Title

Presentation

QuidelOrtho Corporation misses on earnings expectations. Reported EPS is $-0.04 EPS, expectations were $0.37.

Operator: Welcome to the first quarter 2026 financial results conference call and webcast. At this time, all participant lines are in a listen-only mode. For those of you participating in the conference call, there will be an opportunity for your questions at the end of today’s call and prepared remarks. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please note, this conference call is being recorded. An audio replay of the conference call will be available on the company’s website shortly after this call. I would now like to turn the call over to Juliet Cunningham, vice president of investor relations.

Juliet Cunningham: Afternoon, everyone, and thanks for joining us today. With me are Brian J. Blaser, President and Chief Executive Officer, and Joseph M. Busky, Chief Financial Officer. This conference call is being simultaneously webcast on the Investor Relations page of our website. To assist in the presentation, we also posted supplemental information on our Investor Relations page that will be referenced in this call. This conference call and supplemental information may contain forward-looking statements which are made as of today, 05/05/2026. We assume no obligation to update any forward-looking statement except as required by law. Statements that are not strictly historical, including the company’s expectations, plans, financial guidance, future performance, and prospects, are forward-looking statements that are subject to certain risks, uncertainty, assumptions, and other factors.

Actual results may vary materially from those expressed or implied in these forward-looking statements. Please refer to our SEC filings for a description of potential risks. In addition, today’s call includes discussion of certain non-GAAP financial measures. Tables reconciling these non-GAAP measures to their most directly comparable GAAP measures are available in our earnings release and supplemental information on the Investor Relations page of our website. Lastly, unless stated otherwise, all year-over-year revenue growth rates given on today’s call are on a constant currency basis. And now I would like to turn the call over to our CEO, Brian J. Blaser.

Brian J. Blaser: Thanks, Juliet, and good afternoon, everyone. I will start today with a brief perspective on the first quarter and then discuss details of our business performance more broadly. Our first quarter results were impacted by a significantly softer respiratory season compared to Q1 of last year, with influenza-like illness, or ILI, visits down approximately 30% as reported by the CDC in April. While ILI visits are one indicator, the season was also notably weaker across other key measures including severity of illness, hospitalizations, and duration. Overall, the respiratory season was both significantly milder and shorter than in Q1 2025. We also experienced broader macroeconomic and geopolitical headwinds during the first quarter.

In China, sales slowed in March ahead of the anticipated national IVD pricing guidelines as distributors exercised caution on inventory purchases in light of potential future pricing declines. While final guidelines have not yet been issued following the comment period, our updated full-year 2026 guidance reflects the estimated impact based on the current draft. And as is expected, this estimate may change once the final guidelines and implementation timeline are announced, and, accordingly, we are preparing mitigation actions to help offset these headwinds. Moving into 2027, the proposed pricing changes would impact only about half our sales in China, and even with the new guidelines, that business is certainly not going away and will continue to be a meaningful component of our revenues.

Notably, even after these pricing changes are implemented, we believe our China business will continue to be accretive to the company margin profile. We do not think the changes will be fully implemented until the middle of next year, which gives us time to work on mitigating actions. Shifting back to Q1 results, we also saw delays in some orders and tenders due to the ongoing disruption in the Middle East. Assuming conditions stabilize, we expect these orders and tenders to resume during the remainder of the year. Importantly, our underlying business remains strong and durable. Our core labs and immunohematology franchises are performing well, and we are executing against our priorities. As a result, we believe we are well positioned to deliver on our objectives to expand our adjusted EBITDA margin and improve cash flow in 2026.

We are also making solid progress in advancing our strategy. We completed the acquisition of Lex Diagnostics in April, adding a highly differentiated ultrafast molecular platform that strengthens our position in point of care, an area we believe will be a meaningful driver of future growth and reinforces our ability to deliver integrated diagnostic solutions across the continuum of care. We are already seeing strong customer interest and have secured our first orders. Customer insights reinforce this opportunity. Approximately 90% of Sofia customers currently use both antigen and molecular testing systems, and many have indicated a willingness to switch to our more competitive molecular platform. Their priorities are clear: better ease of use, faster time to result, and lower cost.

And Lex is designed to deliver all three. To support launch readiness, we are expanding manufacturing capacity at our site in the UK, and we expect to begin placing instruments this quarter with measurable assay pull-through and associated revenue beginning in early 2027. Turning to our labs business, we launched our high-sensitivity troponin assay in the U.S., strengthening our cardiac portfolio and enhancing our clinical value proposition. We are seeing strong demand, and we are now shipping to more than 300 U.S. customers. We also began rolling out the VITROS 450 platform in select international markets, expanding access to our diagnostic solutions. As a successor to the VITROS 350, this platform is designed to meet the needs of emerging markets requiring low-volume, cost-effective solutions.

