Q3 2024 QuidelOrtho Corp Earnings Call

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Unknown Executive: Welcome to the Quidel Ortho Third Quarter 2024 Financial Results Conference Call and Webcast. At this time, all participant lines are in a listen-only mode. For those of you participating on the conference call, there will be an opportunity for your questions at the end of today's prepared remarks.

Speaker Change: Welcome to the Codell or so third quarter 2024 financial results conference call and webcast. At this time all participant lines are in a listen only mode for those of you participating on the conference call there will be an opportunity for your questions at the end of todays prepared remark.

Unknown Executive: 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.

Speaker Change: Please note. This conference call is being recorded and audio replay of the conference call will be available on the company's website. Shortly after this call I would now like to turn the call over to Juliet Cunningham, Vice President of Investor Relations.

Juliet Cunningham: I would now like to turn the call over to Juliet Cunningham, Vice President of Investor Relations. Thank you. Good afternoon, everyone. Thanks for joining the Quidel Ortho third quarter 2024 financial results conference call. With me today are Brian Blaser, President and Chief Executive Officer, and Joe Busky, Chief Financial Officer. This conference call is being simultaneously webcast on the Investor Relations page of our website. To aid in the discussion, we posted a supplemental presentation on the Investor Relations page that will be referenced throughout the call.

Juliet Cunningham: Thank you good afternoon, everyone and thanks for joining the quite all ortho third quarter 'twenty 'twenty four financial results Conference call with me today are Brian Blazer, President and Chief Executive Officer, and Joe <unk>, Chief Financial Officer.

Juliet Cunningham: This conference call is being simultaneously webcast on the Investor Relations page of our website to aid in the 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. 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, uncertainty, assumptions, and other factors. 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 SEC, including the risk factors section. forward looking statements are made as of today, November 7 2024.

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

Juliet Cunningham: And those that are not strictly historical excluding the company's expectations plans future performance and prospects are forward looking statements that are subject to certain risks uncertainties assumptions and other factors.

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

Juliet Cunningham: 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.

Juliet Cunningham: Forward looking statements are made as of today November seven 2024, and we assume no obligation to update any forward looking statement, except as required by law.

Juliet Cunningham: And we assume no obligation to update any forward looking statement except as required by law.

Juliet Cunningham: In addition, today's call includes discussion 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 QuidelOrtho.com.

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

Juliet Cunningham: Tables reconciling these non-GAAP measures to their most directly comparable GAAP measures.

Juliet Cunningham: Available in our earnings release, and the supplemental presentation, which are on the Investor Relations page of our website at quiet ortho Dot com.

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

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

Brian Blaser: And now I'd like to turn the call over to our CEO, Brian Blaser. Thanks, Juliet. Good afternoon, everyone. I'm pleased to be here with you today and share our third quarter 2024 results. We reported third quarter revenue of $727 million, adjusted EBITDA of $171 million, and adjusted diluted EPS of $0.85. Our results demonstrate solid progress in executing our business improvement initiatives, including our previously communicated $100 million in annualized cost savings that we expect to realize through the first half of 2025. After my remarks, Joe will cover our detailed quarterly financials, as well as provide our full year 2024 financial guidance, which we reinstated today.

Speaker Change: And now I'd like to turn the call over to our CEO, Brian Blazer.

Brian Blazer: Thanks, Julia good afternoon, everyone I'm pleased to be here with you today and share our third quarter 2024 results.

Brian Blazer: We reported third quarter revenue of $727 million, adjusted EBITDA of $171 million and adjusted diluted EPS of <unk> 85.

Our results demonstrate solid progress in executing our business improvement initiatives, including our previously communicated $100 million in annualized cost savings that we expect to realize through the first half of 2025.

Brian Blazer: After my remarks, Joe will cover our detailed quarterly financials as well as provide our full year 2024 financial guidance, which we reinstate it today.

Brian Blaser: I'd also like to highlight the key focus areas where we see the greatest opportunity for improvement in profitability and growth. During my first six months here at Quidel Ortho, we undertook an extensive review of every part of the business. I continue to be excited by the opportunity to serve our customers across the entire healthcare continuum and meet patients' needs in every care setting and at every step of the journey from prevention to diagnosis, treatment, and monitoring. To meet those needs and to do so profitably, we need the right people, the right products, rigorous discipline, and a strong cultural mindset that places customers and quality first.

Brian Blazer: I would also like to highlight the key focus areas, where we see the greatest opportunity for improvement in profitability and growth.

Brian Blazer: During my first six months here quite ortho, we undertook an extensive review of every part of the business I continue to be excited by the opportunity to serve our customers across the entire healthcare continuum and meet patients needs in every care setting and at every step of the journey from prevention to diagnosis treatment.

Brian Blazer: And monetary.

Brian Blazer: To meet those needs and to do so profitably we need the right people the right products rigorous discipline and a strong cultural mindset that places customers and quality first.

Brian Blaser: With that objective in mind, we strengthened our leadership team with the recent addition of two highly experienced industry leaders, Jonathan Segrist, as Chief Technology Officer, and Lee Bowman, as Chief Human Resources Officer. Jonathan has a proven 15 year track record in molecular diagnostics, microfluidic platforms, and biomedical engineering. He most recently was the CTO and head of assay research and development at Cepheid. Lee brings over 25 years of experience leading teams through transformative initiatives in workforce engagement and leadership development at Edwards Life Sciences, Levi Strauss and Company and Target. Lee's expertise in developing talent in a high-performing workplace is critical as we create a winning, continuous improvement culture and drive continued growth here at Quidel Ortho.

Brian Blazer: With that objective in mind, we strengthened our leadership team with the recent addition of two highly experienced industry leaders, Jonathan Seadrift, as Chief Technology Officer, and Leigh Bowman, Chief Human Resources Officer.

Brian Blazer: Jonathan has a proven 15 year track record in molecular diagnostics microfluidics platforms and biomedical engineering.

Brian Blazer: Most recently was the CTO and head of assay research and development at Cepheid.

Speaker Change: Lee brings over 25 years of experience, leading teams through transformative initiatives and workforce engagement and leadership development and Edwards Lifesciences Levi Strauss <unk> company and target.

Speaker Change: <unk> expertise in developing talent and a high performing workplace is critical as we create a winning continuous improvement culture and drive continued growth here are quite El Arco.

Brian Blaser: In addition, we are aligning our leadership structure to be a flatter, more agile organization to increase our customer focus, reduce complexity, and improve our efficiency and cost structure. As part of this effort, Mike Iskra, Chief Commercial Officer, and Rob Bujarski, Chief Operating Officer, will be leading the company. We're grateful to Mike and Rob for their contributions in leading the Quidel Ortho commercial and operations teams and fostering a culture of collaboration. Going forward, our global regions will be fully aligned with our business units, and both the business unit and global regional leaders will report directly to me.

Speaker Change: In addition, we are aligning our leadership structure to be a flatter more agile organization to increase our customer focus reduce complexity and improve our efficiency and cost structure as part of this effort, Mike Garone, Chief Commercial officer, and Robert <unk>, Chief operating officer will be leaving the company.

Speaker Change: We're grateful to Mike and Rob for their contributions and leading the quite all ortho commercial and operations teams and fostering a culture of collaboration.

Speaker Change: Going forward, our global regions will be fully aligned with our business units in both the business units and global regional leaders will report directly to me.

Brian Blaser: The alignment of our leadership team is designed to improve the way we run the business and enable us to achieve consistently improved performance over time. We believe the changes we are making are designed to better leverage the scale of our global commercial team, accelerate cross selling opportunities, and continue to build a customer focused organization. As part of delivering on our customer commitments, we remain steadfast in achieving our product timelines and improving our business efficiency. Under Jonathan's leadership, we're focused on executing our key R&D priorities, including increasing our R&D productivity, expanding our menu, and advancing critical platforms. While Savannah is only one of our initiatives, we believe Savannah and molecular in general is an important driver of future profitable revenue growth.

Speaker Change: The alignment of our leadership team is designed to improve the way we run the business and enable us to achieve consistently improved performance over time. We believe the changes we are making are designed to better leverage the scale of our global commercial team accelerate cross selling opportunities and continue to build a customer focused organization.

Speaker Change: As part of delivering on our customer commitments, we remain steadfast in achieving our product timelines and improving our business efficiency.

Speaker Change: Under Jonathan's leadership, we're focused on executing our key R&D priorities, including increasing our R&D productivity, expanding our menu and advancing critical platforms.

Speaker Change: While Savannah is only one of our initiatives, we believe Savannah in molecular in general is an important driver of future profitable revenue growth.

Brian Blaser: We plan to enter clinical trials with our respiratory panel as the respiratory season develops and to be in market in the later part of 2025. To improve our cost structure, we are also in the early phases of implementing cost and process improvement initiatives in procurement, supply chain, manufacturing quality, and IT. We expect these initiatives to enable us to operate more effectively and deliver incremental margin contributions in 2025 and 2026.

