QuidelOrtho Q2 Earnings Call Highlights

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QuidelOrtho (NASDAQ:QDEL) reported second-quarter revenue growth despite continued pressure from China and a softer respiratory testing environment, while lowering its full-year outlook and withdrawing free cash flow guidance.

Total second-quarter revenue was $631 million, up 2% on a constant-currency basis. Revenue outside China, representing nearly 90% of company revenue, rose 6%, according to Chief Financial Officer Micah Young. Chief Executive Officer Brian Blaser said the underlying business showed broad-based strength across core franchises and regions.

“While we are navigating significant headwinds in China and a softer respiratory environment, the underlying performance of our business remains strong,” Blaser said.

Core regions and franchises post growth

Revenue in North America increased 6%, supported by laboratory and TRIAGE point-of-care businesses. Revenue in the JPAC region rose 10%, driven by Japan and India, while Latin America grew 8%, with strength in Brazil and Central America.

Outside China, laboratory revenue increased 9%, immunohematology revenue rose 5%, and TRIAGE revenue expanded 9%, Blaser said. Young added that the company expects its laboratory and immunohematology businesses outside China to generate aggregate growth of approximately 3% to 5% in the second half of 2026.

Adjusted EBITDA increased 21% to $129 million during the quarter, and adjusted EBITDA margin expanded 310 basis points to 20% of revenue. Adjusted gross margin was 44.4%, down 130 basis points from a year earlier, reflecting unfavorable geographic mix from lower China volumes. Combined non-GAAP selling, general and administrative and research and development expense rose 2% to $219 million, but improved by 40 basis points as a percentage of revenue.

Adjusted earnings per share were $0.13.

China policy uncertainty weighs on demand

China revenue declined 23% year over year as customers adjusted purchases and reduced inventories amid uncertainty around proposed in vitro diagnostics pricing guidelines. Blaser said the second draft of the guidelines, released for comment in late June, differed meaningfully from a preliminary draft issued in March.

The revised draft eliminates methodology and use-case differentiation, includes a broader range of products and expands pilot implementation from three to six provinces, according to Blaser. Final guidelines and implementation timelines have not been established.

“We observed customers adjusting their purchasing and inventory levels more quickly and significantly than we had anticipated,” Blaser said.

The company is focusing its near-term China actions on protecting its installed base, maintaining customer engagement and aligning commercial resources with the changing reimbursement environment. Young said the company does not expect China market conditions to improve in the near term.

Company takes a more conservative respiratory view

QuidelOrtho also cited lower respiratory test positivity rates compared with 2025 and softer-than-expected indicators from the Southern Hemisphere. Blaser said those trends could point to either a later season or a weaker season.

Rather than use an average respiratory season as the basis for its outlook, the company is now assuming that the respiratory testing market will be toward the lower end of historical seasonal activity. Blaser said QuidelOrtho intends to use a more conservative respiratory forecasting approach going forward and align its cost structure accordingly.

The company expects customer placements and test utilization for its newly branded NULEXA point-of-care molecular platform to gain momentum during the respiratory season later this year. QuidelOrtho acquired LEX in April and has been advancing manufacturing scale-up, supply chain readiness and commercial launch preparations, Blaser said.

Management aims to enter the 2027-2028 respiratory season with a growing installed base and expanded commercial activity for the platform.

Outlook reduced; cash flow guidance withdrawn

For full-year 2026, QuidelOrtho now expects:

• Revenue of $2.52 billion to $2.60 billion.
• Adjusted EBITDA of $540 million to $560 million.
• Adjusted EBITDA margin of 21% to 22%.
• Adjusted earnings per share of $0.65 to $0.90.

The revised outlook reflects expectations for continuing China-related demand pressure and a more muted respiratory season in the second half. Management said the revised forecast does not reflect a change in expectations for the company’s core laboratory and immunohematology businesses outside China.

The company withdrew its full-year free cash flow guidance, citing uncertainty surrounding China, the timing and strength of respiratory testing demand, and related working-capital effects.

Operating cash flow was negative $111 million in the second quarter, while free cash flow was negative $136 million. Free cash flow included a $25 million payment to Grifols related to the termination of a joint business arrangement. Additional payments of $25 million and $15 million are expected in 2027 and 2028, respectively. The company also used $97 million of cash for the LEX acquisition during the quarter.

QuidelOrtho ended the quarter with $123 million in cash and $250 million outstanding under its revolving credit facility. Net debt leverage was 4.3 times adjusted EBITDA, including pro forma adjustments allowed under its credit agreement.

Young, who joined as CFO, said his priorities include improving working capital, reducing inventory-related capital needs, improving returns on instrument investments, rationalizing capital expenditures and directing capital toward higher-return businesses and geographies. Blaser said management is pursuing cost-improvement measures and additional mitigation actions to manage through the China and respiratory headwinds.

About QuidelOrtho (NASDAQ:QDEL)

QuidelOrtho is a global diagnostics company formed through the merger of Quidel Corporation and Ortho Clinical Diagnostics. The combined entity develops, manufactures and markets a broad portfolio of rapid and high-throughput diagnostic solutions across immunoassay, molecular diagnostics and transfusion medicine. Its offerings span point-of-care platforms for acute care testing as well as large-scale automated systems designed for clinical laboratories and blood banks.

The company's product range includes rapid antigen and antibody tests for infectious diseases, molecular assays utilizing nucleic acid amplification technology, and integrated immunodiagnostic analyzers.

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