Q1 2024 QuidelOrtho Corp Earnings Call

Operator: Welcome to the Quidel ORFRO First Quarter 2024 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. For those of you participating in the conference call, there will be an opportunity for 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.

Welcome to the quite O or for first quarter 2024 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 questions at the end of today's prepared remarks.

Please note. 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'd like to turn the call over to Juliet Cunningham, Vice President of Investor Relations.

Juliet Cunningham: Thank you. Good evening, everyone.

Juliet Cunningham: Thank you and good evening, everyone and thanks for attending <unk> first quarter financial results Conference call.

Michael S. Iskra: And thanks for joining the Quidel Ortho First Quarter Financial Results Conference Call. With me today are Bryan Blaser, our newly appointed President and Chief Executive Officer, Mike Iskra, EVP and Chief Commercial Officer, and Joe Busky, Chief Financial Officer. Rob Bujarski, our EVP and Chief Operating Officer, will also join us for the Q&A session that follows our prepared remarks.

Juliet Cunningham: With me today are Brian Blazer.

Juliet Cunningham: He is president and Chief Executive Officer, Mike <unk>, EVP, and Chief Commercial Officer, and Joe Bergstein, Chief Financial Officer, Rob.

Speaker Change: Well the guarantee our EVP and Chief operating Officer will also join in.

Speaker Change: The Q&A session that follows our prepared remark.

Speaker Change: This conference call is being simultaneously webcast on the Investor Relations page of our website.

Juliet Cunningham: This conference call is being simultaneously webcast on the Investor Relations page of our website. To aid in the discussion, we have posted a supplemental presentation on the Investor Relations page that will be referenced throughout the call. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not strictly historical, including the company's expectations, plans, future performance, and prospects, are forward-looking statements that are subject to certain risks, uncertainties, assumptions, and other factors.

Speaker Change: And then discussion we posted a supplemental presentation on the Investor relations page that will be referenced throughout the call.

Juliet Cunningham: This conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Juliet Cunningham: Actual results may vary materially from those expressed or implied in these forward-looking statements. Information about potential factors that could affect our actual results is available in our annual report on Form 10-K for the 2023 fiscal year and subsequent reports filed with the FEC, including the risk factors section. Forward-looking statements are made as of today, May 8, 2024, and we assume no obligation to update any forward-looking statement, except as required by law.

Juliet Cunningham: Statements that are not strictly historical.

Speaker Change: Leading the company.

Juliet Cunningham: Patients.

Speaker Change: <unk> future performance and prospects are forward looking statements are subject to certain risks uncertainties assumptions and other factors.

Speaker Change: Actual results may vary materially from those expressed or implied in these forward looking statements.

Speaker Change: Information about potential factors that could affect our actual results is available in our annual report on Form 10-K for the 2023 fiscal year and subsequent reports filed with the SEC, including the risk factors section.

Speaker Change: Forward looking statements are made as of today may eight 2024, and we assume no obligation to update any forward looking statement, except as required by law.

Juliet Cunningham: In addition, today's call includes discussions of certain non-GAAP financial measures. Tables reconciling these non-GAAP measures to their most directly comparable GAAP measures are available in our earnings release and the supplemental presentation, which are on the Investor Relations page of our website at quidelorco.com. Lastly, unless stated otherwise, all year-over-year revenue growth rates, including revenue growth ranges, given on today's call are given on a comparable, constant currency basis.

Juliet Cunningham: In addition, today's call includes discussions of certain non-GAAP financial measures.

Juliet Cunningham: Tables reconciling these non-GAAP measures to their most directly comparable GAAP measures are available in our earnings release and the supplemental presentation, which are on the Investor Relations page of our website at <unk> Dot com.

Juliet Cunningham: Lastly, unless stated otherwise all year over year revenue growth rates, including revenue growth ranges given on today's call are given on a comparable constant currency basis.

Michael S. Iskra: And now, I'd like to introduce Mike Iskra.

Juliet Cunningham: And now I'd like to introduce Mike its Greg.

Mike: Thank you Juliet.

Michael S. Iskra: In a few minutes, I'll introduce our new CEO, Brian Blaser. And then Joe, we'll go into our quarterly financials in detail. First, I'd like to review our first quarter business performance and discuss the recent actions we're taking, which are to improve our cost structure and deliver increased shareholder value, beginning with our first quarter 2024 performance.

Mike: In a few minutes I'll introduce our new CEO, Brian Blazer.

Mike: And then Joe will go through our quarterly financials in detail.

Mike: First I'd like to review, our first quarter business performance and discuss the recent actions, we're taking which are just improve our cost structure and deliver increased shareholder value.

Mike: Beginning with our first quarter 2024 performance, excluding COVID-19 revenue.

Michael S. Iskra: Excluding COVID-19, total revenue grew by 6% in constant currency, with solid growth across regions. Excluding COVID-19, we're having... We saw particularly good growth in EMEA and in China during the first quarter. Our labs have been, which was about 50% of our Q1 revenue, performed as expected with approximately 4% growth, excluding the one-time third-party collaboration settlement in the prior year period. Transfusion Medicine was 23% of Q1 revenue and grew by approximately 4%. Driven by a mutant pathology reagent for cross-region and the OrthoVision SWEP and OrthoVision Max SWEP instrument placement

Mike: Total revenue grew by 6% in constant currency with solid growth across regions.

Mike: Prudent COVID-19 revenue, we saw particularly good growth in EMEA and China during the first quarter.

Mike: Our labs business.

Mike: Which was about 50% of our Q1 revenue.

Mike: As expected with approximately 4% growth.

Michael S. Iskra: Excluding the onetime third party collaborations settlement in the prior year period.

Michael S. Iskra: Transfusion medicine was 23% of Q1 revenue and grew by approximately 4% driven.

Mike: Driven by immuno hematology reagent growth across regions and the organization Swift and worth division backs with instrument placements.

Michael S. Iskra: Within transfusion medicine, our efforts to wind down the U.S. donor screening business continue as planned. Point of Care represented 26% of Q1 revenue. Excluding COVID-19 revenue, our point-of-care business is for approximately $38,000 a year, year-over-year. The group is driven by strong Sophia Sales and Procurement Market, including our combo test, Blue Strut, and R.S.B.

Mike: Within transfusion medicine, our efforts to wind down in the U S donor screening business continuous play.

Mike: Point of care represented 26% from Q1 revenue.

Mike: Excluding COVID-19 revenue or point of care business grew approximately 38% year over year.

Mike: Growth was driven by strong software sales.

Mike: Market.

Michael S. Iskra: Including our combo test.

Michael S. Iskra: Flu strep and RSV test.

Michael S. Iskra: And lastly, Molecular Diagnostics was 1% of Q1 revenue. Excluding COVID-19 revenue, molecular grew approximately 15%, albeit from a low-revenue distribution. On Savannah, we continue to work on producing a highly competitive respiratory panel for the U.S. market, as well as many expansions with the STI panel and additional assays over time. We plan to provide updates as we achieve milestones and get closer to our target for full commercial U.S. launch. Since our earnings call in February, the company has undergone a tremendous amount of change.

Mike: And lastly, molecular diagnostics was 1% in Q1 revenue.

Mike: Excluding COVID-19 revenue molecular grew approximately 15%, albeit from a low revenue base.

Mike: On Savannah, we continue work on producing at highly competitive respiratory panel for the U S market.

Michael S. Iskra: As well as menu expansion with the STI panel and additional assays over time.

Mike: We plan to provide updates as we achieve milestones and get closer to our target for full commercial U S launch.

Mike: Since our earnings call in February the company has undergone a tremendous amount of change for managing change can be challenging we see this as an opportunity to build on our strengths and address the areas we need to improve.

Michael S. Iskra: Managing change can be challenging, but we see this as an opportunity to build on our strengths and address the areas we need to improve. Over the past three months, we have implemented cost-reducing initiatives designed to deliver better results in both the near and long term. Our focus areas include margin restoration, which includes headcount reductions expected to deliver approximately $100 million in annualized savings.

Michael S. Iskra: Over the past three months, we have implemented cost reduction initiatives designed to deliver better results in both the near and long term.

Mike: Our focus areas include margin restoration, which includes head count reduction is expected to deliver approximately 100 million in annualized savings.

Michael S. Iskra: Beyond those initiatives, we are actively looking for new opportunities to improve business efficiencies and realize greater savings as part of our continuous improvement culture. At the same time, while acting in our prior role as interim CEO, Rob, Joe, and I prioritize maintaining business continuity and accelerating our margin restoration initiative. To that end, I believe our first quarter performance speaks to our team's ability to navigate a transitional period while keeping our business momentum intact and forging ahead with purpose.

