Prepared remarks
Welcome to the QuidelOrtho Second Quarter 2025 Financial Results Conference Call and Webcast. Please note, this conference call is being recorded. An audio replay of this conference call will be available on the company's webcast shortly after this call. I would now like to turn the call over to Juliet Cunningham, the Vice President of Investor Relations. Please proceed.
Thank you. Good afternoon, everyone, and thanks for joining the QuidelOrtho Second Quarter 2025 Financial Results Conference Call. Joining me today are Brian Blaser, President and Chief Executive Officer; and Joe Busky, Chief Financial Officer. This conference call is being simultaneously webcast on the Investor Relations page of our website. To aid in the presentation, we have also posted supplemental information on the Investor Relations page that will be referenced throughout this call. This conference call and supplemental information contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not strictly historical, including the company's expectations, plans, financial guidance and future performance as well as prospects are forward-looking statements that are subject to certain risks, uncertainties, assumptions and other factors.
This includes the expected impact of tariffs and macroeconomic conditions and the proposed acquisition of LEX Diagnostics. Actual results may vary materially from those expressed or implied in these forward-looking statements. Information about potential factors that could affect our actual results is available in our annual report on Form 10-K for the 2024 fiscal year and subsequent reports filed with the SEC, including the Risk Factors section. Forward-looking statements are made as of today, August 5, 2025, and we assume no obligation to update any forward-looking statement, except as required by law. In addition, today's call includes discussion of certain non-GAAP financial measures. Tables reconciling these non-GAAP measures to the most directly comparable GAAP measures are available in our earnings release and the supplemental information, which are on the Investor Relations page of our website at quidelortho.com. Lastly, unless stated otherwise, all year-over-year revenue growth rates given on today's call are on a constant currency basis. Now I'd like to turn the call over to our CEO, Brian Blaser.
Thanks, Juliet. Good afternoon, everyone, and thanks for joining us today. I'll begin by reviewing our second quarter results, and then I'll discuss how we are addressing changes to U.S. trade policy and tariffs, and I'll finish with my thoughts on our recently announced intent to acquire LEX Diagnostics in the molecular space. Beginning with our second quarter results, total revenue of $614 million grew 1%, excluding COVID and the Donor Screening business, which we are in the process of winding down. Joe will go into additional detail, but let me provide some of the top line Q2 and year-to-date highlights. First, we delivered consistently solid results in our Labs and Immunohematology business units with organic constant currency growth of 5% and 3%, respectively. Our respiratory business remained stable for this time of year with a relatively small $2 million revenue decline, excluding COVID.
As many of you know, Q2 is typically our lowest revenue quarter of the year due to the seasonally low viral prevalence, especially in North America. As a result, North America revenue declined by 12% during the quarter. Our Q2 OUS performance was led by strength in Latin America, Japan, Asia Pacific, and Europe, Middle East, and Africa. EMEA growth was up 3% in the quarter and is up 6% year-to-date. And our other region grew 10% in the quarter with 14% growth in Latin America and 6% growth in Japan and Asia Pacific. Our low OUS penetration continues to be a significant opportunity for growth for us and is an area of focus. Turning now to China. We had 2% growth in Q2 despite the tariff-related shipment holds we had in place in the month of April, and those shipments have since been fully restored. China has been a challenging market for many of our peers, but it continues to be an important market for us.
Most of our China business is in clinical chemistry, where we have differentiated technology that has not been subject to the volume-based procurement processes that are impacting other multinational companies. Our solutions are highly valued in the market, in particular, in stat labs and distributed testing environments that benefit from our waterless technology and the reliability of our platforms. We also have relatively low market penetration in China, particularly in immunoassays. So we look forward to a very long runway for expansion over the coming years. Our view is that the volume-based procurement initiatives will not have a significant impact on our business this year. We have seen reimbursement changes flow through in cardiac markers that we have discussed for some time now. We have good visibility to our second-half forecast. So we're narrowing our range for China to mid-single-digit growth.
