Good afternoon, everyone and welcome to OraSure Technologies’ 2017 Third Quarter Financial Results Conference Call and simultaneous webcast. As a reminder, today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions]. To allow time for as many questions as possible, questioners are asked to limit themselves to only a single question with no more than one follow-up question related to the same topic. Once the follow-up is completed a questioner can rejoin the queue for further questions. OraSure Technologies issued a press release at approximately 4 PM Eastern Standard Time today regarding its 2017 third quarter financial results and certain other matters. The press release is available on our website at www.orasure.com or by calling 610-882-1820. If you go to our website, the press release could be found by opening the Investor Relations page and clicking on the link for press releases. With us today are Doug Michels, President and Chief Executive Officer; and Ron Spair, Chief Operating Officer and Chief Financial Officer. Doug and Ron will begin with opening statements, which will be followed with a question-and-answer session. Before I turn the call over to Doug, you should know that this call may contain certain forward-looking statements, including statements with respect to revenues, 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 be significantly different. Factors that could affect results are discussed more fully in the company's SEC filings including its registration statements, its Annual Report on Form 10-K for the year ended December 31, 2016, 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 information available to management as of today. The company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after this call. With that, I would like to turn the call over to Doug Michels.

Okay. Thank you, Jonnie and good afternoon, everyone and welcome to our call. I'm pleased to report another outstanding quarter. Revenues exceeded our guidance and reached a record level. On the bottom line, our results were strong and they met expectations. The strong quarterly performance is further evidence our products are well suited to address the large market opportunities that we're pursuing in both the molecular collection and infectious disease businesses. We continue to believe that these opportunities are in the very early stages of development and that we are well-positioned to capitalize on them. Additionally, we're making the necessary investments to increase manufacturing capacity in Bethlehem, in Canada and in Thailand to meet the growing demand for our products. Our third quarter performance was primarily driven by growth in our molecular collection and HCV businesses. We also reported strong sales of our OraQuick HIV self-test reflecting the impact of the World Health Organization prequalification, the expansion of the self-testing in Africa or STAR Project and our work under the charitable support agreement with the Gates Foundation. With respect to the quarter, our consolidated net revenues grew 31% compared to the year ago period and topped $42 million the first time. This is the second consecutive quarter of $40 million or more of revenues. Product revenue growth for Q3 was an extraordinary 62%. Our molecular business delivered another record performance. Q3 revenues reached $18.6 million, which represents a 123% increase over the third quarter of last year. Our infectious disease business also performed extremely well with 59% revenue growth from the year ago period. Significant increases in both international and domestic sales of our HCV product and strong growth in HIV self-test revenues were the primary contributors. On the bottom line, we generated $0.09 per share and we ended Q3 with over $180 million in cash and cash equivalents. In short Q3 continued the strong growth we've seen throughout the year and represents further progress in advancing our strategic priorities. We expect this trend to continue in Q4 as well. So, with those brief comments, let me turn the call over to Ron. After his financial review, I'll provide some business updates and then we'll take your questions. So, Ron.

Okay. Thanks Doug and good afternoon, everyone. As you can see from our press release and Doug's brief introduction, 2017 continues to be a very successful year. Our third quarter consolidated net revenues increased 31% to $42.3 million compared to $32.3 million reported in the third quarter of 2016. Notably our consolidated net product revenues rose 62% to $41.2 million compared to the prior year period. Higher sales of our molecular products OraQuick HCV and the OraQuick HIV self-test were the main drivers of this performance. Our molecular revenues rose 122% to $18.6 million in the third quarter of 2017 compared to $8.3 million in the third quarter of 2016. Sales of our Oragene product to commercial customers increased 157% and academic sales rose 46%, largely due to higher customer demand and customer ordering patterns. International sales of our HCV test in the third quarter of 2017 rose 376% to $6.1 million from $1.3 million in the same period last year, primarily due to the continued shipment of product for foreign government pursuant to a previously announced countrywide elimination program. Domestic OraQuick HCV product sales rose 24% in the third quarter of 2017 to $1.9 million from $1.5 million in the prior year period, primarily due to increased HCV purchases by public health customers. International sales of our HIV test increased 176% to $3.1 million from $1.1 million in the third quarter of 2016, largely due to higher sales of our OraQuick HIV self-test into Africa. The majority of tests shipped into Africa during the quarter were subject to the support payments under our Charitable Support Agreement with the Gates Foundation. Product revenues during the third quarter of 2017 included approximately $458,000 of support payments associated with this agreement. Domestic professional HIV sales decreased 25% to $3.6 million in the…

