Q4 2023 QuidelOrtho Corp Earnings Call
Yeah.
Operator: Welcome to the Quidel Orpho Fourth Quarter and Full Year 2023 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode.
Speaker Change: Welcome to the QUADRA or full fourth quarter and full year 2023 financial results conference call and webcast. At this time all participants are in a listen only mode for those of you participating on the conference call there'll be an opportunity for your questions at the end of today's prepared remarks. Please note that this conference call is being recorded.
Operator: For those of you participating in the conference call, there will be an opportunity for your questions at the end of today's prepared remarks. Please note that this conference call is being recorded. An audio replay of the conference call will be available on the company's website shortly after this call. I would like to turn the call over to Juliet Cunningham, Vice President of Investor Relations. Thank you.
Speaker Change: An audio replay of the conference call will be available on the company's website. Shortly after this call I would like to turn the call over to Juliet Cunningham, Vice President of Investor Relations.
Juliet Cunningham: Thank you good afternoon, everyone and thanks for joining.
Juliet Cunningham: Good afternoon, everyone, and thanks for joining us on our fourth quarter and full year financial results conference call. With me today are Doug Bryant, President and CEO, and Joe Buskey, Chief Financial Officer. This conference call is being simultaneously webcast on the Investor Relations page of our website, and a version of today's presentation can be downloaded there. Before we begin, I will discuss our safe harbor state.
Juliet Cunningham: So fourth quarter and full year financial results conference call.
Juliet Cunningham: With me today are Doug Bryant, President and CEO, and Joe Pesci, Chief Financial Officer.
Juliet Cunningham: This conference call is being simultaneously webcast on the Investor Relations page of our website.
Juliet Cunningham: And a version of today's presentation can be downloaded there.
Juliet Cunningham: Before we begin I will cover our safe Harbor statement. The statements. We will make during this call that are not strictly historical including the company's expectations plans future performance and prospects are forward looking statements within the meaning of the private Securities Litigation Reform Act.
Juliet Cunningham: The statements we will make during this call that are not strictly historical, including the company's expectations, plans, future performance, and prospects, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to a number of risks and uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors identified under risk factors in our annual report on Form 10-K for the fiscal year ended January 1, 2023 and subsequent reports filed with the SEC. Please refer to our SEC filings for a more detailed discussion of forward-looking statements and risks and uncertainties. We cannot assure you that the forward-looking statements we make or are implied by our statements will be realized.
Juliet Cunningham: Act of 1995.
Juliet Cunningham: Forward looking statements are subject to a number of risks and uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in these forward looking statements.
These risks and uncertainties include but are not limited to those factors identified under risk factors in our annual report on Form 10-K for the fiscal year ended January 1st 2023, and subsequent reports filed with the SEC.
Juliet Cunningham: Please refer to our SEC filings for a more detailed discussion of forward looking statements and the risks and uncertainties.
Juliet Cunningham: We cannot assure you that the forward looking statements, we make or our implied by our statements will be realized. Furthermore, such forward looking statements represent management's judgment and expectations as of today.
Juliet Cunningham: Furthermore, such forward-looking statements represent management's judgment and expectations as of today. Except as required by law, we undertake no obligation to update any forward-looking statement or any time-sensitive information to reflect future events, developments, or changed circumstances for any other reason. Also, during today's call, we will discuss certain items that do not conform to U.S. generally accepted accounting principles or GAAP.
Juliet Cunningham: Except as required by law, we undertake no obligation to update any forward looking statement or any time sensitive information to reflect future events developments or changed circumstances or any other reason.
Juliet Cunningham: Also during today's call, we will discuss certain items that do not conform to U S generally accepted accounting principles or GAAP.
Juliet Cunningham: Please see slide 3 for a list of non-GAAP measures. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the investor presentation and press release issued this afternoon. Both are available on the Investor Relations page of the Quidel Ortho website. Lastly, unless otherwise stated, all year-over-year growth rates, including revenue growth rates given on today's call, are given on a comparable constant currency basis. And now, I'd like to turn the call over to Doug Bryant.
Juliet Cunningham: Please see slide three for a list of non-GAAP measures.
Juliet Cunningham: Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the Investor presentation and press release issued this afternoon.
Juliet Cunningham: Both are available on the Investor Relations page of the quiet all ortho website.
Juliet Cunningham: Lastly, unless otherwise stated all year over year growth rates, including revenue growth rates given on today's call are given on a comparable constant currency basis.
Juliet Cunningham: And now I'd like to turn the call over to Doug Bryant.
Douglas C. Bryant: Thank you, Juliet. Good afternoon, everybody. And thank you for joining us today for the fourth quarter and full year 2023 earnings call. 2023 was a foundational year for Quidel Orth. Despite the brevity of the respiratory season in the fourth quarter, we performed well.
Douglas C. Bryant: Thank you Juliet and good afternoon, everybody and thank you for joining us today for the fourth quarter and full year 2023 earnings call.
Douglas C. Bryant: 2023 was a foundational year for quite old or so.
Douglas C. Bryant: Despite the brevity of the respiratory season in the fourth quarter, we performed well.
Douglas C. Bryant: More importantly, we grew above market in our lapsed business, gained market share in our industry-leading respiratory point-of-care product, and achieved several internal milestones. Most notably, our operations team made significant permanent manufacturing upgrades, which increased our production capacity and supply chain resilience. This allowed us to address backlogs and positioned us to meet future market demand. Our global sales team is now in place, actively cross-selling, and we like the strength of our competitive position across the globe. Our combo test continued and continues to... And we've been able to not only gain market share but maintain prices, despite a lower volume season. We received more than 700 regulatory approvals in the U.S., Europe, Middle East, and Africa, and China, with an additional 1,000 approvals in the rest of the world. This includes de novo 510Ks for both SOFIA 2 SARS antigens and the Savannah platform.
More importantly, we grew above market in our labs business.
Douglas C. Bryant: <unk> market share in our industry, leading respiratory point of care products.
And achieved several internal milestones.
Most notably our operations team made significant permanent manufacturing upgrades.
Douglas C. Bryant: Which increased our production capacity and supply chain resilience.
Douglas C. Bryant: This allowed us to address backlogs and positioned us to meet future market demands.
Douglas C. Bryant: Our global sales team is now in place actively cross selling and.
Douglas C. Bryant: And we like the strength of our competitive position across the globe.
Douglas C. Bryant: Our combo test continued and continues to.
Douglas C. Bryant: And we've been able to not only gain market share but maintained pricing.
Douglas C. Bryant: Despite a lower volume season.
Douglas C. Bryant: We received more than 700 regulatory approvals in the U S.
Douglas C. Bryant: Europe, Middle East and Africa and China.
Douglas C. Bryant: With an additional 1000 approvals and the rest of the World. This includes de Novo 510, Ks for both Sofia two Sars antigen.
Douglas C. Bryant: The savanna platform.
Douglas C. Bryant: Additionally, we identified substantial greater synergies while investing in a business and paying down $227 million in term loan debt. All these accomplishments help to bolster our already strong competitive position and Long-Term Growth Profile. We believe we're well-positioned to take additional share in key markets over the longer term. Let me turn to the top line numbers, starting with the full year 2023. Our total revenue was $3 billion, a decline of 26% on a supplemental combined basis compared to the prior year.
Additionally, we identified substantial greater synergies, while investing in the business and paying down $227 million in term loan debt.
Douglas C. Bryant: All of these accomplishments helped to bolster our already strong competitive position in.
Douglas C. Bryant: And long term growth profile, we believe we're well positioned to take additional share in key markets over the longer term.
Speaker Change: Let me turn to the topline numbers.
Speaker Change: Starting with the full year 2023.
Speaker Change: Our total revenue was $3 billion a.
Speaker Change: A decline of 26% on a supplemental combined basis compared to the prior year.
Douglas C. Bryant: The year-over-year decline was related to the respiratory, the lower respiratory season in 2023, compared to the prior year, particularly in COVID-19-related testing, which was down roughly $1 billion. The flu was $248 million for the year, right in the middle of our range of 230 million to 270 million. It was down 29% versus the prior year. However, excluding respiratory, total revenue grew 5% on a supplemental combined basis for the full year.
Speaker Change: The year over year decline was related to the respiratory the lower respiratory season in 2023 compared to the prior year, particularly in COVID-19 related testing, which was down roughly $1 billion.
Speaker Change: Although flu was $248 million for the year.
Speaker Change: Right in the middle of our range of $230 million to $270 million.
Speaker Change: It was down 29% versus the prior year excluding.
Speaker Change: Excluding respiratory total revenue grew 5%.
Speaker Change: Supplemental combined basis for the full year.
Douglas C. Bryant: With that, I will not sugarcoat the fact that our fourth quarter numbers fell short of our expectations, as we overestimated the size of the endemic COVID-19 and flu. Ultimately, our optimistic outlook turned a solid, growth-enhancing year into a less-appreciated achievement, despite the relatively weaker respiratory. We had several bright spots in point of care. First, recent third-party market data suggest that we gained share for respiratory products in both physician offices and acute care segments versus our competitors, all while holding prices steady. We remain the industry leader in flu, SARS, and RSV rapid diagnostic tests. Second, the number of Sophia placements grew to 89,000, which shows continued runway for instrument demand and positions us nicely for future higher-margin revenue growth in the respiratory segment. Our fourth-quarter results for total revenue came in at $743 million.
Speaker Change: With that I will not sugarcoat, the fact that our fourth quarter numbers fell short of our expectations as we overestimated the size of the endemic COVID-19 and flu season.
Speaker Change: Ultimately, our optimistic outlook turn to solid growth enhancing year and to a less appreciated achievement. Despite.
Speaker Change: The relatively weaker respiratory season.
Speaker Change: Several bright spots in point of care.
Speaker Change: <unk> recent third party market data suggest that we gained share for respiratory products in both physician office and acute care segments versus our competitors.
Speaker Change: All while holding price steady.
Speaker Change: We remain the industry leader in flu Sars and RSV rapid diagnostic testing second the number of Sofia placements grew to 89000 instruments.
Shows continued runway for instrument demand.
Speaker Change: Positions us nicely for future higher margin revenue growth in the respiratory segment.
Speaker Change: Our fourth quarter results for total revenue came in at $743 million.
Douglas C. Bryant: Our respiratory revenue was down 49% compared to the prior year period. In North America, prevalence was steady but lacked the inflection point and demand that we would typically expect late in the fourth quarter. This could be an indication that distributor destocking on COVID-19 products will continue into Q1 of 2024. Our distributor partners typically close their fiscal year in March and purposefully carry lower inventories. We also believe that the respiratory season..., or the respiratory testing contraction can be attributed to COVID-19 fatigue, a received reduction in severity of recent strains, and very little asymptomatic testing.
