Q2 2025 QuidelOrtho Corp Earnings Call
Welcome to the.
Widow, orto second, quarter, 2025, Financial results, coverage call and webcast at this time. All participant lines are in a listen-only mode. For those of you participating. In this conference call, there will be an opportunity for your questions at the end of today's prepared. Remarks, please note this conference call is being recorded and audio replays of this conference call will be available on companies webcast shortly. After this call, I would like to turn the call over to Juliet Cunningham the vice president of investor relations.
Please proceed.
Thank you, good afternoon everyone. And thanks for joining the quiet out. Ortho second quarter, 2025 Financial results conference call joining me today are Brian Blazer, president and chief executive officer and Joe busty, Chief Financial Officer.
This conference call is being simultaneously webcast on the investor relations page of our website to Aid in the presentation. We have also posted supplemental information on the investor relations page that will be referenced throughout this call.
this conference call and supplemental information contained, forward-looking statements within the meaning of the private security litigation Reform Act,
Of 1995.
Statements, that are not historically.
Strictly historical, including the company's expectations, plans, Financial guidance, and future performance.
As well as prospects, our forward-looking statements, that are subject to certain risks uncertainties assumptions and other factors.
this includes the expected impact of tariffs and macroeconomic conditions and the proposed acquisition of Lex Diagnostics
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. 10K for the 2024, fiscal year, and subsequent reports filed with the FCC including the risk factor section.
Forward-looking statements are made. As of today, August 5th, 2025. And we assume no obligation to update any forward-looking statement except as required by law.
In addition today's call includes discussion of certain non-gaap Financial measures.
Tables, reconciling these non-gaap measures to the most directly comparable. Gaap measures are available in our earnings release and the supplemental information, which are on the investor rate relations page of our website at quiet ortho.com.
Lastly, unless stated otherwise all year-over-year revenue growth rates, given on today's call, are on a constant currency basis.
Now, I'd like to turn the call over to our CEO, Brian Blazer.
Thanks Juliet, good afternoon, everyone and thanks for joining us today.
I'll begin by reviewing our second quarter results, and then I'll discuss how we are addressing changes to us, trade policy and tariffs. And I'll finish with my thoughts on our recently announced intent to acquire Lex Diagnostics in the molecular space,
Beginning with our second quarter results, total revenue of 614 million through 1%, excluding coid and the donor screening business, which we are in the process of winding down.
Joe will go into additional detail, but let me provide some of the top line, Q2, and year-to-date highlights.
Constant currency growth of 5% and 3%, respectively.
a respiratory business remains stable for this time of year with a relatively small, $2 million Revenue decline, excluding Co
As many of you know, Q2 is typically our lowest Revenue quarter of the year due to the seasonally low viral prevalence, especially in North America.
As a result North America Revenue declined by 12% during the quarter.
Our Q2 us performance was led by strength in Latin America, Japan, asia-pacific and Europe, Middle East, and Africa.
And Mia growth was up 3% in the quarter and is up 6% year to date. Our other region grew 10% in the quarter, with 14% growth in Latin America and 6% growth in Japan and Asia Pacific.
Our low us penetration continues to be a significant opportunity for growth for us and is an area of focus.
Turning down to China. We had 2% growth in Q2 despite the Tariff related shipment holds we had in place in the month of April. And those shipments have since been fully restored
China has been a challenging market for many of our peers, but it continues to be an important market for us.
Most of our China business is in clinical chemistry where we have differentiated technologies that has not been subject to the volume based procurement processes that are impacting other multinational companies.
Our Solutions are highly valued in the market in particular, in stat labs and distributed testing environments that benefit from our waterless technology and the reliability of our platforms.
We also have relatively low market penetration in China, particularly in amino acids. So, we look forward to a very long runway for expansion over the coming years.
Our view is that the volume based procurement initiative will not have a significant impact on our business. This year, we have seen reimbursement changes flow through and cardiac markers that we have discussed for some time. Now we have good visibility to our second half forecasts. So we're narrowing our range for China to Mid single digit growth.
Moving to our Q2 profitability metrics, the impact of our cost structure. Actions are really starting to kick in uh adjusted. Even at a margin improved by 330 basis points. And we also saw meaningful Improvement in adjusted diluted EPS compared to the prior year period. And these results were in line with our guidance and higher than consensus.
