Q3 2024 OraSure Technologies Inc Earnings Call
Okay.
Speaker Change: Good day and thank you for standing by welcome to the Auris Sure Technologies, Inc. 2024 third quarter earnings conference call at.
Speaker Change: At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you Wilton here, an automated message advising your hand is raised to withdraw your question. Please press star one one again.
Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your first speaker today, Jason Parkman, Vice President of Investor Relations. Please go ahead.
Jason Parkman: Good afternoon, and welcome to Orasure Technologies' third quarter 2024 earnings call participating on the call today for OTI or Carrie Eglinton manner, our president and Chief Executive Officer, and Ken Mcgrath, Our Chief Financial Officer.
Jason Parkman: As a reminder, today's webcast is being recorded and the recording can be found on our Investor Relations website.
Speaker Change: 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.
Speaker Change: This planned regulatory filings and approvals expectations and strategies.
Speaker Change: Actual results could be significantly different.
Speaker Change: Factors that could affect results are discussed more fully in <unk> SEC filings. It's annual report on Form 10-K for the year ended December 31 2023.
Speaker Change: Its quarterly reports on Form 10-Q, and its other SEC filings.
Speaker Change: 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.
Speaker Change: <unk> undertakes no obligation to update any forward looking statements to reflect events or circumstances. After this call.
Speaker Change: I am pleased to turn the call over to Kerry.
Kerry: Thanks, Jason and thank you to everyone for joining us today.
Kerry: We're pleased to provide an update on the progress we're making on the three pillars of our strategic transformation, while strengthening our foundation.
Speaker Change: To elevating our core growth.
Speaker Change: And three accelerating profitable growth.
Speaker Change: Few notable developments during the third quarter include we delivered Q3 revenue that was in the top half of our guidance ranges for core revenue and total revenue.
Speaker Change: We received initial international orders for or a quick HCV self test following receipt of W. H O prequalification status in July the <unk>.
Speaker Change: Eric like HCV self test is the first hepatitis C self test to earn this designation and we look forward to expanding access to this important task.
Speaker Change: Also we are expanding our sample management portfolio with the planned launch of a new solution targeting in the rapidly growing blood proteomics market in the second half of 2025.
Speaker Change: In order to further streamline our organization as well as sharpen our focus on markets that align with our strengths and diagnostics and sample management sure Andrew that offer better opportunities for growth and profitability. We are in the process of winding down our risk assessment testing business.
Speaker Change: Which also includes substance abuse testing, we expect to exit this business by the end of 2024.
Speaker Change: During Q3, we generated $12 $7 million of operating cash flow, which includes positive cash flow from operations for the core business.
Speaker Change: And with our healthy balance sheet, we continue investing in our innovation roadmap and the opportunities internally and externally that leverage our existing strengths in order to position OTI for accelerated and sustainable profitable growth.
Speaker Change: Starting with our core business Q3 core revenue of $37 $8 million was above the midpoint of our guidance range performance in both diagnostics and sample management collision was consistent with the outlook embedded in our guidance.
Speaker Change: And our international business had a strong quarter as we expected.
Speaker Change: Within our diagnostics portfolio, we continue to have success with multi product sales across our portfolio of the HIV HCV and syphilis test as health care providers and public health organizations recognize the need for a <unk> approach to rapid testing given the.
Speaker Change: <unk> overlap in patients at risk for these infections. We are also seeing solid momentum with diagnostics direct shipped ore health checks. Following our launch of this test at the end of Q1.
Speaker Change: In our international business, we received initial orders for Oracle like HCV Self Cup. Following its debut HL Prequalification in July as a reminder, the ORC like HCV self test is the first hepatitis C. Self tests to earn this designation and we are actively working.
Speaker Change: With the global health community to bring their pets to populations in need, including the 50 million people living with HCV and 1 million individuals who acquire HCV each year.
Speaker Change: Shifting the sample management solutions revenue increased sequentially in Q3, and we continue to see signs of a.
Speaker Change: Gradual recovery in the market environment as genetic testing and research segments adapt to the post COVID-19 landscape and an evolving regulatory environment for a diagnostic labs.