Speaker Change: Our respiratory revenue was down 49% compared to the prior year period.
Speaker Change: In North America prevalence with steady, but lack the inflection point in demand that we would typically expect late in the fourth quarter.
Speaker Change: This could be an indication that distributor destocking on COVID-19 products will continue into Q1 of 2024.
Speaker Change: Our distributor partners typically close their fiscal year end March and purposely carrying lower inventories.
Speaker Change: We also believe that the respiratory season.
Speaker Change: Or the respiratory testing contraction can be attributed to COVID-19 fatigue.
Speaker Change: Received reduction in severity of recent strange.
And very little.
Speaker Change: Asymptomatic testing.
Douglas C. Bryant: Turning to our business portfolios, our labs business really led the way this year in terms of growth. For the full year 2023, labs grew 8% in cost and current, in line with our expectations, excluding respiratory labs which grew 13% in the fourth quarter and 10% for the full year 2023 in constant current. In our transfusion medicine business, we continue to see great potential and will invest further in our immunohematology portfolio to continue advancing our market-leading position. On the other hand, we plan to responsibly transition out of the U.S. donor screening portfolio, which is experiencing lower growth and has lower margins. While our goal is to wind down this portfolio, we will certainly continue to support our existing customers and honor our contractual commitment.
Turning to our business portfolios, our labs business really led the way this year in terms of growth for the full year 2023 labs grew 8% in constant currency.
Speaker Change: In line with our expectations.
Speaker Change: Excluding respiratory labs grew 13% in the fourth quarter and 10% for the full year 2023 and constant currency.
Speaker Change: And our transfusion medicine business, we continue to see great potential and will invest further in our immuno hematology portfolio to continue advancing our market leading position.
Speaker Change: On the other hand.
Speaker Change: We plan to responsibly trends transition out of the U S donor screening portfolio.
Speaker Change: Which is lower growth and has lower margins, while our goal is to wind down this portfolio.
Speaker Change: We'll certainly continue to support our existing customers and honor our contractual commitments.
Speaker Change: Our molecular business achieved significant milestones with the FTA approval.
Douglas C. Bryant: Our molecular business achieved significant milestones with the FDA approval and the U.S. launch of our Savannah Multiplex Molecular Platform and the HSV-VZV Syndromic Panel. This is a critical step in our strategy to bring central lab sensitivity and specificity to everyone from mid-sized hospitals to remote mobile clinics. The Production Ramp and Marketing Rollout are underway. We currently use low-volume manual manufacturing lines for production of this panel, but we are working toward deploying our high-volume automated solution.
Speaker Change: In the U S launch of our savanna multiplex molecular platform and the HFC Vesey the Syndromic panel.
Speaker Change: This is a critical step in our strategy to bring central labs sensitivity and specificity.
Speaker Change: To everyone from mid sized hospitals to remote mobile clinics.
Speaker Change: The production ramp.
Speaker Change: And marketing rollout are underway. We currently use low volume manual manufacturing lines for production of this panel.
Speaker Change: But we are working towards deploying our high volume automated solution.
Douglas C. Bryant: So, while production in the short term will be dilutive, longer term, this automated line is expected to strengthen margins. We anticipate that our automated line will be in production well in advance of the year-end respiratory. Within our point-of-care business, as I said earlier, our commercial team secured approximately 4,800 new SOFIA instrument placements globally in 2023, raising our global installed base to about 89,000 SOFIA analyzers. The commercial launch of SOFIA 2 SARS Antigen Plus, the first rapid antigen test cleared by the FDA with a CLIA waiver in the United States market, strengthened our position as a top innovator and trusted leader in this evolving
Speaker Change: So while production in the short term will be dilutive longer term. This automated line is expected to strengthen margins.
Speaker Change: We anticipate that our automated line will be in production well in advance of the year and respiratory season.
Speaker Change: Within our point of care business as I said earlier, our commercial team secured approximately 4800, new Sofia instrument placements globally in 2023, raising our global installed base to about 89000 Sofia analyzers.
Speaker Change: The commercial launch of Sofia, two Sars antigen plus the first rapid antigen tests cleared by the FDA with CLIA waiver and the United States market strengthened our position as a top innovator and trusted leader in this evolving space.
Douglas C. Bryant: Additionally, through our triage platform for cardiovascular, we have a revitalized focus on chronic diseases, including heart failure. This work stream will help clinicians detect, monitor, and manage the silent pandemic of chronic diseases that tend to be overshadowed by the trending health story of the moment. Shifting now to our third integration phase, transformation. We call it QO-NEXT.
Speaker Change: Additionally, through our triage platform for cardiovascular.
Speaker Change: Revitalized focus on chronic diseases, including heart failure.
Speaker Change: Extreme will help clinicians detect monitor and manage the silent pandemic of chronic diseases that tend to be overshadowed by the trending health story at the moment.
Speaker Change: Shifting now to our third dinner integration phase transformation.
Speaker Change: We call it Q1 next.
Douglas C. Bryant: And it's geared toward accelerating the execution of value-driven initiatives, for Greater Business Efficiency Investments, and Organizational Agility. We know what needs to be done, and we understand the levers we need to pull. Specifically, we are shifting our product development, R&D, and regulatory efforts to focus on menu expansion, as we see ample opportunities to strengthen our competitive advantage and penetrate across an expanding customer base. We have been actively evaluating our real estate footprint and anticipate consolidating facilities, primarily in the United States. We intend to improve our organizational cost structure by eliminating underperforming, non-value-driven initiatives and initiating a senior level management de-layering effort to create a Liener Team, improved span of control, and speed of execution. We believe this will further reduce our headcount by five to six percent.
It's geared toward accelerating the execution of value driven initiatives for greater business efficiencies investments and organizational agility.
Speaker Change: We know what needs to be done and we understand the levers we need to pull spin.
Speaker Change: Specifically.
Speaker Change: We are shifting our product development R&D and regulatory efforts to focus on menu expansion.
Speaker Change: As we see ample opportunities to strengthen our competitive advantage and pull through across an expanding customer base.
Speaker Change: We have been actively evaluating our real estate footprint and anticipate consolidating facilities.
Speaker Change: Primarily in the United States we.
Speaker Change: We intend to prove our organizational cost structure by eliminating underperforming non value driven initiatives.
Speaker Change: And initiating a senior level management delayering effort.
Speaker Change: To create leaner teams improved span of control and speed of execution. We believe this will further reduce our head count by 5% to 6%.
Douglas C. Bryant: Savannah has been a long time coming in the United States, and our agenda at this point is clear: menu expansion and customer adoption. We're advancing both with FDA review of our RVP4 panel and others in the queue. Our U.S. sales team is meeting this week, and I can assure you a successful Savannah commercial launch is on their menu as well. As noted earlier, we will invest in the higher growth immunohematology side of our transfusion medicine business. These investments are expected to drive higher returns and help balance the seasonal spikes in our current business model. In summary, let me repeat that 2023 was a foundation-building year for us to continue to establish Quidel Ortho as an industry leader capable of serving the breadth of the healthcare continuum, from the largest labs and hospital systems to the most, Promo Appointment Care and in the home. We are a stable, diversified growth company targeting about $19 billion out of a global $48 billion total addressable market. Finally, we are steadfast in accelerating our desired future state and Financial Goals. With this, I'll let Joe take you through the financials in greater detail. Joe. Thanks, Doug. Good afternoon, everyone.
Speaker Change: Savannah has been a longtime coming in the United States in our agenda at this point is clear.
Speaker Change: Menu expansion and customer adoption.
Speaker Change: Advancing both with FDA review of our RVP for panel and others in the queue.
Speaker Change: Our U S sales team is meeting this week and I can assure you if successful Savannah commercial launch.
Speaker Change: Is on their menu as well.
Speaker Change: As noted earlier, we will invest in the higher growth.
Speaker Change: <unk> side of our transfusion medicine business.
These investments are expected to drive higher returns.
Speaker Change: And help balance the seasonal spikes in our current business model.
Speaker Change: In summary, let me repeat that 2023 was a foundation building year for US we continue to establish quite ortho as an industry leader capable of serving the breath of the healthcare continuum from the largest labs and hospital systems to the most.
Speaker Change: Points of care in the home.
Speaker Change: We are a stable diversified growth company targeting about $19 billion out of our global $48 billion total addressable market.
Speaker Change: Finally, we are steadfast in accelerating our designer desired future state and.
Speaker Change: And financial goals.
Speaker Change: With this I'll, let Joe take you through the financials in greater detail John.
Joe Pesci: Okay. Thanks, Doug and good afternoon, everyone I'll begin with a summary of our operating results for the full year and fourth quarter of 2023 and to facilitate a comparison of the company's operating performance.
Joe Buskey: I'll begin with a summary of our operating results for the full year and fourth quarter of 2023 and to facilitate a comparison of the company's operating performance, the 4-year growth rates that I referenced are presented on a supplemental, or all 4-year growth rates that I referenced are presented on a supplemental combined basis, as if Quidel and Rothschild had been combined for the applicable periods. I'm also going to refer to our earnings presentation, which is available on the IR page of our website. Starting with the full year 2023 results on slide four, total revenue was $3 billion, a decline of 26% year-over-year.
At full year growth rates that I referenced.
Joe Pesci: Presented on supplemental or all full year growth rates that I referenced are presented only supplemental combined basis as if <unk> had been combined for the applicable periods I'm also going to refer to our earnings presentation, which is available on the IR page of our website.
Joe Pesci: Starting with the full year 2023 results on slide four total revenue was $3 billion.
Joe Pesci: Klein of 26% year over year of this decline was due to the lower respiratory season in 'twenty three compared to the prior year with approximately $1 billion impact from declines in COVID-19 related testing.
Joe Buskey: This decline was due to the lower respiratory season in 23, compared to the prior year, with approximately $1 billion impact from declines in COVID-19-related tests. Excluding respiratory revenue, total revenue grew 4%, and grew 5% for the full year. Turning now to the full year 2023 operating results, the adjusted gross profit margin was 51%, which was down approximately 800 basis points compared to the prior year due to lower respiratory revenues. Again, due to the lower COVID-19 test, adjusted EBITDA for the full year of 2023 was $723 million, and the adjusted EBITDA margin was 24%. Adjusted diluted EPS for the full year of 2023 was $4.13, a 70% decline from the prior year. The year-over-year change in adjusted diluted EPS and adjusted EBITDA was the result of a decline in COVID-19 revenue compared to prior years, and our full year effective tax rate was 22.3%.
Joe Pesci: Excluding respiratory revenue total revenue grew 4%.
Joe Pesci: Grew 5% for the full year.