Michael S. Iskra: Beyond those initiatives, we are actively looking for new opportunities to improve business efficiencies and realize greater savings as part of our continuous improvement culture.

Michael S. Iskra: At the same time, while locking in our firewall as interim office of the CEO, Rob Gemini prioritize maintaining business continuity and accelerating our margin restoration initiatives.

Mike: To that end I believe our first quarter performance speaks to our team's ability to navigate a transitional period, while keeping our business momentum and attack and forging ahead with purpose.

Michael S. Iskra: We welcome Brian as our new president and CEO. Brian brings over 25 years of senior leadership experience in the diagnostic industry, including seven years of full responsibility for Abbott's Global Dime Housing business. His track record of strengthening operations and driving revenue growth to dramatically improve profitability makes him an ideal leader to guide Quidel Ortho through its next phase of growth. On behalf of our global leadership team, I would like to thank our employees at Quidel Bordeaux for continuing to serve our customers and deliver on our 2024 operating plan.

Unknown Executive: We welcome Brian as our new President and CEO, Brian brings over 25 years of senior leadership experience in the diagnostic industry.

Mike: Including seven years of full responsibility for avid global diagnostic business.

Mike: His track record of streamlining operations and driving revenue growth to dramatically improve profitability makes him an ideal leader you got quite a lot work them through its next phase of growth.

Michael S. Iskra: On behalf of our global leadership team I would like to thank our employees find out worked out for continuing to serve our customers and deliver on our 2024 operating plan.

Mike: We appreciate your dedication and ability to remain focused during a transitional types. We look forward to a smooth transition with Brian now with a home to pave the way for a successful future.

Michael S. Iskra: We appreciate your dedication and ability to remain focused during transitional times. We look forward to a smooth transition with Bryan now at the helm to pave the way for a successful future. Now, I'd like to turn the call over to Bryan.

Michael S. Iskra: Let's turn the call over to Brian.

Bryan: Thanks, Mike.

Brian J. Blaser: I am very pleased to join the call today, and first, let me say that it is a true honor to join this exceptional organization. I am thrilled to have the opportunity to work with this leadership team and our talented colleagues across the company. And today, I'd like to share a few of the reasons I was compelled by this opportunity at this pivotal point in the company's history. First, I have always viewed Quidel and Ortho separately as highly innovative companies and formidable competitors.

Bryan: I'm very pleased to join the call today and first let me say that it is a true honor joined US exceptional organization I am thrilled to have the opportunity to work with this leadership team and our talented colleagues across the company.

Brian J. Blaser: And today I'd like to share a few of the reasons I was compelled by this opportunity at this pivotal point in our company's history.

Mike: First I have always viewed by Dell in ortho separately as highly innovative companies and formidable competitors.

Brian J. Blaser: Combined now as Quidel Ortho, this business has one of the broadest product portfolios spanning the continuum of care, from reference labs to hospitals, clinics, and urgent care, to retail and home testing. It touches every stage of the patient care spectrum, including prevention, diagnosis, patient care, and monitoring.

Brian J. Blaser: Combined now as quite outward, though this business has one of the broadest product portfolios spanning the continuum of care from reference labs to hospitals.

Brian J. Blaser: Critics and urgent care to retail at home testing quite.

Mike: While ortho touches every stage of the patient care spectrum, including prevention diagnosis.

Brian J. Blaser: <unk> care and monitoring.

Brian J. Blaser: This business has all of the underlying capabilities required to drive exceptional growth and profitability in a large and expanding market. There is work to do, and I'm excited about steering the company so it can achieve its full potential. In the short term, I will be focused on our highest priority, which is unwavering attention to customer satisfaction and patient care, improving profitability and cash flow while reducing our debt level, and positioning ourselves to compete effectively in the highly competitive diagnostics market.

Brian J. Blaser: This business has all of the underlying capabilities required to drive exceptional growth and profitability in a large and expanding market.

Brian J. Blaser: There is work to do and I am excited about steering the company. So it can achieve its full potential in the short term I will be focused on our highest priorities.

Mike: Which are unwavering attention to customer satisfaction that patient care, improving profitability and cash flow, while reducing our debt level.

Brian J. Blaser: Positioning ourselves to compete effectively in a highly competitive diagnostics market.

Brian J. Blaser: I look forward to providing more details about our strategic direction as we move forward. I'm excited about the opportunity to engage with many of you in the coming months and answer your questions when I host our second quarter earnings call in August. Joe, I'll now turn it over to you.

Mike: I look forward to providing more details about our strategic direction as we move forward I'm excited about the opportunity to engage with many of you in the coming months and answer your questions. When I hosted our second quarter earnings call in August.

Brian J. Blaser: Joe I'll now turn it over to you.

Joseph M. Busky: Thanks, Bryan. I would also like to welcome you to Quidel Ortho, and I look forward to the next chapter in our company's growth story. Let's begin with details of our first quarter results on slide four of the earnings presentation. As a reminder, unless stated otherwise, all year-over-year revenue growth rates on today's call are provided on a comparable constant currency basis. Our first quarter of 2024 financial results were in line with our expectations, and our underlying business trends remain solid.

Joe: Thanks, Brian I would also like to welcome you to quit.

Joseph M. Busky: That weren't though and I look forward to the next chapter in our company's growth story.

Joseph M. Busky: Let's begin with details of our first quarter results on slide four of the earnings presentation.

Joseph M. Busky: As a reminder, unless stated otherwise all year over year revenue growth rates on today's call are provided on a comparable constant currency basis.

Joseph M. Busky: Our first quarter 2024 financial results were in line with our expectations and our underlying business trends remain solid.

Joseph M. Busky: First quarter 2020 for revenue was 711 million on a reported basis.

Joseph M. Busky: First quarter of 2024 revenue was $711 million on a reported basis, compared to $846 million in the prior year period. The year-over-year revenue decrease is primarily COVID-19 related. Therefore, excluding COVID-19 revenue, our total revenue grew by 6% in constant currency with selling growth across all regions. And if you also exclude the one-time $21 million third-party collaboration settlement from Q1 of last year, total revenue growth was 10% in constant currency. From a regional perspective, in Q1, again, excluding COVID-19 revenue and income concurrency, we achieved revenue growth of 5% in North America. Amaya grew 6%, China grew by 12%, and the rest of the world grew by 6%, which includes Japan, Asia Pacific, and Latin America.

Joseph M. Busky: Compared to $846 million in the prior year period.

Joseph M. Busky: The year over year revenue decrease is primarily COVID-19 related therefore, excluding COVID-19 revenue. Our total revenue grew by 6% in constant currency with solid growth across all regions.

Joseph M. Busky: And if you also exclude the onetime $21 million of third party collaboration settlement from Q1 of last year.

Joseph M. Busky: Total revenue growth was 10% in constant currency.

Joseph M. Busky: From a regional perspective in Q1 again, excluding COVID-19 revenue in constant currency.

Joseph M. Busky: We achieved revenue growth of 5% in North America EMEA.

Joseph M. Busky: EMEA grew 6%, China growth of 12% and the rest of the world growth.

Joseph M. Busky: 6%, which includes Japan Asia Pacific and Latin America.

Joseph M. Busky: First quarter 2024, non respiratory revenue was flat compared to the prior year period and $574 million.

Joseph M. Busky: First quarter 2024 non-respiratory revenue was flat compared to the prior year period at $574 million. However, excluding the one-time, third-party collaboration settlement in the prior year period related to our labs business, non-respiratory revenue grew 4%. In the first quarter of 2024, respiratory revenue was $137 million, which included approximately $50 million in COVID-19 revenue. Respiratory revenue decreased 48% year-over-year, primarily due to lower COVID-19 revenue, excluding government only COVID-19 orders. Reservoir revenue grew 6%, and as Mike mentioned, our first quarter respiratory growth was driven by strong Sophia sales in the professional setting.

Joseph M. Busky: Excluding the onetime third party collaborations settlement in the prior year period related to our labs business.

Joseph M. Busky: Non respiratory revenue grew 4%.

Joseph M. Busky: First quarter of 2020 for respiratory revenue was 137 million, which included approximately $50 million in COVID-19 lemon.

Joseph M. Busky: Restaurant respiratory revenue decreased 48% year over year, primarily due to lower COVID-19 revenue.

Joseph M. Busky: Excluding the government only COVID-19 orders.

Joseph M. Busky: Respiratory revenue grew 6%.

Joseph M. Busky: As Mike mentioned, our first quarter respiratory growth was driven by strong so TSA LS in the professional setting.

Joseph M. Busky: We leverage our large global Sophia install base, with 70% of Sophia customers purchasing multiple units. This includes our combo test, which accounted for greater than 50% of our blue test revenue in Q1 and is consistent with the past several quarters, demonstrating the durability of this product.

