OraSure Technologies, Inc. Stock

Good day, and thank you for standing by. Welcome to OraSure Technologies, Inc. 2026 Second Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Michele Anthony, Chief Accounting Officer. Please go ahead.

Thank you. Good afternoon, and welcome to OraSure Technologies Second Quarter 2026 Earnings Call. Participating in the call today for OTI are Carrie 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, expenses, profitability, earnings or loss per share and other financial performance, product development, performance, shipments to the 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 OTI's SEC filings, its annual report on Form 10-K for the year ended December 31, 2025, its quarterly reports on Form 10-Q and its other SEC filings.

Although forward-looking statements help to provide more 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. OTI 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, Michele, and thanks to everyone for joining us. Today, I'll discuss some of the highlights from Q2 and provide updates on our key priorities for 2026. Q2 was another important quarter in OraSure's transformation. We exceeded our revenue guidance, expanded gross margin sequentially, advanced our decentralized diagnostics pipeline in rapid test and sample management solutions and continue to position the business for sustainable growth and long-term shareholder value in the second half of 2026 and beyond.

Through our multiyear transformation, we have moved from restructuring and portfolio simplification to execution against a more focused growth strategy. In 2025, we said that 2026 would be a transition year on the path back to growth. Q2 demonstrated that transition beginning to take shape through stronger revenue, improving margins and meaningful innovation milestones, including FDA clearance of Colli-Pee Dx with its NucleoPrecision chemistry for use with the Roche's Cobas SCI test plus FDA emergency use authorization for our second-generation OraQuick Ebola Rapid test.

Also on the innovation front and an FDA update is our InteliQuick CT/NG test on the Sherlock platform. While we remain very confident in and excited about this first-of-its-kind rapid molecular self-test, I would like to call out that we are no longer expecting FDA clearance and U.S. launch to occur in 2026. I'll provide additional details later on this, but wants to reiterate our conviction that it's an excellent test that performs very well.

Following constructive conversations with FDA, however, we recently elected to withdraw our submission. We are incorporating feedback from the agency, and we'll be working with them on resubmission to bring it to market. We have positive momentum on multiple fronts. And while we are disappointed in the InteliQuick delay, I want to emphasize, this does not change our commitment or ability to deliver on revenue growth in 2026 or cash flow from operations breakeven as we enter 2027.

We are strengthening our foundation by leveraging our Pennsylvania manufacturing capabilities, in-sourcing work previously performed by third-party contractors and maintaining disciplined cost controls that are visible in our margin performance. We are elevating our core by diversifying the markets, channels and customers we serve across rapid diagnostics and sample management solutions as evidenced in our sequential progress.

We are accelerating profitable growth through targeted R&D and partnerships focused on high-value markets where decentralized access, proprietary know-how, scalable manufacturing and accessible rapid testing and collection solutions can create attractive risk-adjusted returns.

Focusing on our Q2 results. Total revenue was $30.6 million, exceeding our guidance range and gross margins improved sequentially. Lapping the divestiture of our Risk Assessment Testing business and now with COVID almost entirely behind us, we are focused on growing our business, executing launch readiness for near-term catalysts and progressing toward operating cash flow breakeven as we enter 2027. The accomplishments we will highlight today are important proof points of that strategy.

Moving to those highlights. In mid-June, we announced FDA clearance of the Colli-Pee Dx urine collection kit, which enables at-home self-collection of volumetric first-void urine samples for STI testing, which can be collected at any time of day. We believe clearance of OTI's differentiated Colli-Pee collection device with its proprietary NucleoPrecision sample stabilization technology utilized with Roche's STI test on its Cobas molecular diagnostic platform can increase access, convenience and privacy for important STI testing. It also represents a key milestone in our strategy to decentralize diagnostic solutions and connect more people to care while helping increase SMS portfolio growth.

We also recently shared that we received FDA emergency use authorization for our OraQuick Ebola 2.0 rapid antigen test. Building on our Ebola 1.0 rapid antigen test for which we received de novo authorization in 2019, our version 2.0 test was also developed in partnership with BARDA. The test detects all 4 Ebola virus species known to cause human disease, including the Bundibugyo species driving the current outbreak in Central Africa.

This authorization underscores OTI's strength in public health, including our R&D expertise, our regulatory capabilities, manufacturing scale, global reach and long-standing partnerships with government and global health organizations. Together, these capabilities enable us to respond quickly to emerging and ongoing health threats with accessible rapid diagnostic solutions.

While this outbreak is a stark reminder of the devastating impact of infectious diseases, it is another reminder that our mission and expertise matter. We are proud to contribute to the response and remain committed to applying our strengths where they make a meaningful difference for communities in need while creating value for our shareholders.

In International Diagnostics, our Q2 progress reflects an approach to stabilize, diversify and localize. We continue to serve long-standing HIV testing customers while also expanding the portfolio and deepening relationships with partners that support public health needs from Africa to Latin America and in between and beyond. While Ebola is our latest example of the strength of our capabilities to serve global markets, another is our work on near-shoring and in-country value-added assembly programs for our OraQuick HIV Self-Test, which we discussed in Q1.

These partnerships are increasingly important as national health programs adapt to evolving funding structures and as customers seek more resilient local supply chains. We expect to share more on localization later this year.

A third strong global example is in the progress following our acquisition of BioMedomics with Sickle SCAN. We are seeing encouraging progress integrating Sickle SCAN into our international commercial channels and pursuing opportunities with national health programs in geographies where point-of- need sickle cell testing can address significant unmet need. In the hands of our international sales team, Sickle SCAN revenue is growing twice as fast in 2026 as it did in 2025.

Taken together, Ebola 2.0 Rapid Test access, OraQuick HIV near-shoring and Sickle SCAN expansion reflects the strategic evolution of our International Diagnostics business by addressing critical public health priorities with increasing localization while diversifying our revenue base, we are creating new avenues for growth and reinforcing the capabilities that differentiate OTI globally. We believe this approach positions us to serve customers more effectively, strengthen long-term partnerships and create durable value for shareholders.

Switching to U.S. Diagnostics. We saw stronger public health demand in Q2, including customer purchasing patterns tied to fiscal year cycles. Even with continued federal funding pressure, HIV testing programs remain an important public health priority and demand for our market-leading OraQuick HIV Self-Test was strong in the quarter.

We also continue to benefit from the syndemic testing approach we have discussed on prior calls. By offering rapid tests across HIV, HCV and syphilis, we can help customers address overlapping populations while delivering both clinical and health economic value. In addition, our consumer and B2B2C channels for the OraQuick HIV Self-Test continue to grow, including through telehealth and other digital access points. These channels provide a strong foundation for future OTC and decentralized STI testing opportunities and reinforce the growing demand for convenient private access to diagnostic testing. That demand is also reflected in the opportunity we see for InteliQuick CT/NG molecular self-testing.

As I mentioned earlier, I want to provide more details on the withdrawal of our FDA submission and our regulatory path forward. Our studies demonstrated strong performance compared with centralized laboratory molecular diagnostic methods, and we remain encouraged by the product's performance and its potential to address an important public health need. Based on the strength of our data across all elements of performance, the demonstrated patient and provider need for this test and the value of InteliQuick's differentiated profile, we had anticipated FDA clearance around this time.