Speaker Change: Moving to operation operating efficiency, we continue to drive and demonstrate the benefits of operational improvement through an enterprise wide focus on continuous improvement.
Speaker Change: And by leveraging our capabilities, including in automation.
Speaker Change: To that end earlier this year, we discussed our initiative to in source production of certain sample management products from external contractors in Canada into our own manufacturing center of excellence in Bethlehem, Pennsylvania, We're making terrific progress and expect to complete the transfer.
Speaker Change: In 2025, consistent with the project timelines we've outlined previously.
Speaker Change: Internalizing. These activities is expected to further improve our operating efficiency.
Speaker Change: Bridging our existing infrastructure as we work to expand our gross margins.
Speaker Change: As I mentioned earlier as part of our efforts to focus our resources in areas that leverage our core strengths and streamline our cost structure, we plan to exit our risk assessment testing business by the end of 2024.
Speaker Change: OTI has served this market for many years, but our addressable market has now declined significantly due to several external factors, including the evolving legal status of marijuana and cannabis product.
Speaker Change: And changes to the department of transportation testing guidelines.
Speaker Change: Our legacy risk assessment testing products do not meet these new guidelines and would have required significant investment by OTI in bulk product.
Speaker Change: The resources and the new production equipment to continue to successfully compete.
Speaker Change: Given this backdrop and our priority focus on growth opportunities, we have decided to wind down and exit our risk assessment testing business by the end of this year.
Speaker Change: Switching gears to product innovation.
Speaker Change: We are excited to begin sharing more details around our plan 2025 launch into the proteomics space. Our anticipated launch is a Prime example of our sample management solution strategy in action, where we seek to drive growth in our portfolio by targeting new sample type.
Speaker Change: Light and applications.
Speaker Change: We anticipate our proteomics product will address all three priorities as it represents expansion in the blood collection with innovation and protein stabilization that enables us to enter new high growth applications, such as liquid biopsy, all timers disease and diabetes to name a few.
Speaker Change: Sample collection solutions for the years and other chronic illnesses represents a total addressable market in one hundreds of millions of dollars that is rapidly growing.
Speaker Change: These applications, specifically in developing areas like oncology and neurology, maybe more research oriented in the near future, but are expected to evolve into the clinical space overtime, just as genomic risk testing that.
Speaker Change: Our proprietary innovation.
Speaker Change: Sorry.
Speaker Change: Our proprietary innovation target specific gaps in competitive offerings intended benefits of our proteomics device and chemistry combination include ambient temperature shipping and room temperature storage over a longer duration of.
Speaker Change: Time, as well as compatibility with traditional and Nextgen proteomics technologies.
Speaker Change: Initially, we anticipate our product to be per phlebotomy collected blood, but we expect future iterate iterations to marry our proprietary chemistries with self collected small volume blood technology access through our <unk> partnership we look forward to sharing more details as the launch progresses.
Speaker Change: Another important growth driver for our collection kits portfolio involves working with key partners to validate new applications for our Collier to collection devices. We are pleased to share our recent collaboration and which Pac bio validated and endorsed rdna, Gina <unk> saliva collection devices.
Speaker Change: For use with nano buying the extraction kits unpack buyers long read sequencing platform.
Speaker Change: One read sequencing provides insights about complex genomic variables, Inc, including complex bacterial genomes and are also used in applications such as oncology treatment monitoring rare disease testing and chronic disease research.
Speaker Change: Additionally, we are making good progress on our colleague <unk> initiatives for FDA submission of self collected volumetric year end by end of 2025, and the HIV claims expansions that we discussed last quarter on each we expect to share more next year.
Speaker Change: With that I'd like to turn the call over to Ken to discuss our financial results and guidance.
Ken McGrath: Thanks, Carey I'm happy to discuss our results for the third quarter of 2024 and provide updates on our financial outlook.
Speaker Change: In Q3 total revenue was $39 9 million.