Joe Pesci: Turning now to the full year of 2023 operating results adjusted gross profit margin was 51%.
Joe Pesci: Which was down approximately 800 basis points compared to the prior year due to lower respiratory revenues again due to lower COVID-19 testing adjusted EBITDA for the full year of 2023 was $723 million and adjusted EBITDA margin was 24%.
Joe Pesci: Adjusted diluted EPS for the full year 2023 was $4 13.
Joe Pesci: A 70% decline from the prior year the.
The year over year change in adjusted diluted EPS and adjusted EBITDA was the result of the decline in COVID-19 revenue compared to the prior years, though that earlier and.
Joe Pesci: And our full year effective tax rate was 22, 3%.
Joe Buskey: And now I'll provide our fourth quarter results, shown on slide five. Total revenue was $743 million as reported, which was a decline of 14% year over year due to 77 million COVID-19 cases, headwinds from the prior year. Adjusted gross profit margin was 52.4 percent, which was down 220 basis points compared to the prior year period due to lower respiratory revenue. Adjusted EBITDA was $195 million, and adjusted EBITDA margin was 26%. Adjusted diluted EPS was $1.17, a 34% decline from the prior year period, and our fourth quarter effective tax rate was 23%.
And now I'll provide our fourth quarter results shown on slide five total revenue was $743 million as reported which was a decline of 14% year over year to $2 $77 million of COVID-19 headwinds from the prior year.
Joe Pesci: Adjusted gross profit margin was 52, 4%, which was down 220 basis points compared to the prior year period due to lower respiratory revenues.
Joe Pesci: <unk> EBITDA was $195 million and adjusted EBITDA margin was 26%.
Joe Pesci: Adjusted diluted EPS was $1, 17% to 34% decline from the prior year period, and our fourth quarter effective tax rate was 23%.
Joe Pesci: The change the year over year change was primarily driven by product mix with lower respiratory revenues that carry higher margins than our non respiratory business.
Joe Buskey: The change, the year-over-year change was primarily driven by product mix with lower respiratory revenues that carry higher margins and our non-residential students. Our non-respiratory business group, 9%, in both reported and constant currency in Q4 compared to the prior year period. Our labs business led the way with strong revenue growth, which was a great accomplishment by the team after successfully navigating and resolving significant instrument backlog due to supply chain issues in the first three quarters of the year. For the full year 2023, labs grew 8% in constant currency, in line with our expectations. Excluding respiratory labs, labs grew 13% in Q4 and 10% for the full year 2023 in constant currency Given the continued strength and high visibility we have in our lab business, we continue to expect above-market growth.
Joe Pesci: Our non respiratory business grew 9% in both reported and constant currency in Q4 compared to the prior year period.
Joe Pesci: Our labs business led the way with strong revenue growth, which was a great accomplishment by the team after successfully navigating and resolving significant backlog due to supply chain issues in the first three quarters of the year.
Joe Pesci: For the full year 2023 labs grew 8% in constant currency in line with our expectations, excluding respiratory labs grew 13% in Q4 and 10% for the full year 2023 and constant currency given the continued strength in high visibility we have in our lab business, we continue to expect above market growth.
Joe Buskey: Our respiratory results in Q4 were lower than expected as customer ordering patterns followed seasonal respiratory trends, as Doug noted. Compared to our expectations at the end of Q3, the larger part of the respiratory mist in Q4 was due to lower than expected COVID-19 and flu mortality, both of which came in below 2022. Our underlying business trends and sales activity remain strong, and we have a market-leading position in respiratory. Our combo test continues to gain traction, and these trends have enabled us to gain approximately 200 basis points of respiratory market share and maintain price, despite a lower overall season in 2020. In terms of geography, excluding Respiratory and Inconstant Currents.
Joe Pesci: Our respiratory results in Q4 were lower than expected as customer ordering patterns, followed seasonal respiratory trends as Doug mentioned.
Joe Pesci: Compared to our expectations at the end of Q3 of the larger part of the respiratory missing Q4 was due to lower than expected COVID-19 and flew markets.
Joe Pesci: Both of which came in below 2022.
Joe Pesci: Our underlying business trends and sales activity remained strong and we have a market leading position in respiratory our combo test continues to gain traction and these trends have enabled us to gain approximately 200 basis points of respiratory market share and maintain pricing. Despite a lower overall season in 2023.
Joe Pesci: Okay.
Joe Pesci: In terms of geographies, excluding respiratory and in constant currency fourth quarter, North America revenue was flat year.
Joe Buskey: Fourth quarter, North America revenue was flat. Year over year, EMEA grew 23%. China was up 37% off a low prior year comparison due to lockdowns in 2022, and Asia-Pacific, which includes Japan and Latin America, Gru Temperson. For the full year 2023, North America revenue was roughly flat year over year.
Joe Pesci: Year over year.
Joe Pesci: <unk> grew 23%, China was up 37% off a low prior year comparison due to lockdowns in 2022.
Joe Pesci: And Asia Pacific, which includes Japan, and Latin America grew 10%.
Joe Pesci: For the full year of 2023, North America revenue was roughly flat year over year EMEA grew 8%, China grew 21% and Asia Pacific, Japan, and Latin America grew 9%.
Joe Buskey: EMEA grew 8%, China grew 21%, and Asia-Pacific, Japan, and Latin America grew 9%. We saw notable strength in reagents, consumables, and services, growing in the mid-single digits. The Bulletproof Executive 2013, Turning to our business lines, as I mentioned, our last business had a great fourth quarter with approximately 13% revenue growth, excluding respiratory, driven by strength in both clean chem and amino acids. This strong performance rounds out a great year for the labs business and is a testament to our commercial strategy to integrate clinical chemistry and amino acids. In fact, we had growth of 11% in integrated vitro systems and 14% in automated systems for the full year 2023, which validated our strategy to lead with integrated systems. In our transfusion Medicine business, Q4 revenue increased by approximately 2% in constant current, excluding the impact of the donor screening business. Immunohematology performed well during the fourth quarter with high single-digit growth and the full year 2023 with growth in line with market rates in the low
Joe Pesci: We saw notable strength in reagents consumables and services growing in the mid single digits, excluding respiratory.
Joe Pesci: Turning to our business lines as I mentioned, our <unk> business had a great fourth quarter with approximately 13% revenue growth, excluding respiratory driven by strength in both clean Cam and immunoassay.
Joe Pesci: This strong performance rounds out a great year for the labs business and is a testament to our commercial strategy to integrate clinical chemistry and immunoassay testing.
In fact, we had growth of 11% and integrated vitro systems and 14% in automated systems for the full year of 2023, which validated our strategy to lead with integrated systems.
Joe Pesci: In our transfusion medicine business Q4 revenue increased by approximately 2% in constant currency.
Joe Pesci: Excluding the impact of the donor screening business.
Joe Pesci: Hematology performed well during the fourth quarter with high single digit growth in the full year of 2023 with growth in line with market rates in the low single digits.
Joe Buskey: We expect to improve efficiency in the TM business by transitioning out of the US donor screening portfolio, which has lower growth, and Marjorie Profiles and other parts of our. We plan to invest in our immunohematology business in 2024, and we will provide more detail on our plans for this business during our upcoming Investor Day on March 20. Fourth quarter point of care revenues declined by 42% year over year due to COVID-19 headwinds, as discussed earlier.
Joe Pesci: We expect to improve efficiency in the TM business by transitioning out of the U S donor screening portfolio, which has a lower growth and margin profile than other parts of our business. We plan to invest in our immuno hematology business in 2024, and we will provide more detail on our plans for this business during our upcoming Investor day on March <unk>.
Joe Pesci: 20th.
Fourth quarter point of care revenues declined by 42% year over year due to COVID-19 headwinds as discussed earlier.
Joe Buskey: Excluding respiratory revenue, our point of care business grew 6% in Q4 and approximately 2% for the full year in constant currency. Our triage business grew in the low double digits in many OUS markets in Q4, including EMEA, 14 percent, and China, 15 percent. Latin America, 13%, which shows that our early cross-selling initiatives are bearing fruit. Our molecular revenue decreased by 42% compared to the prior year period due to COVID-19 prior year comparisons, excluding respiratory. Molecular revenue declined by 10% in Q4.
Joe Pesci: Excluding respiratory revenue our point of care business grew 6% in Q4 and approximately 2% for the full year in constant currency.
Joe Pesci: Our triage business grew in the low double digits in many <unk>.
Joe Pesci: Markets in Q4, including EMEA, 14%, China, 15%, Latin America, 13%, which shows that our early cross selling initiatives are bearing fruit.
Joe Pesci: Our molecular revenue decreased by 42% compared to the prior year period due to COVID-19 prior year comparisons excluding respiratory.
Joe Pesci: <unk> revenue declined by 10% in Q4 and.
Joe Buskey: 13% for the full year 2023 in constant currency. Obviously, we're excited about the U.S. commercial launch of Savannah and the anticipated growth opportunities. And lastly, we strengthened our balance sheet by paying down $227 million in term loan debt during the year, generated $89 million in adjusted free cash flow in the fourth quarter, and $270 million for the full year.
Joe Pesci: And 13% for the full year 2023, and constant currency. Obviously, we are excited about the U S commercial launch of Savannah, and the anticipated growth opportunities ahead.
Joe Pesci: And lastly, we strengthened our balance sheet by paying down $227 million in term loan debt during the year.
Joe Pesci: We generated $89 million and adjusted free cash flow in the fourth quarter and $270 million for the full year and as of December 31, 2023, we had $175 million in cash and marketable securities.
Joe Buskey: And as of December 31, 2023, we had $175 million in cash and marketable security. And with that, I'd like to turn to our 2024 financial guidance and provide the assumptions that went into our plan, and I will take you through this as clearly as I can. Our non-respiratory business is a highly predictable razor, razor blade model, and the guidance range there is relatively tight. But our respiratory business is not as predictable. So our respiratory revenue range is wider than in prior years. We've based our respiratory guidance on historical flu season market size averages going back to 2017. We expect 2024 to be a transitional year with total revenue in the range of $2.76 billion to $3.07 billion, a decline of 7% to growth of 3% in constant current. We believe that this is a conservative range that accounts for the high variability in the respiratory market.
And with that I'd like to turn to our 2024.
Our financial guidance and provide the assumptions that went into our plan and I will take you through this as clearly as I can on.
Our non respiratory business is a highly predictable razor razorblade model and the guidance range there is relatively tight.
Joe Pesci: But our respiratory business is not as predictable so our respiratory revenue range is wider than in prior years, we've based our respiratory guidance.
Joe Pesci: On historical flu season market size average is going back to 2017.
