OraSure Technologies, Inc.

Good day and thank you for standing by. Welcome to the OraShare Technologies, Inc. 2023 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jason Plagma, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to OraSure Technologies' fourth quarter 2023 earnings call. Participating in the call today for OTI are Kerry Eglinton-Manner, our President and Chief Executive Officer, and Ken McGrath, our Chief Financial Officer. As a reminder, today's webcast is being recorded, and the recording can be found on our investor relations website. Before we begin, you should know that this call may contain certain forward-looking statements, including statements with respect to revenues and guidance, expenses, profitability, earnings or loss per share, and other financial performance, product development, performance, shipments and markets, business plans, regulatory filings and approvals, expectations and strategies. actual results could significantly differ. Factors that could affect results are discussed more fully in OTI's SEC filings, including its registration statements, its annual report on Form 10-K for the year ended December 31, 2022, its quarterly reports on Form 10-Q, and its other SEC filings. Although forward-looking statements help to provide complete information about future prospects, Listeners should keep in mind that forward-looking statements are based solely on information available to management as of today. OCI undertakes no obligation to update any forward-looking statements to reflect events or circumstances after this call. With that, I am pleased to turn the call over to Carrie.

Thanks, Jason, and thank you to everyone for joining us today. We are pleased to provide an update on the progress ORSHA is making on the three pillars of our strategic transformation. One, strengthening our foundation. Two, elevating our core growth. And three, accelerating profitable growth. A few notable items since last quarter include that we generated $41 million of operating cash flow in Q4 and grew our cash balance to $290 million. For the full year 2023, our cash and short-term investments increased by $180 million. We continue to execute on our COVID-19 contract, and we delivered stronger than anticipated in teleswap volumes during the quarter. Our enterprise-wide focus on driving improved operating efficiency continues to unlock incremental cost savings, including gross margin expansion and reduced overhead expenses. In February, we signed a strategic distribution agreement with Diagnostics Direct which allows us to enter the U.S. syphilis testing market with the first CLIA-waved treponemal test. Of course, earlier in the quarter, we also announced our investment and strategic distribution relationship with Sapros, a consumer diagnostics company with unique technology platforms that plan to enable low-cost, high-performance, next-generation diagnostics and sample collection devices. we expect that distribution of Saffros' products will add at least two percentage points to revenue growth in our core business beginning in 2025. Starting with costs, as we continue to strengthen our foundation, for the full year of 2023, we exceeded our target of $15 million in annualized cost savings. Over the last 18 months, we have developed an enterprise-wide mindset that is focused on continuous improvement and operational efficiency. As such, we have identified and are working a number of opportunities that are expected to generate additional productivity enhancements and cost reductions in 2024 and beyond, including consolidating facilities, further leveraging our automation capabilities, and managing our non-production costs. These initiatives give us confidence in achieving our target of operating cash flow break even for our core business by the end of 2024. As we previewed on our last earnings call, in Q4 we collected the final milestone payments from the U.S. government related to the completion of our capacity expansion at our Opus Way facility in Bethlehem, Pennsylvania. We also continued to make progress on consolidating our footprint by transitioning one of our distribution facilities into OpusWay in order to unlock operating efficiencies and cost savings. Moving to COVID-19, IntelliSwap generated $42 million of revenue in Q4. As we discussed last quarter, we have visibility to order trends that are expected to fulfill the remaining portion of our largest contract with the US government and complete our deliveries during the first half of 2024. Looking at our core business, which excludes COVID-related products, core revenue in Q4 increased slightly on a year-over-year basis. Core revenue growth was primarily driven by strong HIV sales in the US and international markets, which were partially offset by declines in non-product revenue and molecular lab services. We've discussed for the past 18 months that external partnerships are a fundamental part of our strategy to drive profitable growth in our core. We continue to execute on each of our initiatives to accelerate our innovation pipeline and expand our product portfolio. We've been sharing examples of strategic distribution agreements that build upon our existing strengths in areas such as infectious disease and sexual health. Along those lines, we are delighted to announce a new agreement with Diagnostics Direct, a New Jersey-based innovator that allows us to distribute their syphilis health check on a semi-exclusive basis in the U.S. Syphilis is a growing public health epidemic, and Diagnostics Direct's syphilis health check is the first FDA-cleared CLIA-waived rapid point-of-care syphilis test. Earlier this month, the CDC