Speaker Change: We plan to enter clinical trials with our respiratory panel as the respiratory season develops and to be in market in the later part of 2025.

Speaker Change: To improve our cost structure and we are also in the early phases of implementing cost and process improvement initiatives and procurement supply chain manufacturing quality.

Speaker Change: We expect these initiatives to enable us to operate more effectively and deliver incremental margin contributions in 2025 and 2026, we plan to provide greater detail in the coming quarters as we move ahead.

Brian Blaser: We plan to provide greater detail in the coming quarters as we move ahead. Lastly, I think it bears repeating that we are focused on challenging every aspect of our business to do more for our customers and improve profitable growth. I'm proud to be the leader of Quidel Ortho.

Speaker Change: Lastly, I think it bears repeating that we are focused on challenging every aspect of our business to do more for our customers and improve profitable growth.

I am proud to be the leader of <unk> or so I am excited about the improvements that we're making and I look forward to updating you on our progress next quarter with that I'll hand, it over to Joe.

Brian Blaser: I'm excited about the improvements that we're making, and I look forward to updating you on our progress next quarter.

Joe Busky: With that, I'll hand it over to Joe. Okay, thanks, Brian. Let's begin with the details of our third quarter and year-to-date 2024 results on slides three and four of the earnings presentation, which is posted on our IR website. I will also provide our reinstated full year 2024 financial guidance and then we will open up the call for questions. Unless stated otherwise, all year-over-year revenue growth rates on today's call are provided on a comparable constant currency basis. During the third quarter and the first nine months of 2024, our business performed well, and we continue to see healthy customer demand and momentum.

Joe: Okay. Thanks, Brian let's begin with the details of our third quarter and year to date 2024 results on slides three and four of the earnings presentation, which is posted on our IR website.

Joe: We'll also provide our reinstated full year 2024 financial guidance and then we will open up the call for questions unless stated otherwise all year over year revenue growth rates on today's call are provided on a comparable constant currency basis.

Joe: During the third quarter and the first nine months of 2024, our business performed well and we continue to see healthy customer demand and momentum.

Joe Busky: Total recorded revenue in the third quarter of 2024 was $727 million, which declined by approximately 2% due to higher COVID-19 and flu revenue in the prior year period. While foreign currency exchange did not have a material impact on overall third quarter results, we had a negative 100 basis point FX impact in our labs, which are the global footprint.

Joe: Total reported revenue in the third quarter of 2024 was $727 million, which declined by approximately 2%.

Joe: Due to higher COVID-19, and flu revenue in the prior year period.

Joe: While our and currency exchange did not have a material impact on overall third quarter results. We had a negative 100 basis point FX impact in our labs business.

Joe: Which.

Joe: The global footprint.

Joe Busky: Third quarter 2024 recurring revenue. which we define as revenues from sales of our assays, reagents, consumables, and services and excludes interest revenue. was $598 million as reported with no significant change in cost of currency. This figure excludes COVID-19 and U.S. donor screening revenue. Recurring revenue growth was 1% in Q3. Underlying labs recurring revenue growth was 6%, but was offset by a decline in cardiac revenue, mainly due to expected order timing between Q3 and Q4 in China. Total reported year-to-date revenue was $2.1 billion, and total year-to-date recurring revenue was $1.74 billion, or 5% growth compared to the prior year period.

Joe: Third quarter 2020 for recurring revenue, which.

Joe: Which we define as revenues from sales of our assays reagents consumables and services and excludes <unk> revenue.

Joe: It was 598 million as reported with no significant change in constant currency.

Joe: This figure excludes COVID-19, and use donor screening revenue.

Joe: Recurring revenue growth was 1% in Q3 underlying labs recurring revenue growth was 6%.

Joe: Offset by a decline in cardiac revenue, mainly due to expected order timing between Q3 and Q4 in China.

Joe: Total reported year to date revenue was $2 1 billion and total year to date recurring revenue was $1 74 billion.

5% growth compared to the prior year period.

Joe Busky: Again, this excludes COVID-19 and U.S. donor screening revenue. From a regional perspective, our third quarter 2024 total revenue performance was led by EMEA growth of 12%. and 8% growth in our other region, which is comprised of Japan, Asia Pacific and Latin America. North America declined by mid-single digits due to higher respiratory revenue in the prior year period and U.S. donor screening business wind down. In China, our labs business grew 5% year-over-year, but that growth was offset by softness in transducent medicine and cardiac point-of-care products, and as a result, China revenue declined by 1% year-over-year. We continue to expect growth in the region to be strong in Q4 and in the high single digits for the full year 2024.

Joe: Again, this excludes COVID-19, and U S donor screening revenue.

Joe: From a regional perspective, our third quarter 2024 total revenue performance was led by EMEA growth of 12%.

Joe: 8% growth in our other region, which is comprised of Japan Asia Pacific and Latin America.

Joe: North America declined by mid single digits due to higher respiratory revenue in the prior year period and in U S donor screening business wind down.

In China, our labs business grew 5% year over year that growth was offset by softness in transfusion medicine, and cardiac point of care products and as a result, China revenue declined by 1% year over year.

Joe: We continue to expect growth in the region to be strong in Q4 and in the high single digits for the full year 2024.

Joe Busky: We continue to closely monitor both value based pricing initiatives and the impact of China's anti corruption policies as potential headwinds. We have not been meaningfully impacted by BPB initiatives to date, and do not expect significant impact in the near term. As we discussed last quarter, we have seen customer delays in a small number of instrument purchases and installations due to the Chinese government's anti-corruption policies. We believe these disruptions will abate in 2025 as customers adjust to these ongoing governmental policies. In addition, there may be some changes to reimbursement on cardiac products in certain Chinese provinces, which could negatively impact our sales in China.

Joe: We continue to closely monitor both value based pricing initiatives and the impact of China's anti corruption policies as potential headwinds, we have not been meaningfully impacted by <unk> initiatives to date and do not expect a significant impact in the near term.

Speaker Change: As we discussed last quarter, we have seen customer delays and a small number of instrument purchases and installations due to the Chinese government's anti corruption policies.

Speaker Change: We believe these disruptions will abate in 2025 as customers adjust to these ongoing governmental policies.

Speaker Change: In addition, there may be some changes to reimbursement on cardiac products and certain Chinese provinces, which could negatively impact our sales in China.

Joe Busky: On the positive side, the recently announced economic stimulus plan by the Chinese government could represent the potential future tailwind. China continues to be a complex market that we are monitoring closely. But despite these dynamics, we believe our China business is solid and we see more potential upside than risk at this time.

Speaker Change: On the positive side, the recently announced economic stimulus plan by the Chinese government could represent a potential future tailwind.

Speaker Change: China continues to be a complex market that we are monitoring closely but despite these dynamics, we believe our China business is solid and we see more potential upside than risk at this time.

Joe Busky: Moving to our non respiratory business, which includes labs, transfusion medicine and cardiac point of care products. Third quarter 2024 revenue grew 1% to constant currency year over year. Labs revenue achieved expected growth of 5% compared to the prior year period. Within our labs and salt base, integrated and automated analyzers grew seven and 17% respectively, compared to the prior year period. The growth in integrated and automated analyzers continues to show that our commercial go to market strategy is working and we continue to expect mid single digit revenue growth in this business. Moving to Transfusion Medicine, I want to highlight that we are now breaking out immunohematology and donor screening as separate line items to provide greater transparency to the impact of largely winding down the U.S.

Speaker Change: Moving to our non respiratory business, which includes labs transfusion medicine in cardiac point of care products third quarter 2024 revenue grew 1% at constant currency year over year.

Speaker Change: Labs' revenue achieved expected growth of 5% compared to the prior year period within our labs installed base integrated and automated analyzers grew 7% and 17% respectively.

Speaker Change: Compared to the prior year period the.

Speaker Change: The growth in integrated and automated analyzers continues to show.

Speaker Change: And then our commercial go to market strategy is working and we continue to expect mid single digit revenue growth in this business.

Moving to transfusion medicine, I want to highlight that we are now breaking out.

Speaker Change: It'll hematology and donor screening as separate line items to provide.

Speaker Change: Later transparency to the impact of largely winding down the U S donor screening business by the end of 2025.

Joe Busky: donor screening business by the end of 2025. Amniotic hematology revenue grew 3% and donor screening declined by 20% in the quarter as expected. The respiratory side of the business performed well versus our expectations during the third quarter with strong performance from our Sophia Flu COVID-19 combo test. and we had $72 million in COVID-19 revenue in the quarter. On a year-over-year basis, total Q3 respiratory revenue was down $20 million, or 11%, due to higher COVID-19 and flu revenue in the prior year period. In addition, our distributors began their normal ordering pattern for flu, RSV, strep products ahead of the fourth quarter, which points to a typical flu season.