Initial shipments are targeted for JAPAC followed by LATAM and EMEA, where we recently received the CE Mark. Importantly, the combination of VITROS 450 and VITROS ECL enables us to deliver a comprehensive solution across clinical chemistry and immunoassays in attractive international markets. We expect these product launches to support our mid-single-digit revenue growth expectations for the labs business, which represents over half of our revenue. In summary, we are navigating near-term headwinds, but our strategy is sound, our innovation pipeline is strong, and we remain focused on executing with discipline to deliver sustainable, profitable growth. I will now turn the call over to Joseph M. Busky.

Joseph M. Busky: Okay. Thanks, Brian. I will walk through the key financials for 2026. Unless otherwise noted, all comparisons are to the prior-year period on a constant currency basis. Total reported revenue was $620 million. Of that, non-respiratory revenue was $552 million, or $544 million excluding the donor screening business. Labs revenue declined 8% primarily due to the factors Brian discussed. In addition, the termination of our joint business agreement with Grifols reduced Q1 labs revenue and created a difficult year-over-year comp. Immunohematology grew 3%, driven by North America, China, and JAPAC. Triage declined by $3 million primarily due to slower distributor sales in China. Looking at our respiratory revenue, as was widely reported, the North America respiratory market showed an atypical decline versus the prior-year period.

This was an industry-wide trend, not unique to QuidelOrtho Corporation, and is supported by KOLs and competitor reports. As a result, our respiratory revenue was $68 million, down significantly as noted in our preannouncement due to the approximately 30% lower ILI visits compared to Q1 2025. Keep in mind that our large global installed base of the Sofia platform and QuickVue has demonstrated growth over time, and importantly, during 2026, we saw no change in testing protocols, and our market share remained stable. Lastly, on revenue, foreign currency exchange was favorable by 210 basis points during the quarter. Now moving down the P&L, non-GAAP opex decreased by 2%, primarily due to R&D efficiencies. Adjusted gross profit margin was 44%, a decrease of 630 basis points due to product mix with lower respiratory revenue contribution, and our adjusted EBITDA was $109 million, representing an 18% adjusted EBITDA margin, and diluted adjusted loss per share was $0.40.

We expect to continue to drive adjusted EBITDA margin expansion for the full year with targeted staffing reductions, procurement, and facility consolidation cost savings initiatives. Now turning to the balance sheet. At the end of March, we had cash of $140 million and borrowings of $130 million under our revolving credit facility. From a cash flow standpoint, operating cash flow was negative $33 million and free cash flow was negative $67 million. While we expected cash flow to be negative in the first half, which is consistent with our historical seasonality, first quarter 2026 cash flow declined year over year primarily due to lower EBITDA related to the weaker respiratory season and the timing of accounts payable and accrued interest. Inventory also increased due to the weaker respiratory season as well as in preparation for multiple upcoming product launches.

On the positive side, we delivered strong accounts receivable cash collections of $54 million and reduced our CapEx by $22 million compared to the prior-year period, as a result of lower systems and manufacturing capacity spend. We remain focused on improving cash flow generation and still expect positive cash flow for the full year, now expected to be in the range of $100 million to $120 million, with positive cash flow driven by higher revenue in the second half of the year. Lastly, net debt to adjusted EBITDA leverage was 4.1x, including pro forma adjustments allowable under our credit agreement. We continue to expect pro forma leverage under the terms of our credit agreement to be at 3.25x to 3.5x by the end of this year. To wrap up, first quarter results reflected the impact of lower respiratory volumes, macro and geopolitical pressure, and continued investment in our strategic initiatives including molecular diagnostics.

Now I would like to cover our full-year 2026 outlook at a high level. For a full list of assumptions, please refer to Page 6 of our first quarter 2026 earnings presentation. Importantly, we are providing a new guidance range. As noted in our Q1 preannouncement, we are tethered to the low end of our previously provided range, which was purposely wide to account for respiratory season variability. We now expect total reported revenue of $2 billion to $2.75 billion, which is driven by two changes: our first quarter performance and the expected lower full-year revenue in China, which takes into consideration distributor reactions to the pending China national IVD pricing guidelines as currently drafted; and in North America, first quarter respiratory revenue reflecting a weaker ILI trend.

