Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- QuidelOrtho Corp (QDEL, Financial) reported second-quarter revenue of $637 million and adjusted EBITDA of $90 million, meeting expectations.
- The company has a broad product portfolio that spans the entire continuum of care, from hospital reference labs to near patient point-of-care testing.
- QuidelOrtho Corp (QDEL) executed $100 million in annualized cost savings initiatives, primarily through staffing reductions.
- The company is focusing on improving business efficiency with initiatives in procurement, supply chain, manufacturing quality, and IT.
- Savanna, a key product, is expected to provide significant competitive advantages in the molecular point-of-care market, with incremental revenue and margin growth opportunities.
Negative Points
- Adjusted gross profit margin decreased to 44.2% from 45.6% in the prior year period, primarily due to lower COVID-19 product sales.
- Non-GAAP total operating expenses increased by 200 basis points as a percentage of revenue due to higher COVID-19 revenue in the prior period.
- Adjusted EBITDA margin decreased to 14% from 17% in the prior year period.
- Recurring free cash flow was negative $66 million, attributed to seasonally lower second-quarter revenue and timing of cost savings realization.
- The company recognized a non-cash accounting book loss of $57 million related to the sale of two properties, driven by purchase accounting step-up and unfavorable real estate market conditions.
Q & A Highlights
Q: Can you provide more details on the margin improvement initiatives and their potential impact?
A: Brian Blaser, CEO: We've achieved $100 million in savings primarily through staffing reductions. We're aggressively pursuing additional savings in operations, supply chain, procurement, and IT. We aim to reach mid- to high-20% adjusted EBITDA margins over the next two to three years.
Q: Could you elaborate on the negative $66 million in free cash flow for the quarter and expectations for the rest of the year?
A: Joseph Busky, CFO: The negative free cash flow was expected due to seasonally lower revenue and timing of cost savings. We anticipate positive free cash flow in the second half, particularly in Q4, and expect to reduce the revolver draw significantly by year-end.
Q: What criteria are you using to evaluate R&D spending and prioritization?
A: Brian Blaser, CEO: We've focused our R&D on critical programs like Savanna, menu expansion for point-of-care and lab products, and life cycle management tasks. This focus aims to deliver high-impact projects efficiently.
Q: How do you plan to achieve mid- to high-20% EBITDA margins, and what role does revenue growth play?
A: Joseph Busky, CFO: Margin improvement will come from both cost reductions and revenue growth. We are a mid-single-digit growth company now, but Savanna's full launch and menu expansion could drive higher growth, aiding our margin goals.
Q: Can you provide an update on the Savanna platform and its menu trajectory?
A: Brian Blaser, CEO: Savanna offers a compelling value proposition with advantages in workflow, turnaround time, and cost. We have several assays in the pipeline, including RVP4 and STI panels, aiming for market entry in 2025.
Q: Will you reinstate guidance for 2024, and if so, when?
A: Brian Blaser, CEO: We remain in a suspended guidance mode to allow for a thorough business assessment. We expect to provide updated guidance during the Q3 earnings call.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