Following constructive interactions with the FDA and in consultation with them, we are building our plan for resubmission. While we are disappointed by the delay in obtaining regulatory clearance and broader market access for InteliQuick CT/NG, our confidence in the quality, performance and clinical value of the test has only increased. We will provide additional updates on our progress in future quarters as we move quickly to complete the work we think is necessary for regulatory clearance and full market launch.

Moving to Sample Management Solutions. We are seeing varied levels of improvements across key customer segments, including commercial advanced diagnostic testing laboratories and other precision health care applications, including microbiome collection, along with early signs of recovery in academic and research channels. We are encouraged by increasing utilization of genetic insights to assess disease risk, inform diagnoses and guide patient care.

For example, the U.K.'s National Institute for Health and Care Excellence, also known as NICE, its recent draft guidance recommending Ziwig Endotest marks another important commercial validation of saliva-based diagnostics in women's health and expands access to noninvasive testing for endometriosis within the U.K. health care system. We've talked about Ziwig before, and Endotest incorporates DNA Genotek's OMNIgene.ORAL saliva collection and nucleic acid stabilization technology, underscoring the capability of our collection solutions to support advanced testing.

This adoption demonstrates the versatility of our technology beyond genetics into high-value diagnostic applications, and it reinforces our position as a trusted partner for innovative developers. As demand grows for similar, accessible, patient-friendly testing, we believe our broad portfolio of collection technologies are well positioned to support the next generation of women's health, wellness and molecular diagnostic programs worldwide.

Additionally, in SMS innovation, we were excited in Q2 to announce the important milestone we achieved with Colli-Pee Dx urine collection kit receiving FDA clearance. The kit solution comprises the Colli-Pee Dx collection device, which enables volumetric self-collection of biomarker-rich urine, enabling a broad range of testing solutions and our NucleoPrecision chemistry, which is proprietary and non-toxic for the stabilization and storage of biomarkers. The recent FDA clearance applies to 8 STI indications. That's 4 types of Roche Cobas tests, Chlamydia, Gonorrhea, Trich and Mgen for both male and female self-collected urine on the Roche Cobas molecular diagnostic platform.

The Colli-Pee Dx launch is off to a nice start as customers are expressing strong interest in the innovation and its potential to expand access to STI testing that is more convenient and private. Overall, SMS revenue increased sequentially in Q2. Combined with the anticipated contribution from Colli-Pee and its NucleoPrecision chemistry, we remain confident in the long-term outlook for Sample Management Solutions and its ability to help drive growth in 2026 and beyond.

With that, I'll turn the call over to Ken to discuss our financial results and guidance.

Thanks, Carrie. Total revenue in the second quarter was $30.6 million and grew 9.7% on a sequential basis. Diagnostic products generated $19.4 million of revenue in Q2, with U.S. revenue higher than international revenue. Diagnostics revenue grew 14.7% on a sequential basis, reflecting stronger public health demand, including customer purchasing tied to fiscal year cycles as well as higher syphilis revenue and the addition of BioMedomics' Sickle SCAN. Sample Management Solutions revenue in Q2 was $9.9 million and grew 9% on a sequential basis with growth across segments.

Our Q2 GAAP gross margin increased 120 basis points sequentially to 43.5% from 42.3% in Q1 2026, and non-GAAP gross margin in Q2 increased to 44.2% compared to 43.4%. Gross margin expansion was driven by lower scrap and operational efficiencies, partially offset by revenue mix.

Looking at GAAP operating expense in Q2. R&D expense was $9.4 million, sales and marketing expense was $6.6 million, and general and administrative expense was $14.4 million. R&D expense declined both sequentially and year-over-year, reflecting the tapering of launch preparation and production readiness spending for our Colli-Pee device. The year-over-year increase in G&A was primarily driven by nonrecurring items, including higher legal and professional service costs related to our proxy and stockholder activism.

As we stated last call, we expect G&A expense to decline to more normalized levels beginning in Q3 as these non-recurring items wind down. Included in the Q2 financials, the company recorded a reduction in its contingent consideration liability as a result of updating our submission plan to incorporate feedback from the FDA for the CT/NG test on the Sherlock platform. Noncash stock compensation expense in the second quarter was $2.3 million, and depreciation and amortization expense was $2.4 million. And our GAAP operating income in Q2 was $5.4 million, and our non-GAAP operating loss was $14.7 million.

Moving to our balance sheet. We ended the quarter with 0 debt and total cash and cash equivalents of $161 million. During the second quarter, we deployed $2 million to repurchase 647,000 shares of our common stock. Since initiating the program last year, we have returned $22 million to shareholders through the repurchase of 7.7 million shares, representing nearly 10% of our outstanding shares and utilizing approximately 55% of the $40 million authorization.

Given the commercial opportunities ahead, we paused additional repurchase activity during the quarter and are prioritizing balance sheet flexibility to support launch-related investment across the portfolio, including Colli-Pee and Ebola 2.0 Rapid Test. The authorization remains in place, and we will continue to evaluate repurchases over time. Consistent with our balanced capital deployment strategy, we continue to evaluate organic and inorganic opportunities that can accelerate our profitable growth in high-value markets and leverage our existing capabilities.

Operating cash flow in the second quarter was negative $9.9 million, which was consistent with our expectations. As Carrie stated, we expect to return to breakeven in cash flow from operations entering 2027. This view is supported by our outlook for revenue growth, including anticipated contributions from new product launches as well as our continued focus on cost savings and operating efficiencies.

Moving to guidance. We expect revenue in the third quarter of $29.5 million to $32.5 million, and we expect our gross margin in Q3 to be similar to Q2.

With that, I'll turn the call back to Carrie to conclude.

Thanks, Ken. As we enter the second half of 2026, OraSure is a more focused and operationally-disciplined company with a stronger innovation pipeline. We've simplified the portfolio, strengthened our production capabilities and consolidated our manufacturing footprint. We advanced important technology and product milestones while also demonstrating a return to growth and preparing for revenue contributions from the launches of Colli-Pee Dx and our Ebola 2.0 Rapid Test.

These achievements reflect the discipline of our operating model, the strength of our innovation engine, the differentiation of our products and the commercial value and execution of our decentralized diagnostic strategy. Looking ahead, we remain focused on converting our pipeline into growth, expanding our portfolio across attractive markets and leveraging our manufacturing capabilities and global partner relationships.

Together, these drivers position OraSure to deliver sustainable long-term value for our customers, partners and shareholders. Thank you for your continued support and confidence in OTI. We look forward to updating you on our progress next quarter.

With that, I'm pleased to turn the call over to Arie for Q&A.

[Operator Instructions] Our first question comes from the line of Mac Etoch of Stephens.

Maybe just a couple of questions for me. Just given the CT/NG update, I'd love to get a sense of how you're thinking about the timing around a resubmission and then potential approval past that? And then secondly, how is that affecting your cost structure moving forward? I know there are some lingering costs around post-approval studies that were going on as well.

Yes. Thanks, Mac. I'll just start with our confidence in the InteliQuick test and the performance that it demonstrated. While we are working to incorporate FDA feedback, we plan to resubmit it. This is a recent discussion. And in terms of timing, we plan to come back to share more on that. We're obviously moving quickly in collaboration with them. This is a priority. But we will update you. We'll update our investors with more on timing as we have that.

Yes. And Mac, as far as the cost, this will not incrementally add to our overall cash flow from operations usage. There's an offset here related to the milestone payments that will be reduced. And obviously, you can imagine, as we go forward with our plan, there'll be some dollars, incremental dollars to support that, but that will be lower than the expected reduction in milestones.