Joseph M. Busky: We leveraged our large global Sofia installed base with 70% of Sofia customers purchasing multiple times.

Joseph M. Busky: This includes our combo test, which accounted for greater than 50% of our flu testing revenue in Q1.

Joseph M. Busky: And it's consistent with the past several quarters demonstrating the durability of this product.

Joseph M. Busky: Moving down to P&L, non-GAAP total operating expenses were essentially flat compared to the prior year period. Slide 5 shows that Q1 adjusted gross profit margin was 47.5% versus 53.8% in the prior year period. The change was primarily related to lower COVID-19 product sales, which are high-margin contributors, as well as one-time items that made for an available year-over-year comparison. In summary, gross margin headwinds were comprised of three one-time items.

Joseph M. Busky: Moving down the P&L.

Joseph M. Busky: non-GAAP total operating expenses were essentially flat compared to the prior year period.

Joseph M. Busky: Slide five shows that Q1, adjusted gross profit margin was 47, 5% versus 53, 8%.

Joseph M. Busky: In the prior year period.

Joseph M. Busky: The change was primarily related to lower COVID-19 product sales, which are high margin contributors as well as one time items that made for an unfavorable year over year comparison.

Joseph M. Busky: In summary, gross margin headwinds were comprised of three one time items.

Joseph M. Busky: 630 basis points related to the large government COVID-19 order in Q1 of last year, and 140 basis points from the one-time third-party collaboration settlement in Q1 of last year. Finally, 230 basis points tied to an inventory reserve related to respiratory product expiration in Q1 of 2024. These three items were partially offset by underlying base business performance and cost-saving actions within manufacturing and supply chain, which were approximately 400 basis points of benefit to the margin.

Joseph M. Busky: 630 basis points related to the large government COVID-19 order in Q1 of last year.

Joseph M. Busky: 140 basis points from the onetime third party collaborations from it in Q4 of last year, and finally 230 basis points tied to an inventory reserve related to respiratory product exploration in Q1 of 'twenty four.

Joseph M. Busky: Those three items were partially offset by underlying base business performance and cost saving actions within manufacturing and supply chain, which were approximately 400 basis points of benefit to the margin.

Joseph M. Busky: Adjusted EBITDA was $132 million compared to $245 million in the prior year period. Adjusted EBITDA margin was 19% compared to 29% in the prior year period. Adjusted diluted EPS was $0.44 compared to $1.80 in the prior year period. The year-over-year change in adjusted EBITDA and adjusted diluted EPS was primarily due to the lower COVID-19 revenue on the government order. Our first quarter affected tax rate was 23.5%, which was consistent with the prior year and in line with our four-year expectations.

Joseph M. Busky: Adjusted EBITDA was $132 million compared to $245 million in the prior year period.

Joseph M. Busky: Adjusted EBITDA margin was 19% compared to 29% from prior year period.

Joseph M. Busky: Adjusted diluted EPS was <unk> 44 cents compared to $1 80 in the prior year period, the year over year change in adjusted EBITDA and adjusted diluted EPS was primarily due to the lower COVID-19 revenue you got from new work.

Joseph M. Busky: Our first quarter effective tax rate was 23, 5%, which was consistent with the prior year and in line with our full year expectations.

Joseph M. Busky: In Q1, 2004, we recorded a noncash goodwill.

Joseph M. Busky: In Q1 2024, we recorded a non-cash Goodwill Impairment Charge of $1.7 million for the North America Reporting Unit due to the decrease in the estimated fair value, which was consistent with the decline in the company's market capitalization during the quarter. Turning now to the balance sheet on slide six of the presentation, we finished the quarter with $79 million in cash and $40 million drawn on the revolver. Note that during the quarter, we liquidated investments to avoid additional reliable borrowings. Recurring free cash flow of negative $13 million was driven by working capital needs.

Joseph M. Busky: Goodwill impairment charge of $1 7 million for the North America reporting unit due to the decrease in the estimated fair value.

Joseph M. Busky: Which was consistent with the decline in the company's market capitalization during the quarter.

Joseph M. Busky: Turning now to the balance sheet on slide six of the presentation.

Joseph M. Busky: We finished the quarter with $79 million of cash and $40 million drawn on our revolver.

Joseph M. Busky: Note that during the quarter, we liquidated.

Joseph M. Busky: Investments to avoid additional revolver borrowings.

Joseph M. Busky: Recurring free cash flow of negative $13 million was driven by working capital needs. We do expect cash flow to improve in.

Joseph M. Busky: We do expect cash flow to improve in the second half of 2024 as margin restoration impacts take effect, along with seasonally higher revenue expected in Q4. We continue to focus on executing our cost-saving and margin restoration initiatives, which are designed to deliver improved performance and sustainable long-term growth. We expect the benefits from these initiatives to be realized in the second half of 2024 and in the first half of 2025, with minimal impact in Q2 of this year.

Joseph M. Busky: Second half of 2024 margin restoration in fact to take effect along with seasonally higher revenue expected in Q4.

Joseph M. Busky: We continue to focus on executing our cost saving and margin restoration initiatives, which are designed to deliver improved performance and sustainable long term growth.

Joseph M. Busky: We expect the benefits from these initiatives you realized in the second half of 'twenty four and in the first half of 2025.

Joseph M. Busky: With minimal impact in Q2 of this year.

Joseph M. Busky: Taking a holistic perspective, we intend to maintain operating flexibility as we implement these initiatives. In light of this, and in an effort to be conservative, we did amend our credit agreement in April to increase the maximum consolidated leverage ratios beginning in Q3 this year through the loan maturity in May of 2027. Importantly, we completed this amendment at a cost of $12.5% of the total loan commitment, and the loan pricing is unchanged.

Joseph M. Busky: Taking a holistic perspective, we intend to maintain operating flexibility as we implement these initiatives in light of this and in an effort to be conservative we did amend our credit agreement in April two.

Joseph M. Busky: To increase the maximum consolidated leverage ratio at the beginning of Q3 this year through the loan maturity in May of 2007 Importantly, we completed this amendment.

Joseph M. Busky: At a cost of 12 and a half of the total loan commitments and the loan pricing is unchanged.

Joseph M. Busky: During the first quarter of 2024, our consolidated leverage ratio was three times, including pro forma EBITDA adjustments compared to the four times maximum specified in the amended credit agreement for the first half of 'twenty four.

Operator: During the first quarter of 2024, our consolidated leverage ratio was three times, including for former EBITDA adjustments, compared to the four times maximum specified in the United Credit Agreement for the first half of 2014. Based on current expectations, we expect our consolidated leverage ratio to be approximately three and a half times by the end of this year, including EBITDA adjustments compared to the four and a quarter maximum specified in the amended credit agreement.

Operator: Based on current expectations, we expect our consolidated leverage ratio to be approximately three and a half times by the end of this year, including pro forma EBITDA adjustments compared to the fourth quarter maximum specified in the in the menu credit.

Operator: And lastly, we want to provide some relevant updates based on our current visibility. Our prior expectation for COVID-19 revenue was approximately $245 million based on our current view, which is subject to change based on COVID-19 developments. We are now expecting approximately $150 million in COVID-19 revenue for the full year of 2024. Second, we also expect that Savannah revenue will be material in 2024 with no expected U.S. respiratory revenue contribution from Savannah in the 24-25 respiratory, And as a reminder, the COVID-19 public health emergency in the U.S. ended in May of 2023.

Speaker Change: Lastly, I want to provide relevant updates based on our current visibility.

Operator: Our prior expectations for COVID-19 revenue was approximately $245 million based on our current view.

Operator: Which is subject to change based on COVID-19 developments, we are now expecting approximately $150 million and COVID-19 revenue for the full year 2024.

Operator: Second we also expect that banner revenue will be immaterial in 2024 with no expected U S respiratory revenue contribution from Savannah in the 'twenty four 'twenty five respiratory season.

Operator: And as a reminder, the <unk>.

Operator: COVID-19 public health emergency in the U S ended in May of 2023. However, we continue to see significant quick view COVID-19 test sales.

Operator: However, we continue to see significant quick-view COVID-19 test sales in the retail setting in the second quarter of 2023. Hence, we expect year-over-year COVID-19 revenue comparisons to again be challenging in Q2 of this year. And as a result of these changes to the COVID-19 and Savannah revenue, our current expectations are to be at or slightly below the low end of our previously communicated 24 guidance for revenue-adjusted EBITDA and adjusted EPS.

Operator: The retail setting in the second quarter of 'twenty three hence.

Operator: Hence, we expect year over year, COVID-19 revenue comparisons to again be challenging in Q2 of this year.

Operator: And as a result of these changes to the COVID-19, and Savannah revenue.