Speaker Change: Core revenue, which excludes COVID-19 products and the molecular service business that we have exited was $37 8 million.
Speaker Change: Core revenue decreased 1% on a year over year basis in Q3 and was impacted by a decrease in revenue from the risk assessment testing business that we're exiting.
Speaker Change: Excluding the impact from the risk assessment business.
Speaker Change: Core revenue growth in Q3 would have been 1%.
Speaker Change: Within core revenue.
Speaker Change: Our diagnostic products generated $22 million of revenue in Q3.
Speaker Change: It increased 13% year over year.
Speaker Change: Driven by strong order trends in our international HIV business.
Speaker Change: As we previewed last quarter.
Speaker Change: Sample management revenue in the third quarter was $12 8 million and decreased 16% year over year.
Speaker Change: But did increase on a sequential basis for the second consecutive quarter.
Speaker Change: Several key end markets show signs of gradual recovery.
Speaker Change: COVID-19 products contributed $2 2 million of revenue in the third quarter.
Speaker Change: Which was above our expectations due to the timing of deliveries at the end of the quarter under our stay warm contract with the U S government.
Speaker Change: Our GAAP gross margin in the third quarter was 42, 8%.
Speaker Change: And non-GAAP gross margin was 43, 3%, which was consistent with our expectations.
Speaker Change: GAAP operating expenses in the quarter were $23 1 million.
Speaker Change: During Q3, we had $2 9 million of noncash stock compensation expense and.
Speaker Change: And 353000 for reduction in workforce severance.
Speaker Change: Our GAAP operating loss in Q3 was $6 million.
Speaker Change: And our non-GAAP operating loss was $2 7 million.
Speaker Change: As Cary discussed during Q3, we initiated steps to exit our risk assessment testing business by the end of 2024.
Speaker Change: The risk assessment business generated revenues of $1 9 million in Q3, and $6 3 million. During the first nine months of 2024, which was a decline from $2 6 million in Q3, 23, and $7 5 million during the first nine months of 2023.
Speaker Change: The risk assessment business have become slightly unprofitable with the declining revenue.
Speaker Change: We are also making progress on the restructuring initiatives, we announced in May.
Speaker Change: Including completing our exit from the molecular sequencing services business during Q3 as we expected.
Speaker Change: Moving to our balance sheet.
Speaker Change: We ended the third quarter with zero debt and total cash and cash equivalents of $279 million.
Speaker Change: During Q3, we generated $12 7 million of operating cash flow drew.
Speaker Change: Driven by solid operational performance in our core business as well as the collection of accounts receivable related to entellus Schwab following the completion of our largest contract with the U S government.
Speaker Change: Turning to guidance, we are guiding to fourth quarter total revenue of $36 million to $38 million we.
Speaker Change: We expect core revenue in Q4 to be 35% to 37 million, which represents a return to core growth on a year over year basis, and this range includes $1 million to $2 million of risk assessment testing revenue as we wind down that business.
Speaker Change: Revenue from COVID-19 products is expected to be approximately $1 million in the fourth quarter, which we anticipate to be the run rate for COVID-19 through the first quarter of 2025.
Speaker Change: Moving to gross margin, we expect our gross margin in Q4 to be consistent with the level we reported in Q3.
Speaker Change: Our fourth quarter gross margin forecast is slightly lower than our prior outlook due to two primary factors.
Speaker Change: Our expectation for another strong quarter in international diagnostics business, which carries gross margins that are lower than our corporate average and second elevated cost in our risk assessment business as we wind down production and exit that business.
Speaker Change: Longer term, we continue to believe we can drive meaningful gross margin expansion and operating leverage from growth in 2025 and beyond.
Speaker Change: We also see significant opportunities to drive efficiencies across our enterprise, including further leveraging our automation capabilities.
Speaker Change: With that I'll turn the call back to Kerry to conclude.
Speaker Change: Thanks, Ken.
Kerry: As we detailed today, we continue to advance our strategic transformation with.
Speaker Change: We generated positive operating cash flow this quarter, even with significantly lower COVID-19 volumes in our core business delivered positive cash flow from operations during Q3.