So in terms of how we think about the total year, Mac, we're clearly disappointed in that delayed timing. Obviously, we were working hard toward a -- to work toward clearance and launch. But in terms of our expectations for the year, I want to reiterate, it does not change our outlook on growth for the year. And in an unanticipated way, we expect that to cost less. We had every intention of that clearance. We believe it's a matter of timing. And this is all about working towards the resubmission.

Got it. And maybe just to clarify on that point, Ken, it sounds like maybe any incremental cost that might be incurred from whatever it might be, will be offset by a reduced -- like a reduction of that $20 million contingency payment.

Correct.

Awesome. And then maybe in terms of SMS, I think I heard, and my connection is a little spotty today, but can you speak to what you're seeing in terms of the advanced genetic testing labs demand?

Yes. So we're seeing the sort of continued not only green shoots in other labs that are growing, but we're seeing a fairly consistent recovery amongst kind of the advanced genetic labs more broadly. So we've delivered that sequential growth. I'd say this has remained muted post COVID, but there is progress. And we see not only advanced genetic testing labs, we see areas like microbiome collection that had been somewhat soft. In the last couple of years, we have seen some uptick there as well.

I am showing no further questions at this time. So I would like to turn it back to Carrie Eglinton Manner for closing remarks.

Great. Thank you to all of you for your engagement and support. Ari, thank you for the facilitation. We look forward to providing updates in the next quarter. With that, we'll close the call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the OraSure Technologies, Inc. 2026 First Quarter Earnings Conference Call. [Operator Instructions] Be advised that today's conference call is being recorded.

I would now like to hand the conference over to your first speaker today, Jason Plagman, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to OraSure Technologies' First Quarter 2026 Earnings Call. Participating in the call today for OTI are Carrie 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, 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 OTI's SEC filings, its annual report on Form 10-K for the year ended December 31, 2025, its quarterly reports on Form 10-Q, and its other SEC filings. Although forward-looking statements help to provide more 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. OTI undertakes no obligation to update any forward-looking statements to reflect events or circumstances after this call.

With that, I'm pleased to turn the call over to Carrie.

Thanks, Jason, and thank you to everyone for joining us today. Today, I'll discuss some highlights from Q1 and provide updates on our key priorities for 2026.

Overall, we continue to advance our strategic transformation and execute with discipline as we focus on driving growth in 2026 and beyond. We have delivered meaningful progress over the last few years and continue strengthening our foundation, including leveraging our manufacturing capabilities and capacity to drive gross margin expansion while also streamlining our cost structure.

We're also elevating our core growth by expanding and diversifying our product portfolio and customer relationships while several of our key end markets adapt to an evolving funding environment. Ultimately, we're accelerating profitable growth through investments in R&D, targeting high-value growth markets, as well as acquisitions and partnerships that leverage our existing capabilities, and provide an attractive risk-adjusted ROI.

We're also preparing for several near-term catalysts for growth, including our 2 product launches planned for mid-year. One, our rapid molecular self-test for chlamydia and gonorrhoeae, also known as CT/NG. And two, our Colli-Pee at-home urine collection device for sexually transmitted infections or STIs.

Looking at our Q1 results, total revenue was $27.9 million, which was above the midpoint of our guidance range, and we generated solid gross margin expansion. In our International Diagnostics business, we made significant progress on our initiatives to establish closer relationships with some of our distribution partners in Africa and their in-country value-added assembly and manufacturing, also known as near-shoring.

During Q1, we delivered on initial orders to one of our near-shoring partners. We anticipate initial orders from other partners in the second half of the year, and we believe this trend represents a significant opportunity in rebuilding momentum in health program implementation in countries around the globe.

Additionally, our international team is building positive momentum with the integration of BioMedomics into our sales channels and in expanding the reach of SickleSCAN into new markets through our relationships with national health programs.

In our U.S. Diagnostics business, our public health customers are stabilizing, as they adapt to the current budget environment. In general, HIV testing programs remain a key priority for state and local public health agencies to control the spread of the virus and to manage downstream costs in the healthcare system.

We are also seeing traction in demand resulting from our syndemic approach that leverages our portfolio of rapid tests across multiple conditions, including HIV, HCV, and syphilis to deliver value and ease of use for customers.

Switching gears to Sample Management solutions. We are seeing gradual improvement with commercial customers, including advanced genetic testing labs, driven by increasing utilization of precision medicine that leverages genetic insights to identify risk factors for cancer and other conditions as well as diagnosis of rare diseases.

During Q1, growth in commercial segments was offset by muted demand in academic and government markets related to the continued slow pace of NIH research grant funding. That said, we remain confident that the Sample Management business is positioned to deliver growth in 2026 and beyond as genomic end segments gradually return to stronger growth.

Next, I'll transition to our innovation and product pipeline, which includes several important near-term catalysts for growth in attractive markets, as well as our pipeline of earlier-stage opportunities in high-value growth markets. From a regulatory standpoint, our 2 applications for FDA clearances are in the review process. We continue to anticipate midyear clearances and expect that revenue from product launches will ramp in the second half of the year.

As a reminder, our 2 submissions were for our over-the-counter rapid self-test for CT/NG that is built on the Sherlock molecular diagnostics platform and our Colli-Pee device for STIs. The Colli-Pee submission, which includes its proprietary stabilization chemistry, covers multiple STI indications, and is being pursued in collaboration with a leading diagnostics platform provider.

These 2 submissions with their potential clearances, reflect our progress on our innovation roadmap and demonstrate how we are advancing our vision to help decentralize diagnostics and connect people to care that is more accessible, convenient, affordable, and private.

With that, I'll turn the call over to Ken to discuss our financial results and guidance.

Thanks, Carrie. Total revenue in the first quarter was $27.9 million and grew 4% on a sequential basis. Diagnostic products generated $16.9 million of revenue in Q1 with a fairly even split between U.S. and international revenue. Diagnostics revenue grew 12% on a sequential basis. Sample Management Solutions revenue in Q1 was $9.1 million, which was basically flat on a sequential basis.

Our GAAP gross margin in the first quarter was 42.3%, compared to 41.1% in Q1 2025. And non-GAAP gross margin in Q1 increased to 43.4%, compared to 41.7% in Q1 2025.

Gross margin expansion was driven by operating efficiencies, largely related to our initiatives to in-source production from third-party contract manufacturers into our Pennsylvania facilities. This transition leverages our advanced manufacturing capabilities and capacity developed during the COVID pandemic.

Looking at GAAP operating expenses in Q1. R&D expense was $13.7 million, sales and marketing expense was $6.8 million, and general and administrative expense was $14.6 million. The increase in R&D was primarily driven by investments in activities related to launch preparation and production readiness for our CT/NG test and our Colli-Pee device, including studies gathering data that we believe will position us for successful commercial go-to-market launch. We expect our R&D expense to taper down during Q2 and Q3.

Looking at G&A expense. The sequential increase in Q1 was primarily driven by nonrecurring items, including severance expense related to a reduction in force in February, professional services related to our proxy, and the annual reset of accruals for performance-based incentive compensation programs. We expect G&A expense to decline to more normalized levels beginning in Q3 following the conclusion of the nonrecurring items I mentioned.

Noncash stock compensation expense in the first quarter was $2.8 million, and depreciation and amortization expense was $2.3 million. Our GAAP operating loss in Q1 was $23.3 million, and our non-GAAP operating loss was $19 million.