Speaker Change: Immuno hematology revenue grew 3% and donor screening declined by 20% in the quarter as expected.

Speaker Change: The respiratory side of the business performed well versus our expectations during the third quarter with strong performance from our Sofia flu COVID-19 combo test.

Speaker Change: And we had $72 million in COVID-19 revenue in the quarter.

Speaker Change: On a year over year basis, total Q3, respiratory revenue was down $20 million or 11% due to higher COVID-19 in flu revenue in the prior year period.

Speaker Change: In addition, our distributors began their normal ordering pattern for flu RSV strep products and in the fourth quarter, which points to a typical flu season.

Joe Busky: I'd also note that distributor respiratory inventories were at expected levels, which were slightly down compared to the prior year period. Now moving down the P&L, slide five shows third quarter 2024 adjusted gross profit margin of 49.2 versus 50.5% in the prior year period. 130 basis point decrease was expected and primarily driven by higher COVID-19 and flu sales in the prior year period. non-GAAP operating expenses of $232 million, including SG&A and R&D, decreased by $17 million compared to the prior year period and was down sequentially by four months. We continue to expect a benefit of at least $50 million in the second half of 2024 due to the cost actions we have already taken.

Speaker Change: I'd also note that distributor respiratory inventories were at expected levels, which were slightly down compared to the prior year period.

Speaker Change: Yeah.

Speaker Change: Now moving down the P&L on slide five shows third quarter 2024, adjusted gross profit margin of 49, 2% versus 55% in the prior year period.

Speaker Change: The 130 basis point decrease was expected and primarily driven by higher COVID-19 include sales in the prior year period.

Speaker Change: non-GAAP operating expenses of $232 million.

Speaker Change: Including SG&A and R&D decreased by $17 million compared with the prior year period and was down sequentially by $4 million.

Speaker Change: We continue to expect the benefit of at least $50 million in the second half of 2024 because of the cost actions we've already taken.

Joe Busky: And looking ahead to Q4, on a sequential basis, we expect our realized cost savings in total OPEX to be offset by timing of selling and marketing costs in Q4. As a result, we expect total OPEX to be relatively flat to Q3. Adjusted EBITDA was $171 million compared to $169 million in the prior year period. Adjusted EBITDA margin was 23.5%, which represents a year-over-year improvement of 80 basis points due to the cost savings actions we have taken, offset by lower revenue for respiratory tests, which are high margin contributors. Notably Q3 2024 was the first quarter in nine quarters to achieve growth in both adjusted EBITDA dollars and margin since the pandemic.

Speaker Change: And looking ahead to Q4 on a sequential basis, we expect our realized cost savings in total opex to be offset by timing of selling and marketing costs. In Q4. As a result, we expect total opex to be relatively flat to Q3.

Speaker Change: Adjusted EBITDA was $171 million compared to $169 million in the prior year period.

Speaker Change: Adjusted EBITDA margin was 23, 5%, which represents a year over year improvement of 80 basis points due to the cost savings actions, we have taken offset by lower revenue for respiratory tests, which are high margin contributors.

Speaker Change: Notably Q3, 2024 was the first quarter in nine quarters.

Speaker Change: To achieve growth in both adjusted EBITDA dollars and margin since the pandemic.

Joe Busky: Adjusted diluted earnings per share was $0.85 compared to adjusted diluted EPS of $0.90 in the prior year period. This year-over-year change was primarily due to the higher respiratory revenue in the prior year period and higher interest expense in the current period, offset by our cost savings initiatives. Our third quarter effective adjusted income tax rate was 23.7%, which is in line with our four-year expectations. Turning now to the balance sheet on slide six. We finished the quarter with $144 million of cash. As of the end of Q3, we had $230 million in borrowings on our $800 million revolver.

Speaker Change: Adjusted diluted earnings per share was <unk> <unk>.

Speaker Change: Compared to adjusted diluted EPS of 90 cents in the prior year period. This year over year change was primarily due to the higher respiratory revenue in the prior year period and higher interest expense in the current period.

Speaker Change: Offset by our cost savings initiatives.

Speaker Change: Our third quarter effective adjusted income tax rate was 23, 7%, which is in line with our full year expectations.

Speaker Change: Turning now to the balance sheet on slide six.

Speaker Change: We finished the quarter with $144 million of cash.

Speaker Change: At the end of Q3, we had $230 million in borrowings on our $800 million revolver. This is a decrease of $23 million from the second quarter as we begin to pay down the revolver.

Joe Busky: This is a decrease of $23 million from the second quarter as we begin to pay down the revolver. Keep in mind, our first capital allocation priority continues to be debt pay down. Third quarter 2024 recurring adjusted free cash flow was 120 million, which represents 70% of adjusted EBITDA. We continue to expect adjusted free cash flow to be positive in the fourth quarter and for the full year 2024. In addition, we expect adjusted recurring free cash flow in the second half of 2024 to exceed 50% of our second half adjusted EBITDA. During the third quarter of 24, our consolidated leverage ratio from the base of the financials is 4.1 times and 3.3 times, including pro forma EBITDA adjustments as permitted and defined under our credit agreement.

Speaker Change: Keep in mind, our first capital allocation priority continues to be debt paydown.

Speaker Change: Third quarter 2024 recurring adjusted free cash flow was $120 million, which represents 70% of adjusted EBITDA. We continue to expect adjusted free cash flow to be positive in the fourth quarter and for the full year 2024. In addition, we expect adjusted <unk>.

Speaker Change: Free cash flow in the second half of 2004 to exceed 50% of our second half adjusted EBITDA.

Speaker Change: During the third quarter of 24, our consolidated leverage ratio from the face of the financials was four one times and.

Speaker Change: And three three times, including pro forma EBITDA adjustments as permitted and defined under our credit agreement.

Joe Busky: Based on our current projections, we expect our consolidated leverage ratio to remain relatively flat to current levels at year end.

Speaker Change: Based on our current projections, we expect our consolidated leverage ratio to remain relatively flat.

Speaker Change: Current levels at year end.

Joe Busky: Lastly, on slide seven, following the Business for You review that Brian conducted upon joining the company, as well as the increased visibility we have after executing some of our cost savings initiatives, I will now provide our full year 2024 guidance. I note that our guidance is in line with the comments we made earlier in the year. We expect full year 2024 total reported revenues of between $2.75 and $2.80 billion. adjusted EBITDA of between $530 and $550 million. which equates to a range of 19.3 to 19.6% adjusted EBITDA margin. and adjusted diluted EPS between $1.69 and $1.91.

Speaker Change: Lastly on slide seven following the business for you review that Brian conducted upon joining the company as well as the increased visibility we have after executing some of our cost savings initiatives I will now provide our full year 2024 guidance I would note that our guidance.

Speaker Change: Is in line with the comments, we made earlier in the year.

Speaker Change: We expect full year 2024, total reported revenues of between $2 75, and $2 8 billion.

Speaker Change: Adjusted EBITDA of between 530 and $550 million.

Speaker Change: This equates to a range of 19, 3% to 19, 6% adjusted EBITDA margin.

Speaker Change: And adjusted diluted EPS of between $1 69, and $1 91.

Speaker Change: Okay.

Joe Busky: These expectations are based on a set of assumptions as follows. We assume oil quarter. 2024 non-respiratory revenue will be in line with the commentary we shared earlier this year, including labs, business growth expected in the mid-single digits, and transfusion medicine, excluding U.S. donor screening, expected to grow in the low-single digits. Now for respiratory revenue, we assume a typical flu season this year with a 50 to 55 million test market. Similar market share to 2023. and greater than 50% of flu product revenue coming from our combo test. Note that we are not changing our full-year assumptions on the respiratory season from earlier this year.

Speaker Change: These expectations are based on a set of assumptions that follows.

Speaker Change: We assume fourth quarter.

Speaker Change: 2024, non respiratory revenue will be in line.

Speaker Change: With the commentary we shared earlier this year, including <unk>.

<unk> business growth expected in the mid single digits and transfusion medicine, excluding U S donor screening.

Speaker Change: <unk> to grow in the low single digits.

Speaker Change: Now for respiratory revenue.

Speaker Change: We assume a typical flu season this year with a 50 to 55 million test market stim.

Speaker Change: Similar market share to 2023.

Speaker Change: And greater than 50% of flu product revenue coming from our combo test.

Speaker Change: Note that we are not changing our full year assumptions on the respiratory season from earlier this year in our view the higher respiratory revenue. We saw in Q3 is timing related and not expected to increase our full year 2020 for outlook.

Joe Busky: In our view, the higher respiratory revenue we saw in Q3 is timing-related and not expected to increase our full-year 2024 outlook. In addition, we assume full year 2024 COVID-19 revenue will be in the range of $160 to $170 million, which includes about $17 million in government contracts in 2024. We assume cost savings of at least $50 million in the second half of 2024 as part of our $100 million annualized target. And note that in Q4, we also assume a year over year increase of $25 to $30 million in SG&A expense related to expected bonus accruals that were not included in the prior year period since we did not meet our performance targets last year.