Our second quarter and year-to-date results, reinforced that the commercial and operations Improvement initiatives, that we launched last year are having a positive impact on our performance.
Our global commercial team has sharpened its focus on key markets value expansion, and key accounts and profitable growth in international markets. That value our broad portfolio of solutions.
Our R&D team is working on compelling Innovation including increasing the breadth of our testing menu in the utility of our current platforms and developing new systems that will continue to differentiate us from our competitors.
Our operations team is making strides in optimizing our cost structure, generating direct and indirect procurement cost savings, and consolidating one of our major manufacturing sites.
We have clear visibility to a rich funnel of projects that we expect will yield significant incremental cost savings and margin expansion. We expect to see the positive impact of these initiatives appear in our results in the latter part of 2025 and into 2026.
And importantly, our efforts to be a more customer-focused organization are really paying off. And you can see this with our announcement last week that quite all orto earned. First place, first place, rankings by Service track for best overall, clinical chemistry, and integrated system performance and best overall for service.
Our company has the highest customer service ranking in our markets as measured by net promoter score among some very tough competitors.
Performance of our business. Also requires investment in top talent. And so we were pleased to Welcome 2, exceptional, senior leaders in global quality and Regulatory Affairs last month.
Devin Burke joined us as senior vice president of global quality and Sergio gadaleta joined as senior vice president of clinical and Regulatory Affairs.
Both Devin and Sergio have extensive industry experience, but more importantly, they're the kind of transformational leaders that we want in our business to elevate our performance.
Tariffs and how we are navigating Uh current conditions. Um well the the global trade tensions have caused uncertainty uh other market conditions in the second quarter were generally consistent with what we saw in the first quarter. I I think our team did a tremendous job of acting quickly to mitigate any potential impact primarily through Inventory management and cost controls.
And given the the current state of trade agreements and our continued mitigation efforts, we estimate potential Tariff, headwinds of 20 to 25 million dollars in 2025, which is lower than our prior estimate of 30 to 40 million dollars. We continue to expect to fully mitigate tariff, headwinds through the actions, we're taking. And of course, we continue to closely monitor the situation.
And, lastly, I'd like to talk about our molecular strategy and why we are so excited about this incremental growth opportunity, uh, as we announced in June the intend to acquire ownership of Lex, Diagnostics upon FDA clearance of its vo, molecular platform and respiratory panel.
Lex is a uk-based molecular Diagnostics company with an Innovative molecular platform that can deliver results in minutes. It takes approximately 6 minutes for a positive result on its respiratory panel for flu, a flu B and Co with excellent performance.
The next platform integrates seamlessly into the point-of-care workflows. It provides a highly competitive value proposition centered on speed, performance, and costs.
And once the transaction is completed, we will move quickly to expand the test menu, both in the respiratory space, but importantly into other applications, like women's health and STI.
And since our announcement, we have garnered significant interests from our customers. Our commercial team is really excited about the growth potential of the platform. Lex submitted a dual 510k and Cleo waiver for the vo platform to the FDA in June and the review process is well underway. If the product is successful in achieving clearance in 2025, we would expect to begin placements, on a limited basis in early 2026 with the objective of ramping up placements, during the 2627 respiratory season.
With that, I'll wrap up by saying that we are pleased with the progress we've made on our top priorities and the strength of our underlying business. We are seeing the results of our efforts materialize. And we remain committed to delivering on our strategy to drive growth, expand profitability, and deliver on innovation that advances the power of diagnostics for a healthier future. With that, I'll turn the call over to Joe to take you through our second quarter financial details. Joe, thanks, Brian. And hello, everyone. I'll start by discussing...
Our second quarter results which are detail on slide, 3 of the supplemental information available on the investor relations section of our website.
And unless otherwise noted all year-over-year revenue growth figures discussed today are presented on a constant currency basis.
let me Begin by taking you through our second 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.
Total reported revenue for the second quarter of 25 is 614 million.