Moving to our balance sheet. We ended the quarter with 0 debt and total cash and cash equivalents of $177 million. During the first quarter, we deployed $5 million to repurchase 1.8 million shares of our common stock. Over the last 4 quarters, we have returned $20 million of capital to shareholders through the repurchase of 7.1 million shares.

Consistent with our balanced capital deployment strategy, we continue to evaluate organic and inorganic opportunities that can accelerate our profitable growth in high-value markets and leverage our existing capabilities.

Operating cash flow in the first quarter was negative $14 million, which was consistent with our expectations. As we discussed in February, we expect to return to breakeven from an operating cash flow standpoint as we enter 2027. This view is supported by our outlook for revenue growth, including contributions from our anticipated product launches, as well as our continued focus on delivering cost savings and operating efficiencies.

Moving to guidance. We expect revenue in the second quarter of $27 million to $30 million, which includes a negligible amount of revenue for COVID-19 testing. We expect our gross margin in Q2 to be similar to Q1. We anticipate our operating expense will be in the high $20 million range in Q2, which includes non-run rate expenses and excludes stock compensation. Then we expect operating expenses to decline further to the mid-$20 million in Q3 as non-run rate expenses wind down.

With that, I'll turn the call back to Carrie to conclude.

Thanks, Ken. As we move through 2026, OraSure is positioned to accelerate our growth as we approach a series of regulatory and commercial milestones, and we continue to transform our business as we deliver on our strategy to decentralize diagnostics. We are excited about all of our opportunities, near-term and long-term, to expand our portfolio with our innovative product pipeline and our ability to leverage our manufacturing capabilities and capacity as we work to create value for our customers and all shareholders.

With that, I'm pleased to turn the call over to the operator for Q&A. Tyler?

[Operator Instructions] Our first question comes from the line of Patrick Donnelly from Citi.

This is [ Brendan ] on for Patrick. And congrats on the quarter. I want to start on the near-shoring initiatives. It's great to see orders kind of start to come through there. I was wondering if you'd be able to size those and down the line as more are added, what those could potentially turn into from a revenue standpoint? And then also along those lines, can you talk about what the pipeline kind of looks like to add more sites to that program?

Sure. Thanks, Brendan. So as far as near-shoring, we're really excited about the opportunity. And just for background, this is something that we've been working with these countries for several years to put in place.

We did -- we said it was significant. We haven't given an exact number as far as dollars, but you can imagine in the millions is significant for us. And not all will be -- all relationships will be in that range, but we are seeing good progress as we continue to advance conversations and initiate near-shoring opportunities with other countries as well.

And then to touch on the margins, we view that -- it's great to see the first quarter kind of come in ahead of expectations. Should we kind of view this as a new baseline for gross margins? And is there more internal like in-sourcing initiatives that you guys are planning on implementing to kind of further that margin expansion?

Yes. And yes, so what we said is Q2 will be similar to Q1. What we're seeing as far as tailwinds for improving our margins is our operation efficiency, which you may recall, we've talked about in the past where we consolidated our manufacturing into some core operation facilities.

As we take advantage of that operating efficiency overall on our improved absorption, and in addition, as we increase our volumes, we will continue to see improvements in our gross margin. That could be offset, obviously, time to time by mix and other dynamics that play out within our margins. But we're encouraged by the strong tailwinds that we have.

One moment for our next question. The next question comes from the line of Mac Etoch from Stephens.

Thank you for view on the outlook for the CT/NG test. As you approach the launch of these products, I assume the commercial teams are already advancing discussions around the agreements and partnerships. So what progress have you made on that front so far? And how should we think about the early commercialization traction there?

Hello, Mac. You're right in that, when you have the product launch expectation, everybody starts gearing up. There is an important distinction to be made, of course, as you well know, in FDA, with FDA-cleared products, unlike research use only, you really can't premarket.

We do, of course, well understand market interest and opportunity in infectious disease, in STIs, in sample collection, and urine collection because we have such strong portfolios there today. So we've done good market research. We stay very connected to these customers. We're thinking about the kinds of conversations you can have ahead of time, which is really about how the whole test-to-treat system would work upon clearance.

And so I'd say, it's those dialogues that are all within bounds that really give a sense for the enthusiasm and interest to make STI testing, private, convenient, affordable, accessible, and that make urine self-collection something that can be done outside of a doctor's office. So yes, I kind of frame it that way. But with the FDA process, we're also very smart and compliant around not premarketing.

And then maybe following up on the margin question. I appreciate the color that you gave, Ken. But just thinking about the launch of some of these products that you have in the pipeline, should we expect any maybe near-term volatility or decremental margins just as we think about near-term margin progression?

Yes. I'll tell you what we said in the past, and then -- and will be answering your question as I go through that. So what we've said for CT/NG is in the fullness of time, it will be accretive to our overall margins. But to your point, there's a ramp-up of that. When your volumes start out lower, you don't have as large -- as good margins. So we will experience some of that as we ramp up.

For our Colli-Pee device, similar, we expect margins in the fullness of time to be equal or accretive to our overall current margins, but there is that ramp-up time that takes place, to your point, as we ramp up the volumes and kind of get that full absorption over time.

I am showing no further questions at this time. I would now like to turn it back to Carrie for closing remarks.

Thanks, Tyler, and just thank you to everyone for joining us. We hope you have a great day. And with that, we'll close the call. Thanks.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the OraSure Technologies 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, Jason Plagman, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to OraSure Technologies Fourth Quarter 2025 Earnings Call. Participating in the call today for OTI are Carrie Eglinton Manner, our President and Chief Executive Officer; and Kenneth 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, 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 OTI's SEC filings, its annual report on Form 10-K for the year ended December 31, 2024, its quarterly reports on Form 10-Q and its other SEC filings. Although forward-looking statements help to provide more 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. OTI 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. I'll discuss some highlights from Q4 and our key priorities for 2026 and beyond. As we've discussed previously, 2025 was a transition year, and we supported our customers in navigating a challenging and uncertain funding environment. As we enter 2026, we are seeing increasing signs of stability in key segments, including improved visibility to funding for important testing and research programs, and we are excited by several near-term catalysts for growth, including our two product launches planned for midyear. One, our rapid molecular self-test for chlamydia and gonorrhea, also known as CT/NG; and two, our Colli-Pee at-home urine collection device for sexually transmitted infections. Our submission of these two separate applications to the U.S. FDA in December represents significant milestones on our innovation road map as we move into the next phase of our multiyear strategic transformation to deliver profitable growth and to create value for our customers and shareholders.

Looking at our Q4 results, total revenue was $26.8 million and core revenue was $26.7 million, which was above the midpoint of our guidance range. In our International Diagnostics business, order trends are stabilizing as national health programs adapt to revised funding structures, including framework agreements that have been signed between the U.S. and more than a dozen countries in Africa that incentivize greater levels of local investment in order to build more resilient and durable health systems.

To that end, we are well underway establishing closer relationships with some of our existing distribution partners in Africa, including their in-country value-added assembly and manufacturing, also known as nearshoring. We believe that this trend represents an important opportunity in rebuilding health program momentum in countries around the globe and expect these expanded local relationships in Africa to begin to contribute revenue in Q1 and throughout 2026. We also expanded OTI's presence in Canada with the recent launch of our OraQuick HIV Self-Test following its receipt of a license from Health Canada. This test is Canada's first oral HIV self-test, and we are excited to work with St. Michael's Hospital, Unity Health Toronto, as the exclusive distributor of this test in Canada.