We expect 2024 to the additional year with total revenue in the range of $2 76 billion.
Joe Pesci: To $3 <unk> 7 billion.
Joe Pesci: A decline of 7% to growth of 3% in constant currency.
Joe Pesci: We believe that this is a conservative range that accounts for the high variability in the respiratory market.
Joe Buskey: In addition, there were nine recurring items that benefited 2023 but are not expected in 2024, including in Q1 of 23, a government COVID-19 award of $143 million, along with the inventory relief of $39 million, which taken together, brought the government order in line with our respiratory margins. We made the business decision that without this inventory reserve relief..., we would not have participated in the low-margin government award, so they must be viewed as part of the same transaction. And second, also in Q1 of 23, a one-time collaboration settlement with a third party of approximately $19 million, which impacted both revenue and adjusted EBITDA.
Joe Pesci: In addition, there were nonrecurring items that benefited 2023, but are not expected in 2024, including in Q1 of 23 eight.
Joe Pesci: A government COVID-19 award of $143 million, along with the inventory release.
Joe Pesci: $39 million.
Joe Pesci: Taken together.
Joe Pesci: Brought the government order in line with our respiratory margins, we made the business decision that without this inventory reserve relief would not have participated in the low margin government Government award. So they must be viewed as part of the same transaction.
Joe Pesci: And second also in Q1 of 'twenty three a onetime collaborations settlement with a third party of approximately $19 million, which impacted both revenue and adjusted EBITDA.
Joe Buskey: Now let me provide details on the components. Of our 20, 24 guys, of the total revenue range, we expect non-respiratory revenue to be in the mid to high single digits in 2024, excluding the one-time third-party collaboration settlement of $19 million in 2023 and transitioning out of the U.S. donor screening portfolio. We expect non-respiratory year-over-year growth of 4 to 6 percent in 2023. We expect respiratory revenue of between $460 million and $730 million, which we believe provides the range necessary to capture the absolute low end as well as provide a reasonable high end, given the high variability of respiratory. This respiratory guidance assumes a range of 40 million to 60 million flu tests in the U.S. per year. Given the gap between our full-year COVID-19 expectations versus how the respiratory season played out in Q4, we are resetting our CO This, again, excludes any new government contracts and, we believe, more accurately reflects the current endemic environment.
Joe Pesci: Now let me provide details on the components.
Joe Pesci: Of our 2020 for guidance.
Of the total revenue range, we expect non respiratory revenue.
Joe Pesci: Between $2 3 billion to $2 three 4 billion.
We expect labs growth to be in the mid to high single digits in 2024.
Excluding the onetime third party collaborations settlement of $19 million in 2023, and transitioning out of the U S donor screening portfolio, we expect non respiratory year over year growth of 4% to 6% in 2024.
Joe Pesci: We expect respiratory revenue of between $460 million and $730 million.
Joe Pesci: Which we believe provides the range necessary to capture the absolute low end as well as provide a reasonable high end given the high variability of the respiratory business.
Joe Pesci: This respiratory guidance assumes a range of 40 million to 60 million flu tests in the U S per year.
Joe Pesci: Given the gap between our full year, COVID-19 expectations versus handle the respiratory season played out in Q4, we are resetting our COVID-19 range to the low 200 millions for 2024.
Joe Pesci: This again excludes any new government contracts and we believe more accurately reflects the current endemic environment.
Joe Buskey: Our guidance also assumes a minimal contribution of between $30 to $50 million in respiratory revenues from Savannah RVP4, and we expect that revenue to be primarily in the fourth quarter of 2024, given the timing of approvals for the respiratory indication, which we expect. We continue to expect Savannah instrument placements of approximately 1,000 in 2024, which will pave the way for 2025 Savannah revenue growth. Moving down the P&L, we expect SG&A to be relatively flat and approximate the 2023 year-end exit rate on an annualized basis.
Joe Pesci: Our guidance also assumes minimal contribution of between 30% to $50 million in respiratory revenues from Savannah RVP for.
Joe Pesci: And we expect that the revenue to be primarily in the fourth quarter of 2024, given the timing of approvals for the respiratory indication, which we expect in Q1.
Joe Pesci: We continue to expect savanna instrument placements of approximately 1000 in 2024, which will pave the way for 2025 savanna revenue growth.
Joe Pesci: Moving down the P&L, we expect SG&A to be relatively flat and approximate the 2023 year end exit rate on an annualized basis.
Joe Pesci: We expect R&D to be flat at approximately 8% of revenue in 2024.
Joe Buskey: We expect R&D to be flat at approximately 8% of revenue in 2024, and adjusted EBITDA in the range of $565,000 to $720,000,000, or 21 to 24% margin. Our adjusted EBITDA and EBITDA margin, as well as adjusted EPS, are obviously significantly impacted by bringing down the estimate for endemic COVID-19 revenue and widening the range for flu, which impacts the bottom line disproportionately given the high To counterbalance these impacts, as Doug mentioned, we are taking actions to reduce costs by midyear, which is expected to yield approximately $50 million in annualized costs.
Joe Pesci: Adjusted EBITDA in the range of $5 $65 million to $720 million or 21%, 24% margin.
Joe Pesci: Our adjusted EBITDA, and EBITDA margin as well as adjusted EPS are obviously significantly impacted by bringing down the estimate for endemic COVID-19 revenue and widening the range for flu, which impacts the bottom line disproportionately given the high margins on these products.
Joe Pesci: To counterbalance these impacts as Doug mentioned, we are taking actions to reduce cost by mid year is expected to yield approximately $15 million in annualized cost savings.
Joe Buskey: We are continuing to execute on 2.0 Next, which will have a more significant impact in 2025 than in 2024. We expect gradual improvement in Savannah margins as we ramp up sales and move to high volume manufacturing during the second half of 2020. So we finished 2023 at 24% adjusted EBITDA margin, and we are guiding to a midpoint of roughly 22% in 2024. At a high level, this approximates a 200 basis point decrease consisting of one, lower COVID-19 revenue, which would be approximately three points of margin, to the impact of the U.S. commercial Savannah launch with initially dilutive margins of approximately one point and three, offset by approximately two points of Interest expense is assumed to be approximately $150 million in 2024. We've assumed a full year effective tax rate in 2024 of 23 to 24%. Adjusted diluted EPS in the range of $2.40 to $3.07 based on 67.6 million shares.
Joe Pesci: We are continuing to execute on KUOW next which will have a more significant impact in 2025 and 2024.
Joe Pesci: We expect gradual improvement in Savannah margins as we ramp up sales and move to high volume manufacturing during the second half of 2024.
Joe Pesci: So we finished 2023 or 24% adjusted EBITDA margin and we are guiding to a midpoint of roughly 22% in 2024 at a high level. This approximate a 200 basis point decrease consisting of one lower COVID-19 revenue, which would be approximately three points of margin.
Joe Pesci: Two the impact of U S commercial Savannah launch.
Joe Pesci: With initially dilutive margins of approximately one point and.
Joe Pesci: And three.
Joe Pesci: Offset by approximately two points of expected improvement in margin due to cost savings and synergy achievement.
Interest expense is assumed to be approximately $150 million in 2024.
Joe Pesci: We've assumed a full year effective tax rate in 2024 of 23% to 24%.
Joe Pesci: Adjusted diluted EPS in the range of $2 $43 <unk> based on 67 6 million shares outstanding.
Joe Buskey: The areas that give us confidence that we can achieve our high 20s long-term, even on margin in 2025, include our expectations related to cost savings programs, which include head count reductions of 5 to 6 percent. Continued Savannah growth and margin improvements in 2025. Plan Synergy Target Achievement, and finally benefits from our QO Next program in 2025. Based on our current outlook, we believe that our 2024 financial guidance is both realistic and data-driven, given the unpredictable nature of the respiratory season and where we are in the process of transforming our company. We remain confident that we can achieve our long-term revenue targets of 69% top line growth and 27 to 29%, even on margins, in 2025. We plan to provide greater detail about our specific initiatives during our March 20. Investor Day. Now, I'll turn the call back to Doug for his closing remarks. Thanks, Joe. 2023 was our first full year operating as Quidel Ortho.
Joe Pesci: The areas that give us confidence that we can achieve our high <unk> long term EBITDA margin. In 2025 include our expectations related to cost savings programs, which include head count reductions of 5% to 6%.
Joe Pesci: Continued savannah growth and margin improvements in 2025.
Joe Pesci: Planned synergy target achievement.
Joe Pesci: And finally benefits from our <unk> program in 2025.
Joe Pesci: Based on our current outlook, we believe that our 2024 financial guidance is both realistic and data driven given the unpredictable nature of the respiratory season.
Joe Pesci: And where we are in the process of transforming our company. We remain confident that we can achieve our long term revenue targets of 6%, 9% topline growth and 27% to 29% EBITDA margins in 2021.
Joe Pesci: We plan to provide greater detail about our specific initiatives during our March 20th Investor Day.
Joe Pesci: So now I'll turn the call back to Doug for closing remarks.
Douglas C. Bryant: Thanks, Joe.
Douglas C. Bryant: 2023 was our first full year operating as quite of ortho.
Douglas C. Bryant: We successfully laid the foundation for building a global company.
Douglas C. Bryant: One poised for advancing the power of diagnostics for a healthier future Bill.
Douglas C. Bryant: We successfully laid the foundation for building our global company, one poised to advance the power of diagnostics for a healthier future. Building a high-performing organization took a lot of hard work by many of my colleagues. I would be remiss not to thank them for their dedication, perseverance, and the many long hours it took to achieve such an important milestone.
Douglas C. Bryant: Building a high performing organization took a lot of hard work by many of my colleagues.
Speaker Change: Would be remiss not to thank them for their dedication.
Speaker Change: Perseverance and the many long hours it took to achieve such important milestones looking ahead I see a bright future for our company our customers and patient health.
Douglas C. Bryant: Looking ahead, I see a bright future for our company, our customers, and patient health. We have a growth strategy and an action plan in place. We're accelerating our business efficiency initiatives, cost-saving measures, and transformational programs. These efforts, combined with our R&D menu expansion pipeline, Global pull-through across our growing installed base, and commercial excellence program, will provide further support to achieve our long-term revenue target of 27 to 29 percent EBITDA margin by 2025. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two.
Speaker Change: We have a growth strategy and an action plan in place.
Speaker Change: We're accelerating our business efficiency initiatives.
Speaker Change: Cost saving measures.
Speaker Change: And transformational programs. These efforts combined with our R&D menu expansion pipeline.
Global pull through across our growing installed base and commercial excellence program.
Speaker Change: We will provide further support to achieve our long term revenue targets of 69% topline growth and.
Speaker Change: In 27% to 29% EBITDA margins.
