QuidelOrtho (QDEL 3.60%), a diagnostics technology firm, announced its third-quarter results on Nov. 7. The highlight of its report was its adjusted earnings per share (EPS) result of $0.85, notably higher than the $0.27 that analysts expected. Though revenue fell by 2.3% year over year to $727 million, it exceeded the consensus estimate of $642 million. A decrease in COVID-19 and influenza testing revenues was responsible for the decline. Overall, the quarter demonstrated strong earnings despite the revenue drop, with enhanced profitability thanks to strategic cost-cutting initiatives.
| Metric | Q3 2024 Result | Q3 2024 Analysts' Estimate | Q3 2023 Result | % Change YOY |
|---|---|---|---|---|
| Adjusted EPS | $0.85 | $0.27 | $0.90 | (5.6%) |
| Total revenue | $727 million | $642 million | $744 million | (2.3%) |
| Adjusted EBITDA | $171 million | - | $169 million | 1.2% |
| GAAP net income | ($20 million) | - | ($13 million) | N/A |
Source: Analysts' estimates for the quarter provided by FactSet.
Business Overview
QuidelOrtho is a key player in the diagnostics industry, providing a variety of products ranging from laboratory solutions to molecular diagnostics. Known for its global reach across over 130 countries, the firm prioritizes a diverse product portfolio driven by ongoing research and development (R&D) efforts.
Recently, QuidelOrtho has focused on cost efficiencies and strategic hirings to bolster operations. The company has made organizational improvements with new leadership in pivotal roles such as chief technology officer and chief human resources officer.
Quarterly Highlights
During Q3, QuidelOrtho made strides despite revenue challenges. The company's total revenue slipped by 2.3% to $727 million, primarily due to declining demand for COVID-19 tests and influenza tests. However, adjusted EPS surprised positively at $0.85, well above the $0.27 forecast. Revenue from its non-respiratory segments was stable, illustrating the strength of its core operations.
Its adjusted EBITDA margin rose to 23.5% from 22.7% in the prior-year period thanks to successful cost-cutting initiatives. However, its GAAP net loss increased to $20 million from $13 million, reflecting some profit constraints despite improved EBITDA margins. Operating income decreased to $15 million from $26 million, aligning with the broader revenue decline.
Throughout the quarter, QuidelOrtho implemented strategic moves to refine its cost structure, reducing GAAP operating expenses by $13 million and non-GAAP expenses by $17 million. Despite a 4% increase in lab revenue, point-of-care services and donor screening segments saw downturns. North American revenue fell by 6.2%, while the EMEA region showed growth of 12.8%.
Recurring revenue -- excluding COVID-19 and U.S. donor screening -- grew by a modest, but meaningful, 0.4%, highlighting the company's resilience in its core businesses. Further, it took goodwill and asset impairments, reflecting post-acquisition integration adjustments.
Looking Ahead
Management, which had earlier in 2024 suspended its financial guidance, offered a fresh outlook for the full year, setting a revenue target between $2.75 billion and $2.80 billion, with adjusted EBITDA projected to land between $530 million and $550 million, and adjusted EPS in the range of $1.69 to $1.91. The resumption of guidance reflects management's confidence in its ability to achieve its objectives despite existing economic uncertainties.
Investors should keep an eye on QuidelOrtho's strategic initiatives aimed at boosting margins and optimizing cost structures, as these will be crucial to its future performance. The company's strategic reordering, leadership enhancements, and product innovation will be key elements for achieving sustained growth and profitability.