Moving to our Q2 profitability metrics. The impact of our cost structure actions is really starting to kick in. Adjusted EBITDA margin improved by 330 basis points, and we also saw meaningful improvement in adjusted diluted EPS compared to the prior year period. And these results were in line with our guidance and higher than consensus. Our second quarter and year-to-date results reinforce that the commercial and operations improvement initiatives that we launched last year are having a positive impact on our performance. Our global commercial team has sharpened its focus on key markets, value expansion in key accounts, and profitable growth in international markets that value our broad portfolio of solutions. Our R&D team is working on compelling innovation, including increasing the breadth of our testing menu, improving the utility of our current platforms, and developing new systems that will continue to differentiate us from our competitors.
Our operations team is making strides in optimizing our cost structure, generating direct and indirect procurement cost savings, and consolidating one of our major manufacturing sites. We have clear visibility to a rich funnel of projects that we expect will yield significant incremental cost savings and margin expansion, and we expect to see the positive impact of these initiatives appear in our results in the latter part of 2025 and into 2026. Importantly, our efforts to be a more customer-focused organization are really paying off. You can see this with our announcement last week that QuidelOrtho earned first place rankings by ServiceTrak for best overall clinical chemistry and integrated system performance and best overall for service. Our company has the highest customer service ranking in our markets as measured by Net Promoter Score among some very tough competitors. Advancing the performance of our business also requires investment in top talent.
We were pleased to welcome two exceptional senior leaders in Global Quality and Regulatory Affairs last month. Devon Burek joined us as Senior Vice President of Global Quality and Sergio Gadaleta joined as Senior Vice President of Clinical and Regulatory Affairs. Both Devon and Sergio have extensive industry experience, but more importantly, they're the kind of transformational leaders that we want in our business to elevate our performance. Now I'd like to briefly discuss the situation with tariffs and how we are navigating current conditions. While global trade tensions have caused uncertainty, other market conditions in the second quarter were generally consistent with what we saw in the first quarter. I think our team did a tremendous job of acting quickly to mitigate any potential impact primarily through inventory management and cost controls. Given the current state of trade agreements and our continued mitigation efforts, we estimate potential tariff headwinds of $20 million to $25 million in 2025, which is lower than our prior estimate of $30 million to $40 million.
We continue to expect to fully mitigate tariff headwinds through the actions we're taking. Of course, we continue to closely monitor the situation. Lastly, I'd like to talk about our molecular strategy and why we are so excited about this incremental growth opportunity. As we announced in June, we intend to acquire ownership of LEX Diagnostics upon FDA clearance of its Velo molecular platform and respiratory panel. LEX is a U.K.-based molecular diagnostics company with an innovative molecular platform that can deliver results in minutes. It takes approximately 6 minutes for a positive result on its respiratory panel for flu A, flu B, and COVID with excellent performance. The LEX platform integrates seamlessly into the point-of-care workflows and provides a highly competitive value proposition centered on speed, performance, and cost. Once the transaction is completed, we will move quickly to expand the test menu, both in the respiratory space and into other applications like women's health and STI.
Since our announcement, we have garnered significant interest from our customers. Our commercial team is really excited about the growth potential for the platform. LEX submitted a dual 510(k) and CLIA waiver for the Velo platform to the FDA in June, and the review process is well underway. If the product is successful in achieving clearance in 2025, we would expect to begin placements on a limited basis in early 2026 with the objective of ramping up placements during the '26, '27 respiratory season. With that, I'll wrap up by saying that we are pleased with the progress we've made on our top priorities and the strength of our underlying business. We are seeing the results of our efforts materialize, and we remain committed to delivering on our strategy to drive growth, expand profitability, and deliver innovation that advances the power of diagnostics for a healthier future. With that, I'll turn the call over to Joe to take you through our second-quarter financial details. Joe?
Thanks, Brian, and hello, everyone. I'll start by discussing our second-quarter results, which are detailed on Slide 3 of the supplemental information available on the Investor Relations section of our website. Unless otherwise noted, all year-over-year revenue growth figures discussed today are presented on a constant currency basis. Let me begin by taking you through our second-quarter performance, followed by a discussion of our full-year 2025 financial guidance, which remains unchanged. Total reported revenue for the second quarter of '25 was $614 million compared to $637 million in the prior-year period. The year-over-year decrease in total revenue was primarily due to lower COVID and Donor Screening revenue, the latter of which is related to the continued wind down of that business. Excluding COVID and Donor Screening revenue, revenue growth was 1% during our seasonally lowest quarter of the year.