Compared to 637 million in the prior year period. The year-over-year decrease in total revenue was primarily due to lower Co and donor, screening Revenue, the latter of which is related to the continued wind down of that business, excluding Co, and donor, screening revenue. Revenue growth was 1% during our seasonally lowest order of the year.
for our current currency translation had a slightly favorable impact of 20 basis points during the second quarter,
Based on foreign currency exchange rates. As of the end of July, we expect FX to now have a neutral impact on revenue and adjusted EV butt off for the full year.
Brian provided the regional commentator. So I'll focus on our broader business results. Looking at our non-respiratory business, in the second quarter of 25, Revenue, grew 1% excluding donor screening within that 9 respiratory category. Our Labs business grew 5%,
Driven by good performance in both Clint chemistry and amino acid testing notably in our Labs business. We continue to see strong recurring Revenue with long contracts in a loyal customer base.
Integrated and automated Labs installed base group 6 and 11 respectively.
Well.
In transfusion medicine, you know, hematology Revenue continued, its consistent performance with 3%. Growth with particular strength, in Latin, America and Europe, Middle East, and Africa.
And donor, screening Revenue, decreased by 61% due to the continued wind down of that business as expected.
And lastly our triage business decreased by 2%. Largely driven by order timing in China
Note that we also saw some decline in other cardiac testing revenue, which was training-related, between quarters.
turning now to our respiratory business revenue of 47 million, decrease by 2 million, excluding Co
Point of care was down 21% primarily due to lower Co sales, which were 9 million in the quarter and decreased by 52%.
Flew a slightly down compared to the prior year period.
Given lower a year to date co revenue and what we have seen thus far in Q3 we now expect full year 2025 Co revenue between 70 to 100 million compared to our previous range of 110 to 140 million.
To be prudent. We are lowering the range because while positivity rates are increasing.
Emergency room visits and hospitalization rates indicate that the current coid strains are not severe which typically results in less testing.
We will, of course, continue to monitor summer activities for any change.
We do, however, expect to see normal increases in Co Revenue later in the year.
And therefore, it's likely that Co Revenue will be lower in Q3 than originally anticipated.
That the finish up our business unit results. Molecular Revenue grew 24%, although office smaller base as we continue to support our Savannah customers through our transition plan.
Moving down the p&l second quarter, adjusted gross profit. Margin was 45.7% versus 44.2% in the prior year period, the 150 basis. Point year-over-year increase was driven by discipline and expense control and favorable product mix.
Non-gaap operating expenses of 215 million comprised of sgna and R&D decreased by 21 million.
Or 9% as a direct result of our ongoing cost savings actions in the areas of Staffing and indirect procurement.
Our Q2 results, included 179, million in restructuring integration, and other charges consistent with our June announcement. We had primarily non-cash charges 150 million related to the discontinuation of the Savannah platform.
These charges were related to fixed assets and inventory.
We also recorded 23 million in integration costs, primarily related to our Erp system conversion.
And we are happy to report that we have completed our ERP conversion related to the business combination, and it has gone very well. Thanks to the efforts and dedication of our team.
In addition because of this, we expect a lower integration costs in the second half of the year.
Also included in the struct in the restructuring Reserve was a 6-count reductions related to our Rarity in New Jersey, manufacturing site, consolidation given the complexity of the manufacturing operations and Raritan, we expect the site closer to take place over a 2-year period. We expect to save approximately 20 million.
Dollars of annual operating cost cost as a result. These savings are. Another example of actions that move us toward our adjusted, our margin goals with mid to high 20% range.
Adjusted evadav 107 million increased by 19% compared to the prior year. Period. Adjusted even on margin was 17% a 330 basis, point Improvement.
And on a year-to-date basis suggested e but I was 267 million or 20% margin which represents an increase of approximately 400 basis points?
Notably adjusted diluted EPS was 12 cents compared to adjusted diluted loss of 7 cents in the prior year period, which was growth of 271%.
Year to date. Adjusted. Diluted EPS 86 cents.
Leave it on more dyngles.
Turning down on the balance sheet on slide 6, we finish the quarter with $152 million in cash and $390 million in borrowings on our $800 million revolving credit facility. We had an increase of $81 million in net debt, as expected, since Q2 was our seasonally lowest quarter for revenue, margin, and cash flow.
Adjusted free cash flow was a negative $32 million, which was in line with our expectations for Q2.