Operator: Current expectations are to be at or slightly below the low end of our previously communicated 24 guidance ranges for revenue adjusted EBITDA and adjusted EPS.

Operator: With our new president and CEO coming on board this week, we've decided to suspend guidance to give Brian an opportunity to assess the business and evaluate our plans for the rest of 2024. We do intend to resume providing guidance later in the year when we are able to share our plans. I would now like to ask the operator to please open the call for questions. If you would like to ask a question, please press star followed by one on your telephone.

Operator: With our new President and CEO coming on board. This week, we decided to suspend guidance, Brian and opportunity.

Operator: To assess the business and evaluate our plans for the rest of 2024.

Operator: We do intend to resume providing guidance later in the year, we are able to share our plans.

Operator: 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. 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 Jack Meehan with Nefron Research. Your line is now open.

Operator: I would now like to ask the operator to please open the call for questions.

Jack Meehan: 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 move that a question. Please press star followed by two again to ask a question press Star one.

Jack Meehan: Wonder if you're using a speaker phone. Please remember to pick up your handset before asking a question. We'll pause here briefly is questions you registered.

Operator: The first question is from the line of Jack Meehan with Nephron Research. Your line is now open.

Jack Meehan: Thank you good afternoon, and Brian welcome aboard.

Jack Meehan: Thank you. Good afternoon. And Brian, welcome aboard. Thank you.

Jack Meehan: Thank you.

Jack Meehan: One just wanted to get your thoughts maybe to start on two topics.

Jack Meehan: One just wanted to get your thoughts maybe to start on two topics. First, as you were taking the CEO role at Quidel Orso, can you talk about the work you did on Savannah and what your view is on the level of confidence to bring a competitive platform to market there? That's number one. Number two is your view on what the right margin profile is, kind of once you go through this transition period, like, aspirationally, where do you want to get this business to?

Jack Meehan: First as you were taking the CEO.

Jack Meehan: I E were diligent, saying, taking the CEO role at final words, though can you talk about the work you did on savanna and what your view is on <unk>.

Jack Meehan: Just level of confidence spring competitive platform the market. There that's number one number two is.

Jack Meehan: Your view on what the right margin profile kind of once you go through this transition period.

Jack Meehan: Aspirational, where do you want to get this business too.

Brian J. Blaser: Well, yeah.

Speaker Change: Oh well yeah.

Brian J. Blaser: Well, yeah, let me answer generally, you know, kind of why I took the job and some first impressions of the business. And I've been here three days. And, you know, the amount of information that I had.

Speaker Change: Let me answer generally.

Brian J. Blaser:

Brian J. Blaser: Okay.

Brian J. Blaser: Why I took the job and my first impressions on the on the business.

Brian J. Blaser: And I've been here three days and.

Brian J. Blaser: <unk> innovation.

Speaker Change: <unk> had available to me if I did my due diligence was with somewhat limited, but yeah. Let me, let me say first that I've been around the industry for a long time.

Brian J. Blaser: I've been around the industry for a long time. I'm still in the very early days of learning the details of the business, but I am very familiar with the market landscape, the business model for business models, in this case. And I've had the opportunity to work with some really talented teams in this space to drive a lot of change and have been able to do things and work on projects to expand into new markets, a lot of product development, and launching complex new systems. Manufacturing and Supply Chain Optimization, Optimizing Commercial Models, and that sort of thing.

Brian J. Blaser: I'm still in the very early days of learning the details of the business.

Brian J. Blaser: But I am very familiar with the market landscape the business model or business models here in this case.

Brian J. Blaser: And I've had the opportunity to work with some some really talented teams in this space to drive a lot of change and have been able to do.

Brian J. Blaser: <unk>.

Brian J. Blaser: Work on projects to expand into new markets.

Brian J. Blaser: A lot of product development and watching complex new system.

Brian J. Blaser: Manufacturing and supply chain optimization, optimizing commercial models and that sort of thing.

Brian J. Blaser: And, you know, in my assessment of the business prior to taking on the role, and now, as I said, now, having been here a few days, I like what I see here. I think there are clear opportunities to improve the performance of the organization in all of the areas that I just mentioned where I have experience. Many of the opportunities that I mentioned here have already been identified by the interim office of the CEO and are in light of moving along.

Brian J. Blaser: And you know in my assessment of the business prior to taking on the role.

Brian J. Blaser: Now as I said now having been here a few days I.

Brian J. Blaser: I like what I see here I think there are clear opportunities to improve the performance of the organization.

Brian J. Blaser: And all of the areas that I, just mentioned where I have experienced.

Brian J. Blaser: Many of the opportunities that the.

Brian J. Blaser: I've mentioned here have already been identified by the interim office of the CEO and are are in flight are moving along.

Brian J. Blaser: I see the opportunity to do some more, particularly in the areas of product development and productivity, commercial excellence, and just productivity improvement in general. I think the leadership team sees those opportunities as well. And I'm excited to work with the team here on these things to improve our performance. So, you know, I look at this as a great opportunity. To your second question about aspirationally, I don't want to get, you know, too far over my skis here, but, you know, certainly, operating margins in the high 20s would be something that I think would be very, you know, reasonable for a business like this. And certainly, we're going to do everything we can to achieve that and do more if we can.

Brian J. Blaser: The opportunity.

Brian J. Blaser: Some more.

Brian J. Blaser: Particularly in the areas of product development and productivity commercial excellence.

Brian J. Blaser: Productivity improvement in general.

Brian J. Blaser: I think the leadership team sees those opportunities as well.

Brian J. Blaser: And I'm excited to work with the team here on these things to improve our performance.

Brian J. Blaser: So so you know I look at this as a great opportunity.

Brian J. Blaser: To your second question about aspirational I don't want to get too far over my skis.

Brian J. Blaser: Skis here, but certainly.

Brian J. Blaser: Operating margins in the in the high Twenty's would be.

Brian J. Blaser: Something that I think would be very.

Brian J. Blaser: Reasonable for a business like this in.

Brian J. Blaser: And certainly we're going to do everything we can see the usage.

Brian J. Blaser: Cheese out and do more if we can.

Brian J. Blaser: Right.

Brian J. Blaser: Great.

Joseph M. Busky: And then I wanted to ask about guidance. So appreciate the color, Joe, around kind of where you're shaking out relative to the prior guide. Can you just give us a timeline when you expect to reinitiate guidance? Do you think with 2Q, or could it come before then?

Speaker Change: And then wanted to ask about guidance. So I appreciate the color Joe around kind of where you're shaking out relative to the prior guide.

Joseph M. Busky: Can you just give us a timeline when you expect to Reinitiate guidance do you think with <unk> or could it come before then.

Joseph M. Busky: Well, Jack, first of all, we wanted to be as transparent as possible, so we did provide those updates on our expectations for COVID revenue in Savannah because we know that they've been open questions. And we did suspend guidance to give Brian a chance to assess the business a little further and evaluate our plans for 2024. And we will resume guidance at some point in 2024. I think it's too early to say specifically what that date will be.

Speaker Change: Well, Jeff first of all we want to be as transparent as possible. So we did provide those updates.

Joseph M. Busky: Our expectations for Covid revenue and Savannah, because we know that there's anything open questions.

Joseph M. Busky: For investors.

Joseph M. Busky: And we did suspend the guidance to give Brian a chance to assess the physical business a little further and evaluate our plans for 2024.

Joseph M. Busky: And we will resume guidance at some point in 2024, I think it's too early to say specifically what that data itself.

Joseph M. Busky: Yes.

Brian J. Blaser: Yes, and let me just add, this is Brian. Let me just add to that a little bit. You know,

Brian J. Blaser: This is Brian let me just add to that a little bit.

Brian J. Blaser: I'm going to talk a little bit, you know, there was an investor day that was postponed as a result of the things that happened. And, you know, I'm, I'm anxious to get out in front of investors as soon as we can, but we haven't defined definitively when we might do an investor day. But, you know, certainly we're thinking before the end of the year. And again, I'm anxious to get out there and interact with everyone.

Brian J. Blaser: There was a there was an investor day that was.

Brian J. Blaser: Postponed.

Brian J. Blaser: As a result of the things that happened and.

Brian J. Blaser: I'm I'm anxious to get out in front of investors as soon as we can.

Brian J. Blaser: We haven't defined definitively whether we'd like you at Investor day, but certainly we're thinking before the end of the year.

Brian J. Blaser: And again.

Brian J. Blaser: I'm anxious to get out there and interact with everyone.

Speaker Change: Alright, okay. Thanks for the questions I appreciate it.

Jack Meehan: Okay. Thanks for the questions. I appreciate it.

Jack Meehan: Oh.

Speaker Change: Thank you for your question next.

Operator: The next question is from the line of Andrew Brackmann with William Blair. Your line is now open.