Foreign currency translation had a slightly favorable impact of 20 basis points during the second quarter. Based on foreign currency exchange rates as of the end of July, we expect FX to now have a neutral impact on revenue and adjusted EBITDA for the full year. Brian provided the regional commentary, so I'll focus on our broader business results. Looking at our non-respiratory business in the second quarter of '25, revenue grew 1%, excluding Donor Screening. Within that non-respiratory category, our labs business grew 5%, driven by good performance in both clinical chemistry and immunoassay testing. Notably, in our Labs business, we continue to see strong recurring revenue with long contracts and a loyal customer base. Integrated and automated labs installed base grew 6% and 11%, respectively. This growth is evidence that our commercial strategy to lead with integrated analyzers and automation continues to work well.
In Transfusion Medicine, immunohematology revenue continued its consistent performance with 3% growth with particular strength in Latin America and Europe, Middle East, and Africa. Donor Screening revenue decreased by 61% due to the continued wind down of that business as expected. Lastly, our Triage business decreased by 2%, largely driven by order timing in China. Note that we also saw some decline in other cardiac testing revenue, which was timing related between quarters. Turning now to our respiratory business. Revenue of $47 million decreased by $2 million, excluding COVID. Point of Care was down 21%, primarily due to lower COVID sales, which were $9 million in the quarter and decreased by 52%. Flu was slightly down compared to the prior year period. Given lower year-to-date COVID revenue and what we have seen thus far in Q3, we now expect full-year 2025 COVID revenue of between $70 million to $100 million compared to our previous range of $110 million to $140 million.
To be prudent, we are lowering the range because while positivity rates are increasing, emergency room visits and hospitalization rates indicate that the current COVID strains are not severe, which typically results in less testing. We will, of course, continue to monitor summer activity for any change. We do, however, expect to see normal increases in COVID revenue later in the year, but therefore, it's likely that COVID revenue will be lower in Q3 than originally anticipated. Now to finish up our business unit results, Molecular revenue grew 24%, although off a smaller base as we continue to support our Savanna customers through our transition plan. Moving down the P&L. Second quarter adjusted gross profit margin was 45.7% versus 44.2% in the prior year period. The 150 basis point year-over-year increase was driven by disciplined expense control and favorable product mix. Non-GAAP operating expenses of $215 million comprised of SG&A and R&D decreased by $21 million or 9% as a direct result of our ongoing cost savings actions in the areas of staffing and indirect procurement.
Our Q2 results included $179 million in restructuring, integration and other charges. Consistent with our June announcement, we had primarily noncash charges of $150 million related to the discontinuation of the Savanna platform. These charges were related to fixed assets and inventory. We also recorded $23 million in integration costs primarily related to our ERP system conversion. We are happy to report that we have completed our ERP conversion related to the business combination, and it has gone very well, thanks to the efforts and dedication of our team. In addition, because of this, we expect lower integration costs in the second half of the year. Also included in the restructuring reserve was a $6 million charge for planned headcount reductions related to our Raritan, New Jersey manufacturing site consolidation. Given the complexity of the manufacturing operations in Raritan, we expect the site closure to take place over a two-year period.
We expect to save approximately $20 million of annual operating costs as a result. These savings are another example of actions that move us toward our adjusted EBITDA margin goals of mid- to high 20% range. Adjusted EBITDA of $107 million increased by 19% compared to the prior year period. Adjusted EBITDA margin was 17%, a 330 basis point improvement. On a year-to-date basis, adjusted EBITDA was $267 million or 20% margin, which represents an increase of approximately 400 basis points. Notably, adjusted diluted EPS was $0.12 compared to adjusted diluted loss of $0.07 in the prior year period, which was growth of 271%. Year-to-date adjusted diluted EPS was $0.86 compared to $0.37, which was growth of 132%. The impressive growth in adjusted EBITDA and diluted EPS are evidence that our cost savings initiatives are working and that we continue to drive towards our adjusted EBITDA margin goals.
