Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- QuidelOrtho Corp (QDEL, Financial) reported Q3 revenue of $727 million, demonstrating solid progress in executing business improvement initiatives.
- The company achieved adjusted EBITDA of $171 million, marking the first quarter in nine quarters to achieve growth in both adjusted EBITDA dollars and margin since the pandemic.
- QuidelOrtho Corp (QDEL) has strengthened its leadership team with the addition of experienced industry leaders, enhancing its focus on technology and human resources.
- The company is implementing cost and process improvement initiatives expected to deliver incremental margin contributions in 2025 and 2026.
- QuidelOrtho Corp (QDEL) reinstated its full-year 2024 financial guidance, reflecting confidence in its business strategy and execution.
Negative Points
- Total reported revenue declined by approximately 2% due to higher COVID-19 and flu revenue in the prior year period.
- The company faces potential headwinds from China's anticorruption policies and changes to reimbursement on cardiac products in certain Chinese provinces.
- Adjusted gross profit margin decreased to 49.2% from 50.5% in the prior year period, primarily driven by lower respiratory test sales.
- QuidelOrtho Corp (QDEL) anticipates a year-over-year increase of $25 to $30 million in SG&A expense related to expected bonus accruals.
- The company is experiencing customer delays in instrument purchases and installations due to Chinese government policies, which could impact future sales.
Q & A Highlights
Q: Can you elaborate on the 100 to 200 basis points adjusted EBITDA margin improvement expected for 2025?
A: Joe Busky, CFO: The improvement is primarily driven by the $100 million in annualized cost savings, with $20 million realized in the first half of 2025. Additional cost-saving initiatives are underway across procurement, IT, and other areas. However, we also anticipate a 3% merit increase for employees and normal inflation, which could impact margins. The timing of the 2024-2025 respiratory season could also affect margins.
Q: How predictable is the demand for consumables in the labs business, and what is the outlook for Q4 and 2025?
A: Joe Busky, CFO: The labs business has good visibility due to five to seven-year contracts and predictable ordering patterns. We expect mid-single-digit growth in this business, with some variability due to timing between quarters.
Q: What are the expectations for the respiratory season, given the early start last year and the summer spike this year?
A: Joe Busky, CFO: We are assuming a typical flu season with a 30% year-over-year decline in respiratory revenue for Q4. We are cautious about the timing of revenues, which could shift to Q1 2025. The COVID-19 revenue is expected to be in the range of $160 to $170 million for the full year.
Q: Can you provide more details on the organizational changes and their impact on the company?
A: Brian Blazer, CEO: We eliminated the Chief Commercial Officer and COO roles to flatten the organization, improve speed and efficiency, and get closer to customers. The changes are at the top level and have no impact on customer-facing roles. We have strong leaders in place who will now report directly to me.
Q: What is the outlook for the China market, considering the cardiac reimbursement pressures and potential stimulus benefits?
A: Joe Busky, CFO: We expect high single-digit growth in China for 2024 and mid to high single-digit growth for 2025. While there are potential headwinds from value-based pricing and anti-corruption policies, the Chinese government's economic stimulus plan could be a tailwind. We are monitoring the situation closely.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
