Q1 2025 QuidelOrtho Corp Earnings Call
Speaker Change: Welcome to the Quindell or so, first quarter, 2025 is the Financial Results Conference call and webcast. At this time, all participant lines are in listened mode only.
For those of you participating in the conference call, there will be an opportunity for questions at the end of the end of the prepared remarks.
Speaker Change: Please note, this conference call is being recorded. An audio replay for 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 relation. Thank you very much.
Speaker Change: Thank you. Good afternoon, everyone, and thanks for joining Despite El Orzo's first quarter 2025 financial results conference call. Joining me today are Brian Blaser, President and Chief of Executive Officer and Joe Busky, Chief Financial Officer.
Speaker Change: This conference call has been simultaneously webcast on the Investor Relations page of our website. To aid in the presentation, we also posted supplemental information on the Investor Relations page that will be referenced throughout this fall. [inaudible]
Speaker Change: This conference saw and supplemental information contained forward-looking statements to the meaning of the Private Security's litigation reform act of 1995.
Speaker Change: Statements that are not strictly historical, including the company's expectations, lands, financial guidance, future performance and prospects are forward looking statements that are subject to certain risks, uncertainties, assumptions, and other factors.
This includes the expected impact of tariffs and macroeconomic conditions.
Speaker Change: Actual results may vary materially from those expressed or applied 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 10K for the 2024 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 7, 2025, and we assume no obligation to update any Forward-looking statements, except as required by law.
Speaker Change: In addition, today's call includes discussion of certain non-gas financial measures.
Speaker Change: Gable reconciling these non-GAAP measures to their most directly comparable GAAP measures are available in our earnings release and the supplemental information, which are on the investor relations page of our website at quietelorco.com
Speaker Change: Thanks, Juliet, and good afternoon, everyone. As I reflect on my first anniversary since joining the company, I first want to thank all our employees and our leadership team for their unwavering support as we implemented difficult but necessary changes to our business over the last year.
Speaker Change: Together, we refocus the organization on a narrow set of priorities and set in motion key initiatives to improve our performance and our cost structure. Our business faced unique challenges that increasingly dynamic environment.
Speaker Change: The organization came together around our common mission with our customers at the center of everything we do. The team's efforts played a critical role in the strong results we delivered in Q1, reinforcing my confidence in our strategy and operational discipline.
[inaudible]
Speaker Change: Let me start by taking a closer look at our first quarter results followed by my thoughts on the evolving tariff situation.
Speaker Change: During Q1, we delivered solid, bid single digit revenue growth of 6% excluding COVID and donor screening. This performance was primarily driven by our labs business as well as stable growth in immunodimitology and a strong flu season.
Speaker Change: We also recognize cost savings from our previously announced initiatives that drove a 450 basis point year-over-year improvement in adjusted even a margin and a 68% increase in adjusted deluded earnings for share compared to the prior year period.
Speaker Change: From a business unit perspective, our labs business, which was 54% of total company revenue to 1, achieved revenue growth of 7% with strength in both clinical chemistry and amino-assay testing.
Speaker Change: Our Immunohematology business continued its global leadership position and consistent trajectory with 4% growth during the quarter.
Speaker Change: Our point of care business represented 25% of our Q1 revenue and grew 8% excluding COVID.
Speaker Change: Q1 COVID testing was down compared to the prior year period, but flu sales were strong, resulting in 18% year-over-year growth. This performance was led by our COVID flu combo test, which has continued to deliver durable revenue.
Speaker Change: and our molecular diagnostics business grew 11% excluding COVID, albeit off a smaller revenue
Speaker Change: We are currently in the last stages of the clinical trial for our Savannah Respiratory Panel and are completing verification of validation testing. Once our trial data has been fully successfully finalized, we expect to make our submission to the FDA this summer.
Speaker Change: Our Q1 performance is further proof that the initiatives we launched in 2024 having a positive impact on the performance of the business.
Speaker Change: As we look forward to the balance of 2025, we continue to be focused on our narrow set of strategic initiatives, including increasing the content and utility of our platforms, expanding margins, and commercial and operational execution.
Speaker Change: Our commercial teams are more focused and ever before on driving profitable growth by targeting the most attractive customers of market segments where we can drive value with our unique
Speaker Change: and we are on track to realize the remainder of the 100 million in annualized cost savings we defined in 2024 with 50 million in cost savings expected in the first half of 2025.
