QuidelOrtho Corporation

I would like to turn the call over to Juliette Cunningham, Vice President of Investor Relations.

Thank you. Good afternoon, everyone, and thanks for joining us for the fourth quarter and full year Financial Results Conference Call. With me today are Doug Bryant, President and CEO, and Joe Buskey, Chief Financial Officer. This conference call is being simultaneously webcast on the Investor Relations page of our website. and a version of today's presentation can be downloaded there. Before we begin, I will cover our safe harbor statement. The statements we will make during this call that are not strictly historical, including the company's expectations, plans, future performance, and prospects, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to a number of risks and uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in these forward-looking statements. These risks and uncertainties include but are not limited to those factors identified under risk factors in our annual report on Form 10-K for the fiscal year ended January 1, 2023. and subsequent reports filed with the SEC. Please refer to our SEC filings for a more detailed discussion of forward-looking statements and the risks and uncertainty. We cannot assure you that the forward-looking statements we make or are implied by our statements will be realized. Furthermore, such forward-looking statements represent management's judgment and expectations as of today. Except as required by law, we undertake no obligation to update any forward-looking statement or any time-sensitive information to reflect future events, developments, or change circumstances for any other reason. Also, during today's call, we will discuss certain items that do not conform to U.S. generally accepted accounting principles or GAAP. Please see slide three for a list of non-GAAP measures. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the appendix to the investor presentation and press release issued this afternoon. Both are available on the investor relations page of the Quidel Ortho website. Lastly, unless otherwise stated, all year-over-year growth rates, including revenue growth rates given on today's call, are given on a comparable constant currency basis. And now I'd like to turn the call over to Doug Bryant.