Speaker Change: We continue to focus our resources in markets that align with our core strengths and rapid diagnostics and sample management and that offer the most attractive opportunities for profitable growth, while we streamline our operations in order to unlock efficiency gains.
Speaker Change: Our Q4 outlook reflects a return to year over year growth in core revenue.
Speaker Change: And we are innovating in product development, and our portfolio Road map, both for new launches and enhancements to existing product lines.
Speaker Change: Overall, we are confident that OTI is well positioned to return to growth in 2025 and beyond as key end markets gradually recover and we leverage our differentiated assets are unique internal capabilities and our strong customer relationships.
Speaker Change: <unk>, our balance sheet is enabling flexibility to invest in our innovation roadmap, including internal development partnership and acquisition opportunities that can build on our existing assets and strength to accelerate our growth.
Darren: With that I'm pleased to turn the call over to Gary on the operator for Q&A Darren Thank.
Gary: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again please.
Gary: Please standby as we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Patrick Donnelly of Citi. Your line is now open.
Brendon: Hi, This is brendon on for Patrick and Thank you guys for taking my question. So first off thanks for the additional color on the risk assessment business. I was wondering if you guys would be able to kind of give an update on how long it may take to work through those additional gross margin headwinds moving forward.
Speaker Change: Yes. Thank you for the question Brendan.
Speaker Change: You mentioned in the guidance, we have some great opportunities to continue to improve our gross margins over time.
Speaker Change: Part of this for Q4 is driven by Hey, like you mentioned the risk of test and assessment business and then also the international mix that we're seeing.
Speaker Change: And as a reminder, we've said it before that the international business has lower margins than the overall business overall gross margin of the business.
Speaker Change: But we continue to be excited about the opportunities to drive efficiency and those what excites US is when it comes to some of the efforts that we've gone forward as far as.
Speaker Change: Leveraging our automation through our business and leveraging some of the automation and capabilities that we developed while implementing COVID-19 <unk> products as well as consolidating our business into our opus way facility in Bethlehem.
Speaker Change: It's allowed us to do kind of consistent what we announced in Q1 earnings.
Speaker Change: Where we are consolidating some of our manufacturing both external contract manufacturing as well as manufacturing from Thailand into the Opus way facility and what that allows us to do is leverage that overhead.
Speaker Change: So we have a lot of optimism about.
Speaker Change: About driving additional gross margin growth and I think what we said.
Speaker Change: In prior quarters is we have visibility and expectations in the future to get back to the <unk> for gross margin.
Speaker Change: Got it. Thank you I appreciate the color and then just to follow up wanted to touch on the <unk> partnership.
Speaker Change: Any more details on a possible timeline or even just an update on how the new products are kind of progressing. Thank you.
Speaker Change: Yes, Thanks, Brendan we're very encouraged by the co development and strategic partnership with SAP for US we've talked about it being off to a good start in terms of launches.
Speaker Change: We remain in the regulatory process.
Speaker Change: I should say they remain on the regulatory process, which is always always has uncertainty in it but we've accounted for that so youll remember that we always described that the revenue would be for 2025, even though we knew.
Speaker Change: The mission was planned ahead of time based on that uncertainty and their experience and our experience with it we had planned for 2025 and that's still what.
Speaker Change: What we are anticipating but also a very good start.
Speaker Change: Regulatory process to be worked to be continued to work through and then still planning 25 launch and the revenue that we had previously talked about.
Speaker Change: Thank you Brandon.
Speaker Change: Thank you our next question.
Speaker Change: Comes from the line of Jacob Johnson of Stephens. Your line is now open.
Speaker Change: Good afternoon. This is Michael on for Jacob just just a few quick ones for me.
Speaker Change: I think you're guiding to a roughly 5% year over year growth in core revenues report year 'twenty four.
Speaker Change: Do you see this as a reasonable starting place for modeling 2025 outside of the superior contribution.
Speaker Change: Yes, I think what we've said in prior earnings calls us.
Speaker Change: What was the exact quarterly views Jason for overall growth.