Speaker Change: And while much of our work last year was focused on staffing reductions, we have expanded our efforts to improve cash flow generation with initiatives targeting direct and indirect procurement, inventory utilization, capital expense management, and optimization of our cash conversion cycle.
Speaker Change: We expect these initiatives to yield an incremental 30 to 50 million in cost savings in 2025.
Speaker Change: I'd now like to turn to the evolving developments at the macro level, including the expected impact on our business and the actions we're taking to address these challenges.
Speaker Change: Obviously, this is a very dynamic situation so my comments reflect our assessment based on current information.
Speaker Change: Our business is based on a recurring revenue model with more than 90% of our sales coming from consumables and a small percentage coming from instrument placements.
Speaker Change: The majority of our manufacturing is facing in the United States and over the past three years we have invested nearly a billion dollars in US-based manufacturing and R&D.
Speaker Change: Over half our employees are based in the US and over the next several years, we expect to continue to invest and expand our capabilities to support the growth of our business both domestically and globally.
Speaker Change: We also have company and third-party manufacturing located in the UK, China, Europe , and Mexico. These locations further our strategy of being close to our important customers, as well as reinforcing our business continuity objectives.
Speaker Change: With our global operating footprint, we estimate the potential tariff headwinds, prior to mitigations, is roughly $30 to $40 million of impact in 2025.
Speaker Change: But since the discussion of tariffs began in 2024, we have been diligently working on plans to mitigate potential impacts.
Speaker Change: These plans include changing the origin of source materials, repositioning inventory, shifting our supply chain to alternate suppliers, as well as implementing select pricing actions and additional reductions to our controllable costs.
Speaker Change: Collectively, we believe the incremental actions we are taking are sufficient to fully offset the tariff impacts that they stand today and while the environment can always change, we are maintaining our full year 2025 financial guidance based on our current business outlook.
Speaker Change: We remain focused on our key priorities and achieving our previously communicated cost savings initiatives over and above any tariff-related offsets.
Speaker Change: So to wrap up, we are pleased with the strength of our first quarter results in the progress we have made in our key priorities over the last 12 months. We remain focused on supporting our customers and believe we are well positioned to continue to drive consistent growth.
Speaker Change: while also expanding our profitability and value for shareholders in 2025 and beyond.
Speaker Change: So thank you for your time and continue supporting with that. I'll now turn the call over to Joe to take you through our first quarter of financials in more detail. Joe.
Joe Busky: Okay, thanks, Brian . And hello, everyone. I'll start by walking through our first quarter results, which are detailed on slide three of the supplemental information available in the investor relations page of our website.
Speaker Change: and I'm less otherwise noted all year over your revenue growth figures discussed today are presented on a constant currency basis. As Brian noted, our first quarter performance was in line with our expectations, and we anticipate continued momentum through the rest of 2020-25.
Speaker Change: Particularly with our lab's business where we see strong recurring revenue with long contracts and a loyal customer base.
Speaker Change: Let me begin by taking you through our first quarter performance followed by a discussion of our full year 2025 financial guidance, which remains unchanged. After that, we'll open up the call for questions.
Speaker Change: Unknown Executive, Brian Blaser, Joseph Busky, Joseph Cunningham, Unknown Executive, Brian
Speaker Change: Total reporting revenue for the first quarter of 2025 was $693 million compared to $711 million in the prior year period. The year-over-year decrease in total revenue was primarily due to lower COVID revenue and lower donor screening revenue related to the plan winding down of that business.
Speaker Change: Excluding COVID and donor screening revenue, we achieve mid-single-digit revenue growth of 6%
Speaker Change: This performance was primarily driven by strength in our lab's business, as well as consistent growth in immune hematology and the strong flu season. Foreign Couragey Translation had an unfavorable impact of 150 basis points during the first quarter.
Speaker Change: From a regional perspective, our Q1 revenue performance was led by our other region which is comprised of Japan, AsiaPak and Latin America, with 12% growth, driven by strong 17% growth in labs revenue.
Speaker Change: and looking at our other regions, North America declined by 6% compared to the prior year period due to the year of a year of decrease in COVID revenue and the ongoing wind down of our donor screening business. But absent these headwinds, North America grew by 5%.
Speaker Change: Europe , Middle East, and Africa grew 9% driven by strong contribution from labs and immunohemicology.