Looking back over the past ten years, and excluding pandemic years, in periods where ILI declined in Q1 versus the prior year, trends rebounded over the remainder of the year, resulting in higher ILI on a full-year basis. Despite this empirical data, to be prudent, we are continuing to plan for an average respiratory season and forecasting a flat second half without a bump-up and an 8% decline in respiratory revenue for the full year 2026. These two revenue impacts flow from the top line to the bottom line. Therefore, we now expect full-year 2026 adjusted EBITDA of $615 million to $630 million, still representing an adjusted EBITDA margin of 23%, which reflects a 100 basis point improvement over full-year 2025. We expect adjusted diluted earnings per share of $0.80 to $2.00.

We expect to deliver free cash flow of $100 million to $120 million. Note that the second quarter has historically been our seasonally lowest quarter. Consistent with this pattern, we expect sequential revenue, adjusted EBITDA, and adjusted EPS to be roughly in line with Q1 2026 but still reflecting year-over-year growth across all three metrics. Our updated outlook reflects improving operating performance in the second half of the year as well as continued disciplined execution and the ramping up of the Lex Diagnostics business. We will now open the call for questions.

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Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Tycho Peterson of Jefferies. Your line is open. Please go ahead.

Jack Meehan: Yeah, hi. This is Jack on for Tycho. Thanks for the question. Could you just walk us through the guide for second quarter growth by segment? And then also, down the P&L, what are margins going to look like?

Joseph M. Busky: Yeah. Jack, as noted in the prepared remarks, we do expect that sequentially Q2 will be relatively flat with Q1 but will provide growth year over year. The growth is going to come from the core business as you think about the labs business and the IH business and the Triage business, that growth versus prior year.

Jack Meehan: Okay. That is helpful. Then on China, NHSA, can you tell us exactly how big of a headwind that is in 2026, what you are assuming in the guidance, and just a little bit more detail on how you arrived at that number?

Joseph M. Busky: Yeah, sure. As you think about the updated revenue guide, which, again, is tethered to the low end of the previous revenue guide, there are really only two changes that we made to the revenue guide. I want to be really clear with that. One is the respiratory season weakness we saw in Q1, and then the impacts that we are seeing in China from our distributors pausing on their purchases due to the pending new national pricing guidelines, which we expect to come out in the next couple of months. I would say if you look at the new revenue guide, Jack, it is down roughly $75 million at the midpoint. It is probably split almost 50/50 between respiratory and China, maybe a little bit less on China, a little bit more on respiratory.

Maybe, you know, 45 million respiratory and 30 million China kind of thing. That is where we are seeing it. We have pretty good visibility, as you would imagine, from our local team and the good relationships we have with our customer base. So we feel pretty good about this new guide for 2026.

Operator: Your next question comes from the line of Andrew Brackmann of William Blair. Your line is open. Please go ahead.

Andrew Brackmann: Hey, guys. Good afternoon. Thanks for taking the question. I wanted to pick up off of Jack’s first question there with respect to Q2. So if you are sequentially sort of flattish to Q1, I think that implies a pretty significant ramp in adjusted EBITDA margin in Q3 and Q4. Can you maybe just talk to us about some of the levers that you see there, not just on the revenue side but also on the cost side as well?

Joseph M. Busky: Yeah, hey, Andrew. I do think that what we are looking at in the guide, as you think about first half versus second half, is that we are expecting the revenue growth to pick up quite a bit in the second half versus the first half. That is really a function of our expectation that the China impacts we talked about in the prepared remarks generally are going to happen in the first half of the year and not so much in the second half of the year. In addition, as I said, we are expecting continued growth with labs, IH, and Triage. We are planning for an average respiratory season in the second half of the year, so we are not expecting growth in the second half for respiratory year over year, but we do expect it to be flat, so I do not expect it to be a headwind.

All those factors, including what Brian mentioned with the new products coming out—the 450, the high-sensitivity troponin—and you are going to have some Lex revenue in the second half, all those things contribute to the higher revenue in the second half versus the first half of the year, which will drop down and drive higher EBITDA, EPS, and cash flow.

Andrew Brackmann: Okay. Thanks for all that. And then, Brian, with respect to Lex, it sounds like some folks in your customer base are pretty interested. Can you maybe just remind us about switching dynamics and what you are seeing?

Brian J. Blaser: We are excited about Lex and are working actively, as I mentioned, to build additional capacity at our site in the UK to support the ramp-up. At this point, we are expecting to place a few hundred instruments this year, followed by a more significant ramp-up in 2027 that I think is really going to begin to create meaningful assay pull-through. We are doing everything we can to bring on additional capacity as quickly as possible, because I think more than anything, we will probably be capacity constrained versus demand constrained given what we are seeing with the product. Most of these instruments will be placed in customers’ sites, meaning there is no real capital outlay from a switching cost standpoint. The ease-of-use profile—this is truly a plug-and-play instrument that requires sample in, answer out in six to ten minutes.