Speaker Change: 2025.
Speaker Change: If you would like to ask a question press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one as a reminder, if youre using a speakerphone. Please remember.
Speaker Change: To pick up your handset before asking a question. We'll pause here briefly is question is a registry.
Operator: Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Andrew Brackman with William Blair. Your line is now open.
Speaker Change: The first question is from the line of Andrew <unk> with William Blair. Your line is now open.
Andrew: Hi, guys. Good afternoon, and thanks for taking the question.
Andrew: Maybe just start on guidance and thanks for all the color there.
Douglas C. Bryant: Hi guys, good afternoon, and thanks for taking the questions. Maybe to start on guidance, and thanks for all the color there, it does sound like there's been some sort of change in philosophy to setting this annual range versus sort of your process in the past, so can you maybe just talk about that a little bit? And as a second part here, Joe, you talked about sort of some areas of conservatism there, but any part of the guide that you'd call out as a little bit higher risk or things need to sort of go your way in order to achieve those, thanks. Yeah, thanks for the question, Andrew. I'll start, and Joe, you jump in.
Andrew: It does sound like there's been some sort of change in philosophy to setting this annual range versus sort of your process in the past. So can you maybe just talk to that a little bit.
Andrew: I had a second part here, Joe you talked about sort of some areas of conservativism, there, but any part of the guide that you would call out as a little bit higher risk or things you need to sort of go your way in order to achieve those.
Speaker Change: Yes. Thanks for the question, Andrew I, I'll start and Joe you jump in.
Speaker Change: No.
Speaker Change: We did see cobot sales in Q3.
Speaker Change: And then it dropped pretty dramatically.
Speaker Change: Sars hospitalizations are now down to spirit.
Speaker Change: These.
Speaker Change: Clearly not what it once was and as I mentioned, we don't see any.
Douglas C. Bryant: We did see COVID cells in Q3, and then the number dropped pretty dramatically. SARS hospitalizations are now down, and the severity of the disease is clearly not what it once was, and as I mentioned, we don't see any asymptomatic testing whatsoever. So I think it is absolutely prudent for us to take down the COVID number to the lower end of the range. And that's probably the most dramatic change in philosophy.
Asymptomatic testing whatsoever. So I think it is absolutely prudent.
Speaker Change: For us to take down the Covid number to the lower end of the range.
Speaker Change: That's probably the most dramatic change in philosophy and I'll, let you jump in there Joe yes.
Joe Pesci: Thanks, Doug.
Joe Pesci: Just to add onto that point Andrew.
Joe Buskey: Yeah, thanks, Doug. So just to add to that point, Andrew. When you think about the margin profile that we had communicated previously of low 50s GP margin and high 20s EBITDA margin, that was really predicated on the endemic COVID revenue being in the high end of the range that we had communicated, closer to $400 million. Having seen what happened in Q4 of 2020, we feel it prudent to pull it down to the very low end of that range, closer to $200 million. And that has about a three to four hundred basis point impact on the margin just by pulling out that very high-margin revenue. And so we are taking actions to counteract that, but it's gonna take a little time to get back to where we wanna be. We do expect to get back to where we wanna be in 2025. So that is the respiratory section, the big ticket item in the respiratory section.
Joe Pesci: When you think about the margin profile that we have communicated previously.
Joe Pesci: Low <unk> GP margin and high <unk> EBITDA margin that was really predicated on the endemic Covid revenue being in the high end of the range that we had communicated closer to the 400 and so now.
Joe Pesci: Having seen what happened in Q4 of 'twenty.
Joe Pesci: We feel it prudent to pull it down to the very low end of that range closer to $200 million and that has.
Joe Pesci: About a 3% to 400 basis point impact on the margins.
Joe Pesci: Just by pulling out that very high margin revenue and so we are taking actions to counteract that but it's going to take a little time.
Joe Pesci: Get to get back to where we want to be we do expect to get back to where we want to be in 2025. So.
Joe Pesci: That is the respiratory the big ticket item in the respiratory section the flu numbers are actually very consistent 24 with what they were in 2023 and.
Joe Buskey: The flu numbers are actually very consistent in 24 with what they were in 2023. The only difference is now you've got the additional respiratory revenue for Savannah that I talked about in the range of 30 to 50 million, which we expect mostly will come in Q4. And the other areas, RSV, and strep, again, they're very similar to what we did in 2023, so I don't see a lot of risk there. And then, finally, moving to the non-respiratory revenue section, we've proven that that's a very predictable part of our business. And you can see that by, you know, what we did in 2023. And you can see that we've put a fairly tight range on that in 2024. We feel pretty good about that revenue and where it's going to come out, in the four to six percent range.
Joe Pesci: Only differences now you've got the additional respiratory revenue for savanna that I talked about in the range of $30 million to $50 million, which we expect mostly will come in Q4.
Joe Pesci: And the other areas RSV and strep again, they are very similar to what we did in 2023, So I don't I don't see a lot of risk there.
Joe Pesci: And then finally moving to the non respiratory revenue section, we've proven that that is a very predictable part of our business.
Joe Pesci: And you can see that by what we did in 2023 and you can see that we've put a fairly tight range on that in 2024, we feel pretty good.
Joe Pesci: That revenue and where its going to come out.
Joe Pesci: In the 4% to 6% range.
Speaker Change: Okay. Thanks for that and then Joe maybe just another one for you on the balance sheet and debt level. It looks like leverage is starting to creep up a little bit can you maybe just sort of talk about your comfort with the current leverage ratio any covenants that we should be taken note of and sort of your plan for debt Paydown throughout 2024. Thanks for the question.
Joe Buskey: Okay, thanks for that. And then Joe, maybe just another one for you on the balance sheet and debt level. It looks like leverage is starting to creep up a little bit. Can you maybe just sort of talk about your comfort with the current leverage ratio, any covenants that we should be taking note of, and sort of your plan for debt paydowns throughout 2024? Thanks for the questions, www.larryweaver.com Yeah, yeah, Andrew. It's, it's, The leverage ratio, the net debt leverage ratio at the end of 23 was at 3.2, but it's really important to note, and I'm sure you've all done this, but if you look at the credit agreement and the way that the leverage ratio is calculated, you'll see that we get the ability to add pro And so the actual leverage ratio that goes against the covenant is about a half a turn or maybe even a little bit more than a half a turn or more than what the straight financial statement calculation would give you.
Joe Pesci: Yes, Andrew.
Speaker Change: <unk>.
The leverage ratio the net debt leverage ratio at the end of 2003 was at three two but it's really important to note.
Joe Pesci: I'm sure you've all done this but if you look at the credit agreement and the way that the leverage ratio as calculated youll see that we get the ability to add pro forma adjustments like synergies and like head count reductions that we've talked about and so the actual leverage ratio.
Joe Pesci: It goes against the Covenant is about a half a turn.
Or maybe even a little bit more than half a turn more than what the financial statements straight calculation would give you. So in other words, our credit agreement calculation for leverage at the end of the year is going to be more like two six versus that $3. Two that you've calculated so if you carry that through.
Joe Pesci: Through the end of the year, we should be right around three times levered per the credit agreement.
Joe Pesci: <unk> versus a covenant of three and a half so it gets a little tighter, but we feel like we're in okay shape.
Joe Pesci: Not really concerned there.
Speaker Change: Okay. Thanks, guys.
Joe Buskey: So in other words, our credit agreement calculation for leverage at the end of the year is going to be more like 2.6 versus that 3.2 that you calculated. So if you carry that through, you know, through the end of the year, we should be right around three times leveraged per the credit agreement versus a covenant of three and a half. So it gets a little tighter, but we feel like we're in okay shape.
Thank you for your question.
Speaker Change: The next question is from the line of Alex Nowak with Craig Hallum. Your line is now open.
Okay, great. Good afternoon, everyone. So you provided endemic respiratory rate for 2023, and you were very confident in that throughout the year and sales still came in below that so before COVID-19 the respiratory business for Codell Standalone was roughly $150 million of sales now youre endemic rate for 2020.
Joe Buskey: Not really concerned. Okay, thanks guys. Thank you for your question. The next question is from the line of Alex Nowak with Craig Howland. Your line is now open. Okay, great. Good afternoon, everyone.
Speaker Change: As for as it.
Speaker Change: Today is 467 30.
Speaker Change: Now if you get this endemic wrong for 'twenty 2024, there's a lot of downside I guess the question is why do you think this new number is right.
Douglas C. Bryant: So you provided an endemic respiratory rate for 2023, and you were very confident in it throughout the year, and sales still came in below that. So, before COVID, the respiratory business for Quidel Standalone was roughly $150 million in sales. Now, your endemic rate for 2024, as it's set today, is 460 to 730. Now, if you get this endemic rate wrong for 2024, there's a lot of downside. I guess the question is, why do you think this new number is right?
Speaker Change: Thanks for the question Alex.
Speaker Change: We think we have a pretty good understanding of market size.
Speaker Change: And we think the number of tests.
Speaker Change: Starting with flu between 40 and $60 million.
Speaker Change: It makes the most sense.
Speaker Change: We haven't seen something as low as $40 million.
Speaker Change: In a while.
Speaker Change: And we wouldn't expect at this stage.
Speaker Change: Two to see something more than $60 million.
Speaker Change: So I think we've pegged the market size correct.
Douglas C. Bryant: Thanks for the question, Alex. We think we have a pretty good understanding of the market size, and uh... we think the number of tests, starting with flu, between 40 and 60 million, makes the most sense. You know, we haven't seen something as low as $40 million in a while. And we wouldn't expect, at this stage, to see anything more than six.
Speaker Change: The question is what's your market share while our market share actually has increased in the recent report that we saw this morning.
Speaker Change: Slightly more than that.
Speaker Change: The other factor is what's happening with your price will our price basically is is flat and we've been able to take share in place Sofia analyzers.
Douglas C. Bryant: So I think we've pegged the market size correctly. The question is... What's your market share? Well, our market share actually has increased in the recent report that we saw this morning, increased slightly more than that. Well, the other factor is what's happening with your price. Well, our price basically is flat, and we've been able to take share in place of the analyzers with that same price. We've also seen a shift towards the combo assay, which, for Health.
Speaker Change: With that same price.
Speaker Change: We've also seen a shift.
Speaker Change: Towards the combo assay, which is super healthy so.
Speaker Change: Obviously very difficult to.
Speaker Change: Predict this market.
Speaker Change: Which is why we're widening the range.
Speaker Change: Now across diagnostics, what other bench top systems have ramp to 30 to 50 million of sales on a single test year, just that we can use that as a proxy versus Dan at the end of this year.