Speaker Change: Finally, China revenue was flat compared to the prior year period, primarily related to order timing, and the decrease in triage revenue related to lower reimbursement rates.
for the Certain Cardiac Markers.
Speaker Change: Lab's revenue in China grew 2% with strong contribution from Clinton chemistry testing. We continue to expect mid-to-high single-digit growth in China for the full year, assuming no change in the current tariff situation.
Joseph Cunningham, Unknown Executive, Brian Blaser, Joseph Busky
Speaker Change: Now, looking at our non-respiratory business in the first quarter of 25, revenue grew 2%. Now, within that non-respiratory category, our lab's business grew 7%, driven by good performance in both Flynn chemistry and amino acid testing. We had a strong recurring revenue growth, which was partially offset by an approximately 8 million dollar decline in instrument revenue due to order timing.
Speaker Change: Non-core revenue was flat year over year with an increase in collaboration revenue offset by a timing of contract manufacturing revenue.
Speaker Change: In transfusion medicine, immunohematology, revenue continued its consistent growth of 4% with particular strength in your immunolyse in Africa, donor screening revenue declined by 62% due to the continued line down that business as expected, and they lastly are creating a business to form a 9% year-old year.
Speaker Change: Turning now to our respiratory business, revenue of 120 million grew 11% excluding COVID. We saw strong flu sales in Q1 with year-over-year growth of 18%. COVID revenue was 23 million dollars though in the quarter, which were the 53% year-over-year decline.
Moving down the P&L.
Speaker Change: Q-125, adjusted gross profit margin was 50.1% versus 47.5% in the prior year period. The year year increase was primarily driven by product mixed with higher margin attribution from flu and Covid-Full Combo Test.
Joseph Cunningham, Unknown Executive, Brian Blaser, Joseph Busky
Speaker Change: Non-GAB operating expenses of 233 million, including SGNA and R&D, decreased by net 18 million compared to the prior year period, which resulted primarily from our ongoing cost savings actions.
Speaker Change: The primary areas of savings included staffing reductions, decreased travel and lower
Speaker Change: At Justice EBITDA was $160 million compared to $132 million in the prior year period. At Justice EBITDA, a margin was 23%, a 450 basis point improvement, which again reflects the cost savings actions we have taken.
Speaker Change: and adjusted deluded EPS with $0.74 compared to $0.44 in the prior year period, which is a 58% year-over-year improvement.
Speaker Change: Okay, turning down on the balance sheet on slide 5, we've finished the quarter with 127 million in cash and 250 million in borrowings on our 800 million revolving craft facility.
Speaker Change: Reminder, our capital allocation priority continues to be debt paydown
Speaker Change: Our first quarter of 25 adjusted free cash flow is 47 million, which represents 29% of our adjusted EBITDA and 94% of adjusted net income in the quarter. This is in line with our previous and communicated targets.
Unknown Executive, Brian Blaser, Joseph Busky
Speaker Change: During Q1, our net debt to adjusted EBITDA ratio decreased sequentially from 4.4 times at year and 24 to 4.2 times.
Speaker Change: Arcasolidated, leverage ratio, including performance, EBITDA adjustments was 3.4 times as permitted and defined under our credit agreement.
Now, Turning to Slide 6
Speaker Change: Based on our current business outlook, we are maintaining our full year 2025 Financial Guidance as follows. We expect the rose tariff impacts of 30 to 40 million to be neutral to our overall financial results based on the expected mitigation plans that Brian discussed earlier.
Speaker Change: We continue to expect full-year 2025 total reported revenue of between 2.6 billion and 2.81 billion.
Speaker Change: Note that the U.S. dollar has weakened since year end 2024, creating an opportunity for FX tailwinds of approximately 26 million. However, we are leaving total reported revenue guides unchanged at this time due to current currency volatility.
We continue to expect
Speaker Change: COVID revenue of between 110 million to 140 million. It's the students that we see a summer life of COVID activity as we've seen in the past two years. And of course we will monitor this closely and we'll look to mitigate any impact with further cost reductions if the seasonal cases don't materialize as expected.
Speaker Change: We expect adjusted EBITDA between 575 and 615 million which equates to 22% adjusted EBITDA margin, which is a 250 basis point improvement over a full year 24.
Speaker Change: and we expect adjusted diluted EPS between $2.07 and $2.57.
Speaker Change: Other key points related to our assumptions for four-year 25 guidance include, we assume a typical quarterly seasonality with Q2 revenue being our lowest quarter.