Speaker Change: In addition, we assumed full year 2020 for COVID-19 revenue will be in the range of 160.

Speaker Change: $170 million, which includes about $17 million in government contracts in 2024.

Speaker Change: We assumed cost savings of at least $50 million in the second half of 'twenty four as part of our $100 million annualized target.

Speaker Change: And note that in Q4, we also assume a year over year increase of $25 million to $30 million in SG&A expense related to expected bonus accruals.

Speaker Change: Were not included in the prior year period since we did not meet our performance targets last year.

Joe Busky: We assume second half and full year 2024 positive adjusted free cash flow to exceed 50% of adjusted EBITDA, including expected full year interest expense of $160 to $165 million. and we assume CapEx of approximately $170 million excluding reagent rentals. We plan to provide our detailed 2025 financial guidance when we report our full year 2024 results in February, but directionally in 2025, we are expecting Top-line growth in the mid-single digits. excluding COVID-19 and U.S. donor screening revenue, which we expect to be $40 to $50 million as that business winds down. expected lapse growth in the mid-single digits and transfusion medicine growth excluding U.S.

Speaker Change: We assume second half and full year 2024 positive adjusted free cash flow to exceed 50% of adjusted EBITDA, including expected full year interest expense of $1 $60 million to $165 million.

Speaker Change: And we assume capex of approximately $170 million, excluding reagent rentals.

Speaker Change: We plan to provide our detailed 2025 financial guidance when we report our full year 2024 results in February but directionally in 2025, we are expecting.

Speaker Change: Top line growth in the mid single digits.

Speaker Change: Excluding COVID-19, and U S donor screening revenue, which we expect to be $40 million to $50 million as that business winds down.

Speaker Change: Expected labs growth in the mid single digits, and transfusion medicine growth, excluding U S donor screening in the low single digits.

Joe Busky: donor screening in the low single digits. increased cross selling efforts of legacy Quidel products outside of the U.S. More to come on the 2025 respiratory expectations as we exit this year, but we expect to use the same forecast methodologies we used this year, which includes the number of flu tests per year, our market share, and product mix. We expect COVID-19 revenue to decrease year over year by at least $17 million, which is related to the 2024 government contract that is not expected to repeat. And importantly, we expect to realize the remaining benefit of our previously announced $100 million in annualized cost savings in the first half of 2025.

Speaker Change: Increased cross selling efforts of legacy <unk> products outside of the U S.

Speaker Change: More to come on in 2025 respiratory expectations as we exit this year.

Speaker Change: But we expect to use the same forecast methodologies. We use this year, which includes the number of flu tests per year, our market share and product mix.

Speaker Change: We expect COVID-19 revenue to decrease year over year by at least $17 million.

Speaker Change: Which is related to the 2020 for government contract that is not expected to repeat.

Speaker Change: Sure.

Speaker Change: And importantly, we expect to realize the remaining benefit of our previously announced $100 million in annualized cost savings in the first half of 2025, we expect these initiatives among other things.

Joe Busky: We expect these initiatives, among other things... We expect to deliver a just a little bit of margin improvement of approximately 100 to 200 basis points. compared to the 2024 year-end exit rate, depending on the timing of the 24-25 respiratory. All right, now wrapping up, we believe our solid third quarter performance demonstrates progress as we remain focused on our top priorities and execute on our cost savings and business efficiency initiatives.

Speaker Change: We expect to deliver adjusted EBITDA margin improvement of approximately 100 to 200 basis points.

Compared to the 2024 year end exit rate, depending on the timing of the 'twenty four 'twenty five respiratory season.

Speaker Change: Alright, now wrapping up we believe our solid third quarter performance demonstrates progress as we remain focused on our top priorities and execute on our cost savings and business efficiency initiatives.

Joe Busky: Based on the progress we are making, we are pleased to reinstate our 24 financial guidance and provide an initial outlook for 2025. We are optimistic about the path ahead and look forward to providing further updates in future quarters.

Speaker Change: Based on the progress we are making we are pleased to reinstate our 24 financial guidance and provide an initial outlook for 2025.

Speaker Change: We're optimistic about the path ahead, and look forward to providing further updates in future quarters and with that I will now ask the operator to please open up the line for questions.

Unknown Executive: And with that, I will now ask the operator to please open up the line for questions. Absolutely, we will now begin the Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question.

Speaker Change: Absolutely we will now begin the Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question. Please press star followed by two again to ask a question. Please press star one.

Speaker Change: A reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question. The first comes from Andrew Blackman with William Blair You May proceed.

Andrew Brackmann: The first comes from Andrew Brackmann with William Blair, you may proceed. Hi, guys. Good afternoon. Thanks for taking the questions. Maybe I can pick up where you left off there, Joe, related to 2025 and the adjusted EBITDA margin target that you sort of laid out there. I think it was 100 to 200 basis points compared to the 24 exit rates. So by my math, I think that means, call it somewhere in the low 20s for adjusted EBITDA margin for next year. Can you maybe just sort of talk about high level, the building blocks that get you there?

Speaker Change: Hi, guys. Good afternoon, thanks for taking the question.

Speaker Change: Maybe I can pick up where you left off there Joe related to 2025, and the adjusted EBITDA margin target that you sort of laid out there I think it was a 100 to 200 basis points compared to the 24 exit rates. So by my math I think that means call it somewhere in the low twenties for.

Speaker Change: For adjusted EBITDA margin for next year can you, maybe just sort of talk about high level. The building blocks that get you there how does that $100 million in annualized cost savings roll in throughout the year and any other thing our cost saving initiatives that we should be penciling in here.

Joe Busky: How does that $100 million in annualized cost savings roll in throughout the year and any other thing, cost saving initiatives that we should be Sure. So, and by the way, thanks, Andrew. So yeah, here's how I put together the more significant building blocks of that 100 to 200 basis points of margin improvement off the exit rate of this year's margin. First, we'll have the roughly 50 million of cost savings that relate to the first 100 million actions that we've already executed. That'll come in the first half of the year. And then, you know, there are additional cost savings initiatives that Brian hinted at in his pair of remarks that we haven't really framed out yet, but these are all in progress.

Sure.

Speaker Change: And by the way Thanks, Andrew So again here.

Speaker Change: Put together the more significant building blocks of.

Speaker Change: Of that 100 to 200 basis points of margin improvement off the exit rate of this year's margin.

Speaker Change: First we will have.

Speaker Change: <unk> roughly a $50 million.

Speaker Change: Cost savings that.

Speaker Change: Relate to the first $100 million.

Speaker Change: Actions that we've already executed that will come in the first half of the year.

Speaker Change: Then.

Speaker Change: There are additional cost savings initiatives that Brian hint to that in his prepared remarks that we havent really framed out yet but these are all in progress and these are going to be in really all of the areas that Brian laid out I think procurement.

Joe Busky: And, you know, these are going to be in really all the areas that Brian laid out, I think, you know, procurement, IT, you know, really across all the areas.

Speaker Change: <unk>.

Speaker Change: Really across all the areas and I would say that the scoring structure. The flattening of the org structure is probably a good example of what that will be or what types of things that will be in that second tranche of cost savings over and above the $100 million that we've already executed on.

Joe Busky: And I would say that, you know, this org structure, the flattening of the org structure is probably a good example of what that will be, what types of things that will be in that second tranche of cost savings that's over and above the 100 million that we've already executed on.

Joe Busky: The third thing is, you know, there are some bad guys that, you know, I need to call out. And this is not, shouldn't be surprising, you know, there's going to be a roughly 3% merit increase for our employees, which will have a negative impact, which will have to build in. And then, of course, there's going to be what I call, you know, normal inflation within the business of, you know, roughly 1% to 2% that will be a downside in the margin calculation.

Speaker Change: The third thing is.

Speaker Change: There are some there are some bad guys that I need to call out and this is not shouldnt be surprising.

Speaker Change: Theres going to be a roughly 3% merit increase for our employees.

Speaker Change: We will have a negative impact which will have to build in and then of course. There is there is going to be what I call normal inflation within the business of roughly 1% to 2%.

It will be a downside in the margin calculation and then the last thing I'll mention with potentials in the script, but just to reiterate it.

Joe Busky: And then the last thing I'll mention, which was in the script, but just to reiterate it, where, or I should say when the 24-25 respiratory season starts and ends, which we don't really know at this point, will likely, or could, I should say, could have an impact on where the margins eventually land for this year and next year.

Speaker Change: Where or I should say when the 'twenty four 'twenty five respiratory season starts and ends which we don't really know at this point, we will likely or could I should say it could have an impact on where the margins eventually land for for this year and next year.

Andrew Brackmann: Great, thanks.

Speaker Change: Great. Thanks, and then if I could ask just on the labs business. It sounds like you had some nice placements there in the quarter.