Douglas C. Bryant: So, obviously, very difficult to predict this market, which is why we're widening the range. Now across diagnostics, what other benchtop systems have ramped to 30 to 50 million sales on a single test in less than a year, just so we can use them as a proxy for Savannah at the end of this year? What other ones?
Speaker Change: What other ones.
Speaker Change: Yes, I'm just trying to really.
Speaker Change: Yes, what gives you the confidence in the third.
Speaker Change: $30 million to $50 million revenue range for Savannah respiratory.
Speaker Change: Well okay.
Douglas C. Bryant: Yeah, I'm just trying to, yeah, what gives you the confidence in the 30 to 50 million revenue range for Savannah Preservatory? Well, okay, what I would say is, Early on, we've seen placement, and 100% of our placements have indicated their interest and strong desire to run our estuary biopanel process. So 100% of the customers that we've closed and shipped thus far with Savannah, 100% of them are highly likely to order that product as we go into the third and fourth quarter. That's significant, and the number of tests on average that they're running. Our plan to run is about 3,000, protest. Full flu season, respiratory season.
Speaker Change: What I would say is <unk>.
Speaker Change: Early on we've seen placements and.
Speaker Change: And 100% of our placements.
Speaker Change: Have indicated.
Speaker Change: Interest and strong desire to run a respiratory viral panel product.
Speaker Change: So 100% of the customers that we've closed and shipped thus far with Savannah, 100% of them.
Highly likely to order that product as we go into the fourth quarter.
Third and fourth quarter.
Speaker Change: That's significant.
Speaker Change: And the number of tests on average that they're running.
Speaker Change: Our plan to run is about 3000.
Speaker Change: Per customer.
Speaker Change: Our full fleet of flu a flu season with a respiratory season would be Q4 Q1.
Douglas C. Bryant: Q4Q1. So if you take the 1,000 analyzers that we intend to play, times our assumed price, times 3,000 tests, assume that holds true. And then you take that amount, and you split it evenly between the two quarters.
Speaker Change: So if you take the 1000 analyzers that we intend to place.
Speaker Change: Times are assumed price.
Speaker Change: 3000 tests and you assume that holds true.
And then you take and you split it evenly between the two quarters you get roughly to what we're suggesting we're going to do for savanna in 2024.
Douglas C. Bryant: You get roughly to what we're suggesting, where we're going to... So those are our assumptions. You can argue with them if you like.
Speaker Change: So those are our assumptions you can argue whether your assumptions if you like but those are the facts and those are our assumptions and thats the basis for the number.
Douglas C. Bryant: But those are the facts, and those are our assumptions. And that. Page 10 of 10, All right, got it. Appreciate the update. Thanks. Thank you for your question. Next question is from in line for Casey Woodring with JPMorgan. Your line is now open.
Speaker Change: Alright got it appreciate the update thanks.
Speaker Change: Sure. Thank you for your question.
Speaker Change: Next question is from in line of Casey Woodring with Jpmorgan. Your line is now open.
Douglas C. Bryant: Great. Thank you for taking the time to answer my questions. Just on the 21 to 24 adjusted EBITDA margin for this year, I appreciate you quantifying the components driving the year-over-year difference against 23, but I was hoping that you could bridge that 24 number to your comment on getting back to where you want to be in 2025. Are you talking about the LRP range of 27 to 29? And if so, just what assumptions have changed about the base business that's preventing you from getting there?
Casey Woodring: Great. Thank you for taking my questions.
Casey Woodring: On the 21% to 24 adjusted EBITDA margin for this year I. Appreciate you quantifying the components driving the year over year difference against 23, but was hoping that you can bridge that 24 number to your comment on getting back to where you want to be in 2025 are you talking about the <unk> range of 27 to 29 and if so just what assumptions have changed.
Casey Woodring: <unk> on the base business, that's preventing you from getting there.
Douglas C. Bryant: Or are you saying today that this step down is all on kind of lower COVID assumptions and this slight Savannah manufacturing headwind in the first part of the year? We're lowering, to be clear, Casey, thanks for the question, we're lowering our guidance on COVID. We think it's prudent, but that has consequences in terms of mix. It has a consequence.
Casey Woodring: Or are you, saying today that the step down is all on kind of lower COVID-19 assumptions and the slight Savannah manufacturing headwind in the first part of the year.
Speaker Change: We are lowering.
Speaker Change: To be clear Casey. Thanks for the question, we are lowering our guidance on Covid and we think it's prudent.
Speaker Change: But that has a consequence in terms because of mix it has consequences.
Douglas C. Bryant: We're going to solve for that. And so if you think about what we just announced in terms of the head count reduction. Again, that gets us about $50 million, as Joe said. And then you can back into the number if you want, but effectively, we're assuming that we generate another $100 million in savings in 2025 through our QO next. And then for that reason, it becomes more creative with the continued growth of 2025. That's the other factor. And those are the factors that will get you back.
Speaker Change: We're going to solve for that and so if you think about what we've.
Speaker Change: Just announced in terms of the head count reduction.
Speaker Change: Again that gets us about $50 million as Joe said.
Speaker Change: And then you come back into the number if you want but effectively we're assuming that we generate another $100 million in savings in 2025.
Through our COO next initiatives.
Speaker Change: And then Savannah becomes more accretive with the continued growth in 2025, that's the other factor in those those are the factors Casey that gets you back to those high Twenty's margins, which are which our confidence in the $100 million I would say it's pretty good.
Speaker Change: We have.
Speaker Change: Gone through our diligence phase, we've gone through a business planning phase.
Speaker Change: We have at this point.
Douglas C. Bryant: I-20's Margin, a plan that totals far greater than $300,000. And we assume that we should be able, when looking at the initiatives, to ensure that we get at least a third of them fully accomplished. That's what's in the. Got it. That's helpful. And then maybe, can you talk about North American non-restoration?
Speaker Change: Our plan that totals far greater than 300.
Speaker Change: And we assume that we should be able to when looking at the initiatives, we should be able to.
Speaker Change: To ensure that we get at least a third of them fully accomplished that's what's in the number.
Speaker Change: Yeah.
Speaker Change: Got it that's helpful. And then maybe can you talk about north American non respiratory it looks like the business slightly declined in <unk>. So curious on how the different business units performed relative to expectations and maybe walk through your expectations by region for the year.
Douglas C. Bryant: Looks like the business slightly declined in 4Q. So curious how the different business units performed relative to expectations and maybe walk through your expectations by region for the year. You know, you're flapping the China comp with the lockdowns from last year. So just any color.
Speaker Change: Lapping the China comp with the.
Speaker Change: Locked down from last year, so just any color.
Speaker Change: Okay.
Speaker Change: Yes, I think it's pretty flat Casey because if youre talking about non respiratory.
Douglas C. Bryant: Yeah, I think it's pretty flat, Casey, because if you're talking about non-respiratory... Most of that business is going to be the triage and the former Beckman business. And that was pretty flat year over year, fourth quarter. Does that actually address your question, Casey? Yeah, that's helpful. I'll jump back in the queue.
Most of that business is going to be the triage.
Speaker Change: And the former Beckman business and that was pretty flat year over year fourth quarter.
Speaker Change: Does that actually address your question Casey.
Casey Woodring: Yes, that's helpful I'll jump back into queue. Thanks.
Douglas C. Bryant: Thank you. Thank you for your question. The next question is from the line of Jack Meehan with Nefron Research. Your line is now open. Thank you. Good afternoon.
Okay. Thank you for your question.
Casey Woodring: Next question is from the line of Jack Meehan with Nephron Research. Your line is now open.
Jack Meehan: Thank you good afternoon.
Douglas C. Bryant: First, on the transfusion medicine business. So you announced some strategic decisions here. Just, you know, there were headlines in the fall around considering a sale, just, you know, considering you've decided to exit US donor screening, and you're investing in immunohematology. Is it safe to assume that kind of a sale process is off the table at this point? We continue to evaluate all options, Jack. I think it's a great
Jack Meehan: First is on the transfusion medicine business, So you announced some strategic decisions here.
There were headlines in the fall around considering a sale just considering you decided to exit U S donor screening and you're investing in immuno hematology.
Jack Meehan: Is it safe to assume kind of a sale process is off the table at this point.
We continue to evaluate all options Jack I think it's a great question.
Douglas C. Bryant: I just think when I look at it, you look at the, We spent a lot of time and effort to do a carve out on a business where we actually are the brand leader, um, There's a lot of there's a lot of value in that brand strength. When I look at the opportunity to potentially, leverage that strength within the medium-sized hospital, and help with our, Strategy, which is focused on the integrated platform. I felt like we would just be giving up too much, and.
Jack Meehan: I think when I look at it when you look at the.
Jack Meehan: The time and effort to do a carve out on in a business, where we actually are the brand leader.
Jack Meehan: There's a lot of there's a lot of value in that brand strength when I look at.
Jack Meehan: The opportunity to potentially.
Leverage that strength within the medium sized hospital.
Jack Meehan: And help with our.
Jack Meehan: Strategy, which is focused on the integrated platform.
Jack Meehan: Yeah.
Jack Meehan: I felt like we would just be giving up too much and I do think that there are measures that we can take to improve the efficiency in the business and I do think that with <unk>.
Douglas C. Bryant: I do think that there are measures that we can take to improve efficiency in the business, and I do think that with modest investment, we can continue to grow the menu. And so, at this time, I don't think it's an asset that we would be willing to give up on so quickly.
Jack Meehan: A modest investment we can continue to grow the menu.
Jack Meehan: And.
Jack Meehan: So at this time.
Speaker Change: I don't think.
Speaker Change: I don't think its an asset that we would be willing to give up on so quickly on the other hand, when you look at the U S donor screening business. Specifically these are the larger factories, if you will.
Douglas C. Bryant: On the other hand, when you look at the U.S. donor screening business specifically, these are the larger factories, if you will. That business is in a market that's flat to declining, and it's not expected to grow.
Speaker Change: That business is.
As in a market Thats flat.
Speaker Change: Flat to declining.
Speaker Change: Not expected to grow.
Douglas C. Bryant: It's a very expensive business to maintain, and by not being in that business over time, I think we get about a hundred basis point improvement in our growth rate, and I think it helps our margins as well, our profile. So, great question, Jack. Our I.H.
Speaker Change: It's a very expensive business to maintain.
Speaker Change: And.
Speaker Change: By not being in that business over time, I think we get about 100 basis points.
Speaker Change: The improvement in our growth rate.
And I think it helps our margins as well our profile.
Speaker Change: So great question Jack.
Speaker Change: Our IH business, though the immuno hematology part of it.
Douglas C. Bryant: business, the immunohematology part of it, I think... is a valuable asset that we want to see if we can grow. Yeah, Jack, just sounds good. Yeah, one point in 2023.
