QuidelOrtho's Q4 2024: Navigating Contradictions in China Growth, VBP Pressures, and COVID Revenue

These are the key contradictions discussed in QuidelOrtho's latest 2024Q4 earnings call, specifically including: China Market Growth Expectations, VBP Reimbursement Pressure, Free Cash Flow Conversion and Profitability Targets, and COVID Revenue Expectations:



Financial Performance and Guidance:
- QuidelOrtho finished the year with solid top line results, achieving total reported revenue of $708 million in Q4, which decreased by 4% year-over-year due to expected declines in COVID and flu testing revenues.
- For full year 2024, total reported revenue was $2.8 billion, with nonrespiratory revenue at $2.3 billion.
- Guidance for 2025 includes total reported revenue between $2.6 billion and $2.81 billion and adjusted EBITDA between $575 million and $615 million, reflecting a 250 basis point improvement off of 2024.

Cost Reduction and Margin Expansion:
- The company implemented cost savings of approximately $100 million in annualized actions, with $50 million expected in the first half of 2025 as part of their margin improvement strategies.
- These savings are anticipated to benefit both OpEx and GP, driving margin growth over the next few years and achieving benchmark profitability levels.
- The focus on procurement and gross margin improvement initiatives is expected to contribute significantly to margin expansion goals.

Regional Revenue Trends:
- In Q4, the other region (Japan, Asia Pacific, and Latin America) grew 13%, with strong Labs performance in China offset by softness in cardiac point-of-care products due to timing and reimbursement changes.
- North America and the Europe, Middle East, Africa region declined by 11% and 6% respectively, due to anticipated year-over-year decline in respiratory revenue and other regional factors.
- For the full year, China, excluding respiratory, grew in the high single digits, aligning with expectations.

Respiratory Revenue and Future Outlook:
- Respiratory revenue declined 18% year-over-year in Q4, with a strong focus on Sofia's flu/COVID combo test contributing to favorable product mix.
- Full year 2025 COVID revenue is expected to range between $110 million and $140 million, excluding government contracts and retail sales, reflecting endemic levels.
- Respiratory revenue is expected to be in the range of $50 million to $55 million overall, with typical quarterly seasonality assumed in guidance.