Quidelortho Corporation ((QDEL)) has held its Q3 earnings call. Read on for the main highlights of the call.
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QuidelOrtho Corporation’s recent earnings call painted a picture of resilience and strategic growth amidst a challenging landscape. The company demonstrated robust performance in organic sales growth and cost savings, despite facing headwinds from declining COVID and donor screening revenues, negative cash flow due to system conversion, and a substantial goodwill impairment charge.
Organic Sales Growth
QuidelOrtho reported a commendable 5% organic sales growth, excluding COVID sales and the exit from the U.S. donor screening business. This growth underscores the strength of their diversified global diagnostics portfolio, showcasing their ability to adapt and thrive in a shifting market.
Improved Adjusted EBITDA
The company achieved an expansion in adjusted EBITDA to 25% of sales, driven by successful margin improvement initiatives that resulted in over $140 million in cost savings. This improvement highlights QuidelOrtho’s commitment to enhancing operational efficiency and profitability.
Strong Regional Performance
Excluding COVID-related impacts, QuidelOrtho saw impressive regional growth, particularly in Latin America, which led with a 21% overall increase and 22% growth in labs. Japan, Asia Pacific, and China each reported approximately 5% growth, while Europe, the Middle East, and Africa grew by 3%.
High-Sensitivity Troponin Assay
The FDA clearance for the VITROS high-sensitivity troponin assay was achieved in just 90 days, significantly boosting the competitiveness of QuidelOrtho’s cardiac panel. This rapid approval reflects the company’s innovation and agility in product development.
Cost Savings Achievements
QuidelOrtho’s focus on cost-saving measures paid off, with adjusted EBITDA margin improving by 180 basis points from the previous year. This achievement underscores the company’s strategic efforts to streamline operations and enhance financial performance.
Decline in COVID and Donor Screening Revenue
The company faced a 4% year-over-year decrease in total reported revenue, primarily due to declines in COVID and donor screening revenues. This decline highlights the ongoing challenges in these segments as the pandemic’s impact wanes.
Negative Adjusted Free Cash Flow
QuidelOrtho reported a negative adjusted free cash flow of $50 million, attributed to the impacts of ERP system conversion on accounts receivable and payable. This financial strain indicates the complexities involved in system transitions.
Goodwill Impairment Charge
A significant $701 million goodwill impairment charge was recorded in Q3, leaving no goodwill on the balance sheet. This charge reflects the company’s reassessment of its asset values in the current economic environment.
Impact of Tariffs
Tariff impacts contributed to a 50 basis point year-over-year decrease in gross profit margin, though these were mitigated by strategic cost actions. This situation underscores the external pressures affecting the company’s profitability.
U.S. Donor Screening Business Exit
The exit from the U.S. donor screening business is expected to be completed by the first half of 2026, presenting a substantial revenue headwind. This strategic decision is part of QuidelOrtho’s broader plan to focus on more profitable segments.
Forward-Looking Guidance
Looking ahead, QuidelOrtho is on track to achieve sustainable mid- to high 20s EBITDA margins, driven by continued cost savings and strategic growth initiatives. The Labs business is expected to see steady growth, with particular strength in the immunohematology and point-of-care Triage product lines. Despite challenges in respiratory revenue, the company remains focused on sustainable, profitable growth.
In summary, QuidelOrtho’s earnings call highlighted a strategic focus on growth and efficiency, with strong performances in organic sales and regional markets. Despite facing significant challenges, the company is poised for continued success, driven by innovation and strategic cost management.