QuidelOrtho (NASDAQ:QDEL) reported third-quarter revenue of $619 million, down 12% year over year on a constant-currency basis, as China pricing changes and softer respiratory testing demand continued to weigh on results. The company said revenue rose 3% excluding China, respiratory testing and the prior-year contribution from its U.S. Donor Screening business, which it is winding down.
President and Chief Executive Officer Brian Blaser said the company’s underlying Labs and Immunohematology businesses remained resilient. Excluding China, Labs revenue increased 4% and Immunohematology revenue grew 3%, with growth across Latin America, Japan and Asia-Pacific. Those businesses represented 73% of total company revenue excluding China, according to Chief Financial Officer Micah Young.
China and Respiratory Testing Pressured Results
China revenue fell 45% from the prior-year period as distributors and customers reduced purchases and inventory following the finalization of nationwide in vitro diagnostics pricing guidelines in mid-August. The company expects implementation to begin in six provinces by year-end, although timing will be determined at the provincial level.
Blaser said QuidelOrtho expects continued destocking through the remainder of 2026, followed by increased pricing pressure as changes are implemented more broadly in 2027. The company now expects China to account for about 8% of total revenue in 2026, declining to roughly 4% to 5% in 2027.
“As you look into next year, it is really three factors,” Blaser said during the question-and-answer session, citing continued destocking, lower reimbursement rates affecting prices and increased competitive pressure affecting volumes.
Point of Care revenue declined 27% year over year, including a 39% decline in respiratory revenue. Management said respiratory activity remained below the prior-year period. While the company has seen an early start to the respiratory season, Blaser said an early season does not necessarily indicate a higher or longer peak, and QuidelOrtho maintained a cautious outlook based on trends through the third quarter.
Restructuring Program Targets More Than $80 Million in Savings
QuidelOrtho announced a cost transformation and enterprise restructuring program intended to improve profitability, cash generation and deleveraging. The initiative is expected to produce more than $80 million in annual savings in 2027, with savings beginning in the fourth quarter and ramping through 2027, weighted somewhat more heavily toward the second half of the year.
The company expects to record approximately $30 million to $35 million of one-time restructuring charges in the fourth quarter, with most of the associated cash outflow expected during that quarter.
Blaser said the savings are incremental to more than $140 million in savings generated over the past several years. He said initial savings would come primarily from staffing reductions, with further review of indirect spending planned over the coming months.
As part of the restructuring, QuidelOrtho will organize around two businesses:
- Point of Care Diagnostics, including the Sofia, Triage and NULEXA product lines, focused on clinics, physicians’ offices and emergency rooms.
- Core Diagnostics, combining Labs, Immunohematology and informatics offerings for clinical laboratories, hospitals and blood banks.
Blaser said the company previously operated under a regional model that had evolved into a business-unit-led structure matrixed across regions. The new approach is intended to provide clearer accountability, align investments with the needs of distinct customer groups and minimize disruption to customer-facing activities.
Margins, Cash Flow and Debt
Adjusted gross margin was 47.8%, down 90 basis points year over year. Young said the decline reflected lower revenue and an unfavorable product mix, partly offset by cost actions. The quarter also included about 300 basis points of benefits from tariff refunds, vendor credits and cost savings that are not expected to recur in the fourth quarter.
Non-GAAP operating expenses declined 3% to about $210 million, though they rose 300 basis points as a percentage of revenue to approximately 34%. Adjusted EBITDA was $148 million, or a 24% margin, while adjusted earnings per share were $0.31.
Operating cash flow was $20 million, improving by $65 million from a year earlier. Net capital expenditures declined to $19 million from $49 million in the prior-year quarter, resulting in approximately break-even free cash flow. That compared with negative free cash flow of $95 million a year earlier and negative free cash flow of $136 million in the second quarter.
At quarter-end, QuidelOrtho had approximately $2.8 billion in net debt, net leverage of 4.5 times adjusted EBITDA and $166 million in cash. The company amended its credit agreement, increasing the maximum consolidated leverage ratio to 5.5 times adjusted EBITDA through the second quarter of 2028 before the covenant steps down over time.
Guidance Narrowed
QuidelOrtho narrowed its full-year revenue outlook to $2.52 billion to $2.54 billion, from a prior range of $2.52 billion to $2.6 billion, primarily reflecting its updated expectations for China. The company now expects adjusted EBITDA of $540 million to $545 million and adjusted earnings per share of $0.65 to $0.70.
Management left its expectation for low- to mid-single-digit 2026 growth in Labs and Immunohematology, excluding China, unchanged. Blaser said QuidelOrtho intends to continue targeted investments in the VITROS 450 analyzer and the NULEXA molecular Point of Care platform while focusing on profitability, free cash flow and debt reduction.
About QuidelOrtho (NASDAQ:QDEL)
QuidelOrtho Corporation (NASDAQ:QDEL) is a global in vitro diagnostics company formed through the combination of Quidel Corporation and Ortho Clinical Diagnostics, a transaction completed in 2022. The company develops, manufactures and markets diagnostic technologies used to detect disease, guide treatment decisions and support blood-transfusion safety.
Its portfolio includes rapid immunoassays, molecular testing systems, clinical chemistry and immunohematology products, as well as laboratory automation solutions.