Speaker Change: Q4 be in our highest quarter for revenue and margins and further, we expect Q2 performance in China to be lower compared to the prior year period due to our decision to delay some shipments early in this quarter as the tear of situation evolved. [inaudible]
Speaker Change: Since then, regular shipments are trying to have resumed and we do not expect any impact on our full year 2025 guidance. Again, this is timing only between Q2 and second half 2025.
Speaker Change: We assume cost savings are approximately 50 million and the first half of 25 is part of our previously implemented 100 million of annualized cost savings initiatives.
Speaker Change: We continue to expect incremental cost savings to 25 between 30 to 50 million and primarily related to procurement efforts. And again, this is in addition to any care of related bosses.
Speaker Change: We expect higher cash flow in the second half of 25, which is in line with the seats only higher revenue and the realization of our cost savings. Can we continue to target free cash flow conversion of 50% of adjusted EBITDA on the same timeline as our margin improvements? We expect higher cash flow conversion of 50% of adjusted EBITDA on the same timeline as our margin improvements?
Speaker Change: We also continue to expect our net leverage showed up between three and a half and four times by year end.
Speaker Change: And since our credit facility matures in May of 2027, we plan to refinance the debt sometime in the second half of 2025 or early 26. Time you know this refinancing, of course, depends upon market conditions.
Speaker Change: So, in summary, our continued operational improvements played a meaningful role in our performance of the quarter, were actively navigating a fluid macro environment and believe our current business outlook is in lockstep with our 2025 four-year financial guidance.
Speaker Change: Looking ahead, we remain focused on execution, commercial excellence and cost savings initiatives to deliver profitable growth.
Speaker Change: and despite recent macro challenges and the impact of tariffs, we continue to see a clear pathway to our adjustity, but I'm Martin Gold in the mid to high 20% range over the next couple of years.
Speaker Change: With that, I'll ask the operator to please open up the line for questions.
Speaker Change: If you'd like to ask a question, it is star one on your telephone keypad. If for any reason you'd like to remove that question, it is star followed by two again to ask a question, it is star one. Thank you.
Speaker Change: Our first question is from Conor McNamara with RBC. No, I'm just not open. Hey guys, thanks for taking the question and grab some of them on a solid quarter. Just wanted to dig into the tariff, impact a little bit more. Can you?
Speaker Change: You know, you've got a lot of business to fund reagent rental contracts, so to the extent that you're able to pass through pricing, how much of the tariffs can you offset with that if they already get worse from here? I'll start there.
Speaker Change: Hey Conor, thanks for the question. Yeah, you know, we are looking at selected pricing actions where we can take them but you know, these are competitive markets and we have to be concerned about the impact there.
Speaker Change: I would say the business has had some experience in doing this during the pandemic when the business went through some, you know, the high inflation time period and we were able to pass some of that through. So I think we'll be doing it on a on a selective basis.
as we as we can.
Great. Thanks for that. And then. Um.
Speaker Change: Again, I appreciate the color on plans for mitigating some of the tariff impacts, but longer term, is this likely to impact any of your longer term manufacturing buildout plans by region?
Speaker Change: At this point, I don't expect any change in our overall manufacturing footprint. Obviously, it's a fluid situation, so we need to understand how things develop. We have, as we said, major manufacturing centers in the United States, the UK.
China, and some...
Speaker Change: The third party manufacturing in Mexico, those sources and that global footprint has served as well, as we've tried to get closer to our customers and also manage some of our supply continuity risk. So, we'll, um...
Speaker Change: We'll continue to utilize that network and as we always do you know make modifications as we see you know the dynamics change here. [inaudible]
Great. Thanks for the questions. I appreciate it.
Patrick Donnelly: Our next question is from Patrick Donnelly with City. Your line is now open.
Speaker Change: Unknown Speaker 2012 CUNNINGHAM, UNKNOWN EXECUTIVE, BRIAN BLASER, JOSEPH BUSKY, Unknown Executive, Brian Blaser, Joseph Busky
Hey guys, thank you for taking the questions.
Patrick Donnelly: Joe, maybe another one just on the car side, again, you know, encouraging at the CD offsets here.
Patrick Donnelly: Can you just talk about, you know, the exposures, obviously the China, the US or US, the China people should say, was a big concern coming in. How you thinking about, you know, just quantifying that and again, you know, how the offsets, the confidence level that you guys can get there. Again, I think maintaining the guidelines for the good outcome here.