Speaker Change:
Speaker Change: As a valuable asset that we wanted to see if we can grow.
Speaker Change: Yes, Jack just to add 1.1 and 2023.
Douglas C. Bryant: Sorry, Jack, I didn't mean to talk over you, but I just wanted to add that in 2023, if you were to exclude the donor screening business, our x-respiratory growth actually would have been 200 basis points higher. So it had a much bigger impact even in 2023. Got it. It makes sense. And then on Savannah, I just want to understand, I guess, the gating factors to getting our VP for approved. Is there any Do you feel like you have all the trial activity you need done at this point?
Speaker Change: Sorry, sorry, Jack.
Jack Meehan: Talk a view, but I just wanted to add that in 2023, if you would exclude the donor screening business are ex respiratory growth actually would've been 200 basis points higher.
Speaker Change: So it had a much bigger impact even in 2023.
Jack Meehan: Got it makes sense.
Jack Meehan: And then on Savannah, and just wanted to understand I guess like the gating factors to getting RVP. Four approved is there any do you feel like you have all the trial activity you need done at this point that's number one and number two when do you expect to be CLIA waiver for savanna does that come in conjunction with RVP for or do you think that's later in the year.
Douglas C. Bryant: That's number one. And number two, when do you expect the clear waiver for Savannah to be granted? Does that come in conjunction with our VP, or do you think that's later in the year? I'll go in reverse order.
Jack Meehan: Yeah.
Speaker Change: I'll go in reverse order.
Douglas C. Bryant: It's an appropriate question. The CLIA waiver is expected by year-end. The status of the submission of the fights in K is on track, as per my previous comments.
Inappropriate question the CLIA waiver is expected by year end.
Speaker Change: The status of the submission of the <unk> K.
Speaker Change: Is on track per my previous comments recall that I have said that we expect to.
Douglas C. Bryant: Recall that I had said that we expect to get clearance before the end of the first quarter. I think we're still on track for all. Okay, if I could squeeze in one final one. Joe, what does the guidance assume for growth in the China region for 2024? Yeah, the China region goes back to what we would define more as normal high single-digit growth. To go back to, you know, before the pandemic with the ortho business, it was high single-digit growth. We'll be right back. Okay, thank you. www.larryweaver.com. Thank you for your question. The next question is from the line of Connor McNamara with RBC. Your line is now open.
Speaker Change: To get clearance before the end of the first quarter I think we're still on track for all that.
Speaker Change: Okay.
Speaker Change: Could squeeze in one final one.
Speaker Change: What does the guidance assume for growth in the China region for 2024.
Speaker Change: Yes, the China region goes back to what we would define more as a normal high single digit growth.
Speaker Change: You go back to.
Speaker Change: Before the pandemic with the ortho business. It was it was high single digit growth region.
Speaker Change: Gets back to that.
Speaker Change: Okay. Thank you.
And its Brian.
Brian: Thank you for your question.
Brian: The next question is from the line of Conor Mcnamara with RBC. Your line is now open.
Conor Mcnamara: Hey, guys. Thanks for taking my questions appreciate it I guess.
Douglas C. Bryant: Hey guys, thanks for taking the questions. I guess, just the first question: in early January, you guys didn't pre-announce, which typically you do in early January, and, you know, given the size of, you know, the EBITDA guidance and this relative to where folks had come out. Was there anything that, first off, what was your decision not to pre-announce? Was there anything that's come up in the last month that kind of surprised you that you didn't know about in January?
Conor Mcnamara: Just first question in early January you guys didn't pre announce which typically you have another January.
Conor Mcnamara: Given.
Conor Mcnamara: The size of.
Conor Mcnamara: The EBITDA guidance and Miss relative to where folks have come out was there anything that the first of all what was the decision not to pre announcements or anything thats come up in the last months that kind of surprised you that you didn't know about in January.
Yes.
Douglas C. Bryant: Yeah, thank you. Thank you, Connor, for the total revenue we knew and we knew that we were going to be quite close and understanding that the mess was about 6 or 7 percent of what we had projected. So we didn't feel like
Speaker Change: Thank you. Thank you Conor the total revenue we knew and we knew that we were going to be quite close in understanding that.
Speaker Change: The mess.
Speaker Change: Was about six or 7%.
Speaker Change: What we had projected.
Speaker Change: So we didn't feel like.
Speaker Change: It was something that we could announce and further to that.
Douglas C. Bryant: It was something that we could announce, and further to that, I didn't, I knew for sure I wouldn't have all the answers to all the questions that we would have during the one-on-ones at the coffee, and we certainly didn't know where we stood at that stage in terms of EBITDA. I could have told you, obviously, that... Any gain or loss relative to the forecast with respiratory has a bigger impact. I knew that, but we really didn't have the specifics as we went into the conference. That's the only reason I got it.
Speaker Change: I didn't I knew for sure I wouldn't have all of the answers to all the questions that we would.
Speaker Change: During the the one on ones at the conference.
Speaker Change: And we certainly didn't know where we stood at that stage in terms of EBITDA. So.
Speaker Change: Okay.
Speaker Change: I could have told you've obviously that debt.
Speaker Change: And any gain or loss relative to the forecast with respiratory has a bigger impact I knew that but we really didn't have the specifics as we went into the conference. That's that's the only reason.
Speaker Change: Got it thanks for that I appreciate that and then.
Joe Buskey: Thanks for that, Doug. I appreciate that. And then, you know, Joe, you talked about getting the high 20s EBITDA margins in fiscal 25. I mean, is that for the full year?
Speaker Change: Joe you talked about getting that getting the high Twenty's EBITDA margins in fiscal 'twenty five I mean does that.
Speaker Change: Is that for the full year or should we think about that as things ramp up.
Joe Buskey: Or should we think about that as things ramp up, you know, through 2024 and then exiting 2025, you'll be there as... You know, is assuming Savannah gets to a high respiratory number, exiting 25, or is that, you know, is it realistic to think that that's something that's achievable for all of fiscal 25? Yeah, hey, Connor, we'll talk more about this in detail at investor day. But at this point, I would say I do think it's for the full year 2025. You know, we execute. And as I said, Conor, we're chasing a bigger number than the hundred in terms of costs. Got it. Okay. And just, sorry, last question, just housekeeping. On the decision to transfer out of or get out of the U.S. transfusion business, what's, can you quantify it, all the revenue and even the impact of that? And it actually sounds like, you know, you're going to reinvest some money.
Joe Pesci: Through 2024, and then exiting 2025, there will be there is.
Assuming savannah gets to it.
Speaker Change: Hi, Russ.
Speaker Change: Before a number exiting 'twenty fibers or is that is it realistic to think that thats something thats achievable for all of fiscal 'twenty five.
Speaker Change: Yes.
Russ: Yeah, we will talk more about this in detail at the Investor day, but at this point I would say I do think its for the full year 2025.
Russ: We execute.
Russ: As the plan has been laid out NSA, there and as I said, Conor we're chasing a bigger number than the 100 needed.
Russ: In terms of cost synergy.
Speaker Change: Got it okay, and just sorry, the last question just housekeeping on the <unk>.
Speaker Change: Susan will transfer all of that.
Speaker Change: Get out of the U S. <unk> business Whats can you quantify at all the revenue and EBITDA impact of that and actually it sounds like youre going to reinvest some money so maybe it's.
Joe Buskey: So maybe it's, It's pretty deluded to even doubt, but is there any way to quantify the impact there? Yeah, the revenue, we've said this, the revenue is about 25% of the total TM business, and the EBITDA margins are in the lows. So, you know, by exiting this business, it's going to... All right, thanks. Thanks guys, I appreciate that. Thank you for your question. The next question is from the line of Andrew Cooper with Raymond James. Your line is now open.
Speaker Change: Its pretty dilutive to EBITDA, but is there any way to quantify the impact of that.
Speaker Change: Yes. The revenue we've said this the revenue is about 25% of the total TM business.
Speaker Change: And the EBITDA margins are in the low single digits.
Speaker Change: Okay.
By exiting this business, it's going to be accretive.
Speaker Change: Both top and bottom line alright. Thanks.
Speaker Change: Thanks, guys I appreciate that.
Speaker Change: Thank you for your question.
Speaker Change: Next question is from the line of Andrew Cooper with Raymond James Your line is now open.
Andrew Cooper: Hey, guys. Thanks for the questions maybe.
Joe Buskey: Hey guys, thanks for the question. Maybe first just following up on some of the margin dynamics, and this one's going to be a little bit backwards looking, but, I guess, thinking about respiratory revenues that ultimately came within the range you had provided for the full year, but even coming some, you know, 10% below the low end of the range, you know, was the low end of the respiratory revenue not actually contemplated in that margin range? Or, if so, why not?
Andrew Cooper: Maybe first just following up on some of the margin dynamics and this one's going to be a little bit backwards looking but.
Andrew Cooper: Tom.
Andrew Cooper: I guess thinking about respiratory revenues that ultimately came within the range you had provided for the full year, but EBIT coming.
Andrew Cooper: 10% below the low end of the range.
Speaker Change: <unk> was the low end of the respiratory revenue not actually contemplated in that margin range or if so why not what were the offsets maybe you expected that you might have found that you didn't just help us think about the disconnect there between the top line and the prior guidance ranges.
Joe Buskey: What were the offsets you might have expected that you might have found that you didn't? Just help us think about the disconnect there between the top line and the prior guidance ranges. Hey Andrew, it's Joe.
Joe Pesci: Yeah, Andrew it's Joe.
Joe Pesci: You may recall on the Q3 earnings call that I said that we needed to be at the high end.
Joe Buskey: You may recall on the Q3 earnings call that I said that we needed to be at the high end of the flu range to hit our numbers that we were talking about on the bottom line. So, 230 to 270 was the flu range. Doug's right; we had to be in the middle.
Joe Pesci: Of the flu range to hit our numbers that we were talking about on the bottom line. So $2 30 to $2 70 was the flu range does right in the middle we did $2 48, right, but we needed to be at the high end or even slightly above that range to hit our numbers and we werent.
Joe Buskey: We did 248. Right, but we needed to be at the high end, or even slightly above that range, to hit our numbers. We work. And in addition to that, there were some estimates on COVID that we came in below as well. And so the combination of those two things led to. Okay, and then just on kind of a guide for 24, you know, appreciate the 40 to 60 million flu cases as a volume number, the 200 million of COVID as a dollar number. Can you maybe just help us think about sort of dapple dapples, whether it's unit volumes or dollars across that respiratory base, and then maybe also where combo fits in that math as you talk about it today? I know historically, it was in flu, but just want to make sure we sort of understand what the starting point assumptions are for kind of overall unit volume or dollars.
