OraSure Technologies, Inc. (OSUR) Earnings Call Transcript & Summary

Good morning, and welcome to the OraSure Technologies 2020 Annual Meeting of Stockholders. My name is Mike Celano, and I'm the Chairman of the Board of Directors, also serve on the company's Audit and Compensation Committees. I will be acting as Chairman of this meeting. With me today are Steve Tang, OraSure's President and CEO; and Roberto Cuca, Chief Financial Officer for the company. Steve is also a member of the Board. Jack Jerrett, OraSure's General Counsel, is also here and will act as secretary of the meeting. We are pleased again to be conducting this meeting in a completely virtual format. There are several items of business to be considered as explained in our proxy. Following these items, there will be a Q&A session during which stockholders attending the meeting may ask questions. Questions may be submitted by following the instructions on the website page for this meeting and the meeting notice sent to stockholders. You may submit your questions now and anytime during the meeting. Only questions that are germane to the matters being discussed at today's meeting will be considered. An archived audio copy of the meeting will be available on the web page for the meeting approximately 24 hours after our meeting concludes and will remain available for a period of 7 business days thereafter. The inspector of election for this meeting is Ms. Anna Hagberg of Broadridge Financial Solutions, Ms. Hagberg has taken an oath, which will be included with the minutes of this meeting. Broadridge has also provided us with an affidavit certifying the notice of the meeting was sent on April 9, 2020, to all stockholders of record as of March 27, 2020, record date. Notice of this meeting has therefore been given in accordance with the company's bylaws and applicable law. As required by law, a complete list of the stockholders entitled to vote at this meeting is available for inspection by any stockholder for any purpose germane to this meeting. This list may be accessed on the web page for the meeting. According to both the company's records and our certificate of the inspector, there are 62,748,088 shares of company's common stock entitled to vote at this meeting. Inspector has determined that persons holding a majority of the outstanding shares of stock are attending this meeting by proxy. Accordingly, I declare that a quorum is present and the 2020 Annual Meeting of Stockholders is now called to order. Before proceeding further, I would like to introduce the additional members of the company's Board of Directors. Each of these directors is also attending the meeting electronically. From the Board, we have Mara Aspinall, President and CEO of Health Catalysts, an investment and advisory firm serving health care and technology companies. Mara is Chairman of the Audit Committee and serves on the Compensation Committee. Jim Datin, President and CEO of BioAgilytix Labs, LLC, a leading bioanalytical contract research organization. Jim serves on the Audit and Compensation Committees. Eamonn Hobbs, President of Hobbs Medical Ventures, a health care consulting company, Eamonn is Chairman of our Nominating & Corporate Governance Committee and also serves on the Comp Committee. Ronny Lancaster, former Senior VP for Federal Government Relations of Assurant, Inc., a global provider of risk management solutions. Ronny is Chairman of our Compensation Committee and serves on the Nominating & Corporate Governance Committee. Dr. David Shulkin, President and CEO of Shulkin Solutions, Inc., a company that promotes innovation in health care and advocates for veterans and underserved populations. David serves on the Audit and Nominating & Corporate Governance Committee. As you may have seen, we recently announced the departure of 2 Board members. Aradhana Sarin decided to resign because of the demands of her position as CFO at Alexion Pharmaceuticals. Aradhana joined the Board in 2018 and served as Chairman of the Audit Committee and is a member of the Nominating & Corporate Governance Committee. Chuck Patrick is the other Director who has left. Chuck became a director in 2006 and served on the Audit and Nominating & Corporate Governance Committees. Both Aradhana and Chuck have made significant contributions while serving as directors. On behalf of the Board and the entire management team, I would like to thank them for their service and wish them well in their future endeavors. A special thank you to Chuck for his 14 years of outstanding Board service. You'll be missed, Chuck. Finally, Jennifer Strong and Meghan Bowen from KPMG are also attending the meeting electronically. KPMG is the company's independent registered public accounting firm. The KPMG representatives are available to respond to questions raised during the Q&A session, if necessary. Before proceeding with the formal agenda, I would like to make a few brief remarks about OraSure's performance during 2019 and some of our current priorities. We had some challenges financially during 2019, but we also had a number of noteworthy highlights. Our consolidated net revenues in 2019 declined by 15% from the prior year primarily due to an unexpected change in promotional strategy by the top firms offering ancestry testing to consumers. This reduced both product sales in our genomics business and royalty income received under a litigation settlement agreement. We also delivered positive earnings for the year despite the revenue decline. While we had to deal with this negative trend in the consumer genomics market throughout 2019, the rest of our business remained on solid footing. We saw growth and new opportunity in the disease risk management subsegment of the genomics market. Our microbiome business continued its robust growth in 2019, and our new microbiome laboratory service offerings started to make solid contributions. On the infectious disease front, our HIV and HCV franchises delivered growth in 2019, with particularly strong increases in sales of our international HIV Self-Test products. We are especially pleased with the company's strategic accomplishments during 2019. We advanced our innovation growth strategy with acquisitions of 2 leading microbiome laboratory service pioneers CoreBiome and Diversigen and Novosanis with its first-void urine collection technology. These acquisitions increased OraSure's product and service offerings to capture and expand new market opportunities, which will continue to contribute to future growth. We