And given that we expect seasonally stronger cash flow in the second half of the year. We continue to expect full year, recurring cash flow to be 25 to 30% of adjusted Ava.
During Q2 our net debt to adjust the debit, our ratio was 4.2 times.
Our Consolidated Consolidated, leverage ratio including proforma ibida adjustments as permitted and defined under our current agreement with slightly down sequentially at 3.3 times.
We expect our gross year. End leverage ratio to be at the higher end of our previously, communicated range of 3 and a half to 4 times.
As an update on our debt refinance, we now have high confidence that we will refinance our existing Term Loan in Q3.
And we do expect advantageous terms as compared to our current credit agreement.
And lastly, our highest capital allocation priority continues to be debt paydown.
And our goal continues to be net debt leverage between 2 and a half and 3 times.
Now turning to slide 7, based on our current business outlook, we are reiterating our full year 2025 financial guidance. As follows, we continue to expect full year 2025 total reported revenue to be between $2.6 billion and $2.81 billion, with a neutral FX impact to the full year.
We are reiterating our full year Revenue guidance range with the balancing factors of a decrease in Co Revenue assumptions and a benefit, the revenue from FX Tailwind,
And as Brian mentioned, we now expect gross tariff impacts of 20 to 25 million, which on a net basis is now a Tailwind to our overall Financial results due to our mitigation plans already in progress.
Therefore, on the adjusted EBIT out and adjusted EPS lines, we expect lower COVID margin contribution to be fully offset by lower tariffs as well as some savings from the Savannah discontinuation.
There's there is no change straw folio guides.
We are maintaining our full year guidance for adjusted IBA, a 575 to 615 million, which equates to 22% adjusted evida margin, which is a 250 basis, point improvement over the prior year.
And adjusted diluted EPS up between 2 dollars and 7 cents. $257.
Finally, we expect incremental cost Savings of 25 between 30 to 50 million, primarily related to indirect periods. This is in addition to any tariff related offsets.
Our continued operational improvements played a meaningful role in our performance this quarter, particularly on margin and UPS. We are proactively navigating the challenging macro environment. We believe our current business outlook is in line with our 2025 full-year financial guidance.
We remain focused on execution commercial excellence and cost savings initiatives to deliver profitable growth. And despite recent tariff impacts. We continue to see a clear pathway to our adjusting ebida margin goal. In the mid to high 20% range by mid 27 with that. I'll ask the operator to please open up the line for questions.
Again, our question and answer session at this time, if you'd like to ask a question, it is star followed by 1 or your telephone keypad. If for any reason you would like to remove that question, it is star followed by 2 again, to ask a question. It is star 1 as a reminder, if you're using a speaker-phone, please remember to pick up your headset before I ask you a question. Our first question comes from Andrew breham with the company. William. Blair, Andrew Yolanda's, not open.
Everyone, this is Maggie Billy on for Andrew today. Thanks for taking our questions. Maybe first just to start. Can you walk through? Um, just your respiratory expectations for the remainder of the year. Um, and just how you got to where your current Co guidance is. Do you feel that you've, you know, kind of gotten your guide to a more conservative a place given. Um, the chance it could be a lighter season. Thanks.
Remarks that we're not changing any of our flu assumptions.
The the flu guidance is exactly the same as it was when we started the year, there was no change there. The the only change in our respiratory Revenue, guidance is on Co. And, you know, it's again, as I said, you know, in the remarks, we, we are seeing a rise in positivity. In, in CO as we speak, uh, however, Ed visits and hospitalizations are lower at which points to less disease, severity and and and likely less testing as a result.
So uh year to date we've had about 33 million in ko, ko Revenue. We do expect higher Revenue in the second half.
But but we so we we probably not as much as we assume per Q3. So we are bringing the Rains Down from 1:10 to 140 to 70 to 100 for the full year for Co
Yeah, that's helpful. Thank you Joe. Um, and then just maybe 1 on China, can I, I know you mentioned in the prepare remarks, the visibility you have that gave you comfort and narrowing that range to Mid single digit growth for 2025? So can you walk us through how that's the right number? Um, is there where does the potential risk lie there? And then just how you, how are you thinking about the revenue growth opportunity in China over the longer term. Thanks.