Turning now to the balance sheet on Slide 6. We finished the quarter with $152 million in cash and $390 million in borrowings on our $800 million revolving credit facility. We had an increase of $81 million in net debt as expected since Q2 was our seasonally lowest quarter for revenue, margin, and cash flow. Adjusted free cash flow was a negative $32 million, which was in line with our expectations for Q2. Given that we expect seasonally stronger cash flow in the second half of the year, we continue to expect full-year recurring cash flow to be 25% to 30% of adjusted EBITDA. During Q2, our net debt to adjusted EBITDA ratio was 4.2x. Our consolidated leverage ratio, including pro forma EBITDA adjustments as permitted and defined under our credit agreement, was slightly down sequentially at 3.3x. We expect our gross year-end leverage ratio to be at the higher end of our previously communicated range of 3.5 to 4x.
As an update on our debt refinance, we now have high confidence that we will refinance our existing Term Loan A in Q3, and we do expect advantageous terms compared to our current credit agreement. Our highest capital allocation priority continues to be debt paydown, and our goal continues to be net debt leverage of between 2.5 and 3x. Now turning to Slide 7. Based on our current business outlook, we are reiterating our full-year 2025 financial guidance as follows: We continue to expect full-year '25 total reported revenue of between $2.6 billion and $2.81 billion with a neutral FX impact to the full year. We are reiterating our full-year revenue guidance range with the balancing factors of a decrease in COVID revenue assumptions and a benefit to revenue from FX tailwinds. As Brian mentioned, we now expect gross tariff impacts of $20 million to $25 million, which on a net basis is now a tailwind to our overall financial results due to our mitigation plans already in progress.
Therefore, on the adjusted EBITDA and adjusted EPS lines, we expect the lower COVID margin contribution to be fully offset by lower tariffs as well as some savings from the Savanna discontinuation. There is no change to our full-year guidance. We are maintaining our full-year guidance for adjusted EBITDA of $575 million to $615 million, which equates to a 22% adjusted EBITDA margin, a 250 basis point improvement over the prior year, and adjusted diluted EPS of between $2.07 and $2.57. Finally, we expect incremental cost savings of '25 between $30 million to $50 million, primarily related to indirect procurement efforts. This is in addition to any tariff-related offsets. Our continued operational improvements played a meaningful role in our performance this quarter, particularly on margin and EPS. We are proactively navigating the challenging macro environment and believe our current business outlook is in line with our 2025 full-year financial guidance.
We remain focused on execution, commercial excellence, and cost savings initiatives to deliver profitable growth. Despite recent tariff impacts, we continue to see a clear pathway to our adjusted EBITDA margin goal in the mid- to high 20% range by mid-'27. With that, I'll ask the operator to please open up the line for questions.
Questions and answers
Our first question comes from Andrew Brackmann with William Blair.
This is Maggie Boeye on for Andrew today. Maybe first, just to start, can you walk through your respiratory expectations for the remainder of the year? And just how you got to where your current COVID guidance is? Do you feel that you've kind of gotten your guide to a more conservative place given the chance it could be a lighter season?
Yes, Maggie, it's Joe. First of all, I want to clarify that we are not changing any of our flu assumptions. The flu guidance remains the same as it was at the start of the year. The only adjustment in our respiratory revenue guidance pertains to COVID. As I mentioned earlier, we are currently observing an increase in COVID positivity. However, emergency department visits and hospitalizations are lower, indicating less disease severity and likely reduced testing as a consequence. So far this year, we've generated about $33 million in COVID revenue. We anticipate higher revenue in the second half of the year, but probably not as much as we originally projected for the third quarter. Therefore, we are lowering our full-year COVID guidance range from $110 million to $140 million down to $70 million to $100 million.
Okay, that's helpful. Regarding China, I know you mentioned in your prepared remarks about the visibility you have that allows you to feel confident in narrowing the growth range to mid-single-digit growth for 2025. Can you explain how you arrived at that number? Where might the potential risks be? Additionally, how do you view the long-term revenue growth opportunity in China?