Speaker Change: Modest I think we use modest growth in the past.
Speaker Change: This little bit is probably the.
Speaker Change: Example of Q4 of last year being a little bit lower.
Speaker Change: So we are looking for moderate growth in 2025.
Speaker Change: Being driven by our investments in our partnership and diagnostics direct with our syphilis test, which we are very very positive on as well as <unk> driving that growth.
Speaker Change: Yeah, we'll provide martin thanks, Ken will prove and Mac for the question. We will provide more details in February we don't provide that sort of 2025 guidance.
Speaker Change: But we will provide more color to that after our Q4 or within Q4 earnings.
Speaker Change: And I think we are building on a quarter over quarter sequential growth and a gradual.
Speaker Change: Covering you that we continue to stay with them with some green shoots just in terms of the customers we're adding.
Speaker Change: I appreciate the color.
Speaker Change: And then <unk>.
Speaker Change: Real quick $280 million with the cash.
Speaker Change: How should we think about this capital being deployed in the near term should we expect more continued partnerships and smaller investments or could you potentially look at larger deals one was 30.
Speaker Change: To be presented.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Highly focused on innovation accelerating growth through our product roadmap.
Speaker Change: Opportunistically we.
Speaker Change: Very clearly are working on internal development, and where we can accelerate that profitable growth through external opportunities from strategic transformation through bolt on.
Speaker Change: Gives me through bolt ons and otherwise.
Speaker Change: Yes, I think it's it's the opportunity that rebuilding and strengthening our foundation has given us.
Speaker Change: Which is the.
Speaker Change: The opportunity to really do the right diligence we've talked about this before I know Matt.
Speaker Change: Sheridan and probably every quarter, but to take multiple shots on goal aligned with the strengths we have today leverage our asset and really figure out that.
Speaker Change: It takes it takes the time to make the right bet.
Speaker Change: With multiple opportunities of the cash we have that that gives us the potential to do that so I'd say everything you described is that as well and our line of sight and we look forward to talking more about about each of those.
Speaker Change: I appreciate you taking the questions.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Vijay Kumar of Evercore ISI. Your line is now open.
Vijay Kumar: Hey, guys. Thanks for taking the question.
Speaker Change: On the Q4.
Speaker Change: How should we think about gross margins and opex on a sequential basis.
Speaker Change: Is that going to be flattish up or down.
Speaker Change: And gross margins, it's been it's been it's moved around quite a bit given the Max what's the rate.
Speaker Change: Baseline for gross margins from which to spend.
Speaker Change: Yeah. Thanks, that's great question, yes, what we're guiding towards is consistent with Q3, so to your point relatively flattish the drivers for that for Q4 as well.
Speaker Change: We are seeing or expecting.
Speaker Change: More international revenue than we expected.
Speaker Change: Then originally when we gave the guidance in the prior quarter.
Speaker Change: In addition, with as we wind down our risk assessment business the <unk>.
Speaker Change: Costs related to that so we are considered pretty consistent from an operating same pretty consistent with Q3.
Speaker Change: <unk> forward, we do have expectations and visibility to margins gross margins in the 50%.
Speaker Change: Again, driven by all the things we talked about.
Speaker Change: Whether it's automation operation efficiency consolidations into one facility all of those elements.
Speaker Change: We do have expectations in the in the future in outer years to be in the 50% margins.
Speaker Change: So.
Speaker Change: The back half here.
Speaker Change: The low forty's is that the right jump off point.
Speaker Change: Should be modeling gross margin expansion.
Speaker Change: Yes, we haven't guided to 2025.
Speaker Change: I would say Q3 and Q4 were impacted.
Speaker Change: A bit by the international mix.
Speaker Change: Which is a bit more than usual.
Speaker Change: But we havent guided to 25 as far as margins, where we have guided to is.
Speaker Change: We think in the long term future later mid to long term future, we have visibility expectations to be in the 50% range.
Speaker Change: Sorry, Ken.
Speaker Change: What is the right baseline right. So clearly back half is not the right baseline given the Max is mid Forty's is the right baseline for us to model.