divested our cryo systems product line in order to better align with our strategy and focused our efforts on higher priority growth opportunities. We also received several important regulatory approvals, including a generic 510(k) clearance of our Oragene family of molecular collectors, 510(k) clearance of our rapid Ebola test and approval to use our prequalified OraQuick HIV professional and self-test products for pediatric testing. These approvals will substantially improve the competitive positioning of these products. Our balance sheet remains strong with $176 million in cash as of March 31, 2020, and no debt. Looking forward, our priorities will continue to be to grow our existing business and execute against our long-term growth strategy through acquisitions. As you may have heard during our Q1 earnings call, we will also be working to minimize any negative impact on our business from COVID-19 pandemic and take full advantage of some new opportunities that are before us. We see significant potential for new pan-SARS-coronavirus antigen self-testing using oral fluid and new antibody -- and a new antibody laboratory assay, both of which are under development. We also see a large potential opportunity for using 1 or more of our existing oral fluid products for COVID-19 testing. Steve and his team will update you on our progress against these priorities as the year progresses. We remain optimistic about our expected 2019 full year performance despite the changing market dynamics and opportunities we are seeing. We're also confident in our management team. We believe we are on the right track to continue executing against our strategy and deliver long-term value to our stockholders. Before concluding my remarks, I wanted to acknowledge the many brave and dedicated health care professionals who are fighting to keep us safe from the pandemic. I want to thank the company's 470 employees and especially those who remain who must perform their jobs at our facilities on a daily basis. The Board cannot be more proud of the work you do and grateful for your continued dedication and commitment. With that, I will now move into the formal part of our stockholders' meeting. The order of business will be as set forth in the proxy statement. A copy of the agenda is available on the website for this meeting. The business transacted today will be limited to 4 items. The polls are open for voting by following the directions on the website and the meeting notice sent to our stockholders. After all business items have been discussed, I will close the polls and no further voting will be permitted. As indicated in the agenda, the first item of business is the election of 2 Class II Directors. The Board nominees are: Mara G. Aspinall and Ronny B. Lancaster. The Class II Directors elected today will hold office until the company's annual meeting in the year 2023. Each nominee is presently a director of the company and has consented to serve if elected. The names of the director nominees have been placed in the nomination. Additional information about each nominee can be found in our proxy statement. No other nominations will be made in accordance with the procedures established by the company's bylaws. Accordingly, the nominations have been closed. The company's Board of Directors is recommending the stockholders to vote for the director nominees. The second item of business is the ratification of the appointment of KPMG as the company's independent registered public accounting firm for 2020, KPMG has served in this capacity for the past several years. The appointment of KPMG has been approved by the Audit Committee and the Board is recommending that stockholders vote for ratification of KPMG's appointment. The third item of business is the approval by a nonbinding advisory vote of the compensation of the company's named executive officers as disclosed in our proxy statement. Federal law requires that we provide stockholders with the opportunity to vote on the compensation paid to executives. This is commonly referred to as say-on-pay vote. Setting appropriate levels of executive comp is an important issue and one [Audio Gap] approval of the resolution on the executive compensation as set forth in the proxy statement. Finally, the last item of business is the amendment of the company's stock award plan. Company has amended and restated the plans and increased the number of shares of common stock available for grant by 5 million shares. Additional shares are required so the company can continue to offer equity compensation opportunities to attract and retain qualified employees and directors. We also may need additional shares to make retention grants in connection with any business development opportunities we pursue. The company's Board of Directors is recommending that the stockholders vote for approval of the amendment and restatement of the stock award plan. The polls will be closed momentarily. So if you have not done so yet, please cast your vote at this time. [Voting]

Stockholders desiring to vote have now had an opportunity to vote their shares, either prior today or during the meeting. Accordingly, I declare that the polls are closed. I ask that the inspector tally the votes and prepare a certificate of results. There being no further business to conduct, the formal portion of the meeting is now adjourned. The time remaining, we will answer questions if there are any. Does not appear to be any questions, so I'll conclude the Q&A session. Before ending the webcast, I would like to provide a preliminary report on the voting as prepared by the inspector. Taking into account the number of shares represented at the meeting, the tabulation of all the proxies and ballots indicate that on a preliminary basis, the nominees for the boards -- Board have been reelected. The appointment of KPMG has been ratified. The compensation of the company's named executive officers as described in the proxy statement has been approved, and the amendment and restatement of the company's stock award plan has been approved. A written certificate of the final vote totals for each of these items will be prepared by the inspector and filed with the minutes for this meeting. These results will be disclosed by the company in an upcoming SEC filing. That is all we have for today. On behalf of the company and the Board, I'd like to thank all of our stockholders for their continued support and for your participation in this year's meeting.

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.