Okay. Thanks Ron. I'll now provide a few business update starting with our molecular business since that was the most significant contributor to our strong third quarter performance. Our molecular business performed exceptionally well in Q3 as it did during the first half of the year. Revenues in the quarter increased 123% compared to last year and we expect this trend to continue again here in the fourth quarter. Our primary driver was continued growth in our commercial genomics business, both compared to the prior year quarter and sequentially from Q2 of this year. Revenues grew as a result of the addition of new customers and higher sales to many of our largest customers. During the quarter, 16 of our top 20 molecular customers increased our purchases over the prior year period and year-to-date 19 of the top 20 customers generated higher sales when compared to last year. Our genomics business also benefited from higher international sales and expanded adoption of our services offerings. Our international business doubled from the prior year quarter and delivered double-digit sequential growth from Q2. Our GenoFIND service business had another record quarter in the third quarter delivering a fourfold increase from the prior year quarter and double the revenue from the previous quarter. Growth from existing customers as well as the acquisition of new business continues to drive the strong performance of our services business. Finally, we won a significant new contract during the third quarter to provide customized collection devices and GenoFIND services for our pharmacogenomics pilot, focusing on members of a statewide retirement group benefit plan. While this is a pilot program, we believe this could expand into a much broader opportunity, involving a large number of retirees under the plan. In addition, it could serve as a model for adoption by…

[Operator instructions] Our first question comes from the line of Brandon Couillard from Jefferies. Sir your line is now open.

Thanks. Good afternoon. Doug with respect to the single large countrywide elimination contract that you spoke about, I guess could you give us a sense of whether that development has changed? How you're thinking about your capacity expansion plans and how you would characterize your level of visibility around the potentially signing one or more other contracts to sort of fill that hole that you'll be facing next year?

Yeah. So, thanks for the question Brandon. Obviously, it was a disappointment that contract was not renewed, despite the fact that we've been in renewal discussions for quite some time and we were told that we should expect a renewal actually, we were shown documents that represented the request from the Ministry of health to the finance authorities for not only renewal but a substantial increase in the number of test that likely be contracted for. So, it was quite a surprise unfortunately that we received last week. That being said, it doesn't dampen our enthusiasm for hepatitis C eradication programs and the use of our product in those programs and we continue to be engaged with a number of different countries on their program design and what they're anticipating to do. Certainly, as we've indicated previously, the challenge is funding in many cases and the timing is always very, very challenging because of everything that has to be put in place to execute one of one of these programs right. It's not just about screening, but it's also about getting the confirmatory testing completed. It's also critically important that the drugs are available to the individuals who are diagnosed positive and all that has to come together in these eradication programs. So, we continue to be enthusiastic and optimistic. Our test is ideally designed for these kinds of programs and were to continue to pursue them. Relative to our capacity expansion plans, this doesn't dampen those whatsoever. We continue to expect increased demand for both hepatitis C and our HIV testing products, both domestic as well as internationally and we're going to continue to execute on expanding our capacities to be prepared for that increased demand and that's only part of it right because of the other component is the expansion of our molecular capacity and all those programs are going along really well.