Yeah, so thanks Maggie for the question. Um, you know, I'll I'll just double click into China for a minute here. So, you know, our business in China is a little different than, uh, most of our peers there. Uh, we have a mostly clinical chemistry business.
Uh where we have, you know, very good pricing due to our dry slide technology. We're we're also under penetrated in amino acids which generally have higher prices and margins. And so that's a real opportunity for us. Um, and, you know, we continue to, um, see China as an important market for us as long as the economics, um, you know, continue and notwithstanding any anything crazy that happens with, uh, a tariffs or otherwise. Um,
The, the market has, you know, seen a number of of, um, pricing and volume actions taken taking place. There have been a couple of of vbp, uh, actions that took place in infectious disease and hormone, uh, some tumor marker markers were impacted by that. Those had relatively minimal, uh, impact on on us. There was also a, a unified reimbursement plan for, uh, some some additional cardiac, uh, assays. And, and that also had kind of a relatively, uh, minor impact, uh, to our business there. And of course they've gone through this uh, panel debate process.
Or drg, uh, process which has had had some um, impact to our volume there. But because we're largely, a, a stat lab, uh, focused, um, placement there. Um,
Those panels are generally not be bundled when they're running a stat lab that you're you're generally looking for a a broad indications of what's going on. And so you know you you don't tend to to unbundle you know those those tests so we've been maybe less impacted um you know by that.
I would say, you know, that most of the, the vbp, the the this reimbursement of the unbundling actions. These are kind of already happened and we don't really see any actions on the immediate Horizon that would impact the remainder of 2025. So um, we are expecting a higher growth in the back half of the year that would bring us to the mid single digit uh level for the 4 full year and you know, just uh monitoring the environment carefully. As as you always have to do and in in that region
Great. Thanks so much.
Our next question comes from Patrick Dunley with the company City, Patrick Yulan is not open.
Hey guys, thank you for the question. Um, Joe it sounds like, you know, maybe a few moving pieces on the IBA side, you know, maybe a little less coid and then better on the on the Savannah piece. And and maybe the tariffs, can you just talk through the moving pieces? You know, obviously when Savannah got discontinued felt like you guys had some room is that just, you know, coid being high margin moving down a little bit, what are the levers there? And again, it sounds like you're still confident in in the midterm guy, you know, 26 and Beyond. Um but yeah, maybe just walk us through the margins, the moving pieces to keep it here. You know it felt like maybe there's some room is their conservatism still uh Curious how you're thinking about it.
On the revenue side it it's actually pretty simple. The co numbers are coming down a little bit. It's being offset by Les FX impact. So therefore, the revenue guide for the full year is is unchanged. And then when you move down to adjusted ibida and adjusted eps,
We are, uh, looking at the the co Revenue range coming down on the low and the high end by 40 million due to the reasons. I just outlined in response to Maggie earlier. Uh, and that's, you know, that's probably a 20 to 25 million dollar impact on on gross profit and adjusted Ava.
And then the good guys offsetting that are we have less less tariff impacts.
Uh to the tune of 15 to 20 million dollars and then we have the discontinuation of the Savannah development. That is is going to provide 5 to 10 million of upside.
And so all those really those 3 things.
Net out and get us back to the same number for the bottom line, and just to keep it out, adjust the DPS.
Okay. Got it. Um and then maybe a quick follow-up on China you know I know you it sounds like a trim the guy from mid mid to high single to just the mid single is that just the cardiac piece and then again it sounded like some of the shipments that were on hold and 2 Q have already shipped. Can you just talk about you know the confidence in the 2 Hp is a lot of that driven by the timing or or are there other variables that that we should be keeping an eye on?
Thank you guys.
Yeah. Patrick, I think the, the narrowing of the, of the China, for your guidance, to Mid single digits, is just really based on the fact that we've got 2 quarters behind this. And there's only 2 quarters to go.
And and this business, it's mostly a Labs business. I mean, there are some business there, there's some triage business there but it's mostly labs. And the labs business is is pretty predictable business for us. Not only China, but around the world, and so it's really just the, the, the visibility we have. And the fact that, like Brian said, most of those, those impacts we think are behind us.
And and therefore we we don't expect any more any more of those downsides. And so it's just it's just good. Visibility we can we can narrow the range down to a a pretty small, small range.