Jack Meehan: The next question is from the line of Andrew <unk> with William Blair. Your line is now open.

Operator: Hi, everyone. This is Maggie on for Andrew today, Thanks for taking our question.

Andrew Frederick Brackmann: Hi, everyone. This is Maggie Bowie on for Andrew today.

Andrew Frederick Brackmann: Thanks for taking our questions. Joe, I appreciate the color you provided us on COVID and Savannah based on, you know, what you're seeing this far. But with the full respiratory season under your belt at this point, can you talk about what you view as realistic endemic revenue levels from here? Thank you.

Maggie Bowie: Joe I appreciate the color you provided us on Covid and Savannah based on what Youre seeing thus far with the full respiratory season under your belt. At this point can you talk about what you view as realistic endemic revenue levels from here. Thank you.

Joseph M. Busky: And Maggie, before I answer, you're specifically asking about COVID revenue, correct?

Speaker Change: And maybe before I answer your specifically asking about Covid revenue correct.

Maggie: Yes, just COVID-19 and respiratory revenue.

Andrew Frederick Brackmann: Yes, just COVID and respiratory.

Maggie: Yeah got it okay. So let me just hit on the Covid.

Joseph M. Busky: Yeah, got it. Okay, so let me just hit on the COVID first. We did take Full Year COVID revenue down to $150,000. You guys have probably heard me say this before. The truth is no one can accurately predict COVID Market Size and Timing, but we do use it. Customer, Industry, and Peer Data, as well as some proprietary research, as well to try and remove data points and come up with the projection that we spoke about. But we don't believe it's zero, to be clear. We don't think that's the right number.

Joseph M. Busky: First we did take.

Joseph M. Busky: The full year of Covid revenue.

Joseph M. Busky: Down to 150.

Speaker Change: And okay.

Joseph M. Busky: You guys have probably heard me say this before the truth is no one can accurately predict.

Joseph M. Busky: The cobot market size or the timing, but we do use.

Joseph M. Busky: Customer industry and peer data as well as access to proprietary research as well to triangulate data points and come up with the the.

Joseph M. Busky: The projection that we that we spoke about.

Joseph M. Busky: We did 50 million in COVID revenue in Q1, as we said in the scripted remarks, and we continue to see COVID sales in Q2, although at lower levels. And we do expect COVID revenues in the second half to be higher, given the typical respiratory season in the third and fourth quarters, and we will carefully continue to monitor. All leading indicators, and obviously, we'll adjust expectations as things evolve and the year progresses. All right. All right.

Joseph M. Busky: We don't believe it's zero to be clear, we don't think that's the right number we did $50 million of cobot revenue in Q1, as we said in his scripted remarks.

Joseph M. Busky: And we continue to see Kobe sales in Q2 on that although at lower levels and.

Joseph M. Busky: And we do expect Covid revenues in the second half to be higher given the typical respiratory season in the third and the fourth quarters and we will carefully continue to monitor.

Joseph M. Busky: All the leading indicators and obviously, we'll adjust expectations as things evolve and as year progresses.

Joseph M. Busky: As far as.

Joseph M. Busky: Respiratory revenue outside of COVID. As a reminder, following last year, we did put in place a new methodology for forecasting the flu, the flu revenue. And that methodology was based on market share, market size, number of tests, when I say market size, and mix of products, specifically mix of combo versus flu only test. And, you know, I would have to say that, you know, the Q1 numbers turned out pretty much as expected, based on that new methodology.

Joseph M. Busky: Respiratory revenue.

Joseph M. Busky:

Joseph M. Busky: Outside of Covid and the reminder.

Joseph M. Busky: Following last year, we did put in place a new methodology.

Joseph M. Busky: For forecasting.

Joseph M. Busky: The flu.

Joseph M. Busky: The flu revenue in that methodology was based on market share and market size number of test when I say market side.

Joseph M. Busky: Mix of products, specifically mix of combo versus.

Joseph M. Busky: Flu only test.

Joseph M. Busky: And I would have to say that the Q1 numbers turned out pretty much as expected.

Joseph M. Busky: And so if you think about the balance of the year for us As you move into the second half, we do expect a typical flu season of roughly 50 million tests. And remember, we've said that we think that the range. Volume for the size of the market is 40 to 60 million texts, and so we think we're going to land somewhere in the middle. That's where we've pegged it. And we haven't seen any changes in distributor inventory levels or any other leading indicators that would materially impact our forecast. So maybe I'll stop there and see if that answers your question.

Joseph M. Busky: Based on that new methodology, and so as you think about the balance of the year for us.

Joseph M. Busky: As you move into the second half we do expect.

Joseph M. Busky: A typical flu season.

Joseph M. Busky: Roughly 50 million tests and remember we've said that we think that the range.

Joseph M. Busky: Our volume for <unk>.

Joseph M. Busky: Size of market is 40 to 60 million tests and so we think we're going to land somewhere in the middle and that's where we we pegged. It can meet we haven't seen any changes in distributor inventory levels or at any other leading indicators that would materially impact our forecast.

Speaker Change: So maybe I'll stop there to see if that answers your question.

Andrew Frederick Brackmann: Yes, that's great. Thanks so much for all that color.

Speaker Change: Yes, that's great. Thanks, so much for all that color and then maybe just another one on gross margins.

Speaker Change: I can appreciate it a couple of moving pieces, we saw in Q1, but just how should we be thinking about those on a quarterly basis as we go throughout the rest of the year. Thanks, so much.

Speaker Change: Yeah. So.

Speaker Change: Yes. This is no different than what we've seen in prior years.

Andrew Frederick Brackmann: You're going to have some seasonality within the quarters, but Q2.

Andrew Frederick Brackmann: And then maybe just another one on growth margins. You know, I can appreciate the couple moving pieces we saw in Q1. But just how should we be thinking about those on a quarterly basis as we go throughout the rest of the year?

Andrew Frederick Brackmann: Will be our lowest quarter for gross margin and the revenue is typically our seasonally lowest of the year and there is there is a certain amount of fixed costs within gross the gross margin line that will bring that margin down for Q2 will be the lowest.

Joseph M. Busky: Thanks so much.

Andrew Frederick Brackmann: Yeah, so this is no different than what we've seen in prior years. You know, you're going to have some seasonality within the quarter. So Q2 will be our lowest. Transcripts provided by Transcription Outsourcing, LLC. And then Q3 and Q4 will go back up again, based on the seasonally higher respiratory revenues and even the last seasonality you see in Q4. So we would expect that margins would go back up in the second half of the year.

Joseph M. Busky: And then Q3 and Q4, we will go back up again based on the seasonally higher respiratory revenues and even the labs.

Andrew Frederick Brackmann: Seasonality you see what.

Andrew Frederick Brackmann: We've seen in Q4, so we would expect that the margins would go back up in the second half of the year.

Speaker Change: Great. Thank you so much.

Joseph M. Busky: Great! Thank you so much.

Speaker Change: You got it. Thank you. Thank you for your question.

Operator: You got it. Thank you. Thank you for your question. Next question is from the line of Andrew Cooper with Raymond James. Your line is now open. Hey, everybody. Thanks for the question.

Operator: Next question is from the line of Andrew Cooper with Raymond James Your line is now open.

Andrew Harris Cooper: Hi, everybody. Thanks for the question, Brian Good too.

Andrew Harris Cooper: Hey, everybody. Thanks for the question, Brian. Good to have your first earnings call underway. Maybe just first, you know, thinking about margins and the trajectory for the year, can you give a sense for maybe just where we are in terms of the cost saves that are in motion and in flight already versus maybe what's identified to get to the $100 million target and not quite started, and what maybe you need to go out and find in the base as it sits today?

Andrew Harris Cooper: Your first earnings call underway maybe.

Andrew Harris Cooper: Maybe just first.

Andrew Harris Cooper: Thinking about margins and the trajectory for the year can you give a sense for maybe just where we are in terms of the cost saves that are already in motion and in flight already versus maybe what's identified to get to the $100 million target end and not quite started and what maybe you need to go out and find in the base as it sits today.

Joseph M. Busky: Yeah, I'll take that question, Andrew. How are you doing with So? You will recall that on the last earnings call, we talked about a headcount reduction of in the range of 5% to 6% of headcount and 100 million annualized. And, you know, I'm happy to say that we've completed the majority of those headcount reductions, and we're continuing to look at ways to, you know, continue to improve the organization. We expect to complete the majority of these headcount reductions, which are going to be around 500 positions that we announced by mid-year this year.

Speaker Change: Yeah, Hey, I've seen I'll take that question, Andrew how are you by the way.

Joseph M. Busky: So.