Speaker Change: Gross margins going forward, what does the I'd say, Brian wind is probably right baseline is probably like the mid <unk>.
Speaker Change: In that range.
Speaker Change: Understood that's helpful and maybe one for you on this <unk>.
Speaker Change: Revenues.
Speaker Change: Meaningful could these revenues be.
Speaker Change: What's the.
Speaker Change: The margin profile on this.
Speaker Change: And is that when you say revenues to fall through in fiscal 'twenty five.
Speaker Change: Is it back half of 'twenty five.
Speaker Change: Yes, Hi, Vijay it's it it's good to hear you.
Speaker Change: Yes.
Speaker Change: The specific of surround SaaS efforts, we will share as well.
Speaker Change: We launched the product together with them. So we are anticipating sharing more on that in February as well I'm talking more about 25, yes.
Speaker Change: Opportunities are significant so in terms of what kind of scope without without sizing that theyre, giving guidance. What we've shared is it really spans our portfolio and I think that's part of our excitement on that.
Speaker Change: Sample management side, it's an opportunity in small volume self collected blood.
Speaker Change: We have shared that we anticipate that to be the first launch.
Speaker Change: And then it's a range of diagnostics products from a visual and digital lateral flow through to molecular like and onwards too.
Speaker Change: The potential for a molecular point of care type offering and the roadmap down the road. So I know its unsatisfying. When you ask a detailed question is not to give you. The detailed line by line here is the exact timing of launch. This is contribution and this is a margin but.
Speaker Change: We do anticipate sharing more on that and how it can be accretive to our core growth exactly to follow yes, we've shared in the past when it comes to some of these deals we do expect them to be accretive.
Speaker Change: From an operating perspective.
Speaker Change: And then just one thing to keep in mind is the P&L geography could be different depending on some of these deals.
Speaker Change: You could see from between gross margins or operating margins, where we leverage.
Speaker Change: Understood and maybe one last one for you Ken this risk assessment exit.
Speaker Change: Does it impact the P&L from a gross margin and operating margin standpoint.
Speaker Change: Yes.
Speaker Change: Now I think.
Speaker Change: We've said, we said it was slightly.
Speaker Change: Declining in revenue as well as slightly unprofitable.
Speaker Change: So it should improve slightly.
Speaker Change: As you pull that mix out.
Speaker Change: From a gross margin and an operating perspective.
Speaker Change: And in Q4 like on revenues.
Speaker Change: Last quarter should we expect some risk assessment revenues in France next year correct, Yes, we will be exiting by the end of 2024 correct.
Speaker Change: Understood. Thank you guys.
Speaker Change: Thanks P J.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Casey <unk> of J P. Morgan. Your line is now open.
Casey: Hi, great. Thank you for taking my questions.
Casey: I guess the first one can you just walk through what drove the 13% growth in diagnostics, maybe if you could break that down between HIV and HCV and.
Speaker Change: Maybe internationally versus domestic kind of where you saw the strength in the quarter.
Speaker Change: Yes, we saw some we saw a lot of strength.
Speaker Change: Kind of alluded to it during <unk>.
Speaker Change: During the script in our international business, where we saw some positive growth versus the prior year as well as sequentially.
Speaker Change: That's probably the big driver was international and the domestic business.
Speaker Change: And we did see some shrinks.
Speaker Change: Domestically, but the majority of the growth was from international NSF HIV.
Speaker Change: Correct.
Speaker Change: Got it okay.
Speaker Change: And then curious to hear your thoughts or get an updated view on how you guys are thinking about the consumer genomics market one of the larger players in that space has been going through a lot of.
Speaker Change: Turmoil publicly over the last few weeks. So I'm just curious to hear your latest thoughts on the opportunity.
Speaker Change: There for your business.
Speaker Change: Yeah, Casey Youre right on.
Speaker Change: There is some significant.
Speaker Change: Turmoil in and.
Speaker Change: Some of our largest customers.
Speaker Change: We have very close relationships and work sort of hand in hand and have shared some.