Joe Busky: And then if I could ask just on the labs business, it sounds like you had some nice placements there in the quarter. You're also seeing some nice sort of recurring revenue growth in that business as well. Can you maybe just sort of remind us your visibility into the underlying demand for the consumables for that business? And how should we be thinking about that for the balance of Q4, but also in the 25?

Speaker Change: Youre also seeing some nice sort of recurring revenue growth in that business as well can you, maybe just sort of remind us your visibility into the underlying demand for the consumables for that business and how should we be thinking about that for the balance of Q4, but also into 'twenty five thanks guys.

Joe Busky: Thanks, guys.

Joe Busky: Yeah, I would say, Andrew, for the for the non respiratory business, particularly the labs business and the immunohematology business, there's really good visibility. Because as you know, most of these Contracts we have with our customers are five to seven-year contracts, and there's very predictable ordering patterns that we have with these customers.

Speaker Change: Yes, I would say Andrew.

Speaker Change: Andrew.

Speaker Change: The non respiratory business, particularly the labs business and the immuno hematology business, there's really good visibility because as you know.

Speaker Change: Most of these.

Speaker Change: Contracts, we have on our customers are five to seven year contracts and theirs.

Speaker Change: Predictable ordering patterns that we have with these customers and so the non respiratory side of the business, specifically labs, which is your question.

Joe Busky: And so the non-respiratory side of the business, you know, specifically labs, which is your question, is very predictable. So we have good visibility into Q4 and even into next year, I would say. You know, there's always the variability caused by timing that may slip between one quarter to the next, but generally you've got pretty good visibility there.

Speaker Change: Is very predictable. So we have good visibility into into Q4 and even into next year I would say.

Speaker Change: There is always the variability caused by timing that may slip between one quarter to the next but generally get.

Speaker Change: Pretty good visibility there.

Unknown Executive: Thank you.

Speaker Change: Thank you. The next question comes from Jack Meehan with Nephron Research you May proceed.

Jack Meehan: The next question comes from Jack Meehan with Nefron Research. You may proceed. Thank you. Good afternoon. I wanted to ask a little bit more on the respiratory season. Just checking my math, you know, the guide 160, 170 million of, I guess, COVID. I think that implies 20 to 30 in the fourth quarter. I guess just would love to hear like, what, how you went about thinking about what might have been pull forward versus actual demand. It's been like an unusual respiratory season given the summer spike, but just is that, I guess, just any comments on that would be great.

Jack Meehan: Okay. Thank you good afternoon.

Jack Meehan: Wanted to ask a little bit more on the respiratory season, just checking my math. The guide of 160 170 million of I guess COVID-19.

Speaker Change: I think that implies 20% to 30% in the fourth quarter I guess, just would love to hear like.

Speaker Change: What how you went about thinking about what might have been pull forward versus actual demand.

Speaker Change: Unusual respiratory season, given the summer spike, but just.

Speaker Change: Is that.

Speaker Change: I guess, just any comments on that would be great.

Joe Busky: Yeah, hey, Jack, this is Joe.

Speaker Change: Hey, Jack this is Joe.

Joe Busky: Thanks for the question. So if you look at the guide that we just put out, it is true that the variability, or the range that we put out is predominantly in the respiratory space. As I just said to the previous question, the non-respiratory side of the business is fairly predictable. So there's not a lot of range in the guide for non-respiratory. It's really all in the respiratory space. The flu season began early last year, and we really haven't seen it tick up to that level yet. You know, the ILI, which everyone knows is a public metric that we can all look at, is just beginning to start to tick a little.

Jack Meehan: Thanks for the question.

Jack Meehan: So.

Jack Meehan: If you look at the guide that we just put out it is true that the variability or the range that we put out is predominantly in the respiratory space as I just said to the previous question.

Jack Meehan: The non respiratory side of the business is fairly predictable so theres.

Jack Meehan: Theres not a lot of range.

Jack Meehan: In the guide for non respiratory it's really all in the respiratory space.

Speaker Change: The flu season began early last year.

Speaker Change: We really haven't seen it tick up to that level, yet the ili, which everyone knows us as a public metric that we can all look at is just beginning to start to start to tick up.

Joe Busky: Last time I looked at it, it was like 2 or 3 percent. And you're right, the midpoint of our guide has respiratory down about 30 percent year over year. So, you know, based on the data we're seeing from the Southern Hemisphere.

Speaker Change: Last time I looked at it was like two or 3%.

Speaker Change: And Youre right that the midpoint of our guide has as respiratory down.

Speaker Change: About 30% year over year, so based on the data we're seeing from the southern hemisphere.

Joe Busky: There is a chance that volumes overall may be higher than the average flu season, but we are being somewhat Prudent on the timing to account for the risk that revenues could land in Q125 versus Q4 this year. So, you know, going back to Q3 last year. You know, we we had a strong Q3 with with both flu and COVID. And last year, we expected that that trend to continue into Q4 of last year, but it but it didn't. And so as a result, you know, we over called respiratory and we missed the quarter last year Q4.

Speaker Change: There is a chance that volumes overall may be higher than the average flu season.

But we are being somewhat.

Speaker Change: Prudent on the timing.

Speaker Change: To account for the risk that revenues could land in Q1 25 versus Q4 this year.

Speaker Change: Okay.

Speaker Change: So going back to Q3 last year.

Speaker Change: We had a strong Q3.

Speaker Change: With both flu and Covid and last year, we expected that that trend to continue into Q4 of last year, but it didn't.

Speaker Change: And so as a result, we all recall in respiratory and we missed the quarter last year Q4. So we just really don't intend to do that again. So we've in the guide this year, we have as I said we've.

Joe Busky: So we just really don't intend to do that again. So we've in the guide this year, we have, as I said, we've, we've planned that the COVID numbers to come down to about the range that you just quoted, I think that's, that's a fair number. And that, and that flu would come down slightly as well versus prior year.

Speaker Change: We planned that Nicole.

Speaker Change: Covid numbers will come down to about the range that you just quoted I think that's a fair number.

Speaker Change: And then fluid come down slightly as well versus prior year.

Unknown Executive: Okay, got it.

Speaker Change: Okay got it.

Jack Meehan: And then I wanted to follow up on your China comments. Is it possible to frame up on the cardiac side, just the potential magnitude of sales that could be exposed there? I'm not sure if that's related to the Yangtze province, the VBP, but just any color would be great. Yeah, there are There are proposed decreases for certain party act marker, specifically against BNP reimbursement changes in various provinces. And again, this is different than BPB, just want to make sure that's clear.

Speaker Change: And then.

Speaker Change: I wanted to follow up on your China comments is it possible to frame up on the cardiac side, just the potential magnitude of sales that could be exposed there I'm not sure if that's related to the young <unk>.

Speaker Change: Province, the GBP, but just any color would be great. Thanks.

Speaker Change: Yes, there are.

Speaker Change: There are opposed decreases for certain.

Speaker Change: Cardiac marker specifically as BNP.

Speaker Change: Reimbursement changes.

Speaker Change: In various provinces and again this is different than <unk> I just want to make sure that's clear.

Joe Busky: We're still assessing the potential impact, Jack, but at this point, we believe it be it'll be 1% or less of 2025 China revenue, China revenue. Got it. Excellent.

We're still assessing the potential impact Jack but at this point, we believe it be it'll be 1% or less of 2025, China revenue China revenue.

Speaker Change: Got it excellent. Thank you.

Unknown Executive: Thank you.

Speaker Change: Thank you. The next question comes from Bill Bonello with Craig Hallum. You May proceed.

Bill Bonello: The next question comes from Bill Bonello with Craig Hallam. You may proceed. Hey, guys. Thanks a lot. So two questions, one financial one not. First of all, thanks for providing the assumptions underlying the guidance. It's really helpful, and very much appreciate the prudent I am hoping you might be able to help me connect the dots a little bit between those assumptions and what sort of the implicit Q4 EBITDA outlook. It seems like, if I'm doing my math right, at the midpoint, it looks like EBITDA would be down maybe 250 basis points or so. That's down about 23 million.

Bill Bonello: Hey, guys. Thanks, a lot.

Speaker Change: So two questions one financial one.

Speaker Change: First of all thanks for providing the assumptions underlying the guidance that's really helpful and very much appreciate the prudence.

Speaker Change: Im helping hoping you might be able to help me connect the dots a little bit between those assumptions and what sort of the implicit Q4 EBITDA.

Speaker Change: Look.

Speaker Change: It seems like if I'm doing my math right at the midpoint it looks like EBITDA would be down maybe 250 basis points or so thats down about $23 million on <unk>.

Joe Busky: 27 million decline in revenue. I'm just sort of trying to understand, okay, which, which of the assumptions sort of, you know, accounts for that and, and maybe, you know, whether or not there was anything, you know, any unusual benefit this, this quarter, it sounds like maybe there's some uptick in sales and marketing costs next quarter, and maybe it's that.