Continuing with our international business. Our integration of BiMedomics is off to a good start following the close of the acquisition in November. We are seeing strong demand from existing customers for the Sickle SCAN Sickle test, which is a rapid point-of-need test for sickle cell disease or SCD. Our team is also building momentum with our initiatives to expand the reach and adoption of Sickle SCAN by leveraging our international sales channels and our existing relationships with national health programs, particularly in Africa, where more than 385,000 babies are born each year with SCD as well as in Latin America with its moderately high incidence of SCD and lack of newborn screening programs.

In our U.S. Diagnostics business, demand for our rapid test from public health customers is stabilizing as those organizations adapt to the current funding environment at the federal and state level. We are also seeing consistent demand for our over-the-counter HIV self-tests from telehealth and direct-to-consumer online platforms that want to offer a reliable FDA-approved self-test that is authorized for use with oral fluid and is designed to meet the needs of individuals who wish to test themselves privately and painlessly at home.

Switching gears to sample management. We remain confident that the sample management business is positioned to deliver growth in 2026 and beyond as genomic end segments continue to stabilize and gradually return to stronger growth, driven by clinical adoption of precision medicine. We also anticipate modest contributions to SMS revenue growth from the academic and government segments as NIH funding returns to a more regular cadence from international markets and from progress with our blood proteomic solution that we launched in mid-2025.

Next, I'll transition to our innovation and product pipeline, which includes several important near-term catalysts for growth in attractive markets as well as our pipeline of earlier-stage opportunities in high-value growth markets that we discussed last quarter. Starting with Sherlock. We submitted our rapid molecular self-test for CT/NG to the FDA in late December. As we've discussed previously, OTI's rapid self-test for CT/NG is built on the Sherlock molecular diagnostics platform and is designed to provide the results in approximately 30 minutes in a disposable over-the-counter format.

The test uses a self-selected swab and results are intended to be read directly on the handheld testing device without the need for an electrical connection, enhancing accessibility and ease of use. OTI estimates the testing for CT/NG represents a total addressable market of more than $1.5 billion. Today, the vast majority of CT/NG Tests in the U.S. are processed in centralized laboratories, creating an opportunity for meaningful market expansion through the introduction of a convenient, private and affordable rapid self-test. Also in December, OTI submitted a separate application to the FDA for clearance of our Colli-Pee device for sexually transmitted infections or STIs. The Colli-Pee device, which includes its proprietary stabilization chemistry, is designed for at-home urine collection and is aligned with patient preferences for private and convenient diagnostic testing.

The submission covers multiple STI indications and is being pursued in collaboration with a leading diagnostics platform provider. Receipt of clearance for the Colli-Pee device for these indications would be in addition to the research use-only products and is expected to expand access to testing while further strengthening OTI's leadership position in novel collection devices and chemistries.

We anticipate that revenue from our product launches will ramp in the second half of the year. And these two submission milestones reflect meaningful progress on our innovation road map and demonstrate how we are advancing our vision to help decentralize diagnostics and connect people to care that is more accessible, convenient, affordable and private.

With that, I'll turn the call over to Ken to discuss our financial results and guidance.

Thanks, Carrie. Total revenue in the fourth quarter was $26.8 million. Core revenue, which excludes COVID-19 products, was $26.7 million. Diagnostic Products generated $15.1 million of revenue in Q4, and Sample Management Solutions revenue was $9.1 million, and both were consistent with our expectations. Our GAAP gross margin in the fourth quarter was 41% compared to 36.2% in Q4 2024, and non-GAAP gross margin was 41.4% compared to 40.1% in Q4 '24.

Looking at GAAP operating expenses in Q4. R&D expense was $11.4 million, sales and marketing expense was $6.6 million and general administrative expense was $9.8 million. Noncash stock compensation expense in the fourth quarter was $1.5 million, and depreciation and amortization expense was $2.4 million. Our GAAP operating loss in Q4 was $20.1 million, and our non-GAAP operating loss was $15.2 million.

Moving to our balance sheet. We ended the year with 0 debt and total cash and cash equivalents of $199 million. During the fourth quarter, we deployed $5 million to repurchase 1.9 million shares of our common stock. For the full year 2025, we returned $15 million of capital to shareholders through the repurchase of 5.3 million shares. Consistent with our balanced capital deployment strategy, we also continue to evaluate organic and inorganic opportunities that can accelerate our growth.

As we discussed in November, we invested approximately $4 million during Q4 to acquire BiMedomics in order to expand our portfolio of rapid diagnostic tests that we can sell to our international customers. Operating cash flow in the fourth quarter was negative $9 million, which was consistent with our expectations given our investments in the Sherlock platform, clinical trials for our molecular CT/NG test in Colli-Pee and other innovation projects.

We expect to return to breakeven from an operating cash flow standpoint as we enter 2027, driven by our expected return to revenue growth, including contributions from our anticipated product launches as well as our continued focus on delivering incremental cost savings through operating efficiencies.

For the first quarter, we are guiding to revenue of $26 million to $29 million, which includes a negligible amount of revenue for COVID-19 testing. We expect our gross margin in the first quarter to be in the low 40% range. On a sequential basis, we expect that our Q1 gross margin will improve slightly compared to Q4 2025.

Overall, we remain focused on disciplined execution that aligns our organization and cost structure with our revenue growth and continued profitability improvement. Recently, we eliminated a number of nonproduction roles and continue to take actions that increase operating efficiencies, which are partially offset by targeted commercial investments supporting anticipated product launches as well as onetime costs related to severance and other nonrecurring items.

With that, I'll turn the call back to Carrie to conclude.

Thanks, Ken. A year ago, we entered 2025 with the strength to withstand what turned out to be multiple external headwinds, and we are proud to have supported our customers in navigating that environment while we continue to invest in our future and further streamlined our business. We made significant progress in advancing our innovation pipeline and ended the year with two major product submissions to the FDA.

Now here in 2026, we are already seeing signs of market stabilization, and we are also well positioned to capitalize on the growth opportunities that our near-term product road map can unlock.

With that, I'm pleased to turn the call over to the operator for Q&A. Lisa?

[Operator Instructions] Our first question for the day will be coming from the line of Mac Etoch of Stephens.

Maybe just a couple for me. I appreciate all the color on the call. Given that you've submitted this application for Colli-Pee and the CT/NG test, I think on average, you were calling out roughly $7 million to $8 million a quarter for R&D associated expenses. How should we anticipate R&D tapering off or continuing from here? And do you anticipate redeploying those funds towards other R&D efforts?

Yes. Thanks, Mac. Great question. We are anticipating over the full year, lower R&D expense for the full year, referencing kind of what you talked about in clinical trials. However, there is some continuation of clinical trials to capture some additional data that supports our performance claims in support of the launches. So there will be some continuing in Q1, but we will see lower R&D throughout the year to reference to what you pointed out around clinical trial spend.

Appreciate that. And then I think international HIV was a little bit more of a record in 2024 than slightly disrupted in 2025 due to the PEPFAR and USA implementation issues. So I just kind of wanted to get a clear picture of maybe the -- whether or not the ordering cadence is normalized at this point?

Yes. You described the history '24 and '25 accurately. And what we are seeing is improved visibility to countries within Africa figuring out not only their funding, but also the implementation. So you'll remember that in many cases, both the U.S. and the countries themselves said these are the most important test to treat life-saving programs we have. We're totally committed to the testing and consumables, we still have money for, but they had removed all of the people on the programs to implement them.