Speaker Change: 11. 20. 15. 6. 8. 11. 2. 6. 9. 4. 1. 0. 1. 0. 7. 0. 5. 5. 5. 6. 6. 7. 0. 4. 6. 6. 7. 2.
Speaker Change: Patrick, thanks for the question. You know, we said in the remarks, most of our products are actually manufactured in the US and so our largest. [inaudible]
Speaker Change: Terrific impacts are immutual assay products that are manufactured in the UK and shipped to the US. We also ship products to China, but we're only seeing that a small portion of these are being subject to tariffs.
Speaker Change: And then finally I would say we have some impact on some sub-component materials.
Speaker Change: that are purchased around the world, that are being surcharged since we come in. So that is what makes up the gross 30 to 40 million dollar tariff, in fact that we just mentioned, that again is fully mitigated through identifying incremental controllable costs. [inaudible]
Speaker Change: that we can take down as well as passing on, where it's appropriate, some of these tariffs to our customers and movie realignment inventories and changing suppliers.
Speaker Change: So, you know, through all those actions that we feel really comfortable with and confident in because we've identified them all and we've implemented them all that we feel we can fully mitigate the the tariff impacts and leave our financial guidance.
as is.
Speaker Change: Okay, that's helpful. And then maybe just on Savannah, just an update there, I guess the commitment, the ongoing commitment to that program. How do you think about that piece? There are additional pushouts.
Speaker Change: You guys walk away from it. What's the right way to think about just the commitment level and the confidence in some of those time lives and what we can keep an eye on on that piece. Thank you guys.
Speaker Change: Yeah, thanks Patrick. What I can say at this point is really, we are just so focused on getting our RBP4X submission into the FDA that I really don't want to speculate on outcomes beyond that molecular continues to be...
Speaker Change: One of the fastest growing segments in diagnostics. We want to participate in that and benefit from that and so we're just laser focused on getting the job done here. And we'll update you accordingly as we make our progress.
Understood. Appreciate it, guys.
Andrew Breckman: Our next question is from Andrew Brackmann with William Blair, your line is now open.
Andrew Breckman: Hi guys, good afternoon, thanks for sticking to questions. Joe, I think in the assumptions you said that China is still expecting to grow mid to high single digits for the year, what sort of underpinned your confidence in that growth rate, and is there anything that you can share with respect to maybe what you've seen in the region in April with which supports that? Thanks.
Andrew Breckman: Yeah, Andrew, again, thanks for the question. You know, we, even though we're seeing some saltness in the triage sales due to the reimbursement rates on certain cardiac markers. Thank you very much.
We are seeing good growth in labs and immunohematology.
and as you know, those businesses. This is...
Andrew Breckman: have good visibility to us forecasting going forward. So you know, that's really what gives us the confidence that our China team can hit that mid to high single-digit growth target for the full year. And again, you know, as we've said many times.
Andrew Breckman: The BPP is not really having an impact on us as it is with others in our space. And so, you know, that's not really a concern for us right now. So it's just really the visibility to that non respiratory business that we have in China that gives us the confidence that we can still hit those numbers.
Andrew Breckman: Okay, appreciate that. And then maybe just a clarification to your answer to Patrick's question. I think you said only a small percentage of products being shipped to China are subject to tariffs right now. Are those exemptions that are specifically called out or any color on why you're not seeing those be subject to tariffs? Thank you.
Speaker Change: Our next question is from Jack Meehan with Neffron Research. Our line is now open.
Thank you. Good afternoon.
Speaker Change: One of the start-up asking about the respiratory sales in the quarter, so you hit our forecast but got there in a way, wasn't exactly expecting less COVID, more flu combo.
Speaker Change: Brian , I was curious, do you think we're seeing some sort of permanent shift here toward combo slash Sophia? And maybe for Joe, like, what are the implications for the guide?
Patrick Donnelly: If COVID came down, do you think you can make up for it kind of on the other respiratory piece?
Yeah, well, hi, Jack. Thanks for the question. You know,
We did see COVID down year over year.
Patrick Donnelly: and Flew is up. I think we're still expecting that 110 to 140 million range that we provided in the guidance, which includes the summer spike that happened for the last couple of years.