Speaker Change: $27 million decline in revenue.

Speaker Change: I'm, just sort of trying to understand okay, which are the assumptions sort of.

Speaker Change: Accounts for that and it may be.

Speaker Change: Whether or not there was anything.

Any unusual benefit this this quarter.

Speaker Change: It sounds like maybe there is some uptick in sales and marketing costs next quarter, maybe it's that simple.

Joe Busky: Yeah, hey, Bill.

Speaker Change: Yeah, Hey, Bill this is John.

Joe Busky: This is Joe. Good question. And so let's break it down this way for the year Q4. And again, assuming the midpoint of the guide, as As we just went through on the previous question about the respiratory season, we are assuming a roughly 30 percent drop in respiratory revenue year over year, Q4 to Q4. And so that GP or adjusted EBITDA impact, the dropping down from that decline in respiratory revenue will be the majority of what you're referring to as the EBITDA drop year over year. But the other big piece or two other pieces, I would say one, we will have some incremental cost savings in Q4, which is a good guy.

Speaker Change: Good question.

Speaker Change: So let's.

Speaker Change: Break it down this way.

Speaker Change: The year of it.

Speaker Change: Q4, and again, assuming the midpoint of the guide.

Speaker Change: As we just went through on the previous question about the respiratory season, we are assuming a roughly 30% drop in respiratory revenue year over year Q4 to Q4 and so that.

Speaker Change: Net GDP, our EBIT adjusted EBITDA impact.

Speaker Change: Dropping down and from that that decline in respiratory revenue will be the majority of.

Speaker Change: What youre, referring to is the the EBITDA drop year over year.

Speaker Change: The other big piece there are two other pieces I would say.

Speaker Change: One we will have some incremental cost savings in Q4, which is a good guy, but then there's another bad guy offsetting that is the bonus accrual that I mentioned in the prepared remarks. So we we did not have <unk>.

Joe Busky: And but then there's another bad guy offsetting that is the bonus accrual that I mentioned in the prepared remarks. So we we did not have a bonus accrual in the previous year Q4 because we missed our performance targets. This year we are tracking towards those performance targets and we do have a bonus accrual. And so that that dynamic is causing a roughly twenty five to thirty million dollar increase in SG&A year over year in Q4. That's a big part of the story. Okay, that's super helpful.

Speaker Change: <unk> accrual in the previous year Q4, because we missed our performance targets. This year, we are tracking towards those performance targets and we do have a bonus accrual and so that that dynamic is causing a roughly $25 million to $30 million increase in SG&A year over year in Q4, that's a big part of.

Speaker Change: Story.

Speaker Change: Okay. That's super helpful and I'm glad you have that bonus accrual this year.

Unknown Executive: And I'm glad you have a bonus.

Brian Blaser: And then just not financial, but can you talk to us a little bit more about the organizational changes that you're making and what you announced, maybe the rationale for the changes, and then just also, you know, how we might think about the risk of disruption and what you're doing to mitigate that risk. Sure, Bill, this is this is Brian. Thanks for the question. And, you know, really, the decision to eliminate our chief commercial officer and COO roles was all about flattening our organization, improving our speed, efficiency, and getting closer to our customers. You know, Mike and Rob did a great job for the business had a really significant impact on our team, especially as we went through the CEO transition earlier in earlier in the year, you know, at the at the customer level, this really has no impact.

Speaker Change: And then just.

Speaker Change: <unk> financial but can you talk to us a little bit more about the organizational changes that you're making and what you announced.

Speaker Change: Maybe the rationale for the changes and then just also how we might think about the risk of disruption and what youre doing to mitigate that risk.

Brian Blazer: Yeah sure Bill. This is this is Brian thanks for the question.

Brian Blazer: The decision to eliminate our chief commercial officer, and CFO roles was all about.

Brian Blazer: Flattening, our organization, improving our speed efficiency and getting closer to our customers.

Brian Blazer: Mike and Rob did a great job for the business had a really significant impact.

Brian Blazer: On our team, especially as we went through the CEO transition earlier and earlier in the year.

Brian Blazer: At the at the customer level. This really has no impact of all of these changes are.

Brian Blaser: All of these changes are kind of at the top of our organization. We've got very strong business unit, regional, commercial and functional leaders in place who are now going to report to me. So I'm, I'm excited about this organization and what it means in terms of our ability to, you know, operate more effectively and, you know, bring more value to our customers.

Brian Blazer: That's kind of at the top of our organization, we've got very strong business unit.

Brian Blazer: Our regional commercial and functional leaders in place who are now going to report to me. So I'm excited about this organization and what it means in terms of our ability to operate more effectively.

Brian Blazer: Bring more value to our customers.

Brian Blaser: And just in terms of the commercial organization, I mean, is there a change sort of in the in the way the sales force is organized? And, you know, are you anticipating any other kinds of change in the sales force structure? Or will it be relatively transparent to the sales Yeah, this will be a bill relatively transparent to the sales team at the at the customer interface level. We've consolidated our regional structure. So at the, again, at the top of the, the organization from five regions to three. And we've consolidated our business units from four to two.

Brian Blazer: And just in terms of the commercial organization.

Speaker Change: Is there a change sort of in the in the way. The sales force is organized and are you anticipating any other signs of change in the sales force structure or will it be relatively transparent to the sales team.

Bill Bonello: Yes, this will be a bill.

Bill Bonello: <unk> transparent to the sales team at the at the customer interface level.

Bill Bonello: We consolidated our regional structure so.

Bill Bonello: At the top of the.

Bill Bonello: The organization from five regions to three.

Bill Bonello: And we've consolidated our business units from four to two.

Brian Blaser: And in doing that, you know, have affected a lot of the top of our business. But really, again, our customer facing impact here is, is non existent, there really isn't any any change at all.

Bill Bonello: And in doing that.

Bill Bonello: <unk>.

Bill Bonello: Affected a lot of the top of our business, but really again, our customer facing impact here.

Bill Bonello: Is it.

Bill Bonello: It does not exist there really isn't any change at all.

Unknown Executive: Okay, thank you very much. Thank you.

Speaker Change: Okay. Thank you very much.

Speaker Change: Okay.

Speaker Change: Thank you.

Lu Li: The next question comes from Lu Li with UBS. You may proceed. Great. Thank you so much for taking my questions.

Speaker Change: Next question comes from Lou <unk> with UBS you May proceed.

Speaker Change: Great. Thank you so much for taking my questions.

Lu Li: I want to go back to the China part. I think you mentioned the cardiac reimbursement pressure is not VBP related. Do you think that the other categories could be impacted as well? Or it just really just the cardiac biomass? Yeah, I believe based on what we're hearing now, and in the research we've done, we believe that it is cardiac only. However, as I said, in the remarks, you know, China is a complex environment, and we'll, we'll continue to monitor and watch it closely. But right now, we believe it's it's it's going to be limited to cardiac And, you know, our business there, you know, we're heavily weighted in clinical chemistry and utilize a dry slide technology, which so far the the BBP actions have not been focused on, they've been more focused on immunoassay testing and wet chemistry testing in the in the region.

Speaker Change: We wanted to go back to the China part.

Speaker Change: You mentioned the cardiac <unk>.

Speaker Change: Reimbursement pressures not <unk> related.

Speaker Change: Do you think about the other categories could be included as well or it just really just a cardiac biomarkers.

Speaker Change: Okay, Yes.

I believe based on what we're hearing now and in the research we've done.

Speaker Change: We believe that it is.

Speaker Change: Cardiac only.

Speaker Change: However, as I said.

Speaker Change: In the remarks, China is a complex environment and we will we'll continue to monitor and watch it closely but right now we believe it's going to be limited to cardiac.

Speaker Change: Our business.

Speaker Change: There were heavily weighted in clinical chemistry, and utilize a dry slide technology, which so far the pvp actions have not been focused on they've been more focused on immunoassay testing and wet chemistry.

Speaker Change: Testing in the region.

Brian Blaser: Got it.

Got it.

Brian Blaser: And then, do you have any update on the Savannah platform and then also the manual kind of approval of the timeline? Any comment would be great. Yeah, so on Savannah, we continue to be on track with our RPV4x panel to enter clinical trials during the start of this year's respiratory season, with the objective being that we'll have approval for that assay in the later part of 2025. We're not expecting, you know, any sort of significant revenue impact from that panel in 2025. Most of the ramp up will be in 26 and 27.

Speaker Change: And then one day.

Speaker Change: Today on the Savannah.

Speaker Change: And then also the millennial.

Speaker Change: <unk> top line any color will be great.

Speaker Change: Yes, so on Savannah, we continue.

Speaker Change: Continue to be on track with our PV for ex panel to enter clinical trials.

Speaker Change: During the start of this year's respiratory season with the objective being that we will have approval.

Speaker Change: For the for that assay in the later part of 2025.