Yes. So thanks, Maggie, for the question. I'll just double-click into China for a minute here. Our business in China is a little different than most of our peers there. We have mostly clinical chemistry business where we have very good pricing due to our dry-slide technology. We're also underpenetrated in immunoassays which generally have higher prices and margins. That's a real opportunity for us. We continue to see China as an important market for us as long as the economics continue and notwithstanding anything crazy that happens with tariffs or otherwise. The market has seen a number of pricing and volume actions taking place. There have been a couple of BBP actions that took place in infectious disease and hormone. Some tumor markers were impacted by that. Those had relatively minimal impact on us. There was also a unified reimbursement plan for some additional cardiac assays. That also had kind of a relatively minor impact on our business there.
Of course, they've gone through this panel debundling process or DRG process, which has had some impact on our volume there. But because we're largely a stat lab-focused placement there, those panels are generally not debundled when they're run in a stat lab that you're generally looking for broad indications of what's going on. You don't tend to unbundle those tests. Most of the impacts from the BBP, this reimbursement, the unbundling actions, we think, have already happened. We don't see any actions on the immediate horizon that would impact the remainder of 2025. We're expecting higher growth in the back half of the year that would bring us to the mid-single-digit level for the full year and just monitoring the environment carefully as you always have to do in that region.
Our next question comes from Patrick Donnelly with the company, Citi.
Joe, it sounds like maybe a few moving pieces on the EBITDA side, maybe a little less COVID and then better on the Savanna piece and maybe the tariffs. Can you just talk through the moving pieces? Obviously, when Savanna got discontinued, it felt like you guys had some room. Is that just COVID being high margin moving down a little bit? What are the levers there? And again, it sounds like you're still confident in the midterm guide, '26 and beyond. But yes, maybe just walk us through the margins, the moving pieces to keep it here. It felt like maybe there's some room. Is there conservatism still? Curious how you're thinking about it.
Yes, sure, Patrick. So again, maybe for the full year guidance on the revenue side, it's actually pretty simple. The COVID numbers are coming down a little bit. It's being offset by less FX impact. So therefore, the revenue guide for the full year is unchanged. When you move down to adjusted EBITDA and adjusted EPS, we are looking at the COVID revenue range coming down on the low and the high end by $40 million due to the reasons I just outlined in my response to Maggie earlier. That's probably a $20 million to $25 million impact on gross profit and adjusted EBITDA. The good aspect offsetting that is we have less tariff impacts to the tune of $15 million to $20 million. We also have the discontinuation of the Savanna development that is going to provide $5 million to $10 million of upside. All those moving pieces net out and get us back to the same number for the bottom line adjusted EBITDA and adjusted EPS.
Okay. Got it. And then maybe a quick follow-up on China. I know it sounds like you trimmed the guide from mid- to high-single to just mid-single. Is that just the cardiac piece? And then again, it sounded like some of the shipments that were on hold in 2Q have already shipped. Can you just talk about the confidence in the 2H piece? Is a lot of that driven by the timing? Or are there other variables that we should be keeping an eye on?
Yes, Patrick. I think the narrowing of the China full-year guidance to mid-single digits is just based on the fact that we've got two quarters behind us, and there's only two quarters to go. This business is mostly labs. There is some IH business there. There's some Triage business there, but it's mostly labs. The labs business is a pretty predictable business, not only in China but around the world. It’s really just the visibility we have and the fact that, like Brian said, most of those impacts, we think, are behind us. We don't expect any more of those downsides. It's just good visibility, so we can narrow the range down to a pretty small range.
Our next question comes from Tycho Peterson with the company, Jefferies.
This is Jack on for Tycho. Appreciate the question. Congrats on the good quarter. Just want to touch on point of care. I know you talked through Triage a little bit, but that was, I believe, down 2% in the quarter, but I want to touch on the other elements there in Sofia and sort of what happened in the quarter?
Yes, Jack, this is Joe. As we've said a couple of times, Q2 is our lowest respiratory quarter. The respiratory revenue excluding COVID was pretty flat. We did mention that COVID was down 52%. The other piece in there is this other cardiac revenue, which I noted in the prepared remarks was down about $10 million year-over-year in the quarter, but it's all timing within the quarter. We expect to make that up in the second half of the year. So it was a bit of a headwind in Q2 for sure, but it's mostly timing with the second half of the year. Those are all the pieces that will get you to the Point of Care numbers.