What we're seeing is -- at least what we're looking at into the Q1, Q2 is a recovery where those countries are figuring out the funding and the programs, they're investing more themselves. We mentioned 14 countries in Africa that have signed MOUs with the government, and it really is about your targeted focus, local investment that matches in these bilateral agreements and what we're seeing as part of the encouraging signs of stabilization.

Yes. In addition to build on that, Carrie mentioned during the scripted remarks around nearshoring opportunity and that we're excited about that opportunity. It's an opportunity for us to partner with some of these countries starting in Africa, which we think can be meaningful dollars -- revenue dollars in the future.

And that's really -- I'm sure folks know the term nearshoring, but it's really for local manufacturing assembly in country that makes that available in a more meaningful way with the local demand.

And our next question is coming from the line of Patrick Donnelly of Citi.

This is [ Brendan ] on for Patrick. I want to ask a little bit about the two product launches in midyear. What kind of latest you've heard from the FDA visibility into launching into the second half? And I know you guys only typically guide quarterly, but any additional insight we can get on potentially what that ramp in the second half could look like?

Yes. [ Brendan ] we're still working toward that midyear launch and the revenue ramp in the second half, exactly as you described. What we'd say is that there's always uncertainty in the regulatory review process. To give you anything -- in terms of timing, we'd be giving you false precision, but we'll clearly keep the -- provide that information as we have more to share. But I'd just reiterate, still working toward midyear launch, still working toward a revenue ramp. And as you noted, we don't do guidance beyond the quarter, but we'll share more when we do.

Appreciate it. And then I believe on the last call, you guys talked about expanding beyond the public health setting into more like the clinical such as like the urgent cares and hospitals, specifically for the hep C test. Would you be able to talk about how traction has kind of evolved since the call? And any other opportunities really come about since then?

Yes. We are both encouraged by the progress in our expansion of customer segments. That's part of the stabilization that we've been encouraged by is the pickup and not just public health, but that clinical setting. And so we have seen in the syndromic approach, we've talked about a number of times, but that's the occurrence of the sort of the synergy of epidemics amongst HIV, HCV and syphilis that there is a focus on that in emergency rooms, there is a focus on that in urgent care and we do have -- we are encouraged by the progress. We love the public health self-funding space, but we're encouraged by the market and segment expansion beyond it.

And our next question will be coming from the line of Andrew Cooper of Raymond James.

Maybe start with Sample Management. I would love if you could share to some degree, how you view the growth when you look back at '25 ex the large customer headwind that you've talked about, meaning what does that underlying look like? And when you talk about a gradual improvement there, just a little more color for what that looks like and what some of the drivers are as we move through 2026 and beyond.

Yes. No, thanks, Andrew. When you look at the full year for Sample Management and to your point, when you exclude that one large customer, for the full year, we did see growth year-over-year, and that encourages us, driven by a lot of things, right? Some could be driven by market, but also driven by our diversification of our customer base, which we think now starts paying off benefits as we look at multiple customers and multiple avenues for growth.

Okay. That's helpful. And then maybe just another one for you, Ken, on the guide. Presumably, on the gross margin side, there's a pretty big difference in absorption at least between the bottom end of the revenue range and the top end of the revenue range, just given the kind of breadth of the guide. So just would love how we should think about gross margins, both in 1Q, but also as revenues hopefully ramp, what that trend can look like on the margin side?

Yes. So what we did say is that in Q1, we expect sequentially some improvement, and we guided to the low 40s. But you're right on as far as the absorption part of it. What we said before is that we're probably operating at around 30% capacity. So you can imagine, as we add volume -- as we add revenue and add volume, we get the benefit from not having to add the fixed costs associated with that volume. So you will see a natural improvement in gross margin. The other thing you may recall is we had a project where we were consolidating some manufacturing to our Bethlehem facilities. And all of that has been done at this point. And we had two areas. One was moving some of our HIV testing From Thailand to our Opus Way facility in Bethlehem and to leverage, like you said, some of that absorption -- overhead absorption. And actually, it was cheaper because when you run it on automation, it's actually cheaper than what we were getting in Thailand.

The other aspect was consolidating or internalizing some of our volume from our sample management business from contractors that we had in Canada. And we've essentially completed all but some cats and dogs, like 95% or 97% of all that volume has been brought into our Bethlehem facility. So as you can imagine, as we kind of ramp up that, we will get the benefit as well. There is some initial -- the reason you don't see the benefit initially is there is some initial kind of transaction transfer costs that are associated with that transition. But once you get that through and you start getting at the same efficiency rates, you will see that benefit.

Okay. Helpful. And then if I can sneak maybe just one last one in. I guess when we think about '26 and the comment at least in the press release and I think some in the call here, this expectation to get back to better growth, how much of '26 is just normalizing from a 2025, where you saw spend come out of the system versus end market growth that you would expect to be more durable as opposed to comp oriented?

Yes. That's a great question. I think -- I'll say what we know and then we can elaborate as we go from there. And what we do believe is that our core business, we will be seeing some growth at the core business. And then we think we expect to accelerate that growth with the product launches in the second half of the year. So kind of start with that framework. Then as far as that core growth, we are seeing stabilization, right? Like we said, we saw stabilization and some growth in sample management in 2025.

And we are seeing stabilization, both international as well as U.S. when it comes to funding. The area where we do, we are getting excited in international, and Carrie mentioned it was around this nearshoring opportunity, where we are partnering with -- and we're starting in Africa with some African countries, and then we'll expand it beyond that into Latin America and Central Asia. But we're partnering with these countries as they become more self-sufficient, we're partnering with them to help them be able to on-site, be able to do some assembly where we can work with them and be their provider going forward. And we think that's an exciting opportunity. And it's not an opportunity that's cannibalizing existing. It's in addition to existing sales.

Yes. And Ken provided a nice overview of that. Just giving thoughts to your distinction around what sort of recovery from where funding came out versus what's growth in end markets. I'd say it's obviously different by portfolio and segment. And SMS is sort of more driven by end market growth, where the core of diagnostics, where you're talking HIV, HCV syphilis, I do think it is more about recovery. The huge impact in '25 was public health funding cuts. So part of that growth is -- it's not necessarily that the funding is completely cutting back, but it's that this type of testing is so critical in test-to-treat life-saving program that people are figuring out how to provide those services because they just save lives.

So I think it's different -- sample management is more about end market recovery. Diagnostics is more about a return to core growth based on those segments figuring out funding, figuring out the programs and making trade-offs. And then we layer in product launches onto both portfolios. We layer molecular into diagnostics. We layer Colli-Pee into sample management, and those are organic growth drivers that I think very much align with trends that are clear customer-driven trends around self-collection, around privacy, access that's affordable.

Then you factor in our ability to win in those markets like syphilis, where we drive -- we've been driving good growth over the years.

And this does conclude today's Q&A session. I would like to go ahead and turn the call back over to Carrie for closing remarks. Please go ahead, Carrie.

Thank you, Lisa, and thank you for everyone who participated in our call today and for your continued interest in OTI. Thank you so much. Bye-bye.

This does conclude today's program. You may all disconnect.

Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the OraSure Technologies, Inc. 2025 Third Quarter Earnings Conference Call.

[Operator Instructions]

I would now like to turn the conference over to Jason Plagman, VP of Investor Relations. You may begin.