Your question about the switching costs: there are really very low barriers to customer objection to placing new instruments. We do not think that is going to be an issue, and we think the value proposition across speed, turnaround time, and cost is really going to position this platform well.

Operator: Your next question comes from the line of Patrick Donnelly of Citi. Your line is open. Please go ahead.

Patrick Donnelly: Hey, guys. Thank you for taking the question. Maybe one on the China side. I am sure you guys saw this morning a competitor of sorts that walked away from their China diagnostics business and sold it, which was rewarded, given that it has been an overhang on a lot of the company. What is your commitment there on the China side and visibility given some of these recent changes? It just feels like a slippery slope over there. How are you framing up that risk and the comfort level going forward on that business?

Brian J. Blaser: Thanks, Patrick. Clearly, the reimbursement changes are a headwind there, but the way we are looking at it, the reimbursement changes themselves will only impact about half our sales there. We have no plans to walk away from China, and even after these changes are implemented, we believe the business continues to be accretive to our company margin profile. We have time to address this. We think that the changes will not be fully implemented until probably mid next year, and so we are going to be taking actions to offset that. We will continue to monitor the environment in China after these changes are made, but as long as the economics continue to be favorable, we intend to remain in that market. Over the very long term, it continues to be an attractive growth market for healthcare and diagnostic testing in particular.

Patrick Donnelly: Okay. That is helpful. And then maybe just on the margin side, the EBITDA build, can you talk about some of the actions you are taking on the cost side, not only this year but just the base heading forward? Obviously, you guys in the past have given some longer-term targets. How are you thinking about the key levers there as we work our way through the year and into next year? Thank you.

Brian J. Blaser: We continue to do a lot of heavy lifting on the margin side of the business. I referenced that we have taken out close to a thousand positions in the organization. A lot of that work pushed us into the low-20s adjusted EBITDA margin. We are going to start to see a 50 to 100 basis point improvement starting in 2026 from our donor screening exit. We have a rich portfolio of projects across our indirect and direct procurement efforts. We have the shutdown of our Raritan facility in progress, and we have a lot of opportunity outside the U.S. to optimize our profitability in our OUS regions. Additionally, we continue to benefit from placing more immunoassay volume that is at higher margin. Moving forward, you are going to see the benefit of Lex and molecular margins being typically much higher than immunoassay margins as well.

We get into that mid-20s range solidly with our procurement initiatives and the Raritan footprint optimization, and with some targeted staff reductions, I think we push into the higher-20s as Lex becomes a bigger component of the business over the next few years.

Operator: Your next question comes from the line of Lu Li of UBS. Your line is open. Please go ahead.

Lu Li: Great. Thank you for taking my questions. I want to go back to China a little bit. I think you mentioned that in the guide you are assuming the China impacts are basically happening in the first half and not the second half. Can you provide a little bit more color on that? Are you still seeing distributors pausing sales in April and May as well?

Joseph M. Busky: Yeah. We are still seeing some of that pressure, and over the next couple of months here, we are going to see that behavior in the first half order patterns. We expect it to start to mitigate, and we believe that will stabilize over time.

Lu Li: Got it. And then my second question, just to double confirm your margin target. Are you still hoping to get to mid- to high-20s by mid 2027, or does that margin target get a little bit delayed given potential changes in China and maybe other macro factors?

Joseph M. Busky: Hey, Lu. It is Joe. I think Brian touched on this a minute ago. Just to reiterate, we are confident in our EBITDA margin goals and the timeline for them. There is no change to that. That is because we still have, as Brian said, all these initiatives around procurement and site consolidation in flight that we expect to complete as we move through this year and into early next year. On China, we do have some time. We do not think that these potential reimbursement changes will be enacted until you get more into mid-2027, so we have about a year to implement cost mitigation actions to offset any potential price declines that we may see in 2027. Because of all that, we still feel really good about the margin goals and the timing that we have communicated already in the past.

Operator: If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. There are no further questions at this time. I will now turn the call back to Brian J. Blaser, President and Chief Executive Officer, for closing remarks.

Brian J. Blaser: Thank you, operator. In closing, stepping back from the first quarter and the headwinds that we saw in the respiratory season and China, this really does not change our direction. We are executing well. Our strategy is working, and we are strengthening the business in the right areas. We do expect a stronger second half and remain focused on delivering consistent, profitable growth. Thank you for your interest in the company, and we look forward to updating you in the quarters ahead.

Operator: This concludes today’s call. Thank you.

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