Okay. And then I guess any color on Sofia specifically?
Yes. Again, Sofia, that's the flu revenue, and it was pretty small in the quarter and it's flat year-over-year.
Okay. And if I could just sneak one more in. As we think about China, I appreciate the colors on EVP and DRG. It sounds like you're still bundling a lot of these assays at the stat labs. How should we think about sort of like the go-forward exposure to DRG if that were to, I guess, turn adversely?
I think it's the way I characterized it. Again, most of our business there is in the labs space, and a significant portion of that business is in stat labs. We continue to position our systems in stat labs and distributed testing environments where I think they're less likely to do unbundling just because of the nature of how they're treating patients. We'll see some of it moving forward, but I don't expect it to turn sharply for any reason.
Our next question comes from Conor McNamara with the company, RBC Capital Markets.
Great. And sorry, Joe, just one more housekeeping item on the guidance, just to follow up on what Patrick was asking. It looks like you took out about $50 million in revenue between COVID and China and then…
Conor, just to maybe be clear, the China revenue in the guide is not changing at all. I want to be really clear about that. We narrowed the range for everyone. What did come down was COVID revenue range, and that was $40 million, 4-0 on the top and the bottom. That's really fully offset by the now change in FX assumption where FX is neutral for the year.
Okay. Got it. Can you discuss the opportunity with molecular diagnostics and your strategy for when you enter the market? Will you focus on early placements with existing Sofia customers, or is there potential to target new accounts? Who will be responsible for sales in this area? Will it be the legacy Quidel team, or will the legacy Ortho sales representatives be involved? If you could provide more details on that, it would be appreciated.
Yes. Well, it's a really compelling platform. As I described it, it's basically an ultra-fast real-time PCR, taking 6 minutes to get a result on their respiratory panel. It has a low-cost profile for both the instrument and the cartridges. It has a direct swab option. It's got room temperature reagents and a very simple sample-to-answer workflow. I won't single out any specific competitors, but if you look at our platform against any of the competitive platforms out there, there's great differentiation. We think there's plenty of opportunity to take share from existing competitors, but also some greenfield opportunity. The channel will be a combination of the current channel that we use for Sofia, but we'll also leverage professional applications for this. We expect to utilize the legacy Ortho commercial team to place those instruments, and we're very excited about the platform.
And one final question, if you don't mind. Just with one of your competitors changing hands. Do you see an opportunity to potentially take some market share if there's any disruption there? Or is it too early to tell if that's an opportunity for you guys?
Any time there's disruptive activity in the market, it's generally a good opportunity for competitors, and we'll certainly look to exploit that the best we can, just like they would if we were going through it. So yes, we'll be looking at that carefully.
Our next question comes from Casey Woodring with the company, JPMorgan.
Can you explain your thoughts on free cash flow for the second half of the year? The second quarter saw a decline due to lower respiratory volumes. What is your outlook on achieving the 25% to 30% adjusted EBITDA conversion target for the year and the expected improvement compared to the approximately 5% you achieved in the first half?
Yes, Casey, it's Joe. That 25% to 30% of adjusted EBITDA target is a recurring free cash flow number. To reiterate the numbers, we've done $15 million of recurring free cash flow in the first two quarters of this year. Last year, we used $79 million of cash in the first two quarters of the year. We've been saying all along that our business is very seasonal and that we will generate more cash in the second half of the year versus the first half of the year. This was evident last year as well; we generated $189 million of recurring free cash flow in the second half of the year. To get to our target of that 25% to 30% of adjusted EBITDA, we need to generate about $140 million to $160 million of second-half free cash flow, which is reasonable based on what we did last year and the seasonality of the business.
Got it. That's helpful. And then my follow-up, just on the $30 million to $50 million in incremental savings this year. You had previously said that that would be back half weighted. Just any more color there? Is it closer to $50 million or closer to $30 million? And do you have a better sense of the quarterly cadence that we should assume between Q3 and Q4?
The $30 million to $50 million for this year is primarily related to indirect procurement initiatives, and we are on track to realize that $30 million to $50 million. It's more back-end loaded. If you look at the savings we’ve seen in the first half of the year, the margin improvement from our headcount reduction is evident. You will start to see second-half benefits primarily related to the indirect procurement benefits. It will be in that range of $30 million to $50 million, more to come on the next call.