Joe Pesci: In addition to that there were some estimates on Covid that we came in below as well.
Joe Pesci: And so the combination of those two things led to the Miss.
Joe Pesci: Okay.
Joe Pesci: And then just on kind of a guide for 'twenty four.
I appreciate the $40 million to $60 million blue as a volume number with $200 million of Covid as a dollar number can you maybe just help us think about sort of the apples to apples, whether its unit volumes or dollars across that respiratory base.
Joe Pesci: And then maybe also where combo in that math as you as you talk about it today I know historically it was <unk>, but just want to make sure we sort of understand what the starting point assumptions are.
Joe Pesci: So kind of overall unit volume or dollars.
Joe Buskey: Yeah, it's a good question. I'm glad you asked because I did want to get through this. So, first of all, just a clarification, and this has not changed, but the combo test for us is included in the flu numbers, and we've always included it in the flu numbers.
Speaker Change: Yes, it's a good question I'm glad you asked because I did want to get through this.
Speaker Change: So first of all just a clarification.
Speaker Change: This has not changed but the combo test for US is included in the fluid numbers and we've always included in flu is not in the Covid numbers that we've talked about the endemic COVID-19 numbers.
Joe Buskey: It's not in the COVID numbers that we've talked about, the endemic COVID. And you will recall that if you look at what we just put out, the 24-respiratory revenue guide is 460 to 730. If you pull out an estimate for the low-end of the range for COVID, and you pull out an estimate for RSV and strep that's consistent with 2023, and you pull out the 30 to 50 million in Savannah, you're going to get a flu range that is now about 160 to 360.
Speaker Change: And <unk>.
Speaker Change: You will recall that if you look at the what we just put out the 24 respiratory revenue guidance $4 60 to $7 30. So if you pull out an estimate for low end of.
Speaker Change: The range for Covid, you pull out an estimate for RSV and strep, it's consistent with 2023 and you pull out the $30 million to $50 million in Savannah, Youre going to get a flu range that now.
Speaker Change: Is about 160 to $3 60, and that compares to the $2 30 to $2 70 that we gave for 2023. So we have.
Joe Buskey: And that compares to the $230,000 to $270,000 that we gave for 2023. So we have, In response to what happened in Q4, we are widening the range on the low and the high end, so we don't miss. And we've included a realistic high end that is possible. And that's the $40 to $60 million. And if you think about sort of historical, you know, where that $40 to $50 million sits, in Q4'23, it was a $50 million test market, size market. And that compares to Q4 22 with a 57.
Speaker Change: In response to what happened in Q4, we are widening the range on the low and the high end. So we don't Miss and we've included a realistic high end as possible and thats, the $40 million to $60 million and if you think about sort of historical.
Where that $40 million to $50 million sits in Q4 'twenty three it was a $50 million $50 million, sorry, 50 million test market size market.
Speaker Change: And that compares to Q4 'twenty two is a $57 million.
Speaker Change: <unk> market.
Joe Buskey: And so for 24, we've landed somewhere between, call it 46 to 50 million test files to get to. You know, when you think about like a midpoint of that range, that's the mid. And if you go, if you go between them, it's between the 40 and the 60.
Speaker Change: And so for 24, we've landed somewhere between call it $46 million to $50 million of test volume to get to when you think about like a midpoint of that range. That's the midpoint.
Speaker Change: If you go between there.
Speaker Change: Between the $40 to 60, okay great.
Joe Buskey: Okay, great. I will stop there. I appreciate it. So hopefully, that can help you. It does, thank you.
So hopefully.
Speaker Change: The color I appreciate it.
Speaker Change: Yes. Thank you, yes sure.
Joe Buskey: Yeah, sure. Thank you for your question. The next question is from the line of Patrick Donnelly with Citi. Your line is now open.
Speaker Change: Thank you for your question.
Speaker Change: Next question is from the line of Patrick Donnelly with Citi. Your line is now open.
Joe Buskey: Hey, guys, thanks for taking the questions. Joe, maybe another one on the margins, just given exactly what you're talking about there in the respiratory and COVID piece. Given that that's going to be pretty impactful in terms of the cadence of the year, can you just help us think about the right way to kind of map out margins for the year, you know, obviously, with the respiratory piece, maybe being kind of on the barbell side of 1Q and 4Qs, just want to get our heads around the margin piece as the year progresses here? So that range, you know, that wide respiratory range, And as I just said to Andrew, you know, I would probably recommend that we focus on the midpoint of that right now as a realistic place to start.
Speaker Change: Yeah.
Patrick Bernard Donnelly: Hey, guys. Thanks for taking the questions.
Patrick Bernard Donnelly: Joe maybe another one on the margins just given exactly what you're talking about there on the respiratory and Covid piece.
Patrick Bernard Donnelly: Given that that is going to be pretty impactful in terms of the cadence of the year can you just help us think about the right way to kind of map out margins for the year, you know obviously with the respiratory piece, new being talked about on the barbell side of <unk>, just want to get our hanging around the margin piece of the year progresses here.
Patrick Bernard Donnelly: Yeah.
So so that that range.
Speaker Change: That wide respiratory range, Patrick is going to give you an EBITDA range of 21% to 24%.
Speaker Change: As I noted and as I, just said to Andrew.
Speaker Change: Probably recommend that we focus on the midpoint of that right now is a realistic place to start.
Joe Buskey: It is going to give you gross margins in the range of, you know, the high 40s. And again. I think I said this earlier, the difference between what we were talking about prior to Q4 of gross margins in the low 50s and now in the high 40s is driven by the drop in that COVID revenue of roughly $200 million and the impact of Savannah and the launch and the dilutive impact there. That's about 400 basis points between those two items, with about 80% of that being the COVID drop and maybe 20% of that being the Savannah drop or
Speaker Change: It is going to give you gross margins in the range of <unk>.
Speaker Change: <unk> and again.
Speaker Change: I think I said this earlier that the difference between what we were talking about prior to Q4 of.
Speaker Change: Gross margins in the low fifties and now high Forty's is.
Speaker Change: Driven by the drop in that Covid revenue of roughly $200 million and the impact of Savannah, and the launch and the dilutive impact there.
Speaker Change: That's about 400 basis points between those two items.
Speaker Change: With about 80% of that being the Covid drop and maybe 20% of that being in Savannah drop for the savanna dilution I should say.
Speaker Change: Okay got you.
Speaker Change: Turning to the quarter I saw that you're going to see that.
Douglas C. Bryant: Okay, gotcha. I was going to say, for the quarters, you'll see the same normal cadence of, you know, Q1 and Q4 will be higher, and Q2 and Q3 are at least slightly lower. Okay, understood. And then just on the LRP, I know you've got a few questions. Is that something you guys are going to be reviewing in the next month as the analyst there? You kind of feel good about reiterating it today.
Speaker Change: I was going to say for the quarters Youll see the same normal cadence of Q1, and Q4 will be higher.
Speaker Change: Q2, Q3 or at least like a slightly lower.
Speaker Change: Okay understood and then just on the on the ERP I know you've gotten a few questions. So is that something you guys are going to be reviewing in the next month at the analyst day or are you kind of feel good about reiterating it today and then what kind of talk at the analyst day in more detail I just want to make sure we're kind of getting the message correct.
Douglas C. Bryant: And then we'll kind of talk to the analyst in more detail. I just want to make sure we're kind of getting the message correct. On the margins, that is.
Speaker Change: On the margins that we're definitely going to go through more detail.
Speaker Change: Yeah, and so we're going to.
Douglas C. Bryant: Yeah, and so we're gonna attempt to show on March 20th what the initiatives are, what we're working on, what the milestones are so that our investors can know we're on track with what we say. But I would, I would again, I have terms of.
Speaker Change: Tempt to show on March 20th.
Speaker Change: What the initiatives are working on what the milestones are so that our investors can know that we're on track with what we say.
Speaker Change: But.
Speaker Change: I guess in terms of.
Speaker Change: Yeah.
Speaker Change: Revenue margin that would be over.
Speaker Change: Probably a three year window at this stage.
Speaker Change: Okay. Thanks, Doug.
Speaker Change: Thank you for your question.
Speaker Change: Final question is from the line of Jon <unk> with UBS. Your line is now open.
Douglas C. Bryant: The revenue margin, it would be over, probably a three-year win. Okay. Thanks, Doug. Thank you for your question. The final question is from the line of John Sourbeer with UBS. Your line is now open. I think that's true. I think you probably heard me comment earlier about... You know, the thousand placements, et cetera.
Jon: Hi, Thanks for taking the question.
Jon: Just on the savanna launch.
Jon: You still think there's always the potential for $250 million revenues three years post launch or how should we think about this over and over the long term.
Jon: I think thats true.
Jon: Drew I think you probably heard me comment earlier about.
Jon: 1000 placements et cetera.
Douglas C. Bryant: I think we will achieve what we set out to do in 2024. We'll have a really nice start. So I don't really see that as something that will need to change the forecast.
Jon: I think we achieved what we set out to do in 2024, we will have a really nice start to it.
Jon: I don't really see that.
Jon: $2 50, it will be.
Jon: Something that will need to change the forecast that is.
Jon: Yeah.
Joe Buskey: Appreciate it. And then just, you know, follow up here on a clarifying thing, just to confirm that you're still including the US donor screening business, you know, what's the impact of the guidance there, and just any color on, you know, when that would be actually wound down? Yeah, it's a good question. It's in. The guy.
Speaker Change: I appreciate it and then just a follow up here on a clarifying just to confirm youre still including the U S donor screening business.
Speaker Change: What's the impact in the guidance there and just any color on that would be actually wound down.
Speaker Change: Yes.
Speaker Change: It's a good question it's in the guidance.
Joe Buskey: And I think, as Doug said earlier, if you were to pull it out, it's about a point impact, favorable impact on non-respiratory residents. And there will be a favorable impact on EBITDA margin as well. We'll talk more about that on investor day.
Speaker Change: I think as Doug said earlier, if you were to pull it out its about point impact favorable impact on non respiratory revenue.
Speaker Change: And.
Speaker Change: There will be a favorable impact on EBITDA margin as well, we will talk more or less out on investor day, we'll give a little more.
Joe Buskey: Thank you for taking the question. Thank you for your question. There are no additional questions waiting at this time, so that will conclude the conference call. Thank you for your participation. You may now disconnect your lines. www.charlesboyk-law.com
Speaker Change: More color.
Speaker Change: Thanks for taking the question.
Speaker Change: Thank you for your question.
Speaker Change: There are no additional questions waiting at this time, so that will conclude the conference call. Thank you for your participation you may now disconnect your lines.
Speaker Change: Thanks.
Speaker Change: [music].