Impact of COVID-19 and Foreign Exchange Rates

3 Months Ended

Mar. 31, 2023

Unusual or Infrequent Items, or Both [Abstract]

IMPACT OF COVID-19 AND FOREIGN EXCHANGE RATES

IMPACT OF COVID-19 AND FOREIGN EXCHANGE RATES

Impact of COVID-19

We continue to be a part of the coordinated public and private sector response to the COVID-19 pandemic. There continues to be a high level of uncertainty relating to the pandemic’s continuing evolution, including how governments and consumers will react to new developments, and whether the pandemic will have a longer-term effect on the healthcare industry and patient habits. BioReference has been providing COVID-19 solutions, including diagnostic molecular testing and serology antibody testing, to meet the testing needs of its customers, including physicians, health systems, long-term care facilities, governments, schools, employers, professional sports teams and entertainment venues, as well as the general public through relationships with retail pharmacy chains.

Throughout the pandemic, we have managed our company-wide lab operations specimen acquisition, logistics, procurement, customer service, and initiatives to manage our cost structure to match the ever changing COVID-19 testing volumes and to identify and capitalize on efficiencies in our core clinical lines of business. While BioReference benefited from significant COVID-19 testing volumes in 2020 and 2021, demand declined in 2022 and continued to decline during the first quarter of 2023.

Revenue from services for the three months ended March 31, 2023 decreased by $154.2 million as compared to 2022 due to lower COVID-19 testing volumes. Excluding COVID-19 test volumes, for the three months ended March 31, 2023, routine clinical test volume increased 6.8% as compared to volumes for the three months ended March 31, 2022.

Foreign Currency Exchange Rates

Approximately 18.5% of revenue for the three months ended March 31, 2023, and approximately 10.9% of revenue for the three months ended March 31, 2022, were denominated in currencies other than the U.S. Dollar (USD). Our financial statements are reported in USD and, accordingly, fluctuations in exchange rates will affect the translation of revenues and

expenses denominated in foreign currencies into USD for purposes of reporting the consolidated financial results. In the first quarter of 2023 and the year ended December 31, 2022, the most significant currency exchange rate exposures were to the Euro and Chilean Peso. Gross accumulated currency translation adjustments recorded as a separate component of shareholders’ equity were $34.2 million and $39.9 million at March 31, 2023 and December 2022, respectively.

We are subject to foreign currency transaction risk for fluctuations in exchange rates during the period of time between the consummation and cash settlement of transactions. We limit foreign currency transaction risk through hedge transactions with foreign currency forward contracts. Under these forward contracts, for any rate above or below the fixed rate, we receive or pay the difference between the spot rate and the fixed rate for the given amount at the settlement date. At March 31, 2023, we had 177 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through April 2023 with a notional value totaling approximately $10.4 million. At December 31, 2022, we had 194 open foreign exchange forward contracts relating to inventory purchases on letters of credit with various amounts maturing monthly through January 2023 with a notional value totaling approximately $11.9 million.