Okay. Then maybe a two-part question for Ron, if I can if you look in the third quarter the international HCV revenues, I believe the third quarter if we look back at the $80 million country, the third quarter was to see the largest of the contribution from that a contract, could you give us an update on how much of that we booked in the third quarter. And then as we look into the fourth, how -- in terms of, like the revenue and EPS is that implied like another step down sequentially in terms of gross margins right.

Right. So, in the third quarter of 2017, we recognized approximately $4.7 million worth of revenues from the large countrywide elimination eradication program in revenues and in the fourth quarter of 2017 here we are not forecasting any revenues in our guidance of $45 million to $46 million. We do have probably a small de-minimum amount of shipments that we will have made to that country in Q4, but it's very small.

Okay. Thank you.

Yeah. Okay. Thanks Brandon.

And our next question comes from the line of Andrew Cooper from Raymond James. Sir your line is now open.

Hey guys. Thanks for the question. Just wanted to look at DNA Genotek, as we think about where the growth has come from, could you remind us the breakout of academic versus commercial and then as we think about moving forward this year and beyond, what sort of seasonality we might expect given that I know you had 23 very successful prime day for example in July and the holiday season would a little bit of space. So just wanted to get a little bit of your thoughts on that please?

Yeah. So, we do see that the academic as mentioned picked up approximately 46% over the prior quarter and the prior year's quarter and we also had quite a large step up in our commercial revenues for the third quarter over the comparable period. And as Doug mentioned, microbiome was also well in access of where our performance was. Looking forward into the fourth quarter, we do sense although we don't know definitively, but we do sense that there is some seasonality associated with some of the consumer genetic testing opportunities that are being pursued by a number of our customers and we expect that to accelerate over the next couple of months here and then likely not be replicated in the first quarter of 2018, although I think we still reserve the right obviously to come back to you with further color on the first quarter of 2018 as we actually move into that period and will update you on our fourth quarter call in February. So, I think it's a bit of a learning experience for us as this is really the first year where we have a significant number of customers operating in that space and we're anxious to see their successes and want to be fully supportive of their needs as we move through the balance of 2017 here.

It's really of their, just to add to that, it's really one of the reasons why on our last call, we forecast a sequential growth from Q3 to Q4 and its one of the reasons why we want to give you some commentary on Q1 so that our expectations are somewhat aligned. But as Ron indicated, I think we'll have a better perspective a year from now again as we see these businesses go through different cycles, but nonetheless across both the commercial as well as academic customer set, the molecular businesses is doing really, really well. A small thing but I mentioned, because I went back and looked historically the $3.2 million that we delivered in Q3 as is the best quarter ever for our academic business. Going back to the first quarter of 2016 it was the only one quarter where we did a little bit better. We did $3.3 million. So, it gives you a perspective, the academic business is performing really well. Obviously, the commercial businesses is killing it and the microbiome business continues to perform. So, it really gives us a lot of confidence and very enthusiastic about how that business is going to deliver not just in the fourth quarter but in 2018 as well.

Great. That's really helpful. And then just one quick one on gross margins, I know you called out a little bit of spoilage in the press release, but if you could maybe help us size how much of that was a little shy versus what we thought? How much of that is spoilage versus just a mix dynamic or if there was anything else going on underlying?

Yeah. That's a great question and happy to share a little bit more color on that with you. We did have a production in the third quarter of 2017 that involved our HCV product and a component that was being used in our production process that unknowingly was a defective piece of equipment that has been supplied to us. And because of certain reactions that were occurring with our product and the piece of equipment, we ended up scrapping many lots of products and totaled about $600,000 worth of scrapping a quarter. And so, it was a pretty significant negative contributor to our gross margin performance in the third quarter. Good news is that the team did an exhaustive job of tracking down the root cause of this production problem and we have switched out the piece of equipment that was being used and we are currently in discussions to recoup what we can on the cost that we experienced here during the third quarter and actually some in the second quarter of 2017. So more to come on that, but that's some additional color for impacts on gross margin in Q3.