Understood. Thank you, guys.
Our next question comes from title Peterson with the company Jeffries.
Your line is not open.
Yeah. Hi. This is Jack on for Tau, appreciate the question and uh, congrats on the good quarter. Um, just want to touch on point of care. I know, you talked through triage a little bit, but that was, I believe down to 2% in the quarter, but I want to touch on the other elements there. And, and Sophia and sort of what happened in the quarter.
Yeah, this is um Jack. This is Joe. Um you know the as we've said a couple times Q2 is the is our lowest respiratory quarter. So the the rest the the the respiratory Revenue xco was was pretty flat.
uh, we did already mentioned that Co was down 52% and so the the other piece in there, there's this this other cardiac Revenue which I noted in the, um,
In the prepared remarks was was down about 10 million year-over-year and a quarter, but it's all timing within the quarter. So we expect to totally make that up in the second half of the year. So it it it was a bit of a headwind in Q2, for sure. But it's totally timing with the second half of the year.
And those are the those are all the pieces that will get you to the point of care.
Pointing care numbers.
okay, and then I guess any color on um Sophia specifically
Yeah. Again, Sophia, that's the flu revenue, and if it was pretty small in the quarter and it was flat earlier.
Okay, and if I could just sneak one more in, um,
I guess, as as we think about China, appreciate the colors on, um, bvp and drg. It sounds like you're still bundling a lot of these, uh, assays at the stat labs, I guess, how should we think about, you know, sort of like the go for it exposure um to drg if that were to, I guess, turn adversely.
Just because of the nature of how they're treating patients. So, um, you know, I I think we'll, we'll see some of it moving forward, but, uh, I don't, I don't, I wouldn't expect it to turn, uh, sharply, uh, for any reason,
Okay, thank you.
My next question comes from Connor mcnamera with the company. RBC Capital markets Conor your line is not open.
Great. Uh, thanks for the question guys. And and sorry Joe just 1 more housekeeping item on on the guidance. Um, just to follow up on on what Patrick was asking. So it looks like revenue for, you know, you took out about 50 million in revenue between Co and and China. And then
No hey um Connor just to maybe be clear. Um
The the China Revenue uh, in the guy's not changing.
Is not changing at all. I want to be really clear about that. We just narrow the range
For, for for everyone. Uh, what came down? What came did come down. Yeah, was was Co
Revenue range, and that was $40 million on the top and the bottom. And that's really...
Fully offset by the now, change in FX assumption, where FX is neutral for the year.
Okay, got it. Thanks for that. And
yeah. Uh, just on molecular. Um, can you just talk about, you know, obviously, it's it's still ways off, but can you just talk about the, the opportunity there, uh, and your strategy when you do go to market is is, you know, is the early placements of those going to be with current Sophia customers. Um, or is there is there a Greenfield opportunity to go after new accounts and who's going to be driving the, the sales there, that the Legacy could help us? Are you, are you going to be able to, you know, is this part of what, um, what the Legacy, Ortho sales are up to Springs to the table. If you could just expand on that, that'd be great.
Yeah. Well the, you know, I I it's a really compelling platform, um, you know, as I described it it's a it's basically an ultra fast real-time PCR. Uh, you know, 6 minutes to a result on their respiratory panel, you know, it has a a low cost profile for both the instrument. Um, and the the cartridges it has a direct swab option. It's got room temperature, reagents, and and really. Uh, I mean super simple sample to answer uh, workflow and you know, I won't won't uh, single out any, uh, specific competitors. But if you look at that our platform against
Any of the competitive platforms out there. Um, there are different elements of our value proposition that compete nicely against each of those uh, competitive platforms. And so we think there's, you know, plenty of opportunity. Um uh, you know, to to take share from existing competitors but also, you know, there, there still is some green field opportunity there. Um, you know, it in, in terms of the channel, it'll be a combination of, uh, the, the current channel that we use for, uh, Sophia. But also, um, there are professional applications for this. So, we we expect to, um,
Uh, utilize, uh, the Ortho commercial team, uh, the Legacy Ortho commercial team, to, um, to place those instruments as well.