Speaker Change: Renewal ends.
Speaker Change: Our agreements just the the.
Speaker Change: I believe and the go forward and the opportunity is there but yes.
Speaker Change: Those large customers we've talked about this.
Speaker Change: Yeah that experienced the and their end market softness have continued to be something that we are tracking closely on where our optimism comes in.
Speaker Change: Other than that.
Speaker Change: Durability of their opportunities, but I would say a simultaneously.
Speaker Change: And Adena.
Speaker Change: A number of new customers across different segments as well. So we believe in consumer genomics and that there will be that return.
Speaker Change: Growth for all of US all of those customers, including our larger ones.
Speaker Change: And we've added significant new customer.
Speaker Change: Dave and clinical diagnostics and pharma and biotech we have talked about segment segments like animal health, So youll see that.
Speaker Change: Yes, the green shoots are there, but we all are looking for is the accelerated and return to growth.
Speaker Change: And you know you point out one of those significant ones, but I think what the increasing applications and <unk> across the board.
Speaker Change: We went from a strengthened DNA to adding RNA capabilities, and we just talked and this yes. That's.
Speaker Change: Really it's about our proteomics launched the increasing applications that connect these disease biomarkers to Disney.
Speaker Change: Disease and potential treatments, it's only going to increase we believe its a matter of when not if and so while we believe consumer genomics remains important.
Speaker Change: This ability to add applications and customers and opportunities. We believe those green shoots are going to grow and that will be a significant part of the return to growth.
Speaker Change: Okay.
Speaker Change: Got it that's helpful color, maybe if I can just squeeze one last one in.
Speaker Change: Curious to hear your thoughts on the go to market strategy for the sample management solution in blood proteomics or you're going to have to.
Speaker Change: Is there any additional investment needed to launch that product from a commercial perspective next year and then you mentioned the Tam is in the hundreds of millions of dollars.
Speaker Change: I'm just kind of curious if.
Speaker Change: If that tenant is going to be that big.
Speaker Change: At launch or.
Speaker Change: Just kind of how youre thinking about that end market and the opportunity here for sure. Thank you.
Speaker Change: Yeah, Thanks, Casey Youre right on that that ramp up and you'll note we talked.
Speaker Change: In our prepared remarks about starting with research use only with academic opportunities.
Speaker Change: Arm of opportunities with exploration because it really is about the increasing.
Speaker Change: And potential that cannot protein and protein <unk> biomarkers to disease. So we highlighted oncology neurology neurology in cardio metabolic applications that.
Speaker Change: We mentioned liquid biopsy that includes all timers disease and other dimensions of course.
Speaker Change: So that's a key.
Speaker Change: Customer base that we serve today, many of whom have both blood and saliva based applications in there.
Speaker Change: Under the scheme of their portfolios, but yes, because we're launching <unk> first and this really is about emerging applications in proteomics, which we believe.
Speaker Change: It will be a ramp up but it's one of the exciting areas and omics.
Speaker Change: We're excited to bring some benefits like that longer duration of room temperature storage capabilities and ambient temperature.
Speaker Change: Shipments and not having to do the cold storage et cetera.
Speaker Change: And that our solution, we intended to be compatible with the Nextgen a proteomics. So I know I'm getting started my excitement and on multiple fronts on that but yes, I expect it'll ramp up I think the art itself kind of demonstrates that but we do believe it is an application of the future with really.
Speaker Change: <unk> tremendous potential.
Speaker Change: Yeah.
Speaker Change: Okay got it thank you.
Speaker Change: Thanks Kathy.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Andrew Cooper of Raymond James Your line is now open.
Speaker Change: Hey, everyone. This is a no on for Andrew Thanks for the questions.
Speaker Change: Firstly I was just kind of curious you mentioned international growth has been pretty strong and the margin impacts around that.
Speaker Change: How important are those international growth vectors for your core business going forward and then how would that affect any of the margin ramp longer term towards that 50% range.
Speaker Change: International is healthy.
Speaker Change: Healthy portion of our overall core business.