And did that issue have potential impact on timing of shipments or delays that could have maybe impacted the big eradication contract or no, everything was still shipped on time just at a higher cost yield?

No, thankfully not. We did not have any implications on our shipment schedule, nor we see the product by the focusing country.

Let me just add to that. this was an issue that was identified through our quality control program. We have a robust quality management system. So, it detects any issues well before product is approved for release to customers and so kudos to our quality team and our operations team for identifying the problem. Unfortunately, it didn't cause us to scrap a fair amount of product and incur that cost as Ron described, but no impact to deliveries, no impact to quality to our customers whatsoever.

Great. Thanks. Congrats on the good quarter and I'll follow-up offline.

You bet, thanks.

Thanks Andrew.

Our next question comes from the line of Drew Jones from Stephens. Your line is now open.

Thanks guys. Good afternoon.

Hi Drew.

Hey Drew.

Looking at the 4Q guidance, what implied there as far as HIV self-test?

We generally do not drill down into the individual product contributions from a revenue perspective, but I will say it certainly is a step up from our third quarter performance as we're beginning to build traction in that marketplace and we're very excited about the opportunity that have now accrued to us as a result the WHO prequalification, the implementation of the Gates Agreement and just a broad dissemination of the product's availability to the countries that are being targeted. So, we're seeing good pull through of product there and Q4 does represent a substantial step up, but I really don't want to quantify the precise amount.

Understood and then transitioning over to Hep C and eradication programs, I think you guys have said in the past that you are in discussions with six of the 50 countries that were pursuing eradication programs. Can you give us an update on how have those discussions progressed and have you expanded discussions to other countries?

We continue to be engaged with at least six. There are actually more that we're in discussions with and like I said previously, the challenge is to predict when those are going to translate into substantial orders. But as I mentioned there is a large number of countries that both have developed hepatitis C eradication programs and are considering and actually planning for broad-based hepatitis C screening programs and we're in discussions with those. As we are more to say about specific opportunities as they come our way we'll certainly update you.

Thank guys.

Thank you.

Thanks, Drew.

[Operator instructions] Our next question comes from the line of David Westenberg from C.L. King. Your line is now open.

Hey guys, congrats. So just on the HIV business, the domestic business, I know that just the trends in HIV testing in domestically have not necessarily been very good tailwind, obviously they’ve been headwinds, but I trended down a lot further than me. So, can you discuss what might be the new normal here in terms of what we should expect in that business?

Yeah, I think there is a little bit of ordering patterns in what you saw in the third quarter results. I think we're going to see some improvement in Q4 in the domestic HIV business, but it doesn't change what we described as a difficult market where overall HIV testing volumes are down, where we're seeing pressure on rapid HIV testing and a shift to laboratory-based HIV testing primarily to capitalize on the benefit of the fourth-generation automated laboratory tests are available. So, all we can really say is those pressures are going to continue, although we will see some improvement in Q4.

Got it, thanks and can you run through the process of when you're engaging and the steps that you're in for getting a country, you named six countries that you're in discussion with, just give us a play-by-play on how it works and I understand that most countries are going to be different and what I'm really going after here is you have the baseline business from 2016 and then you have this deal that you have for the majority of 2017. I am trying to just figure out in the context of not renewing this deal but you have other deals that are or other arrangement that you're working on. Just run through the process, so we can understand how to model or how to think about that business as you engage with other countries and organizations?

Dave, I wish there was a playbook. These are new programs that are being contemplated and they vary by the size of the country, the population, the prevalence of hepatitis C, the budget dollars that are available. I can't answer, I can say that in all cases there has to be a provision for the drug. There has to be a budget and an expected way to deploy these tests. Those are the discussions that we engage with in at the country level, both at the political and policymaker level, all the way down to the organizations within country that are charged with deploying these tests whether it's in urban area or in a more rural area and you've seen one, you've seen one. And that's just the way it is. We got good folks on the ground that are working and they engage in these discussions, but given the complex nature of these, it's an involved process and I know you look at cookie-cutter approach to it, unfortunately it just doesn't exist.