And, um, you know, I think, uh, we're just very excited about the platform. It's, uh, inactive review right now with the FDA and, as we understand it, um, the review is, um, going as well as you would hope. And, uh, you know, we're looking forward to getting it on the market when we do, uh, get approval. Assuming again, uh, that happens by the end of the year, um, we'll be making placements, uh, probably with a lot of existing customers. But I, I would expect some new customers as well so that we can get a, a full range of input on the performance of the platform. Uh, and our objective will be to scale, uh, placements as quickly as possible.
Quickly as we possibly can. Um, and uh, and, and I, I think importantly also to expend expand the menu of the platform, uh, Beyond, uh, just the respiratory space, but into other areas like women's health and STI, as I mentioned in the prepared remarks. So again, very, very excited about the platform and, um, you know, uh, looking forward to to seeing a successful approval sometime later this year, hopefully,
Thanks and 1 final question if you don't mind. Um just with 1 of your competitors. Uh,
Opportunity to potentially take some market share, if there's any disruption there, or is it too early to tell if that's an opportunity for you guys.
Um, well, you know, anytime there's uh, you know, disrupt disruptive activity in the market. It's generally a good opportunity for competitors. And you know, we'll we'll certainly look to um exploit that the best we can uh just like they would if it if we were going through it. So
Yeah. We'll be looking at that carefully.
Got it. Thanks. Thanks for the question; it’s appreciated.
Our next question comes from Casey, woodwing with the company, JP Morgan, Casey, your line is not open.
Great, thank you for taking my questions. Um, I guess, the first 1 is just, can you walk us through, how you're thinking about free cash flow in the back half? You know, 2 Q took a step down given lower respiratory volumes. Um, but just what's your visibility into the 25-30% of adjusted but do conversion guide for the year and that implied ramp, I'm sorry that implied ramp versus the. I think it's around 5%. You did in the first half.
Yeah, hey Casey, it's Joe. Um, so that 25% to 30% of adjusted EBITDA.
Target, that that's a recurring free cash flow number. And just to reiterate the numbers we did,
Um, we've done $15 million of recurring free cash flow in the first two quarters of this year.
Last year, we actually used $79 million in cash in the first two quarters of the year. And then, you know, we've been saying all along that our business is very seasonal.
Uh, in that, we will generate more cash in the second half of the year versus the first half of the year. And that was evident last year, too. Last year, we generated $189 million in recurring free cash flow in the second half of the year. And so, you know, to get to our target of that 25% to 30%.
Probably adjusted EBITDA. We, you know, we need to generate. We need to be somewhere between, you know, about $140 million to $160 million of second half free cash flow. So it's...
It's totally reasonable based on what we did last year and the seasonality of the business. So we will definitely see more cash flow in the second half of this year to, to get us to that Target
Got it, that's helpful. And then my follow-up, just on the $30 million to $50 million in incremental savings this year. You had previously said that would be back half weighted. Just any more color there? Is it closer to $50 million or closer to $30 million? And do you have a better sense of the quarterly cadence that we should assume between Q3 and Q4? Thank you.
Yeah, the 30 to 50.
For this year, uh, was primarily related to indirect procurement.
Initiatives and we are very much on track to realize that 30 to 50 I would say it's it's definitely more back-end loaded.
And that we'll see that savings uh in the back half of the year. And and if you look at that, the savings that we've seen in the first half of the year
Relative to to last year, you know, you can you can very much see from the margin Improvement that we we're getting the impacts of the head count. The hundred million dollar annualized, headcount reduction that we did a year ago. And so you, you will also start to now see, uh, second half benefits as well. Uh, and that's going to be mostly related to the indirect procurement benefits. And it'll, it'll be in that range of 30 to 50.
Um, Casey, you know, be more to come on that, I guess in the next call.
Got it. Thank you.
Sure.
My next question comes from Jack with the company. The front research Jack your line is not open.
Thank you, good afternoon.
Um, I wanted to talk about the guide, the FDA guide for respiratory testing. Um, flu is unchanged, you brought COVID down a bit. Um, what I was curious about is what you're assuming in terms of the ABC combo test as a percentage of mix. Um,
just the outlook for demand there.
Potentially comes in, how are you feeling about salana and Lyra and kind of their long-term positioning?