Thank you, Juliette. Good afternoon, everybody, and thank you for joining us today for the fourth quarter and full year 2023 earnings call. 2023 was a foundational year for Quidel Ortho. Despite the brevity of the respiratory season in the fourth quarter, we performed well. More importantly, we grew above market in our labs business gained market share in our industry-leading respiratory point of care products, and achieved several internal milestones. Most notably, our operations team made significant permanent manufacturing upgrades, which increased our production capacity and supply chain resilience. This allowed us to address backlogs and positioned us to meet future market demand. Our global sales team is now in place, actively cross-selling, and we like the strength of our competitive position across the globe. Our combo test continued and continues, and we've been able to not only gain market share, but maintain pricing despite a lower volume season. We received more than 700 regulatory approvals in the US, Europe, Middle East, and Africa, and China. with an additional 1,000 approvals in the rest of the world. This includes de novo 510 s for both Sophia 2 SAR Xanagen and the Savannah platform. Additionally, we identified substantial greater synergies while investing in the business and paying down $227 million in term loan debt. All these accomplishments helped to bolster our already strong competitive position and long-term growth profile. We believe we're well positioned to take additional share in key markets over the longer term. Let me turn to the top line numbers, starting with the full year 2023. Our total revenue was $3 billion, a decline of 26% on a supplemental combined basis compared to the prior year. The year-over-year decline was related to the lower respiratory season in 2023, compared to the prior year, particularly in COVID-19 related testing, which was down roughly $1 billion. Although flu was $248 million for the year, right in the middle of our range of $230 million to $270 million, it was down 29% versus the prior year. Excluding respiratory, the total revenue grew 5% on a supplemental combined basis for the full year. With that, I will not sugarcoat the fact that our fourth quarter numbers fell short of our expectations as we overestimated the size of the endemic COVID-19 and flu season. Ultimately, our optimistic outlook turned a solid growth enhancing year into a less appreciated achievement. Despite the relatively weaker respiratory season, we had several bright spots in point of care. First, Recent third-party market data suggests that we gained share for respiratory products in both physician office and acute care segments versus our competitors, all while holding price steady. We remain the industry leader in flu, SARS, and RSV rapid diagnostic testing. Second, the number of SOFIA placements grew to 89,000 instruments, which shows continued runway for instrument demand and positions us nicely for future higher margin revenue growth in the respiratory segment. Our fourth quarter results for total revenue came in at $743 million. Our respiratory revenue was down 49% compared to the prior year period. In North America, prevalence was steady but lacked the inflection point in demand that we would typically expect late in the fourth quarter. This could be an indication that distributor destocking on COVID-19 products will continue into Q1 of 2024. Our distributor partners typically close their fiscal year in March and purposely carry lower inventories. We also believe that the respiratory season or the respiratory testing contraction can be attributed to COVID-19 fatigue, perceived reduction in severity of recent strains, and very little asymptomatic testing. Turning to our business portfolios, our labs business really led the way this year in terms of growth. For the full year 2023, labs grew 8% in constant currency in line with our expectations. Excluding respiratory, labs grew 13% in the fourth quarter and 10% for the full year 2023 in constant currency. In our transfusion medicine business, we continue to see great potential and will invest further in our immunohematology portfolio to continue advancing our market-leading position. On the other hand, we plan to responsibly transition out of the U.S. donor screening portfolio, which is lower growth and has lower margins. While our goal is to wind down this portfolio, we will certainly continue to support our existing customers and honor our contractual commitments. Our molecular business achieved significant milestones with the FDA approval and the U.S. launch of our Savanna Multiplex molecular platform and the HSV-VZV syndromic panel. This is a critical step in our strategy to bring central lab sensitivity and specificity to everyone from mid-sized hospitals to remote mobile clinics. The production ramp and marketing role are underway. We currently use low volume manual manufacturing lines for production of this panel, but we are working toward deploying our high volume automated solution. So while production in the short term will be dilutive, longer term this automated line is expected to strengthen margins. We anticipate that our automated line will be in production well in advance of the year-end respiratory season. Within our point of care business, as I said earlier, Our commercial team secured approximately 4,800 new SOFIA instrument placements globally in 2023, raising our global installed base to about 89,000 SOFIA analyzers. The commercial launch of SOFIA 2 SARS antigen plus, the first rapid antigen test cleared by the FDA with CLIA waiver in the United States market, strengthened our position as a top innovator and trusted leader in this evolving space. Additionally, through our triage platform for cardiovascular, we have a revitalized focus on chronic diseases, including heart failure. This work stream will help clinicians detect, monitor, and manage the silent pandemic of chronic diseases that tend to be overshadowed by the trending health story of the moment. Shifting now to our third integration phase, transformation. We call it QO Next. And it's geared toward accelerating the execution of value-driven initiatives for greater business efficiencies, investments, and organizational agility. We know what needs to be done, and we understand the levers we need to pull. Specifically, we are shifting our product development, R&D, and regulatory efforts to focus on menu expansion, as we see ample opportunities to strengthen our competitive advantage and pull through across an expanding customer base. We have been actively evaluating our real estate footprint and anticipate consolidating facilities primarily in the United States. We intend to improve our organizational cost structure by eliminating underperforming non-value driven initiatives and initiating a senior level management de-layering effort to create leaner teams, improve span of control, and speed of execution. We believe this will further reduce our headcount by 5 to 6%. Savannah has been a long time coming in the United States and our agenda at this point is clear. Menu expansion and customer adoption. We're advancing both with FDA review of our RVP4 panel and others in the queue. Our US sales team is meeting this week and I can assure you a successful Savannah commercial launch is on their menu as well. As noted earlier, We will invest in the higher growth immunohematology side of our transfusion medicine business. These investments are expected to drive higher returns and help balance the seasonal spikes in our current business model. In summary, let me repeat that 2023 was a foundation building year for us. We continue to establish Quidel Ortho as an industry leader capable of serving the breadth of the healthcare continuum from the largest labs and hospital systems to the most remote points of care and in the home. We are a stable, diversified growth company, targeting about $19 billion out of a global $48 billion total addressable market. Finally, we are steadfast in accelerating our desired future state and financial goals. With this, I'll let Joe take you through the financials in greater detail. Joe?