released new recommendations on syphilis testing, explicitly stating that, quote, accurate POC serologic antibody tests for syphilis can shorten the time to treatment because the infection can be identified at the time of the visit or encounter, end quote. Our agreement with Diagnostics Direct allows us to enter the US syphilis testing market sorting all channels and customers aside from a defined group of clients whom Diagnostics Direct will continue to directly support. Fundamentally, we are excited to add syphilis health check to our sexual health portfolio, and we view it as an important tool in the nation's response to syphilis as a public health crisis and for clinical care more broadly. In addition to diagnostics, We are also expanding our portfolio in other important product categories. In our substance abuse testing business, we've entered into an agreement with Veritech USA to be a distributor for Swabtech, an easy-to-use surface testing technology that can quickly detect and differentiate concealed substances. We are pleased to add the Swabtech kits to our portfolio of drug and alcohol testing products, allowing us to help keep workplaces, schools, and other critical environments safe. In molecular sample management solutions, we have entered into an agreement with Anaerobe Systems to be a distributor of portions of their microbiome portfolio. Anaerobe Systems is a manufacturer of high-quality anaerobic culture kits and media, that are highly complementary to our microbiome portfolio. OTI will be the exclusive distributor of the Biome Preserve Anaerobic Microbiome Collection Kit in order to better serve our clients with more comprehensive solutions. Shifting to our current portfolio of molecular sample management solutions, fourth quarter revenue from those products was consistent with our expectations and we continue to create positive momentum in establishing new partnerships and commercial relationships. We are also extending relationships across segments and have signed multi-year agreements with a diverse set of existing customers, which we believe demonstrates their confidence and commitment to the long-term opportunities in the genomics market. As an example, we signed a multi-year agreement with GeneDx to provide saliva collection devices that will be used for pediatric exome and genome testing. GeneDx is a pioneering force in medical genetics, working to expand access to diagnostic insights, especially those focused on pediatric patients with neurodevelopmental delays and rare disease. Looking at the overall market environment as we entered 2024, we see end segments that remain subdued as our customers adapt to the post-pandemic environment, macroeconomic uncertainty, and evolving priorities, research and otherwise. Those factors and the uncertainty in timing for sustained recovery is resulting in a muted outlook for core revenue in the first quarter. For the full year 2024 and beyond, We remain confident in our opportunity to deliver core growth. Our view is supported by multiple factors. First, the expansion of our product portfolio through the distribution agreements we've been discussing, which leverage our sales infrastructure and customer relationships. We expect the contribution from these agreements to increase as we move through the year. Second, Our success over the last two years in diversifying our client base through the addition of new and expanded relationships with diagnostic, pharma, and biotech companies, along with other innovators. We expect the revenue from customer relationships that we've launched in recent quarters will continue to grow during 2024. Third, our current expectations for ordering patterns from our sample management solutions from some of our key customers throughout 2024. Fourth, our view, similar to outlooks discussed by our peers and others externally, that underlying market growth in the life sciences industry will begin to improve in the second half of 2024. Turning to our innovation roadmap, we continue to make progress on our initiatives to accelerate profitable growth through organic and inorganic investments. At the beginning of the year, we announced our strategic relationship and investments in Saffros. As a part of this partnership, OTI gains exclusive commercial and distribution rights for key product lines in Saffros' development pipeline that are expected to strengthen our portfolio, such as blood collection devices, and new diagnostic tests. We also see opportunities for co-funding and co-development of additional innovative offerings as our partnership progresses. Overall, the partnership is off to a great start, and our teams are working really well together in multiple areas, including R&D collaboration and in preparation for the future launch of Safarosa's initial self-collected small volume blood product. timing of course subject to regulatory review. As we discussed in January, from a financial standpoint, we expect distribution of Safros' products to add at least two percentage points to revenue growth in our core business beginning in 2025. Sales of Safros' products are expected to be accretive to Orisher's operating profit beginning in 2026. due to our ability to leverage our existing infrastructure, capabilities, and customer relationships. We anticipate a modest amount of incremental SG&A expense in 2024 and 2025 to successfully launch new Safros products in the market. And we believe our investment in Safros is an efficient method to deploy capital, preserving flexibility for additional organic and inorganic innovation. With that, I'd like to turn the call over to Ken to discuss our financial results and guidance.