Yeah, we're, you know, we're kind of taking a step back. Um, and, and, and looking at that, um, you know, I I expect those to have a, a place in our our portfolio as, you know, they're smaller businesses, um, and, you know, really we're hanging our hat on most of our growth there on the future of, of the Lex platform. So that's that's kind of how we're thinking of of the molecular space.
Okay.
Um, sounds good. Thank you guys.
All right, thanks Jack.
My next question comes from Lee with company. UBS your land is not open.
Great, thank you for taking my questions. Um, I think the first 1 on the last. Um, as you were planning for the commercialization have you already started to do some kind of like commercial work like marketing and even I remember like startup you probably need to move like some of the manufacturing to the US. I wonder if you have already started to doing that.
I live. This is Brian know. We have not started any, uh, commercial efforts whatsoever there. Um, you know, we, we've only announced the intent to acquire the, the business. They still have to get through their FDA approval. Um, you know, we're, we are looking, uh, at what we can do from an infrastructure standpoint, uh, ahead of of an approval. Um, but uh, nothing externally commercial with customers or in the marketplace whatsoever.
Got it makes sense. Um and then I guess like maybe focusing on some other kind of business in terms of like portfolio refresh. Have you started like to identify any areas that you can potentially launch new products in 2026 or maybe even beyond that.
In terms of new products, new new products. Well, you know, our in the short term, we're very focused on, um, really, uh, it's, it's mostly a, a, a number of I would say menu Gap, fillers, a handful of of menu, Gap fillers, uh, across, uh,
Primarily the labs, uh, platforms. Um, we are at this at this point. Now, starting to think about and envisioning concepts for Next Generation platforms. As, you know, you know, you have to to stay relevant in the space and that's important to us. But over the, you know, the near-term, uh, it's primarily going to be content. Uh, and maybe some additional, uh, feature, uh, capability on our existing systems, uh, informatics, uh, and maybe some automation uh, upgrades on on existing platforms as well.
All right. Thank you.
My next question comes from Andrew Cooper with the company. Raymond James, Andrew, your line is not open.
Hey everybody. Thanks for the question. Uh, maybe just first, you know, a lot of talk about vbt. I think we've covered kind of why you're not impacted as much, but does this do anything? There's a competitive landscape when you think about that opportunity and amino acid and and what you bring to the China Market um or does it change the way you approach that in any way?
Well I I just I I I think it's probably speaks more to our longer term opportunity as opposed to any, you know, radical upset of the the competitive landscape there. I mean, it's still, it's still a very competitive market as you know, with, you know, not only um, you know, large multinational uh corporations
We are looking at who participates, but also a lot of local suppliers in the immunoassay market. So we're examining how we shape the organization and how we shape our business to advance our penetration there and also preserve our economics while we do it.
Okay, helpful. And then maybe just 1 kind of similar, similar ilk type question uh on the respiratory side. I know in the past you guys have commented someone on on share, obviously we've heard from some other folks saying some different things in the space. So what's the latest view on, you know, share in that respiratory setting? And I guess in particular in, you know, really those core settings for you and and primary care and acute care and and locations like that, has there been any change? Uh, and and kind of any update to to the thinking there would be great.
To the flu guidance that we put out back in February, you know. And again just to remind everybody the the the the modeling that we do is based on market share um size of the market in terms of volume and the mix of that combo to Standalone flu a test. And and again there there's no change to any of those assumptions. We're still really in the same place, the q1 and Q2 from a respiratory perspective, played out pretty much as we expected. Um, and, you know, based on what we're seeing from the southern hemisphere flu season.
Uh there's there's no change to our guidance there. For the full year on the flu. Not all those assumptions are in the same place.
Okay, I'll leave it there. Thanks everybody.
No more questions regarding Q. I would like to pass the conference over to our host, Brian Blaser, for closing remarks.
Operator. And I thank all of you for your time today. You know, I just say to wrap up. We're we're pleased with our solid results in Q2. Uh, and the first half of 2025, um, with uh, adjusted Eva margin and adjusted, EPS Improvement resulting from our cost initiatives, uh, the strength of our underlying business. Uh, with our recurring Revenue model, long-term contracts. Good visibility gives us confidence.
Confidence that we're on the right track and well positioned for continued growth. So we look forward to sharing our continued progress with you next quarter. Thank you.
That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.