QuidelOrtho (QDEL) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter 2024 revenue was $711 million, down from$ 846 million in the prior year, primarily due to COVID-19 related declines [117] - Excluding COVID-19 revenue, total revenue grew by 6% in constant currency, with a 10% growth when excluding a one-time $21 million third-party collaboration settlement from the previous year [117] - Adjusted EBITDA was$ 132 million compared to $245 million in the prior year, with an adjusted EBITDA margin of 19% versus 29% [51] - The company recorded a noncash goodwill impairment charge of$ 1.7 billion for the North America reporting unit due to a decrease in estimated fair value [19] Business Line Data and Key Metrics Changes - First quarter 2024 respiratory revenue was $137 million, including approximately$ 50 million in COVID-19 revenue, with a 48% year-over-year decrease primarily due to lower COVID-19 revenue [18][106] - Non-respiratory revenue was flat at $574 million, but grew 4% when excluding the one-time collaboration settlement [18] - Point-of-Care business grew approximately 38% year-over-year, driven by strong sales of Sofia tests [31] - Molecular Diagnostics revenue grew approximately 15%, albeit from a low base [31] Market Data and Key Metrics Changes - Revenue growth in North America was 5%, EMEA grew 6%, China grew 12%, and the Rest of the World grew 6% in constant currency, excluding COVID-19 revenue [50] - The company expects COVID-19 revenue for the full year 2024 to be approximately$ 150 million, down from a prior expectation of $225 million [52] Company Strategy and Development Direction - The company is focused on improving profitability and cash flow while reducing debt levels, with a target of$ 100 million in annualized savings from headcount reductions [112][117] - The new CEO emphasized the importance of customer satisfaction and patient care, as well as the need for a competitive product offering in the market [116][34] - The company is working on producing a competitive respiratory panel for the U.S. market and expanding its test menu [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in forecasting respiratory and flu sales, implementing a new methodology to improve accuracy [2][43] - The company plans to resume guidance later in 2024 after assessing the business under new leadership [108][56] - Management expects Q2 to be seasonally low for revenue and margins, with improvements anticipated in the second half of 2024 [10][65] Other Important Information - The company amended its credit agreement to increase the maximum consolidated leverage ratio, providing a cushion for financial flexibility [37][119] - The effective tax rate for Q1 2024 was 23.5%, consistent with the prior year [19] Q&A Session All Questions and Answers Question: How involved were you in the forecasting of respiratory and flu sales? - Management acknowledged that they overcalled COVID and flu revenue in Q4 2023 and have implemented a new forecasting methodology [2] Question: What is the trajectory on the leverage piece as we work through the year? - The leverage ratio is expected to creep up slightly in Q2 but will start to come down in Q3 and Q4, with an expected year-end ratio of around 3.5 times [10] Question: What are your views on the competitive landscape for Savanna? - The new CEO expressed confidence in the competitive product offering and emphasized the need to get the menu of tests to market quickly [34][81] Question: Can you discuss customer conversations around Sofia ahead of the next respiratory season? - Management indicated that they are actively engaging with customers regarding contract renewals and leveraging the installed base of Sofia tests [95] Question: What are the expectations for gross margins throughout the year? - Management expects Q2 to be the lowest quarter for gross margins, with improvements anticipated in Q3 and Q4 due to seasonally higher revenues [65][69]