Joseph M. Busky: And again, we expect to see about 50 million of that benefit in the second half of this year, primarily SG&A, and the other 50 million of that benefit will be in the first half of 2025. It's probably also important to note that these headcount reductions were a little more focused on higher-level individuals within the organization. So even though it's, position reductions are 5-6% of headcount. It's closer to 10-12% of our total compensation and benefits, again because we did focus on taking out higher-level management positions. And again, we're not done. We're going to continue to look for ways to make this company more efficient.

Joseph M. Busky: You will recall that on the last earnings call. We did talk about a <unk>.

Joseph M. Busky: The head count reduction.

Joseph M. Busky: In the range of 5% to 6% head count and a $100 million annualized.

Joseph M. Busky: I'm happy to say that we've completed the majority of those head count reductions and we're continuing to look at ways to continue.

Joseph M. Busky: Continuing to improve the organization.

Joseph M. Busky: We expect to complete the majority of this these head count reductions, which is going to be around 500 positions.

Joseph M. Busky: We announced by midyear this year and again, we expect to see about $50 million of that benefit in the second half of this year.

Joseph M. Busky: Primarily in SG&A.

Joseph M. Busky: And the other $50 million of the benefit will be in the first half of.

Joseph M. Busky: 2025.

Joseph M. Busky: Its probably also important to note that these head count reductions were a little more focused on higher level individuals within the organization. So even though it's.

Joseph M. Busky: The position reductions of 5% to 6% of head count was closer to 10% to 12% of our total compensation and benefits again, because we did focus on taking out higher level management positions.

Joseph M. Busky: And again, we're not done we're going to continue to work the way it looked for ways to make this company more efficient.

Joseph M. Busky: Okay, helpful. And maybe just one more on the gross margin since we just talked about that a bit as well. But just to be clear, when you talk about 2Q being the lowest, I assume that's on a sort of an adjusted basis absent the inventory write-down that you called out for the quarter. Is that a fair way to think about it, at least from a typical trajectory perspective? Or just how should we think about, you know, that piece which, obviously, we're hoping won't be repeated? Yeah.

Speaker Change: Okay helpful and maybe just one more on the gross margin since we just talked about it a bit as well, but just to be clear. When you talk about Q2 being the lowest I assume that's on a sort of an adjusted basis absent the inventory write down that you called out for the quarter or is that a fair way to think about it at least for me.

Joseph M. Busky: That's typical trajectory perspective, or just how should we think about that piece, which obviously, where we're hoping won't repeat.

Joseph M. Busky: Yeah, that's true. And so, as I said in prepared remarks, the Q1 margin was impacted by that 200 basis points due to an inventory reserve, you know, since we overhauled Q4 of 23. And so you still would see Q2 be seasonally low, and we don't expect a significant inventory reserve write-off in Q2.

Speaker Change: Yeah, that's true and so as I said in the prepared remarks. The Q1 margin was impacted by about 200 basis points due to an inventory reserve.

Joseph M. Busky: Since we over call it Q4 'twenty three.

Joseph M. Busky:

Joseph M. Busky: And so you still would see Q2 be seasonally low and we don't expect is significant.

Joseph M. Busky: Inventory reserve write offs in Q2, I guess it will take your questions.

Speaker Change: Okay. Thank you.

Joseph M. Busky: Okay, thank you. And then, if I can sneak one more in, maybe just for Brian, I think Jack tried to ask it, but maybe it got lost in the shuffle.

Joseph M. Busky: And then if I can sneak one more in maybe just for Brian I think Jack tried to ask it but maybe it got lost in the shuffle I guess, what's your views on a product like Savannah in the competitive molecular kind of marketplace. How do you think about the actual kind of our ability to go out and compete with that kind of mid plex.

Joseph M. Busky: Back then and what's attractive about that platform in particular as you think about the path forward.

Joseph M. Busky: I think it's a it's a.

Joseph M. Busky: Tractive competitive product quite frankly and added to the point our challenge is menu.

Andrew Harris Cooper: Just what are your views on a product like Savannah in the competitive molecular kind of marketplace? How do you think about the actual kind of ability to go out and compete with that kind of midplex product and what's attractive about that platform in particular, as you think about the path forward?

Speaker Change: And Oh my focus is.

Andrew Harris Cooper: Getting the menu of tests on that platform as quickly as we can so that we have a competitive offering in the field.

Speaker Change: Got it I'll stop there thanks everybody.

Speaker Change: Thank you for your question.

Andrew Harris Cooper: Next question is from the line of Conor Mcnamara with RBC. Your line is now open.

Brian J. Blaser: I think it's an attractive competitive product, you know, quite unique.

Speaker Change: Hey, guys. Thanks for taking my question and welcome to San Diego Brian.

Brian J. Blaser:

Brian J. Blaser: Frankly, and to the point.

Brian J. Blaser: Joe can you just comment on the.

Brian J. Blaser: How involved do you were in the <unk>.

Brian J. Blaser: The forecasting of respiratory and flu sales.

Brian J. Blaser: When you guys gave Q4 guidance.

Brian J. Blaser: And I know you talked about some of the assumptions that go into how you guys do that but did you.

Brian J. Blaser: Involved where you then versus kind of the way you looked at it now because it looks like you kind of took a pretty big haircut to some of the assumptions. So I'm just curious what your involvement was prior personnel.

Brian J. Blaser: Our challenge is:

Speaker Change: Yes, I think on how are you.

Brian J. Blaser: I don't know that I want to rehash too much through Q4 other than to say that as we've said in the past we overhauled.

Brian J. Blaser: Covid and flu revenue.

Brian J. Blaser: In Q4 of 2023 Unfortunately.

Brian J. Blaser: And.

Brian J. Blaser: As I said on the previous response to a question we did put in place a new methodology.

Brian J. Blaser: Because of.

Brian J. Blaser: Mainly because of what happened last year.

Brian J. Blaser: That forecast.

Brian J. Blaser: Blue and we feel pretty good about it and again using those three variables that I mentioned market size market share and use of products and we're going to continue to use that methodology and refine that methodology.

Brian J. Blaser: [inaudible]

Brian J. Blaser: Hey, Joe if I could this is cause for Mike how are you.

Brian J. Blaser: On both fronts right. If we take the traditional respiratory season as Joe said, we have a new methodology with the memory coming into this year and we feel very good the.

Brian J. Blaser: The market demand and how big the flu season is is to be deterred.

Brian J. Blaser: Determined really outside of our control within our control.

Brian J. Blaser: What are we doing to drive market share gain are we driving the right mix of product leveraging our combo SaaS decided differentiate and get the right mix and are we able to compete on price.

Brian J. Blaser: Not only do we have a good method for forecasting I think we have very specific kpis for.

Brian J. Blaser: Or how we operationalize that and how we are we still doing that.

Brian J. Blaser: That's the traditional respiratory on Covid was I'd say for this year coming in as we spent a good deal of time trying to triangulate on the right number and the question was asked earlier.

Brian J. Blaser: On COVID-19 test getting look theres still more information to come but we feel that we've done pretty wide range.

Brian J. Blaser: Analysis covering.

Brian J. Blaser: Material from our peer group from the industry and market from other experts.

Brian J. Blaser: And.

Brian J. Blaser: I think that the number that we've shared with you today the $1 50.

Brian J. Blaser: Well for us.

Brian J. Blaser: But what.

Brian J. Blaser: What we also learned from last year as we cant just give you take one numbers begin to year end.

Brian J. Blaser: And then not not watch so I think the other piece that's important to note as we've set up.

Brian J. Blaser: Maybe what we would call early warning systems to make sure. We're watching proactively some casing is monitoring the market that we can react more quickly than we have.

Speaker Change: Great. Thanks for that color and then just a follow up on Savannah.

Brian J. Blaser: He took revenues out so you know I missed due to.

Brian J. Blaser: Respiratory revenue is the thought that if you guys do get.

Brian J. Blaser: Approval for respiratory panel you would still wait until you have multiple panels before you launch into the market because Brian it sounded like that's kind of what your commentary was alluding to or is there.

Brian J. Blaser: Is there a chance you would still launch it in 2024 with just respiratory.

Brian J. Blaser: Yes.

Speaker Change: Good question. So look I think we're all absolutely clear.

Brian J. Blaser: Two things one the guidance. We gave you is around financial expectations for savanna.

Brian J. Blaser: Let's not confuse that with the operational expectations.

Brian J. Blaser: And, you know, my focus is getting the menu of tests on that platform as quickly as we can so that we have a competitive offering.

Brian J. Blaser: Have a very aggressive plan to move as quickly as we can not just on respiratory but as mentioned STI and as Brian mentioned, the rest of the savanna menu, which is critical I think.

Brian J. Blaser: What we will be careful to do is set.

Brian J. Blaser: <unk> too early.