Yeah. Let me ask this question another way, in terms of what you see for 2018, relative to what you saw in 2016, before this deal in that HCV business, is it better business today than it was in 2016 internationally? You don't need to necessarily quantify specifically, but just the way we think about that in terms of should we be looking at a more steady business on a go forward basis or is it just going to be so bullet and lumpy that it's not even bit worthy or not even worth it to really dive too deep?

Well, so absent the renewal of this large government contract, our enthusiasm for the other opportunity I would say remains intact. So, no less -- no change in that regard. We believe it's a large opportunity governments have these policies in place and an increasing number of governments are putting them in place to develop hepatitis elimination programs and we're just going to continue to pursue them. We believe we'll be able to capture them.

Got it. Great, great. And then I've just one more on -- would you be willing to break out the contribution from microbiome or is it still too early to really want me to quantify it yet.

It's easily quantified. We did about $1.1 million in 2016. We've done well more than that. We're on track to deliver about $3 million for the full year here 2017. As we look ahead so we're going to more than double our microbiome revenues this year. I think we see a path to doubling them again in 2018 and there's a number of drivers that give us a lot of encouragement for that, not the least of which is increased funding at the NIH level for microbiome research. Microbiome research continues to capture a larger percentage of the total genomics research business. There's interest in new sample types, which we're pursuing despite the fact that gut microbiome or fecal samples continue to be the dominant specimen type and the largest -- fastest growing specimen type, we're well positioned to capitalize on the interest in new sample types. We look at patent filings as an indicator of where the business is heading and we see a continuous increase in patent filings over the last four or five years. We monitor the number of active clinical studies that are going on around the world. That continues to increase and interestingly enough over 80% of them include stool samples as a specimen type. And I think as the cost of sequencing comes down what we're also seeing is a larger average clinical study size in the microbiome space. So, there's a lot of drivers that we see that really but wind in the sales of our microbiome business and we're really well positioned to capitalize on that.

Yeah Dave, Doug dedicated in the call that we've done $2.4 million in microbiome revenues year-to-date.

Okay. Perfect. Thank you very much and congrats on a good quarter.

Thanks Dave.

Our next question comes from the line of Mark Massaro from Canaccord Genuity. Sir your line is now open.

Hi. Good morning. Max Masucci on for Mark. Can you speak to the strength in your Q4 guidance? Is this mainly driven by a favorable seasonality in personal genomics and also looking forward do you expect to fulfill the complete $80 million from the original HCV eradication contract?

Okay. So, the Q4 guidance is strength pretty much across the board. We see it in our infectious disease business. Our molecular business is particularly strong and we are anticipating a good uplift from the seasonality that we see in our commercial business. It's a big driver. We see a little bit of improvement in our cryosurgery business and as Ron mentioned specific to additional revenues expected from the large government contract, we don't have any significant revenues in the fourth quarter from that agreement.

Okay. Great. So just looking for some additional color on gross margins I know we saw a slight dip quarter-over-quarter, what portion of this was to due to where you identify the scraping spoilage costs and what portion was due to mix? Any color there would be great.

Yes, I think as we talked about earlier in response to a question posed, we recorded a little over $600,000 worth of charges associated with the specific issues that we had related to the HCV product and the equipment and I would say that beyond that you're looking really at mix as a potential contributor to the gross margin profile in the quarter as the self-test revenues increased as well as we had nice recurring bolus of revenues from the HCV product sales into the countrywide eradication program. So, they were other contributors for our gross margin step down in Q3

Okay. Thank you.

And that brings the end to the Q&A session of today's call. I will now turn the call over to Doug Michels for closing remarks.

Okay. Just thanks again everybody for being on the call with us this evening, this afternoon. We look forward to delivering real strong Q4 closeout 2017 and in great form and look forward to updating you all on our next call. Have a good evening.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.