Patrick Donnelly: So, we'll be monitoring that very carefully to see what happens here, but I would say on the COVID flu question, that test has just been very durable now for the last couple of years and we've just seen very stable performance from it.
Speaker Change: Yeah, and Jack, I would just add to what Brian said.
Speaker Change: Here, even though we did see COVID come down in the quarter year-over-year [inaudible]
Speaker Change: You know, we did expect COVID to be less this year. We took it down from 185 down to a midpoint of 125, and most of that decline was due to the lack of a government order fulfillment this year versus last year and then a decline in retail. But, you know, we, you know, so we expected the decline and we still think that our range is a reasonable place to be. [inaudible]
Speaker Change: for the full year. But as I said in the prepared remarks, we will obviously keep a close eye on it as we move through the year.
Got it. Okay.
Patrick Donnelly: Um, and I did want to follow up on Patrick's question related to Savannah. Um, I was, it sounds like the trial, you know, might be wrapping up. Um, was curious if you've seen any of the data was a success? Yes.
Patrick Donnelly: And if it's truly for that, I was also curious with how the engagement has been with the FDA around.
Patrick Donnelly: Submission, there's been some discussion around kind of turnover in the approval office. What's curious, if you've seen any of that, you can just stop on if that could delay the approval at all.
Yeah, no, we're just-
Patrick Donnelly: Jack in the in the last stages of our process here before submission.
Patrick Donnelly: You know, doing some of our studies around reproducibility, shelf life, etc.
Patrick Donnelly: We need to get those completed. We really haven't seen any sort of negative impact in terms of our interactions with FDA.
We are hearing things in the industry that pre-submission [inaudible]
Patrick Donnelly: Meetings are taking a while or being delayed, but nothing that is affecting the submission process itself, that's obviously something we're going to have our finger on very carefully here as we go through the process. [inaudible]
Patrick Donnelly: But that's really what I can share at this point about where we're at in the process.
Okay, appreciate all the feedback. Thank you.
Lou Lee: The next question is from Lu Li with UBS. Your line is now open.
Lou Lee: Are we going to see some timing impact here, like maybe some of the mitigation impact the market here show up in Q2 and then more in the second half? I was just wondering how the margin progression on this one?
Speaker Change: Unknown Executive, Brian Blaser, Joseph Busky, Joseph Cunningham, Unknown Executive, Brian
Joe Busky: Yeah, hello, it's Joe. Yeah, I don't think there's going to be a lot of timing impact, because I think we've got the mitigation actions pretty well paired up with the
Joe Busky: that the impacts of the tariffs, the gross impact of the tariffs. So I don't think there's any real timing impact there to speak of. Maybe a little bit but nothing significant. I do think that the only real timing impact is going to be. [inaudible]
Joe Busky: in Q2 because we did slow down shipments to China early this quarter as we waited for the tariff situation to evolve and we're doing our best to catch up.
Joe Busky: on those shipments but I don't think we're going to fully catch up and I think so I do think there'll be, you know, we'll see some softness in China.
Joe Busky: Revenue in Q2 that we'll make up in Q3 and Q4. I think that's really the only time in the fact that we'll see from the terrace.
Okay, got it [inaudible]
Speaker Change: And then I assume that the 30 to 40 growth impact is mostly 2025 number. So I wonder if anything while lingering into 26 and then are you maintaining your 23 to 24% even the margin that you presented few months ago?
Speaker Change: Yeah, Lou, good question. Yeah, we, the numbers that we talked about, the 30 to 40 million, that is a 2025 impact number. So, you know, obviously, the annualized. So, you know, we, we, we, we, we, we, we, we,
Speaker Change: Impact would be a little larger than that, but the tariff impacts, the mitigation impacts I should say that we talk to will fully offset the annualized impacts as well. And so there's no change to our margin targets and where we expect to be for 2026, I will no change. [inaudible]
Thank you.
Speaker Change: Our next question is from Casey Woodring with JP Morgan. Your line is now open.
Speaker Change: Unknown Executive, Brian Blaser, Joseph Busky, Joseph Cunningham, Unknown Executive, Brian
Casey Woodring: Great. Thank you for taking my questions. I'll just take to one. Can you just elaborate on the shipments into China and only a small percentage of those subject to tariffs right now? You know, can you just why is that exactly and what's your visibility into that continuing and is there any kind of risk that a larger percentage would would eventually get hit with tariffs here? Just kind of curious on on that piece. Thank you.