Speaker Change: We're not expecting any sort of significant.

Speaker Change: Revenue impact from that panel in in 2025, most of the ramp up will be in.

Speaker Change: 26% and 27.

Unknown Executive: Connie, thank you. Thank you.

Speaker Change: Got it thank you.

Speaker Change: Okay.

Speaker Change: Thank you as a quick reminder, if you would like to ask a question. Please press star one on your telephone keypad. The following comes from Patrick Donnelly with Citi. You May proceed.

Patrick Donnelly: As a quick reminder, if you would like to ask a question, please press star one on your telephone keypad. The following comes from Patrick Donnelly with Citi. You may proceed. Hey, guys. questions. Brian, and I'm sure Joe, you can jump in as well.

Patrick Donnelly: Hey, guys. Thank you for taking the questions.

Bryan and I'm sure Joe you can jump in as well just on the EBITDA side. When you guys think about that.

Patrick Donnelly: Just on the EBITDA side, when you guys think about Transcripts provided by Transcription Outsourcing, LLC. Unknown Speaker When you look at the organization, where do you see opportunities? Where do you see those additional levers to continue that margin story towards the mid-to-high? Yeah, so, you know, as Joe mentioned earlier, we're really looking at a number of cost and business process improvement initiatives, kind of across the P&L, whether it's in direct costs for our products, which includes everything from, you know, instrument components to plastics, biologics, chemicals, to, you know, a lot of the indirect costs, travel and entertainment, distribution, freight, logistics, seeing what more we can do to be more efficient in R&D, etc.

Patrick Donnelly: To that mid to high 20, when you talked about it sounds like next year 900 2200 bps.

Patrick Donnelly: Expansion.

Speaker Change: What are the key levers beyond this next 100 million leg. When you look at the organization and where do you see opportunities where do you see those additional levers to continue that margin story towards the mid to high <unk>.

Speaker Change: Yes so.

Speaker Change: As Joe mentioned earlier, we're really looking.

Speaker Change: At a number of cost and business process improvement.

Speaker Change: Initiatives.

Speaker Change: So kind of across the P&L whether.

Speaker Change: Other it's in direct costs for our products, which includes everything from instrument components plastics biologics chemicals too.

Speaker Change: A lot of the indirect costs travel and entertainment distribution freight logistics.

Speaker Change: Seeing what more we can do to be more efficient in R&D et cetera.

Brian Blaser: So there's a lot of work that we're doing on the just sort of the basic blocking and tackling cost side of the P&L. In addition, we're doing more with our commercial organization to focus our teams on the most attractive, most profitable and fastest growing segments, where we have competitive differentiation and a right to win. And, you know, by doing that, we not only improve our competitive win rate, but we also improve our profitability in doing that. So those are really our key areas of focus across the business.

Speaker Change: So theres a lot of work that we're doing on the just sort of the basic blocking and tackling cost side of the P&L in.

Speaker Change: In addition, we.

Speaker Change: We're doing more with our commercial organization to.

Speaker Change: Focus our teams on.

Speaker Change: The most attractive most profitable and fastest growing segments.

Speaker Change: Where we have competitive differentiation and at a right to win.

Speaker Change: And by doing that we not only improve our our competitive win win rate, but we also improve our profitability.

Speaker Change: Doing that so.

Speaker Change: Those are really our key areas of focus across the business and as we get further into the implementation of.

Brian Blaser: And, you know, as we get further into the implementation of some of these programs, we'll be providing additional visibility to those as we move forward.

Speaker Change: Some of these programs will be providing additional visibility of those as we move forward.

Unknown Executive: Okay, that's helpful.

Speaker Change: Okay. That's helpful.

Joe Busky: And then, you know, another one on China, you know, let's talk about some of the variables, cardiac VVP, I guess, when you think about just that setup for 25, what are you layering in for China, and then, you know, maybe just longer term, how you think about that geography? Growth side would be helpful. Thank you.

Speaker Change: And then.

Speaker Change: Another one on China.

Speaker Change: Talk about some of the variables cardiac GBP I guess when you think about just that set up for 25, what are you layering in for China, and then maybe just longer term, how you think about that geography.

Speaker Change: On the growth side would be helpful. Thank you guys.

Joe Busky: Yeah, hey Patrick, it's Joe. So, yeah, I mean, we We take the same opinion, I think most in our space do, that it's definitely a complex environment. And we're watching very closely all of these moving pieces that you mentioned, as well as the anti-corruption policies. But we still believe that given all that's going on, we still believe this year is going to be high single-digit growth in China. And for next year, I would probably frame it as somewhere between mid-single-digit to high single-digit.

Speaker Change: Yeah, Hey, Patrick it's John.

Speaker Change: Yes, I mean, we.

Speaker Change: We take the same opinion I think most in our space too and it's definitely a complex environment and.

Speaker Change: We're watching very closely all of these moving pieces that you mentioned as well as anti corruption.

Speaker Change: Policies.

Speaker Change: But we still believe that given all thats going on we still believe this year.

Speaker Change: Is is going to be high single digit growth in China and for next year.

Speaker Change: Probably frame it as somewhere between mid single digit to high single digit and more to come on that as we frame out our 2025.

Joe Busky: And more to come on that as we frame out our 2025 operating plan, and we'll talk more about it as we report on 24 results in February. But we still, as I said before, we still see that there's more opportunity than risk, and we know our business there is pretty solid.

Speaker Change: Operating plan and then we'll talk more about it as we.

Speaker Change: As we report on 24 results in February, but we still as I said before we still see that there's more opportunity than risks.

Speaker Change: Business, there is pretty solid.

Unknown Executive: Good.

Joe: Sounds good thanks, Joe.

Andrew Cooper: Thanks. Thank you.

Joe: Sure.

Joe: Thank you.

Andrew Cooper: The next question comes from Andrew Cooper with Raymond James. Your line is open. Hey, everybody, thanks for the question. A lot's already been asked, and you covered a lot in the prepared remarks. So maybe just one quick one for me. You talked about plans for increasing the cross selling efforts on the legacy Quidel side. I mean, we can go back to 2018 in the the triage deal and trying to do that internationally with Sofia and QuickView. How do you operationalize that? You know, like I said, it's been a long time where we haven't really seen that play out.

Speaker Change: The next question comes from Andrew Cooper with Raymond James Your line is open.

Andrew Cooper: Hi, everybody. Thanks for the question.

Already been asked and you covered a lot in the prepared remarks, but maybe just one quick one for me.

Andrew Cooper: You talked about plans for increasing the cross selling efforts on the legacy quite outside I mean, you can go back to.

Andrew Cooper: 2018, and the triage deal and trying to do that internationally with <unk>.

Speaker Change: Thank you.

Speaker Change: How do you operationalize that like I say, it's been a long time, where we haven't really seen that play out. So maybe just give us a sense for how you refocus the sales force on that how you incentivize it and what you think it can contribute in terms of growth either.

Brian Blaser: So maybe just give us a sense for how you refocus the sales force on that, how you incentivize it, and, you know, what you think it can contribute in terms of growth, either in 2025, or over the long Yeah, you know, my observation on that, thank you for the question, Andrew, is that I think we've we've made some progress there. But we're we're in relatively early innings with with cross selling. I think we probably do more there with our triage product line than anything else. And and so we are we are looking at how we can more effectively approach the market with that with that strategy.

Speaker Change: Either in 2025 or over the longer term.

Speaker Change: Yes.

Speaker Change: My observation on that thank you for the question Andrew is that.

Speaker Change: We've made some progress there, but we're in relatively early innings with with cross selling I think we probably do more there with our triage product line.

Speaker Change: Than anything else.

Speaker Change: And so we are we are looking at how we can more effectively approach the market.

Speaker Change: With that.

Speaker Change: With that strategy.

Brian Blaser: Again, you know, focusing more utilizing our direct commercial force as opposed to reliance on distributors, which, you know, largely are Sophia businesses is heavily dependent on. So the opportunity there is to maybe shift more from that channel to the direct channel. And we're trying to understand how we can do that and it's in our teams to to to effectively compete that way.

Speaker Change: Again.

Speaker Change: Focusing more <unk>.

Speaker Change: Utilizing our direct <unk>.

Speaker Change: Commercial force as opposed to reliance on distributors, which.

Speaker Change: Our Sofia businesses is heavily dependent on so the opportunity there is to maybe shift more from that channel to the direct channel and we are trying to understand how we can do that and incent our teams to ifs.

Speaker Change: Effectively compete that way.

Unknown Executive: Okay, I'll stop there and let others ask. Thanks.

Speaker Change: Okay.

Speaker Change: Out there and let others ask.

Speaker Change: Thank you.

Unknown Executive: Thank you.

Ricardo Moreno: This is your final reminder that if you would like to ask a question, please press star one on your telephone keypad. The following comes from Conor McNamara with RBC Capital Markets. You may proceed.

