QuidelOrtho narrows 2025 revenue guidance to $2.68B–$2.74B as margin initiatives deliver $140M in cost savings

Earnings Call Insights: QuidelOrtho Corporation (QDEL) Q3 2025

MANAGEMENT VIEW

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CEO Brian Blaser highlighted "another solid performance that reflects the strength of our diversified global diagnostics portfolio," reporting organic sales growth of 5% excluding COVID sales and the U.S. donor screening business. He pointed to "significant improvements to adjusted EBITDA, expanding to 25% of sales in the quarter, primarily driven by our continued focus and execution against our margin improvement initiatives," with over $140 million in cost savings delivered to date. Blaser detailed key business unit results: Labs business revenue grew 4%, immunohematology grew 5%, and the Triage product line posted 7% growth. He cited "the clearance of our new VITROS high-sensitivity troponin assay" as a major R&D milestone and confirmed ongoing investments in margin expansion, supply chain optimization, and manufacturing consolidation. Blaser also stated, "We continue to expect to fully offset [tariff] impacts in 2025."

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CFO Joseph Busky stated, "Total reported revenue for the third quarter of '25 was $700 million compared to $727 million in the prior year period. The 4% year-over-year decrease was primarily due to lower COVID and donor screening revenue." Busky noted that "adjusted EBITDA in Q3 was $177 million and adjusted EBITDA margin was 25%, which is a 180 basis point improvement from the prior year period. Adjusted diluted EPS was $0.80." He also addressed a $701 million goodwill impairment charge and confirmed no remaining goodwill on the balance sheet.

OUTLOOK

* Management narrowed full year 2025 total reported revenue guidance to $2.68 billion to $2.74 billion, explicitly stating, "the midpoint of our narrowed guidance range remains the same as our prior guidance." Adjusted EBITDA guidance was narrowed to $585 million to $605 million, while maintaining a 22% margin target for the full year. Full year adjusted diluted EPS guidance was updated to $2 to $2.15, with $0.19 of the impact from higher interest expense and $0.05 from higher taxes. Management reiterated expectations for COVID revenue between $70 million and $100 million and cited "incremental cost savings in the range of $30 million to $40 million in '25, primarily related to indirect procurement efforts."

FINANCIAL RESULTS

* The company reported total Q3 revenue of $700 million, adjusted EBITDA of $177 million, and adjusted diluted EPS of $0.80. Adjusted gross profit margin was 48.7%. Non-GAAP operating expenses were $217 million, down $16 million or 7%. Adjusted free cash flow was a negative $50 million, attributed to ERP system conversion timing. Net debt to adjusted EBITDA ratio was 4.4x. A $701 million goodwill impairment was recorded, with no goodwill remaining on the balance sheet. Integration costs were $28 million, and $40 million in restructuring, integration, and other charges included $11 million related to the discontinuation of the Savanna platform.

Q&A

* Andrew Brackmann, William Blair: Asked about competitive wins and the impact of the new VITROS assay. Brian Blaser responded, "Our competitive wins have been dispersed across our geographies pretty evenly... we're very focused on wins now that are profitable as opposed to just winning at all costs." He described the new assay as "an excellent assay" and a "long-term competitive factor."
* Lu Li, UBS: Questioned the sequential margin dynamics and instrument performance. Joseph Busky explained, "the margins might be slightly lower [in Q4] because we will probably likely, like every year, see slightly higher instrument revenue... instrument revenue for us... is much lower than the reagents and consumables margins."
* Jack Meehan, Nephron Research: Inquired about the Sofia franchise and combo flu test durability. Brian Blaser stated, "Sofia installed base is... stable, expanding, very durable. It's a workhorse platform. And the durability of our flu combo test is also very solid." Asked about LEX FDA review, Blaser confirmed, "Assuming an approval late this year or early 2026, we'll be looking to ramp up placements..."
* Jack Melick, Jefferies: Asked about immunohematology growth and LEX margin impact. Joseph Busky replied, "I would expect that LEX will likely have a dilutive impact on margins next year to some extent."
* Brendan (Citi): Asked about the U.S. donor screening exit. Busky said, "residual revenue will completely wind down in the first half of 2026... I would expect that we'll be somewhere in the range of 50 basis points of margin accretion... as you get into later '26 or into early '27."

SENTIMENT ANALYSIS

* Analysts' tone focused on sustainability of margin gains, clarity on guidance narrowing, and the specifics of geographic and segment performance. The sentiment was neutral to slightly positive, with most questions seeking detail on guidance, product launches, and cost initiatives.
* Management's tone remained confident in both prepared remarks and Q&A. Phrases like "we are encouraged by the progress we've made and confident in the path ahead" and "we continue to expect to fully offset these impacts in 2025" indicated high confidence. Management acknowledged challenges but emphasized successful execution and discipline.
* Compared to the previous quarter, the sentiment remained steady but with increased confidence around margin improvement and cost savings.

QUARTER-OVER-QUARTER COMPARISON

* The company further narrowed revenue and EBITDA guidance ranges while maintaining prior midpoints, compared to reiterating guidance in Q2. The Q3 transcript reflected continued progress on cost savings, now totaling $140 million versus earlier reported $100 million annualized headcount reduction and procurement savings.
* The prior quarter described ongoing ERP integration; Q3 reported this system conversion as completed, though with temporary cash flow impact.
* Strategic focus on margin expansion, global presence, and product pipeline remained consistent. Analysts continued to probe on China market dynamics, respiratory product mix, and capital allocation priorities.
* Management tone was more assertive about achieving sustainable margin targets, and analysts appeared more accepting of narrowed guidance.

RISKS AND CONCERNS

* Management cited ongoing tariff impacts but reiterated expectations to fully offset these in 2025.
* ERP system conversion caused temporary negative free cash flow, which management described as "manageable due to the flexibility provided by our recent debt refinancing."
* A $701 million goodwill impairment was recorded following a decline in stock price and market cap.
* The exit from the U.S. donor screening business remains a headwind but is expected to dissipate in 2026, with some stranded costs to be removed.
* LEX Diagnostics launch is anticipated to be margin dilutive in 2026, with accretive effects expected only as scale ramps in later years.

FINAL TAKEAWAY

QuidelOrtho delivered a quarter marked by solid core business growth, margin expansion, and disciplined cost management, narrowing its 2025 guidance ranges while maintaining the same midpoints. Management emphasized execution on margin initiatives, the successful launch of new assays, and confidence in tariff mitigation, while also navigating one-time charges and the final stages of exiting less profitable business lines. The company remains focused on sustainable growth and profitability, with clear targets for EBITDA margin improvement and a robust pipeline of product innovation. Investors were provided with a transparent assessment of both opportunities and challenges as the company continues its transformation and positions for long-term value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/qdel/earnings/transcripts]

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