ 0.09 $ 0.15 ========== ======= ========= ======= *T -0- *T Three months ended September 30, ---------------------------------------- Percentage of Dollars Total Revenues ----------------- -------------- Market Revenues % 2006 2005 Change 2006 2005 -------- -------- ------- -------- ----- Infectious disease testing $ 7,536 $ 7,037 7% 42% 39% Substance abuse testing 4,213 3,595 17 24 20 Cryosurgical systems 4,025 6,143 (34) 23 34 Insurance risk assessment 1,734 1,275 36 10 7 -------- -------- -------- ----- Product revenues 17,508 18,050 (3) 99 100 Licensing and product development 131 27 385 1 -- -------- -------- -------- ----- Total revenues $17,639 $18,077 (2)% 100% 100% ======== ======== ======== ===== Nine months ended September 30, ---------------------------------------- Percentage of Dollars Total Revenues ----------------- -------------- % Market Revenues 2006 2005 Change 2006 2005 -------- -------- ------- -------- ----- Infectious disease testing $21,239 $19,672 8% 42% 38% Substance abuse testing 11,694 10,060 16 23 20 Cryosurgical systems 13,063 16,002 (18) 26 31 Insurance risk assessment 4,128 5,364 (23) 8 11 -------- -------- -------- ----- Product revenues 50,124 51,098 (2) 99 100 Licensing and product development 297 237 25 1 -- -------- -------- -------- ----- Total revenues $50,421 $51,335 (2)% 100% 100% ======== ======== ======== ===== *T -0- *T September 30, December 31, Balance Sheets 2006 2005 ------------- ------------ Assets ------------------------------------------- Cash, cash equivalents and short-term investments $ 89,534 $ 77,620 Accounts receivable, net 10,236 11,602 Inventories 4,812 4,128 Current portion of deferred income taxes 3,511 6,504 Other current assets 1,646 1,553 Property and equipment, net 16,478 5,815 Deferred income taxes 20,580 20,205 Other non-current assets 2,938 3,320 ------------- ------------ Total assets $ 149,735 $ 130,747 ============= ============ Liabilities and Stockholders' Equity ------------------------------------------- Current portion of long-term debt $ 636 $ 456 Accounts payable 2,519 2,547 Accrued expenses 8,526 7,734 Long-term debt, less current portion 10,303 884 Other liabilities 375 207 Stockholders' equity 127,376 118,919 ------------- ------------ Total liabilities and stockholders' equity $ 149,735 $ 130,747 ============= ============ *T Non-GAAP Financial Measures Net income - before charges and diluted earnings per share - before charges, each exclude the impact of stock option expensing and income tax provisions. These financial measures should not be considered an alternative to net income or diluted earnings per share, respectively, which are indicators of operating performance determined in accordance with GAAP. OraSure Technologies believes that net income - before charges and diluted earnings per share - before charges, although non-GAAP financial measures, are also useful and meaningful to investors because they provide investors with the Company's underlying earnings performance as another criterion in making their investment decisions. OraSure's management also uses these calculations in measuring certain corporate performance goals. Other companies may use different measures to present financial information. Conference Call The Company will host a conference call and audio webcast today to discuss the Company's third quarter 2006 financial results and to provide an update on major business objectives, beginning at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). On the call will be Douglas A. Michels, President and Chief Executive Officer, and Ronald H. Spair, Chief Financial Officer and Chief Operating Officer. The call will include remarks by management and a question and answer session. In order to listen to the conference call, please either dial 888-742-2024 (Domestic) or 706-643-0033 (International), or go to OraSure Technologies' Web site, www.orasure.com, and click on the Investor Info link. A replay of the call will be archived on OraSure Technologies' web site shortly after the call has ended and will be available for seven days. A replay of the call can also be accessed until November 08, 2006, by dialing 800-642-1687 (Domestic) or 706-645-9291 (International) and entering the Conference ID #8995949. About OraSure Technologies OraSure Technologies develops, manufactures and markets oral fluid specimen collection devices and tests and other diagnostic products using its proprietary technologies, including immunoassays and other in vitro diagnostic tests and other medical devices. These products are sold in the United States and certain foreign countries to clinical laboratories, hospitals, clinics, community-based organizations and other public health organizations, distributors, government agencies, physicians' offices, and commercial and industrial entities. For more information on the Company, please visit www.orasure.com. Important Information This press release contains certain forward-looking statements, including with respect to revenues and earnings per share. Actual results could be significantly different. Factors that could affect results include the ability to market and sell products; changes in relationships with strategic partners and reliance on strategic partners for the performance of critical activities under collaborative arrangements; failure of distributors or other customers to meet purchase forecasts or minimum purchase requirements for our products; impact of competitors, competing products and technology changes; ability to develop, commercialize and market new products; market acceptance of oral fluid testing or other new products or technology; changes in market acceptance based on product performance; continued bulk purchases by customers, including governmental agencies, and the ability to fully deploy those purchases in a timely manner; 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 product components; availability of related products produced by third parties; ability to obtain, and timing and cost of obtaining, necessary regulatory approval for new products or new indications or applications for existing products; ability to comply with applicable regulatory requirements; history of losses and ability to achieve sustained profitability; volatility of our 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; loss or impairment of sources of capital; ability to meet financial covenants in agreements with financial institutions; ability to retain qualified personnel; exposure to product liability, patent infringement, 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; ability to complete consolidation or restructuring activities; ability to identify, complete and realize the full benefits of potential acquisitions; and general political, business and economic conditions. These and other factors are discussed more fully in the Securities and Exchange Commission ("SEC") filings of OraSure Technologies, including its registration statements, its Annual Report on Form 10-K for the year ended December 31, 2005, its Quarterly Reports on Form 10-Q, and its other filings with the SEC. Although forward-looking statements help to provide complete information about future prospects, readers should keep in mind that forward-looking statements may not be reliable. The forward-looking statements are made as of the date of this press release and OraSure Technologies undertakes no duty to update these statements.