Good afternoon, and welcome to OraSure Technologies Third Quarter 2025 Earnings Call. Participating in the call today for OTI are Carrie 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, expenses, profitability, earnings or loss per share and other financial performance, product development, 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 OTI's SEC filings its annual report on Form 10-K for the year ended December 31, 2024, its quarterly reports on Form 10-Q and its other SEC filings. Although forward-looking statements help to provide more 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. OTI undertakes no obligation to update any forward-looking statements to reflect events or circumstances after this call.

With that, I'm pleased to turn the call over to Carrie.

Thanks, Jason, and thank you to everyone for joining us today. Today, I will discuss some highlights from Q3 and our progress on key priorities for 2025 and beyond. Overall, we continue to significantly advance our strategic transformation and execute with discipline as we position OraSure for a return to growth in 2026. We have delivered meaningful progress and continued strengthening our foundation. We're also elevating our core growth by expanding and diversifying our product portfolio and customer relationships plus we're accelerating profitable growth through investments in internal R&D as well as acquisitions and partnerships that leverage our existing capabilities and to offer an attractive risk-adjusted ROI.

Looking at our Q3 results, total revenue was $27.1 million, and core revenue was $27.0 million, which included Diagnostics revenue of $14.5 million and Sample Management revenue of $10.3 million. Broadly speaking, our key end markets remain mixed, and we continue to partner with customers that are navigating an environment with elevated levels of uncertainty related to funding for public health programs and research as well as the government shutdown in the U.S. That said, we view 2025 as a transition year, and we're excited about pipeline opportunities in attractive markets that align with our strengths to drive growth in 2026 and beyond. In our International Diagnostics business, we discussed on our last earnings call that we anticipated a slower pace of orders for our HIV test in the second half of the year as our in-country partners work through their existing inventory and national health programs adapt to changes in the funding environment. That trend played out as expected in Q3 and thus far in Q4.

For the full year 2025, we now expect that revenue from our International Diagnostics business will be in the low to mid-$30 million range, representing a decline of approximately 20% compared to 2024, which was a record year for International Diagnostics.

Staying with our International business, we are pleased to share that OTI signed a definitive agreement to acquire BioMedomics. This tuck-in acquisition expands OTI's Diagnostic portfolio by adding Sickle SCAN, a rapid point-of-need test for sickle cell disease that is sold outside the U.S. The global sickle cell testing market, particularly in high burden regions in developing markets, is underserved and fragmented. We believe Sickle SCAN addresses this need with a high-quality, affordable rapid point-of-care test and there is support from government agencies and global health organizations to increase access to sickle cell testing at the point of need.

We see an opportunity to expand the reach and adoption of Sickle SCAN by leveraging OTI's strength including our international sales channels and our existing relationships with national health programs, particularly in Africa and Latin America. Furthermore, many of our international customers and partners have expressed interest in a reliable, low-cost, rapid diagnostic test for sickle cell disease.

Transitioning to our U.S. Diagnostics business. Our public health customers are adapting to significant reductions in staffing at HHS, CDC, SAMHSA and other federal agencies that support public health programs, along with budgetary uncertainty and challenges related to the federal government shutdown.

We are continuing, however, to see traction with our syndemic approach that leverages our portfolio of rapid tests across multiple conditions. And we are expanding our customer base in nonpublic health markets such as urgent care, hospital emergency rooms and correctional facilities for rapid hepatitis C testing plus online channels specializing in consumer-initiated testing. Overall, for the full year 2025, we expect our U.S. Diagnostics business to generate revenue in the low to mid-$30 million range representing a low single-digit percentage decline compared to 2024. We also wanted to provide an update on Together Take Me Home, a collaboration funded by the federal government that makes HIV self-test available through the mail in order to advance the President's goal of ending the HIV epidemic.

We are pleased to share that this highly effective life-saving program was renewed by the Trump administration with strong bipartisan support in Congress. As a result, Together Take Me Home is continuing for program year 4, which runs from October 2025 to the end of September 2026. We expect to recognize approximately $1.8 million of revenue from Together Take Me Home in Q4 and anticipate a similar pace of quarterly revenue in 2026.

Switching gears to our Sample Management business. The overall trend continues to be mixed. SMS revenues increased on a quarter-over-quarter basis in Q3, but we anticipate a sequential decline in Q4, which is consistent with the typical seasonal ordering pattern for this business. For the full year, we expect revenue from Sample Management products in the high $30 million range, which would be approximately flat compared to 2024, if you exclude the impact of the decline in orders from a large consumer genetics customer.

Looking ahead, we are confident that the Sample Management business is positioned to return to growth in 2026 and beyond. As genomic end segments gradually return to stronger growth driven by clinical adoption of precision medicine. Our confidence is also supported by continued scientific and technological advancements such as the increasing utilization of short-read and long-read genomic sequencing, the decline in unit costs for sequencing and analysis and advancements in areas such as proteomics.

We are also seeing early signs of positive trends in some international markets, such as the Middle East, that are planning to invest in population health studies using novel sample collection devices in order to accelerate precision health and life sciences research in the region.

We're also pleased to share that the ENDO 100 projects has selected multiple kits from our OMNIgene and Colli-Pee product lines for the collection and stabilization of a variety of sample types, including saliva, urine, stool and vaginal swab. The ENDO 1000 project is a United Kingdom wide initiative aimed at accelerating discovery and advancing data-driven research into the diagnostics and personalized treatment of endometriosis.

By collecting biological samples and lifestyle data from participants over 2 years, the study seeks to uncover patterns that can inform more effective individualized care strategies. The inclusion of our sample collection kits in this landmark study underscores their value in enabling high-quality research and positions us for continued growth in the Precision Health and Clinical Research segment.

Now I'll transition to our exciting pipeline of innovation, including an update on several products targeting attractive markets. Midyear, we launched a blood collection tube with stabilization chemistry for research use only, or RUO, markets in the burgeoning field of proteomics. We also anticipate near-term milestones for Colli-Pee urine collection, initially for sexually transmitted infection, or STI, indications and future expansion in the liquid biopsy. And our Sherlock Molecular Diagnostics Rapid Test platform whose first assay is expected to serve the large and growing chlamydia and gonorrhea, or CT/NG, segments of STI. As we discussed last quarter, our HEMAcollect PROTEIN product launched in July 2025 in the RUO market, like I just mentioned.

Since this launch, we've received positive and insightful feedback from our customers and early adopters that will help inform our road map as we enhance our proteomics product line and build additional momentum in 2026. Additionally, OTI is presenting at the upcoming Human Proteome Organization World Congress to highlight HEMAcollect PROTEIN's proprietary stabilization capabilities and its performance across a range of proteomics technology platforms.

Moving to our Colli-Pee device, which is designed for first-void urine collection. We plan to submit clinical trial data to the FDA for STI indications by late 2025 or early 2026. Receipt of approvals for these applications subject to regulatory review, would be in addition to our existing Colli-Pee RUO product and is expected to further strengthen our competitive position in novel urine collection.

Our analytical and clinical studies are demonstrating strong performance and flexibility across multiple target analytes. We're in advanced discussions with leading diagnostics platform providers that are interested in enabling self-collected noninvasive testing across large and growing markets, including STIs, HPV and other disease states.

Next in product innovation. Regarding our Sherlock over-the-counter Molecular Diagnostics self-test platform and its first assay for CT/NG, we are making good progress in our clinical trial and our plan for submission to the FDA in late 2025 or early 2026. We anticipate gaining momentum for our product launches for innovation, and it's the work we've done in transforming our enterprise that also allows us to invest in creating a pipeline of earlier-stage opportunities in high-value growth markets that fit well with our strengths and our product platforms where we can compete and win.