Brian J. Blaser: But what we don't want to be confused with this sort of an unrelenting effort to get products approved out in the market as soon as possible.

Andrew Harris Cooper: I'll stop there. Thanks, everybody.

Speaker Change: Great I appreciate that color and thanks for the questions guys.

Operator: The next question is from the line of Conor McNamara with RBC. Your line is now open.

Andrew Harris Cooper: Thank you for your question. The next question is from the line of Patrick Donnelly with Citi. Your line is now open.

Conor Noel McNamara: Hey guys, thanks for taking the question and welcome to San Diego, Bryan. Joe, can you just comment on how involved you were in the forecasting of respiratory and flu sales, and when you guys gave Q4 guidance, and I know you talked about some of the assumptions that go into how you guys do that, but how involved were you then versus the way you look at it now? Because it looks like you kind of took a pretty big haircut on some of the assumptions. So I'm just curious what your involvement was prior versus now.

Conor Noel McNamara: Hey, guys. Thanks for thanks for taking my question.

Conor Noel McNamara: Joe maybe just on the on the leverage side and some of that.

Conor Noel McNamara: Covenant Restructures you guys good.

Conor Noel McNamara: I think you bumped the number all the way up to four and a quarter, but the guidance here I think it's for three and a half. So how do you think about just the trajectory on the leverage piece as we work our way through the year here or is that just the EBITDA moving up excuse me the EBITDA moving around or just how do you think about the leverage progression that live there.

Conor Noel McNamara: Okay.

Speaker Change: Yeah, Hey, Patrick how are you.

Joseph M. Busky: Yeah, hey Conor, how are you? You know, I don't know that I want to rehash too much through Q4 other than to say that, as we've said in the past, you know, we overhauled COVID and flu revenue in Q4 2023, unfortunately. And, you know, as I said on that previous response to a question, we did put in place a new methodology, because of, mainly because of what happened last year, that that forecast, Blue, and we feel pretty good about it. And again, using those three variables that I mentioned, market size, market share, and use of products. And we're going to continue to use that methodology and refine that methodology. Hey, Joe. Joe.

Joe: So again I just want to make sure.

Joseph M. Busky: Joe, if I could, this is Conor. This is Mike. How are you?

Michael S. Iskra: Look, I think on both fronts, right, if we take the traditional respiratory season, as Joe said, you know, we have a new methodology we implemented coming in this year, and we feel very good. But the market demand and how big the flu season is to be determined, really, outside of our control. But what's in our control is what are we doing to drive market share gain? Are we driving the right mix of products, leveraging our combo test, and differentiating to get the right mix?

Michael S. Iskra: Great. I appreciate that, Conor, and thanks for the questions, guys.

Joe: And I know I've said this I think on every earnings call that several quarters just to make sure everyone's clear that there is.

Michael S. Iskra: And are we able to compete and hold prices? So not only do we have a good method for forecasting, but I think we have very specific KPIs for how we operationalize that, and how we see how we're doing. And so that's the traditional respiratory. On COVID, what I'd say for this year coming in is we spent a good deal of time trying to triangulate on the right number. And the question was asked earlier; you know, I'll look at COVID-19 testing.

Michael S. Iskra: I think, look, there's still more information to come, but we feel that we've done a pretty wide range of analysis covering material from our peer group, from the industry, from the market, from other experts, and I think that the number that we've shared with you today, the 150, is well thought through. But, you know, what we also learned from last year is we can't just take one number at the beginning of the year and then not watch it.

Michael S. Iskra: So I think the other piece that's important to know is that we have set up maybe what we would call early warning systems to make sure we're watching proactively some of the KPIs, monitoring the market, so that we can react more quickly than we have.

Operator: Thank you for your question. The next question is from the line of Patrick Donnelly with Citi. Your line is now open.

Michael S. Iskra: Great, thanks for that color. And then just a follow up on Savannah; you took revenues out. So, you know, I'm just, you took respiratory revenue. Is the thought that if you guys do get approval for respiratory panels, you would still wait until you have multiple panels before you launch into the market? Because Brian, it sounds like that's kind of what your commentary was leading to, or is there a chance you would still launch it in 2024 with just respiratory?

Conor Noel McNamara: Yeah, good question. So look, I think we are all absolutely clear on two things. One, the guidance we gave you is around financial expectations for Savannah. Let's not confuse that with operational expectations. We have a very aggressive plan to move as quickly as we can, not just on respiratory, but, as mentioned, STIs, and, as Brian mentioned, the rest of the Savannah menu, which is critical. I think what we should be careful about doing is setting expectations too early. But we don't want to be confused by this. It's sort of an unrelenting effort to get products approved and out in the market as soon as possible.

Conor Noel McNamara: The financial statement leverage ratio that comes straight from the on the face of the financials and then there is the credit agreement.

Conor Noel McNamara: Our leverage ratio at the <unk>.

Conor Noel McNamara: Laos pro forma EBIT, obviously included in the calculation and when you you run that credit agreement calculation for Q1 and that allows the pro forma EBITDA adjustments, we're at three times versus the credit agreement.

Conor Noel McNamara: Covenant of four times at Q1.

Conor Noel McNamara: Based on the seasonality of the business.

Patrick Bernard Donnelly: Hey guys, thanks for taking the question. Joe, maybe just on the leverage side and some of the covenant restructures you guys did, I think you bumped the number all the way up to four and a quarter, but the guidance here, I think it's for three and a half. So how do you think about just the trajectory on the leverage piece as we work our way through the year here? Is that just the EBITDA moving, excuse me, the EBITDA moving around? Or just how do you think about the leverage progression and the debt load?

Patrick Bernard Donnelly: I've said before Q2 will be seasonally low for us I do expect that the.

Patrick Bernard Donnelly: The loss ratio will likely creep up a little bit in Q2, and then it will start to come down slightly in Q3.

Patrick Bernard Donnelly: Q4.

Patrick Bernard Donnelly: And as I said in the prepared remarks I would expect.

Joseph M. Busky: Yeah, hey, Patrick, how are you? So again, I just want to make sure And I know I've said this, I think, at every earnings conference the past several quarters, just to make sure everyone's clear that there's, you know, there's a financial statement leverage ratio that comes straight from the face of the financials, and then there's the credit agreement. Based on the seasonality of the business, you know, and as I've said before, Q2 will be seasonally low for us.

Patrick Bernard Donnelly: From.

Joseph M. Busky: Our credit agreement calculated ratios, including the pro forma EBITDA adjustments will be around.

Joseph M. Busky: I do expect that the level ratio will likely creep up a little bit in Q2, and then it will start to come down slightly in Q3 and Q4. And, as I said in the prepared remarks, I would expect from a credit agreement calculated ratio, including and performing EBITDA adjustments, to be around three-and-a-half times at year-end. Again, versus a leverage covenant of four and a quarter. So I feel like, you know, we've got plenty of cushion there. And obviously, we're going to be, as Bryan said earlier, we're going to be very focused on margin restoration and bringing that leverage ratio down as quickly as possible.

Joseph M. Busky: Three five times.

Joseph M. Busky: At year end.

Joseph M. Busky: Again versus leverage covenant.

Joseph M. Busky: Fourth quarter, so I feel like we've got we've got plenty of cushion there.

Joseph M. Busky: And obviously, we're going to be.

Joseph M. Busky: Brian et cetera, and we're going to be very focused on margin restoration, and bringing that leverage ratio down as quickly as possible.

Joseph M. Busky: Okay.

Patrick Bernard Donnelly: Okay, that's helpful. And then maybe on the core business in China, you saw some decent growth there. Can you just talk about the trends you're seeing in that business? You know, obviously, there have been a lot of questions about the potential impact of some of the various legislations over there. Maybe just kind of pull the current back a little bit on what you're seeing and then expectations as we work our way through the year in that region would be helpful. Thank you, guys.

Speaker Change: Okay. That's helpful.

Patrick Bernard Donnelly: And then maybe on the kind of the core business in China.

Patrick Bernard Donnelly: We saw some decent growth there can you just talk about the trends you're seeing.

Patrick Bernard Donnelly: And that business you know, obviously theres been a lot of questions about the potential impact of some of the various legislations over there.

Patrick Bernard Donnelly: Just kind of pulled back a little bit what you're seeing and then expectations as we work our way through the year in that region would be helpful. Thank you guys.

Michael S. Iskra: I'll cover that. Yeah, Patrick, thank you for the question. Yeah, China, we're very obviously very pleased with the results here in Q1, and credit to our team there. Appreciate all that they're doing. I think, as we've shared, China is a focused market for us. It's changing quickly. It's maturing quickly. Lots of different drivers there.

Speaker Change: I'll cover that Apache things.