Casey Woodring: Hi, Casey. Thank you for the question. You know, again, I can really only say that our experience here of the last several weeks in, you know, what has been a very fluid situation is that we aren't experiencing the tariffs on the bulk of our products going in. It's very just a small subset wherever seeing that and, you know, we'll look to understand if that changes, but it looks like, you know, that's going to be the case for a while.
Casey Woodring: You know, there's no indication that it's not the case at this point, but it's not going to be prominent.
Speaker Change: Our next question is from Andrew Cooper with Raymond James. Caroline is not open.
Thanks for the question.
Baby First, just-
Speaker Change: If I think back a couple of years ago visiting the Rochester-
Speaker Change: And it's an IA manufacturing capacity. If I remember right with COVID grants there, can you just give us a sense what are you able to to to manufacture in the US for you know <expletive> a verse relying on that Wales facility to support this country's utilization there?
Speaker Change: We do have some immuno-assay manufacturing capacity in our Rochester facility, but the bulk of it is in the UK at this point.
Okay. And then.
Speaker Change: Maybe just a touch on China again as well. You called out the 2% growth and called out clinical chemistry especially. I know IA is historically been smaller for you in China but any change in wind rates there across, you know, Quinn's chemistry versus IA and then maybe can you give us a sense for the penetration of integrated instruments in China versus globally?
Speaker Change: Unknown Executive, Brian Blaser, Joseph Busky, Joseph Cunningham, Unknown Executive, Brian
Speaker Change: Well, we get Andrew, we can start with the penetration of integrated instruments, the, you know, our business there is primarily clinical chemistry.
Speaker Change: So most of what we have there are standalone clean chem boxes and so we've got plenty of runway to expand our immunoassade presence there and you know what?
Speaker Change: In terms of the results that we saw in the quarter, our growth rate there was primarily impacted by triage, we did see lower clinical chemistry growth but I would say that some of that is kind of shift across the quarters and I wouldn't read too much into that. [inaudible]
A lot's been covered. I'll stop there. Appreciate it.
Speaker Change: Our next question is from Tai Chau Peterson with Jeffries, Airlines now open.
Tycho Peterson: Thanks. I wonder if you can maybe just talk a little bit more on some of the strength you're seeing on Core Lab and any noticeable change among your hospital customers, given some of the funding uncertainty said.
Tycho Peterson: Yeah, you know, Tyco, thank you, appreciate the question. You know, we really saw across the board, you know.
Strong Performance in Labs
You know, 7% overall.
Tycho Peterson: and then you look across North America, Amia, our last ham area, all reporting pretty strong growth there in the labs segment. .
Tycho Peterson: You know, we can continue to have a very strong value proposition in the lower volume setting where customers value, you know, our technology value proposition with the dry slides as well as our, our, you know, assay capability. So, you know,
Tycho Peterson: Strong Growth in Q1, no real significant competitive headwinds at this point, and we continue to really just drive our value proposition there to continue to drive growth.
Tycho Peterson: Unknown Executive, Brian Blaser, Joseph Busky, Joseph Cunningham, Unknown Executive, Brian
Tycho Peterson: And maybe a follow up on that, you know, on the competitive front, you know, others have tried mass spec and not had much success. Roaches obviously, you know, going to try to go at this, I think with 50 analytes at first, but they talked about scaling up to thousands. And maybe can you just touch on how you view mass spec, you know, as a competitive technology going forward?
Tycho Peterson: Yeah, you know, I saw the launch of their new product. It's really focused on a testing segment that is not mainstream and not, you know, in our
Sort of.
You know central area of African.
Tycho Peterson: You know, competition. So it's not something that we're overly concerned about it. It seems to have a specially special to utilization. I do know they have aspirations for it, but I think it's going to take some time for them, you know, to provide an alternative there that really competes with kind of mainstream core laboratory technology at this point.
Okay, thank you.
Thank you. Thank you.
Tycho Peterson: We have no more questions waiting at this time, so I'll pass the call back over to Brian Blaser.
Brian Blaser: Unknown Executive, Brian Blaser, Joseph Busky, Joseph Cunningham, Unknown Executive, Brian
Tycho Peterson: Well, thank you operator and thank everyone for your interest in the company. We're very pleased with our first quarter results. We are going to keep focused on our key priorities and we look forward to updating you on our progress in the coming quarters. So thank you very much. Thank you very much.