Speaker Change: This is your final reminder, that if you would like to ask a question. Please press star one on your telephone keypad the.

Speaker Change: Following comes from Connor Mcnamara with RBC capital markets you May proceed.

Speaker Change: Yeah.

Ricardo Moreno: Good evening, this is Ricardo Moreno for Conor. Thank you for taking the question. I just wanted to ask what were some of the insights you have about current opportunities within the funnel that coincide with the 28 billion China stimulus for equipment as it starts rolling into 2025? Is this as related to China? Get it. That's a really fun time. Yeah, I mean, you know, we see potential headwinds in terms of the value based pricing initiatives and the anti-corruption policies that are being implemented. The stimulus could be a potential tailwind, but I think it's still a little early for us to understand how that's really going to play out in our market.

Speaker Change: Ricardo Moreno for Connor. Thank you for taking the question just wanted to ask what were some of the insight you'd have about current opportunities within the funnel that coincide with the $28 billion China's stimulus for equipment as it starts rolling into 2025.

Okay.

Speaker Change: Is this as it relates to China stimulus.

Speaker Change: That's it really.

Speaker Change: Yes.

Speaker Change: We see potential headwinds in terms of.

Speaker Change: The value based pricing initiatives and DNA corruption.

Speaker Change: Policies that are being implemented.

Speaker Change: The stimulus could be a potential tailwind, but I think it's still a little early for us to understand how that's really going to play out.

In our market.

Brian Blaser: And so we're still just in the early stages of monitoring that and the impact on our business.

Speaker Change: We're still in the early stages of monitoring that and the impact on our business.

Speaker Change: Okay.

Unknown Executive: Thank you.

Speaker Change: Thank you and then just one more on the business.

Brian Blaser: And then just one more on the immuno business. A lot of those contracts are five to seven years, in particular, those instruments replaced during COVID in 2020. Where do you see the dynamics of the equipment replacement cycle happening, starting now, going into 2025? But generally speaking, whether it's our labs business or our point of care business, you know, we do have longer contract cycles, we have very high retention rates on our existing placements, and we have a positive win loss ratio on new business. So, you know, I think the overall dynamic there really supports the stability of our underlying business model.

Speaker Change: A lot of those contracts are five to seven years.

Speaker Change: In particular those instruments are placed <unk> covenant in 2020, where do you see the dynamics of the equipment replacement cycle happening.

Speaker Change: Starting now going into 2025.

Speaker Change: But generally speaking, whether it's our labs business or our point of care business.

Speaker Change: We do have longer contract cycles, we have.

Speaker Change: Every high retention rates on our existing placements and we have a positive win loss ratio on new business. So.

Speaker Change: Yes, I think the over overall dynamic there really.

Speaker Change: The stability of our underlying business model.

Brian Blaser: And, you know, that sort of mid single digit growth rate, especially for our labs business.

Speaker Change: And.

Speaker Change: That sort of mid single digit growth rate, especially for our labs business.

Unknown Executive: Thank you so much. Good job on the quarter.

Speaker Change: Thank you so much good job on liquidity.

Speaker Change: Thank you. Thank you.

Casey Woodring: The final question comes from Casey Woodring with J.P. Morgan. You may proceed. Great. Thank you for taking my questions. Maybe to piggyback on Patrick's question a little bit earlier, you know, that second tranche of cost savings you mentioned, on top of that 100 million run rate and savings in that first tranche. Would you realize those in 25? And would those bridge kind of the gap in 26 and 27 between below 20. See the thumb margin and 25 and that kind of mid to high 20s margin in the outer years, that's hard to maintain or, you know, would you see, would you need to see more kind of cost savings and execution to reach that?

Speaker Change: The final question comes from Casey Woodring with Jpmorgan you May proceed.

Speaker Change: Great. Thank you for taking my questions maybe to piggyback on Patrick's question, a little bit earlier that second tranche of cost savings you mentioned.

Speaker Change: On top of that $100 million run rate savings in that first tranche.

Speaker Change: You realize those in 2005 and windows.

Speaker Change: Great just to kind of the gap in 'twenty six 'twenty seven between the low Twenty's EBITDA margin in.

Speaker Change: 25, and that kind of mid to high <unk> margin.

Speaker Change: In the outer years that targets <unk> four.

Speaker Change: Would you see would you.

Speaker Change: Seymour.

Speaker Change: Kind of cost savings.

Speaker Change: Execution productivity.

Joe Busky: Hey, Casey, it's Joe. Yeah, I think that this second tranche that was mentioned in Brian's prepared remarks would would have an impact in the 25 and 26. It's not all 25. And again, we'll, we'll try to provide more visibility into sizing that up on the next quarterly calls we, we get through it. And, you know, I think just keep in mind that we are going to be moving to what I would call a continuous improvement culture of, you know, looking for cost savings and efficiency so that there certainly will be will be more to come.

Speaker Change: Hey, Casey, it's Joe Yeah, I think this second tranche that was mentioned in Brian's prepared remarks.

Speaker Change: It would have an impact in the 25 and 26, it's not all 25 and again.

Speaker Change: We'll try to provide more visibility into sizing that up on the next quarterly calls we will get through it.

Speaker Change: I think just keep in mind.

Speaker Change: We are going to be.

Speaker Change: Moving to what I would call a continuous improvement culture of looking for.

Cost savings and efficiency. So that there is certainly will be will be more to come.

Joe Busky: You know, the other the other area I call out as as a. The tailwind, if you will, for the margin improvement is going to be the exit of the donor screening business. You know, that's a that's a dilutive. Business, as you know, and as we exit that at the end of next year, that's going to that's going to provide a tailwind to the margins as well. Okay, got it. So that the low 20s and 25s assumes the cost savings that you haven't identified yet. Well, I would say it a different way. I would say that we haven't fully communicated to you yet into the streets, but we have a majority of it fleshed out.

Speaker Change: The other the other area I would call out as Stephanie.

Speaker Change: A tailwind if you will from the margin improvement is going to be the exit of the donor screening business.

Speaker Change: That's.

Speaker Change: A dilutive.

Business as you know.

And as we exit that.

Speaker Change: At the end of next year, that's going to that's going to provide a tailwind to the margins as well.

Speaker Change: Okay got it so that the low twenty's and 25 assumes cost.

Speaker Change: The cost savings that you havent identified yet.

Speaker Change: Kind of a particular.

Speaker Change: Well I would say it a different way I would say that we haven't fully communicated to the street, but we have a.

Joe Busky: And again, a good example is the flattening of the organization that Brian mentioned today. Okay, got it helpful.

Speaker Change: The majority of it flushed out and again it is a good example is the flattening of the organization that Brian mentioned today.

Speaker Change: Okay got it helpful and maybe just one last one quickly your respiratory framework can you just give us an updated picture on what the competitive landscape looks like there and.

Brian Blaser: And maybe just one last one quickly, your respiratory framework. You just give us an updated picture on what the competitive landscape looks like there. And, you know, you noted that we should expect similar market share to 2023. Can you just remind- where you saw that last year. You know what it looks like now. I know that there's a number of players in that space that I've been talking Solid Growth and their own respiratory panel. So just kind of curious on the updated picture of the share. Thank you.

Speaker Change: You noted that we should expect similar market share.

Speaker Change: The 2023 can you just remind us kind of where you saw that last year.

Speaker Change: What it looks like now I know that there is a number of players in that space that have been talked yep yep.

Speaker Change: Solid growth in narrow respiratory panel, so just kind of curious.

Speaker Change: Okay that makes sure sure. Thank you.

Brian Blaser: Sure. Yeah, so so we are the leader in the respiratory space. I think the other the other large players are going to be Abbott and some smaller players. And, you know, we've got a decent track record of the last couple years post pandemic of taking market share. And as I said, in the in the guidance that we have provided, we've assumed similar market share to last year. But obviously, internally, we're we're working very hard to increase our market share and and beat that beat that target. So more to come. Again, as we finalize in this respiratory season, as you know, when we talked to you guys in February, we can report on what that looks like.

Speaker Change: Sure Yeah. So so we are the leader in the respiratory space.

Speaker Change: I think the other the other large players are going to be Abbott BD.

Speaker Change: And then there are some smaller players and we.

Speaker Change: We've got a decent track record of the last couple of years post pandemic of taking market share and as I said in.

Speaker Change: In the guidance that we have provided we have assumed similar market share so last year, but obviously internally.

Speaker Change: Working very hard to increase our market share and and beat that.

Speaker Change: Beat that target.

Speaker Change: More to come again, as we finalized in this respiratory season as well.

Speaker Change: We talked to you guys in February we can report on what that looks like.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Unknown Executive: There are currently no other questions in queue.

Speaker Change: There are currently no other questions in queue.

Unknown Executive: Thank you for attending today's call. This concludes today's call. Hope you have a great rest of your day.

Speaker Change: Thank you for attending today's call. This concludes today's call will be have a great rest of your day.