Michael S. Iskra: Question, Yeah trying to work a very obviously very pleased with the results here in Q1 and credit to our team. There I. Appreciate all that they are doing I think as we've shared China.

Michael S. Iskra: A focus market for us it's changing quickly it's maturing quickly.

Michael S. Iskra: Lots of different drivers there, but in the end I think the team is executing well in our business across the.

Michael S. Iskra: The.

Michael S. Iskra: Portfolio.

Michael S. Iskra: Seeing leveraging the <unk>.

Michael S. Iskra: But in the end, I think the team's executing well in our business across the portfolio. You know, we're leveraging the direct team we have there. We're seeing some increases in point of care in placements, and the general rest of the business is going well.

Michael S. Iskra: Direct team we have there we're seeing some increases in point of care.

Michael S. Iskra: Placements and.

Speaker Change: Just a general question.

Michael S. Iskra: As you may recall, we have somewhat of a unique position in China where we're pretty prominent in stat labs. I think that has not excluded us from things like VVP, but some of the major VVP efforts so far really have not been in our wheelhouse. In fact, we've participated throughout and won in all rounds of VVP. And so I think, you know, while we've done well so far, we'll continue to keep an eye on that, as well as some of the other challenges in China.

Michael S. Iskra: Business is going well as you as you may recall, we have somewhat of a unique position in China, where we're pretty prominent in the stat labs I think.

Michael S. Iskra: That has.

Michael S. Iskra: Excluded us from things like Pvp, but.

Michael S. Iskra: Some of the major Pvp efforts so far.

Michael S. Iskra: Really have not been in our wheelhouse in fact, we've participated throughout in half one and all rounds of EVP and so I think while we've done well so far we'll continue to keep an eye on that as well as some of the other challenges in China, but again feel very fortunate that we've got a team on the ground that experienced June with those things in.

Michael S. Iskra: But again, I feel very fortunate that we've got a team on the ground that's very in tune with those things. And then I think the other positive thing for us is that a lot of our efforts and investments in China around localization and instrument manufacturing, as well as some R&D projects, are all starting to take shape. And, you know, these are things that are, we think, going to help us as we go forward in the future.

Michael S. Iskra: And then I think the other positive thing for US is a lot of our efforts and investments in China around localization and instrument manufacturing as well as from R&D projects.

Michael S. Iskra: Are all starting to take shape.

Michael S. Iskra: These are things that are.

Michael S. Iskra: We think can help us as we go forward in future.

Speaker Change: Great. Thank you.

Michael S. Iskra: Thank you for your question. The next question is from the line of Casey Woodring with J P. Morgan. Your line is now open.

Operator: Thank you for your question. The next question is from the line of Casey Woodring with J.P. Morgan. Your line is now open.

Casey Rene Woodring: Hi, great. Thanks for taking my questions and welcome Brian.

Casey Rene Woodring: Hi, great. Thanks for taking my questions. And welcome, Brian.

Casey Rene Woodring: So first can you guys touch on customer conversations around Sofia ahead of next respiratory season, you place. The number of Sofia is under two to three year contracts. During COVID-19. So those are likely in renewal negotiations now I would imagine so maybe just walk us through how your how your you and your customers are both approaching that renewal process.

Casey Rene Woodring: So first, can you guys touch on customer conversations around Sophia ahead of next respiratory season? You know, you place the number of Sophia's under two to three year contracts during COVID. So you know, those are likely in renewal negotiations now, I would imagine. So maybe just walk us through how you're how you're, you and your customers are both approaching that renewal process, especially now with the headcount turnover and SG&A that you've called out increasing and, and then, you know, as a follow up to that, can you just talk about an expectation for 510k submission for the Sophia combo test? Well, I think the first part, maybe we can talk about the

Casey Rene Woodring: Especially now with the head count turnover in SG&A that you called out increasing.

Casey Rene Woodring: And then as a follow up to that can you just talk about an expectation for a five 10-K submission for the Sophia Cabo capture.

Michael S. Iskra: Well, I think the first part, maybe we can talk about the PAC-10K submission. Then, so Casey, the first part of the question, I think, is about our base and what we are doing. You know, I went back probably more than a year ago.

Speaker Change: Well I'll take the first part maybe you could talk about the 10-K.

Michael S. Iskra: Submission.

Michael S. Iskra: <unk>.

Casey: Sure Casey.

Casey: The first part of your question I think is around our base and what are we doing.

Casey: I go back probably more than a year ago, we put in a concerted effort to.

Michael S. Iskra: We put in a concerted effort to get back in front of our customers, and reevaluate where they were. I think one of the data points Joe shared in his prepared remarks was around 70% of customers ordering more than one time. Something that shows the effort to get back in front of customers, not only maintaining the business we had, but showing them what other tests they can put on that platform.

Michael S. Iskra: Get back in front of our customers reevaluate, where they where they.

Michael S. Iskra: Where they are in their contract status be proactive king and extending agreements I think one of the data points Joe shared in the.

Michael S. Iskra: Prepared remarks was around 70% of customers ordering more than one platform.

Michael S. Iskra: It is.

Michael S. Iskra: Something that shows the efforts are getting back in front of customers not only maintaining business, we had but showing them what other tests that could put on that platform.

Michael S. Iskra: Helps make us a little more sticky when it creates more value for the customer.

Michael S. Iskra: Order to displace and so I think thats a good number that shows where our project. So.

Speaker Change: Oh look I think we're in good shape.

Michael S. Iskra: No going back gosh, a couple years ago, there were a number of placements that maybe COVID-19 only and because there's one away they went away.

Michael S. Iskra: We're seeing probably a more stabilized base and one that we're trying to leverage for traditional tests.

Michael S. Iskra: Okay.

Michael S. Iskra: AK steel on the second part of your question.

Michael S. Iskra: We would anticipate being in trials during the 'twenty four 'twenty five season unacceptable to us.

Joseph M. Busky: Got it. That's helpful. And then, just, you know, on the headcount reductions between the February call and now you've doubled your expectations from $50 million to $100 million. Can you just walk through how you arrived at that number? And, you know, if that's kind of the last adjustment to that number. Thank you.

Speaker Change: Got it that's helpful. And then just on the head count reductions between the February call and now you've doubled your expectations from 50 million to $100 million can you just walk through how you arrived that arrived at that number and.

Speaker Change: That's kind of the last.

Speaker Change: Yeah adjustments that number thank you.

Joseph M. Busky: Okay.

Joseph M. Busky: Hey Casey, we actually did not change that number. Maybe there's some confusion about the impact in 24 versus the full annualized impact. The $100 million annualized was always the target that we had talked about on the last call, and we're right on track with that to get $50 million in year 24. And then the second half of that, the $50 million in the first half of twenty-five. But again, as I said, we're going to continue to look for efficiencies in the business. I don't want you to think we're going to stop at that number, but we have gotten really far in executing on that first $100 million.

Speaker Change: Hum do we we actually did not change that number or maybe there's some confusion about the impact in 'twenty four versus the full annualized impact.

Casey Rene Woodring: Okay, great. And maybe I can just fit one more in.

Joseph M. Busky: The $100 million annualized was always the target that we had talked about on the last call and we're right on track with that to get $50 million in year 'twenty four and then.

Casey Rene Woodring: The second half of that $50 million in the first half of 'twenty five but again as I've said we're.

Casey Rene Woodring: We're going to continue to look for efficiencies in the business I don't want you to think we're going to stop at that number, but we have gotten really barn and executing on that first $100 million.

Casey Rene Woodring: Did you give what flu was in the new guide here? You gave the new COVID number. Just curious if you're holding the flu number here. Thank you. Yeah, Casey, we do need...

Speaker Change: Okay, great and maybe if I could just fit one more in did.

Speaker Change: Did you give what flu was in the New guide here you gave the new Covid number.

Casey Rene Woodring: I'm, just curious if you're holding especially over here. Thank you.

Joseph M. Busky: Yeah, Casey, we did not. Again, in the spirit of transparency, we wanted to give everyone an update on Savannah and COVID because, you know, we know those were two open questions that the street had, but we didn't give any other updates because we have suspended guidance until Brian gets a little further into the business, and we have more to come on that.

Speaker Change: Yeah, Casey we did not.

Joseph M. Busky: Again, it's in the spirit of transparency, we wanted to give everyone an update on Savannah in Kobe, because we know those were to open questions that the street has but we didn't give any other updates.

Joseph M. Busky: Because we have suspended guidance until Brian its a little further into the business and more to come on that.

Speaker Change: Uh huh.

Joseph M. Busky: Yeah.

Joseph M. Busky: Yeah.

Speaker Change: Great. Thank you.

Casey: Thanks, Ken Thank you for your question.

Operator: 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 line.

Operator: 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.