Our next question comes from Jack Meehan with the company, Nephron Research.
I wanted to discuss the FDA guide for respiratory testing. The outlook for flu remains the same, and you've slightly adjusted your expectations for COVID. I'm interested in your assumptions regarding the ABC combo test as a percentage of the overall mix and the demand outlook for that.
Jack, yes, no change. We still expect greater than 50% of the mix of flu will be the combo test. That combo testing going back to Q1 this year and the two previous years has been durable. We expect the same as we move into Q3 and Q4. No change.
Okay. And then either for Brian or Joe, as you've kind of reassessed the molecular strategy over the last couple of months between Savanna and LEX, I was curious what that means for the other parts of your molecular portfolio as LEX potentially comes in. How are you feeling about Savanna and Lyra and kind of their long-term positioning?
Yes. We're taking a step back and looking at that. I expect those to have a place in our portfolio. As you know, they're smaller businesses. We're hanging our hat on most of our growth there on the future of the LEX platform. That's how we're thinking of the molecular space.
Next question comes from Lu Li with company, UBS.
I think the first one on the LEX. As you're planning for the commercialization, have you already started to do some kind of commercial work like marketing? And even I remember you probably need to move some of the manufacturing to the U.S. I wonder if you have already started doing that.
This is Brian. No, we have not started any commercial efforts whatsoever there. We've only announced the intent to acquire the business. They still have to get through their FDA approval. We are looking at what we can do from an infrastructure standpoint ahead of an approval, but nothing externally commercial with customers or in the marketplace.
Got it. Makes sense. And then I guess maybe focusing on some other kinds of like business in terms of portfolio refresh, have you started to identify any areas that you can potentially launch new products in 2026 or maybe even beyond that?
In terms of new products, in the short term, we're focused mostly on numerous menu gap fillers across primarily the labs platforms. Now we're starting to think about next-generation platforms. You have to stay relevant in this space, and that's important to us. But over the near term, it will primarily be content and maybe some additional feature capabilities on our existing systems, informatics, and maybe some automation upgrades on existing platforms as well.
Our next question comes from Andrew Cooper with the company, Raymond James.
Maybe just first, a lot of talk about VBP. I think we've covered kind of why you're not impacted as much. But does this do anything about the competitive landscape when you think about that opportunity in immunoassay and what you bring to the China market? Or does it change the way you approach that in any way?
I think it probably speaks more to our longer-term opportunity as opposed to any radical upset of the competitive landscape there. It's still a very competitive market, as you know, with not only large multinational corporations participating, but also a lot of local suppliers in the immunoassay market. We're looking at how we shape the organization, how we shape our business to advance our penetration there and also preserve our economics while doing it.
Okay. Helpful. Then maybe just one kind of similar type question on the respiratory side. I know in the past, you guys have commented some on share. Obviously, we've heard some other companies saying different things in the space. So what's the latest view on share in that respiratory setting? In particular, in those core settings for you in primary care and acute care locations like that. Has there been any change, and any update to thinking there would be great.
Andrew, it's Joe. Similar to what I said previously on the flu guidance, there's really no change to the flu guidance that we put out back in February. The modeling we do is based on the market share size in terms of volume and the mix of the combo to stand-alone flu A/B testing. No change to our assumptions. We're still in the same place. Q1 and Q2 from a respiratory perspective played out pretty much as we expected. Based on what we're seeing from the Southern Hemisphere flu season, there's no change to our guidance for the full year on the flu. All those assumptions are in the same place.
At this time, there are no more questions registered in the queue. I'd like to pass the conference over to our host, Brian Blaser, for closing remarks.
Thank you, operator, and I thank all of you for your time today. I'd just say to wrap up, we're pleased with our solid results in Q2 and the first half of 2025 with adjusted EBITDA margin and adjusted EPS improvement resulting from our cost initiatives. The strength of our underlying business with our recurring revenue model, long-term contracts, and good visibility gives us confidence that we're on the right track and well positioned for continued growth. We look forward to sharing our continued progress with you next quarter. Thank you.
That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.