QuidelOrtho NASDAQ: QDEL said its first-quarter 2026 results were pressured by a meaningfully weaker respiratory season, distributor caution in China ahead of expected national IVD pricing guidelines, and some order delays tied to Middle East disruptions, while management reiterated expectations for improved profitability and cash generation later in the year.
Management cites softer respiratory season and China distributor caution
President and CEO Brian Blaser said the quarter was affected by “a significantly softer respiratory season compared to Q1 of last year,” noting influenza-like illness (ILI) visits were down about 30% versus the prior-year period, according to April CDC reporting. He said the season was “notably weaker across other key measures, including severity of illness, hospitalizations, and duration,” calling it both “significantly milder and shorter than in Q1 2025.”
Blaser also highlighted macro and geopolitical headwinds. In China, he said sales slowed in March as distributors became cautious ahead of anticipated national IVD pricing guidelines, pausing inventory purchases due to potential future pricing declines. He noted the final guidelines had not been issued following the comment period, and the company’s updated guidance reflects an estimate based on the current draft. “As is expected, this estimate may change once the final guidelines and implementation timeline are announced,” Blaser said, adding that the company is preparing mitigation actions.
Separately, Blaser said QuidelOrtho saw delays in some orders and tenders due to “ongoing disruption in the Middle East,” but the company expects those orders and tenders to resume during the rest of the year if conditions stabilize.
First-quarter financial results
Chief Financial Officer Joe Busky reported total revenue of $620 million for the first quarter. Non-respiratory revenue was $552 million, or $544 million excluding the Donor Screening business.
Busky said labs revenue declined 8%, attributing the decrease primarily to factors discussed in management’s prepared remarks and the termination of a joint business agreement with Grifols, which “reduced Q1 labs revenue and created a difficult year-over-year comp.” Immunohematology revenue increased 3%, driven by North America, China, and JPAC, while TRIAGE declined by $3 million, primarily due to slower distributor sales in China.
Respiratory revenue was $68 million, declining sharply year over year. Busky characterized the drop as “an industry-wide trend, not unique to QuidelOrtho,” citing key opinion leaders and competitor reports. He said the company saw “no change in testing protocols” and that market share remained stable during the quarter. Foreign currency exchange was favorable by 210 basis points.
On profitability, Busky said non-GAAP operating expenses decreased 2% primarily due to R&D efficiencies. Adjusted gross margin was 44%, down 630 basis points due to product mix, reflecting lower respiratory revenue contribution. Adjusted EBITDA was $109 million, representing an 18% margin, and adjusted diluted loss per share was $0.04.
Cash flow and balance sheet
QuidelOrtho ended March with $140 million in cash and $130 million in borrowings under its revolving credit facility. Operating cash flow was negative $33 million and free cash flow was negative $67 million.
Busky said the company expected negative cash flow in the first half due to historical seasonality, but first-quarter cash flow declined year over year, primarily due to lower EBITDA from the weaker respiratory season and the timing of accounts payable and accrued interest. Inventory increased due to weaker respiratory demand and preparations for upcoming product launches.
He also pointed to “strong accounts receivable cash collections of $54 million” and a $22 million reduction in capex compared to the prior-year period, tied to lower systems and manufacturing capacity spend. The company maintained its expectation for positive full-year free cash flow, now projected at $100 million to $120 million, which Busky said would be driven by higher revenue in the second half of the year.
Net debt to adjusted EBITDA leverage was 4.1x, including allowable pro forma adjustments under the credit agreement. Busky said the company expects pro forma leverage to reach 3.25x to 3.5x by year-end 2026.
Strategy updates: LEX acquisition and product launches
Blaser said the company completed the acquisition of LEX Diagnostics in April, which he described as adding a “highly differentiated, ultra-fast molecular platform” that strengthens QuidelOrtho’s position in point-of-care testing. He said the company is already seeing customer interest and has secured first orders.
Blaser said customer feedback suggests an opportunity to cross-sell into the company’s installed base, noting that “approximately 90% of SOFIA customers currently use both antigen and molecular testing systems,” and that many have indicated willingness to switch to a more competitive molecular platform emphasizing ease of use, faster time to results, and lower costs.
To support launch readiness, Blaser said the company is expanding manufacturing capacity at its U.K. site. He expects instrument placements to begin this quarter, with “measurable assay pull-through and associated revenue beginning in early 2027.” In response to a question about switching costs, Blaser said the company expects “very low barriers” because instruments will largely be placed in customers without capital outlay, describing LEX as “plug-and-play” with “sample in, answer out in six to 10 minutes.” He added that the company may be “capacity constrained versus demand constrained” as the ramp begins.
In the labs business, Blaser said QuidelOrtho launched a high-sensitivity troponin assay in the U.S. and is “seeing strong demand,” with shipments to more than 300 U.S. customers. The company also began rolling out the VITROS 450 platform in select international markets as a successor to the VITROS 350, targeting low-volume, cost-effective needs in emerging markets. Blaser said initial shipments are targeted for JPAC, followed by Latin America and EMEA, where the platform recently received the CE mark.
Updated 2026 guidance and margin outlook
Busky said the company issued a new full-year 2026 guidance range, which he described as tethered to the low end of the prior range that had been set wide to account for respiratory season variability. QuidelOrtho now expects total revenue of $2.7 billion to $2.75 billion, reflecting first-quarter performance and lower expected full-year revenue in China tied to distributor behavior around the pending national pricing guidelines. Busky said the midpoint reduction to revenue guidance versus the previous range was about $75 million and “split almost 50/50 between the respiratory and the China,” with “maybe a little bit less on China, a little bit more on respiratory.”
For respiratory, Busky said the company is “continuing to plan for an average respiratory season” and is forecasting a flat second half without a rebound, translating to an 8% decline in respiratory revenue for full-year 2026.
QuidelOrtho now expects adjusted EBITDA of $615 million to $630 million, implying a 23% adjusted EBITDA margin and representing a 100-basis-point improvement over full-year 2025. The company also guided to adjusted diluted EPS of $1.80 to $2.00 and free cash flow of $100 million to $120 million.
Looking to the second quarter, Busky said Q2 is historically the seasonally lowest quarter and that QuidelOrtho expects sequential revenue, adjusted EBITDA, and adjusted EPS to be “roughly in line with Q1 2026,” while still showing year-over-year growth across those metrics, driven by the company’s core labs, immunohematology, and TRIAGE businesses.
On margins and cost actions, Blaser said the company has taken out “close to 1,000 positions,” and expects a 50 to 100 basis point improvement beginning in the second half of 2026 from its Donor Screening exit. He also cited procurement initiatives and facility actions including the shutdown of the company’s Raritan facility, as well as opportunities to optimize profitability outside the U.S. Busky told analysts there was “no change” to previously communicated adjusted EBITDA margin goals and timeline, citing ongoing procurement and site consolidation initiatives.
Regarding China, Blaser reiterated that QuidelOrtho has “no plans to walk away,” stating that proposed reimbursement changes would impact about half of the company’s sales in the country and that the China business is expected to remain accretive to overall margins. He said QuidelOrtho is working with distributors on “rebates and discounts and other things” to offset pressure and expects distributor behavior to begin stabilizing over the next couple of months.
In closing remarks, Blaser said the headwinds in respiratory and China “really doesn’t change our direction,” adding that the company expects a stronger second half and remains focused on delivering consistent profitable growth.
About QuidelOrtho NASDAQ: QDEL
QuidelOrtho is a global diagnostics company formed through the merger of Quidel Corporation and Ortho Clinical Diagnostics. The combined entity develops, manufactures and markets a broad portfolio of rapid and high-throughput diagnostic solutions across immunoassay, molecular diagnostics and transfusion medicine. Its offerings span point-of-care platforms for acute care testing as well as large-scale automated systems designed for clinical laboratories and blood banks.
The company's product range includes rapid antigen and antibody tests for infectious diseases, molecular assays utilizing nucleic acid amplification technology, and integrated immunodiagnostic analyzers.
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