Speaker Change: We do have.
Speaker Change: Solid expectations for growth in that area.
Speaker Change: As far as the impact on gross margins, what we get excited about is the operational efficiency throughout all of our business and that allows us that gives us visibility.
Speaker Change: Two to get to that 50% gross margin target that we're looking to get to.
Speaker Change: In the mid to long term.
Speaker Change: And those really come from the operational efficiency that we've talked about.
Speaker Change: So, yes, I'd say its a portion of our business.
Speaker Change: It's a healthy portion of our business. We're excited about the growth opportunities there, but we're also excited about the opportunities to drive efficiency throughout the overall business to improve our margins and just to add you can point out around international it let's say.
Speaker Change: A part of the the potential we have is this long track record of <unk>.
Speaker Change: Service too and collaboration with and.
Speaker Change: Credibility with global Thunders, who are a very big portion of the market because it's a big public health need and they are very important are government testing programs and international agencies that support that including through government direct ministries of health.
Speaker Change: And that's a complex environment to navigate which we have decades of serving.
Speaker Change: And we are continuing to brain like WH L. P Q.
Speaker Change: Cleared our status.
Speaker Change: Yes to that.
Speaker Change: And one of the other things we're seeing is real patient preference for saliva collection in international markets versus blood. So a part of the success of reach extra accessing patients and.
Speaker Change: Being able to understand the status and get to treatment and one of the most important diseases in our lifetimes and HIV is the ability to get patients to do the testing and NR all fluid test.
Speaker Change: Is a real enabler for that so I think our track record and demonstrated success over many years really how it.
Speaker Change: We're continuing to build on that and that that growth is an opportunity I think that we think is a big one.
Speaker Change: Awesome.
Speaker Change: And if I could just sneak one more in.
Speaker Change: What would the incremental investments look like in order to drive some of that core growth going forward. I know you have the blood proteomics and the back half of next year, you have SaaS rose partnership coming online.
Speaker Change: But you're also rolling off the risk assessment business, which is somewhat minor revenue, but still.
Speaker Change: But.
Speaker Change: Could be some of those incremental investments that we might need to see in order to get growth or are you, mostly focusing on those organic opportunities that you already have in place.
Speaker Change: Yeah, I mean, I'd say, we see those in our run rate.
Speaker Change: We're not looking at.
Speaker Change: Large incremental investment opportunity as a part of what we're focused on is leveraging the strengths. We have the capabilities. We have that commercial channel we have the customer relationship and history, we have and so we view that as largely within our run rate.
Speaker Change: We decided to add more we'll definitely share that but as we've been planning 20.
Speaker Change: <unk> 25, I would say it really is other than sort of what we've talked about before.
Speaker Change: In the past, we've talked about what safra, some past calls that it could be a few millions of dollars of investment however to Terry's point, what we what we're trying to do is leverage our cause as much leverage as much as we can our existing capabilities and be able to deliver with our existing capabilities. So run rate's, a pretty good assumption whether or not.
Speaker Change: There's $1 billion here or there.
Speaker Change: To help boost some of those launches or are startups, you could see that.
Speaker Change: And then we'll pivot as necessary.
Speaker Change: Our work is going to be and successful launches.
Speaker Change: I said it earlier, but we are incredibly focused on innovation. We've spent two years strengthening the foundation, while making investments into accelerating our innovation pipeline. This is really the financial position. We're in we have a tremendous opportunity through this investment internally and externally.
Speaker Change: To really accelerate innovation and our strengths allow us the potential to scale that and that's where we're laser focused.
Speaker Change: Awesome. Thanks.
Speaker Change: Thanks.
Speaker Change: Thank you. This concludes our question and answer session I would now like to turn it back to Kerry for closing remarks.
Kerry: Thank you Darien, we really appreciate everyone's interest and look forward to the ongoing conversations will talk to you again in February if not before.
Speaker Change: Thanks.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Okay.
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Speaker Change: Hmm.
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Speaker Change: Yeah.
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Speaker Change: Hmm.
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Speaker Change: Okay.