Examples include categories where we already have a presence like in infectious disease and STIs plus in newer ones like liquid biopsy or say antimicrobial resistance, where rapid tests and differentiated chemistries have outsized potential to create and add value. We look forward to sharing more details as new product opportunities progress through our development process.

With that, I'll turn the call over to Ken to discuss our financial results and guidance.

Thanks, Carrie. Total revenue in the third quarter was $27.1 million. Core revenue, which excludes COVID-19 products and the molecular services and the risk assessment testing businesses that we exited was $27 million. Diagnostic products generated $14.5 million of revenue in Q3, and Sample Management Solutions revenue was $10.3 million. Excluding the headwind from the consumer genomic -- genetics customer, Sample Management revenue from the rest of our customer base grew on a year-over-year basis in Q3. Our GAAP gross margin in the third quarter was 43.5% and non-GAAP gross margin was 44.2%, which was slightly better than our expectations due to lower scrap expenses.

GAAP operating expenses in the third quarter were $27.9 million, which includes $2.8 million of noncash stock compensation expense and $376,000 of expense related to an increase in the estimated fair value of acquisition-related contingent consideration. Depreciation expense was $2.6 million in the quarter. Our GAAP operating loss in Q3 was $16.1 million, and our non-GAAP operating loss was $12.7 million.

Looking at our balance sheet. We ended Q3 with 0 debt and total cash and cash equivalents of $216 million. Operating cash flow in the third quarter was negative $10 million, which was consistent with Q2 and our expectations given our investments in the Sherlock platform, the CT/NG clinical trial as its first assay and other innovation projects.

We deployed $5 million during the third quarter to repurchase approximately 1.5 million shares of our common stock. Consistent with our capital deployment strategy, we also continue to evaluate organic and inorganic growth opportunities. As Carrie mentioned, we have signed a definitive agreement to acquire BioMedomics as a tuck-in commercial stage acquisition for $4 million upfront and potential contingent consideration upon achievement of revenue milestones. BioMedomics is currently approaching $1 million of annual revenue, and we believe OTI has the potential to grow back to several million dollars of annual revenue over the next few years. BioMedomics is expected to be cash flow breakeven with a path to a very attractive ROI as revenue grows over the next few years.

We anticipate minimal incremental operating expense for OTI given that BioMedomics can be plugged into OTI's international commercial organization and leverage our administrative and regulatory capabilities to expand availability and adoption of the Sickle SCAN rapid test.

Turning to guidance. We are guiding to fourth quarter revenue of $25 million to $28 million, which includes less than $100,000 of COVID-19 testing revenues. Our guidance also assumes continued disruption in ordering patterns from our SMS customer in the consumer genetics industry. This customer represents approximately $4 million of revenue in Q4 last year. We expect our gross margin percentage in Q4 to be in the low 40% range, which is slightly lower than third quarter due to typical seasonality and a greater mix of international revenue as a percentage of total revenue in Q4.

Moving to operating expenses. In Q4, we expect core operating expenses of approximately $20 million, plus $10 million of investments in innovation, which includes $7 million to $8 million of investments related to Sherlock. With that, I'll turn the call back to Carrie to conclude.

Thanks, Ken. We'll plan to exit the transition year of 2025 and head into 2026 with important near-term catalyst for growth as we advance into the next phase of our multiyear strategy. We've done the work in the last 3 years that gives us the confidence and the capabilities we need to achieve our goals. We have delivered cost productivity at the business level and product level, develop our people and infuse new talent in the organization, leveraged our commercial strength to diversify our customer base and implemented enterprise-wide rigor and built a strategic innovation road map, strengthened our cash flow profile while maintaining a strong balance sheet that has allowed us to invest in attractive innovation pipeline opportunities, including internal product development along with M&A.

We've also refreshed our Board with the addition of 3 new independent directors over the last 3 years, including last week's announcement, adding Steven K. Boyd as a Director and appointing Jack Kenny as Chair of the Board. Also, we'd like to thank Mara Aspinall, who has decided to step down after over 8 years of service to pursue new opportunities. We're grateful for her many contributions and wish her the very best.

Our foundation is strong, but our work is not done. We recognize that in order to capitalize on the many opportunities ahead of us, we must continue to execute on our priorities and deliver more innovation. Our entire team is working with urgency and is aligned in purpose to decentralize diagnostics and connect people to care that is more accessible, convenient, private and personalized to create long-term value for customers and shareholders. We're confident in the path ahead. With that, I'm pleased to turn the call over to the operator for Q&A. Operator?

[Operator Instructions]

Our first question comes from Mac Etoch from Stephens Inc.

I appreciate you taking my questions. just a few for me, and I'll let others ask some. But maybe could you just discuss this bio -- sorry, apologize if I am pronouncing incorrectly, BioMedomics acquisition and what attracted you to that asset just to start, and I'll follow up on that.

Yes. It's a really nice tuck-in that aligns precisely with our portfolio internationally. So rapid diagnostic testing for underserved markets -- the strength we have in Africa, including -- we don't talk as much about Latin America. But for low-cost tests that identify pressing health care challenges whether it's the infectious disease success we've had in HIV or HCV, sickle cell is one of those opportunities where the populations in those underserved regions are often undiagnosed. So we had heard that need. We've been talking with BioMedomics for many years and working with them. And so the opportunity to bring that -- to tap that into our portfolio, leverage the strength of our relationships, our commercial distribution and reach and just put it right into the portfolio made a ton of sense. So a very promising potential for what we think are smart capital deployment.

And Mac, we also -- we think it has a strong return on invested capital. You noticed in the deal structure, we said it's a small upfront with some contingent considerations if they achieve certain milestones, 3 to 5 years out. We believe that structure allows us to really deliver value. We mentioned also that it will be breakeven cash flow. And what that -- as Kerry mentioned, it's leveraging a lot of our capabilities. So we really don't need to add a lot to deliver this and to put it into our channel. And then as we grow the revenue, we'll be able to leverage and be accretive going forward.

I appreciate the context there. And then secondly, pretty good cost management on your part, both at the gross margin level and in terms of OpEx. Just given where revenues fell, can you just highlight some of the puts and takes around gross margins and then given the in-sourcing was completed in 2Q, are there any lingering costs that might have fallen into the quarter?

Yes, that's a great question. Yes, for gross margins, we did do a little bit better than guided than expected. A lot of that was driven by our lower scrap than expected, which is really a complement to our operations team and their continued automation and operational efficiencies. As far as OpEx, that was in line with our spend. And really, our core business essentially is breakeven and what we -- where we do choose to spend our dollars beyond that are on innovation. And in this case, innovation focused on delivering our Sherlock CT/NG clinical trial submission as well as internal innovation.

And then a little bit other benefits of gross margins, there was a little bit of a mix benefit in Q3. And we did mention we guided in Q4 that will be a little bit below Q3. Part of that is the mix, seasonality and the mix change where we expect to see a little bit more international revenue in Q4 as a mix, which will lower the margins a bit.

[Operator Instructions]

There are no further questions at this time. I would now like to turn the call back over to Carrie Eglinton Manner for closing remarks.

Thank you, Mac, for your questions and everybody for participating today. We appreciate your continued interest in OTI. And with that, we'll close the call. Thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect.