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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-01 · 152 added, 120 removed, 187 unchanged (59% of the section changed)

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This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act.

These statements are any statement contained herein that is not strictly historical, including, but not limited to, certain statements under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding our commercial, integration and other strategic goals, our cost-savings initiatives, industry prospects, our expected results of operations or financial position, and future plans, objectives, strategies, expectations and intentions.

These statements are any statement contained herein that is not strictly historical, including, but not limited to, certain statements under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including under “Outlook” and “Liquidity Outlook,” and located elsewhere herein regarding our commercial, integration and other strategic goals, our cost-savings initiatives, industry prospects, our expected results of operations or financial position, and future plans, objectives, strategies, expectations and intentions.

Without limiting the foregoing, the words “may,” “will,” “would,” “should,” “might,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “goal,” “project,” “strategy,” “future,” “continue” or similar words, expressions or the negative of such terms or other comparable terminology are intended to identify forward-looking statements.

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The following factors, among others, could cause actual results to differ from those set forth or implied in the forward-looking statements:

fluctuations in demand for our non-respiratory and respiratory products;

supply chain, production, logistics, distribution and labor disruptions and challenges;

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Latin America and JPAC (Japan and Asia Pacific) are immaterial operating segments that are not considered reportable segments and are included in “Other.” We generate our revenue in the following business units:

Labs, Transfusion Medicine, Point of Care and Molecular Diagnostics.

For the six months ended June 30, 2024, Total revenues decreased by 11% to $1,348.0 million as compared to the same period in the prior year, primarily driven by variability of our U.S.

Labs, Immunohematology, Donor Screening, Point of Care and Molecular Diagnostics.

For the nine months ended September 29, 2024, Total revenues decreased by 8% to $2,075.1 million as compared to the same period in the prior year, primarily driven by variability of our U.S.

respiratory products.

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Our revenues can be highly concentrated over a small number of products, including certain of our respiratory products.

For the six months ended June 30, 2024 and July 2, 2023, revenues related to our respiratory products accounted for approximately 14% and 23% of our Total revenues, respectively.

For the nine months ended September 29, 2024 and October 1, 2023, revenues related to our respiratory products accounted for approximately 17% and 24% of our Total revenues, respectively.

Planned Wind-Down of U.S.

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donor screening portfolio.

Specifically, we plan to wind-down only the ORTHO VERSEIA ® Integrated Processor platform and microplate assays, which are only sold in the U.S., and have a lower growth and margin profile than other parts of our Transfusion Medicine business.

This wind-down will not

affect any donor screening portfolio outside of the U.S.

Specifically, we plan to wind-down only the ORTHO VERSEIA® Integrated Processor platform and microplate assays, which are only sold in the U.S., and have a lower growth and margin profile.

This wind-down will not affect any donor screening portfolio outside of the U.S.

While our goal is to wind-down this U.S.

donor screening portfolio, we will continue to support our existing customers and honor our contractual commitments.

The winding down of the U.S.

donor screening portfolio, as compared to the prior year periods, contributed to the decline in revenue with a margin lower than our overall margin.

Refer to Item 1, “Financial Statements—Note 3.

Revenue” for more information.

The wind-down of our U.S.

donor screening portfolio is expected to be substantially complete by the end of 2025.

Our financial performance and results of operations will depend on future developments and other factors that are highly uncertain, continuously evolving and unpredictable, including the occurrence, spread, severity, duration and emergence of new variants of respiratory diseases, including flu, strep, RSV and COVID-19, as well as ongoing supply, production and logistics challenges.

We expect overall demand for our non-respiratory and respiratory products to continue to fluctuate and pricing pressures on certain products to persist as a result of a number of factors, including increased supply, emergence and spread of new variants, and the seasonal demands of the respiratory seasons, which are typically more prevalent during the fall and winter.

We expect overall demand for our non-respiratory and respiratory products to continue to fluctuate and pricing pressures on certain products to persist as a result of a number of factors, including increased supply, emergence and spread of new variants, and the seasonal demands of the respiratory season, which are typically more prevalent during the fall and winter.

Because our business environment is highly competitive, our long-term growth and profitability will depend in part on our ability to retain and grow our current customers and attract new customers through developing and delivering new and improved products and services that meet our customers’ needs and expectations, including with respect to product performance, product offerings, cost, automation and other work-flow efficiencies.

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In addition, we expect to continue to evaluate strategic opportunities to (i) expand our product lines and services, production capabilities, technologies and geographic footprint and address other business challenges and opportunities, and (ii) rationalize and consolidate facilities with the goal to improve our long-term results.

While we expect the revenues and financial results from our non-respiratory and respiratory products to be affected by the highly competitive environment and seasonal demands of the respiratory seasons, we intend to continue our focus on prudently managing our business and delivering improved financial results, while at the same time striving to introduce new products and services into the market.

While we expect the revenues and financial results from our non-respiratory and respiratory products to be affected by the highly competitive environment and our respiratory products to be affected by the seasonal demands of the respiratory season, we intend to continue our focus on prudently managing our business and delivering improved financial results, while at the same time striving to introduce new products and services into the market.

Revenues from our respiratory products are subject to, and significantly affected by, the seasonal demands of the cold, flu and RSV seasons, which are typically more prevalent during the fall and winter.

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Results of Operations

The following table compares Total revenues by business unit for the three and six months ended June 30, 2024 and July 2, 2023:

Three Months Ended Six Months Ended

(Dollars in millions) June 30, 2024 July 2, 2023 % Change June 30, 2024 July 2, 2023 % Change

The following table compares Total revenues by business unit for the three and nine months ended September 29, 2024 and October 1, 2023:

Three Months Ended Nine Months Ended

(Dollars in millions) September 29, 2024 October 1,

2023 % Change September 29, 2024 October 1,

2023 % Change

Labs $ 355.9 $ 341.4 4 % $ 1,067.0 $ 1,073.5 (1) %

Transfusion Medicine 161.3 163.3 (1) % 321.6 319.2 1 %

Immunohematology (1)

132.0 128.9 2 % 385.9 380.1 2 %

Donor Screening (1)

28.0 35.0 (20) % 95.7 103.0 (7) %

Point of Care 205.6 233.1 (12) % 509.3 675.4 (25) %

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Total revenues $ 727.1 $ 744.0 (2) % $ 2,075.1 $ 2,255.2 (8) %

For the three months ended June 30, 2024, Total revenues decreased to $637.0 million from $665.1 million for the same period in the prior year.

Labs revenue decreased 2% compared to the prior year period, primarily due to a decline in instrument revenue, partially offset by growth in recurring revenue, which includes reagents, consumables and services in our Labs revenue.

Transfusion Medicine revenue decreased 1% compared to the prior year period, primarily due to the wind-down of the U.S.

(1) For presentation purposes, as a result of the wind-down of the U.S.

donor screening portfolio, the previously reported Transfusion Medicine business unit is shown in its two product categories:

Immunohematology and Donor Screening.

Prior periods have been revised to align with the current period presentation.

For the three months ended September 29, 2024, Total revenues decreased to $727.1 million from $744.0 million for the same period in the prior year.

Labs revenue increased 4% compared to the prior year period, primarily due to growth in recurring revenue, which includes reagents, consumables and services in our Labs revenue, partially offset by a decline in instrument revenue.

Excluding foreign currency impact, Labs revenue increased 5% compared to the prior year period.

Immunohematology revenue increased 2% compared to the prior year period, primarily due to reagent growth.

Donor Screening revenue decreased 20% compared to the prior year period, primarily due to the wind-down of the U.S.

donor screening business.

The decrease in Point of Care revenue of $17.1 million was driven primarily by lower demand for QuickVue SARS Antigen assays, partially offset by an increase in sales of Sofia SARS Antigen assays.

Molecular Diagnostics sales decreased by $1.8 million compared to the prior year period.

Currency exchange rates had an unfavorable impact of approximately 100 basis points on our growth rate for the three months ended June 30, 2024.

For the six months ended June 30, 2024, Total revenues decreased to $1,348.0 million from $1,511.2 million for the same period in the prior year.

Labs revenue decreased by $21.0 million, primarily due to a $19.2 million settlement award from a third party related to one of our collaboration agreements in the prior year period.

Point of Care revenue decreased 12% compared to the prior year period, primarily due to lower sales of Sofia SARS Antigen assays, partially offset by an increase in demand for QuickVue SARS Antigen assays.

Currency exchange rates did not significantly impact our growth rate for the three months ended September 29, 2024.

For the nine months ended September 29, 2024, Total revenues decreased to $2,075.1 million from $2,255.2 million for the same period in the prior year.

Labs revenue decreased 1% compared to the prior year period, primarily due to a $19.2 million settlement award from a third party related to one of our collaboration agreements in the prior year period, partially offset by growth in recurring revenue.

Immunohematology revenue increased 2% compared to the prior year period, primarily due to reagent growth.

Donor Screening revenue decreased 7% compared to the prior year period, primarily due to the wind-down of the U.S.

donor screening business.

The Point of Care business unit contributed to revenue decline, driven by a decrease of $178.9 million in sales of QuickVue SARS Antigen assays, primarily due to a COVID-19 government award in the prior year period, partially offset by an increase of $11.8 million in sales of Sofia SARS Antigen assays.

Molecular Diagnostics sales decreased by $6.0 million, driven primarily by lower demand.

Currency exchange rates had an unfavorable impact of approximately 100 basis points on our growth rate for the six months ended June 30, 2024.

Currency exchange rates had an unfavorable impact of approximately 100 basis points on our growth rate for the nine months ended September 29, 2024.

Cost of Sales, Excluding Amortization of Intangible Assets

Cost of sales, excluding amortization of intangible assets, decreased to $361.0 million, or 56.7% of Total revenues, for the three months ended June 30, 2024, compared to $368.6 million, or 55.4% of Total revenues, for the three months ended July 2, 2023.

Cost of sales, excluding amortization of intangible assets, was impacted by revenue decline, partially offset by a shift in product mix.

Cost of sales, excluding amortization of intangible assets, decreased to $739.9 million, or 54.9% of Total revenues, for the six months ended June 30, 2024, compared to $766.1 million, or 50.7% of Total revenues, for the six months ended July 2, 2023.

Cost of sales, excluding amortization of intangible assets, increased to $374.8 million, or 51.5% of Total revenues, for the three months ended September 29, 2024, compared to $374.6 million, or 50.3% of Total revenues, for the three months ended October 1, 2023.

Cost of sales, excluding amortization of intangible assets, was impacted by a shift in product mix.

Cost of sales, excluding amortization of intangible assets, decreased to $1,114.7 million, or 53.7% of Total revenues, for the nine months ended September 29, 2024, compared to $1,140.7 million, or 50.6% of Total revenues, for the nine months ended October 1, 2023.

The decrease in cost of sales, excluding amortization of intangible assets, was driven primarily by a prior year period COVID-19 government award, along with the corresponding inventory release of $39 million, partially offset by an increase in sales of Sofia SARS Antigen assays.

Operating Expenses

The following table summarizes operating expenses for the three and six months ended June 30, 2024 and July 2, 2023:

Three Months Ended Six Months Ended

(Dollars in millions) June 30, 2024 % of

Total Revenues July 2, 2023 % of

Total Revenues June 30, 2024 % of

Total Revenues July 2, 2023 % of

The following table summarizes operating expenses for the three and nine months ended September 29, 2024 and October 1, 2023:

Three Months Ended Nine Months Ended

(Dollars in millions) September 29, 2024 % of

Total Revenues October 1, 2023 % of

Total Revenues September 29, 2024 % of

Total Revenues October 1, 2023 % of

Total Revenues

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Selling, Marketing and Administrative Expenses

Selling, marketing and administrative expenses for the three months ended June 30, 2024 increased by $9.1 million, or 5.1%, to $188.2 million from $179.1 million for the same period in the prior year, primarily due to employee compensation costs.

Selling, marketing and administrative expenses for the six months ended June 30, 2024 increased by $11.4 million, or 3.0%, to $392.9 million from $381.5 million for the same period in the prior year, primarily due to employee compensation costs.

Selling, marketing and administrative expenses for the three months ended September 29, 2024 decreased by $7.7 million, or 4.0%, to $186.4 million from $194.1 million for the same period in the prior year, primarily due to lower employee compensation costs.

Selling, marketing and administrative expenses for the nine months ended September 29, 2024 increased by $3.7 million, or 0.6%, to $579.3 million from $575.6 million for the same period in the prior year, primarily due to higher employee compensation costs.

Research and Development Expense

Research and development expense for the three months ended June 30, 2024 decreased by $6.1 million, or 9.8%, to $56.3 million from $62.4 million for the same period in the prior year, primarily due to lower compensation costs and outside services.

Research and development expense for the six months ended June 30, 2024 decreased by $8.7 million, or 7.0%, to $115.5 million from $124.2 million for the same period in the prior year, primarily due to lower compensation costs and outside services.

Research and development expense for the three months ended September 29, 2024 decreased by $5.6 million, or 9.1%, to $55.9 million from $61.5 million for the same period in the prior year, primarily due to lower outside services and employee compensation costs.

Research and development expense for the nine months ended September 29, 2024 decreased by $14.3 million, or 7.7%, to $171.4 million from $185.7 million for the same period in the prior year, primarily due to lower employee compensation costs and outside services.

Amortization of Intangible Assets

Amortization of intangible assets was $51.9 million and $103.6 million for the three and six months ended June 30, 2024, respectively, and $51.4 million and $102.2 million for the three and six months ended July 2, 2023, respectively.

Amortization of intangible assets was $51.9 million and $155.5 million for the three and nine months ended September 29, 2024, respectively, and $51.4 million and $153.6 million for the three and nine months ended October 1, 2023, respectively.

Integration Related Costs

Integration related costs were $30.9 million and $53.5 million for the three and six months ended June 30, 2024, respectively, and $24.2 million and $53.9 million for the three and six months ended July 2, 2023, respectively.

The increase in costs for the three months ended June 30, 2024 compared to the prior year period was primarily due to increases in compensation related charges, partially offset by decreases in consulting costs.

Integration related costs were $36.8 million and $90.3 million for the three and nine months ended September 29, 2024, respectively, and $26.5 million and $80.4 million for the three and nine months ended October 1, 2023, respectively.

The increase in costs compared to the prior year periods was primarily due to consulting costs and employee compensation related charges.

Goodwill Impairment Charge

During the six months ended June 30, 2024, we identified a triggering event requiring an interim goodwill impairment assessment for our reporting units.

During the nine months ended September 29, 2024, we identified a triggering event requiring an interim goodwill impairment assessment for our reporting units.

As a result, we recognized a non-cash goodwill impairment charge of $1.7 billion for the North America reporting unit.

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Asset Impairment Charge

During the three and six months ended June 30, 2024, we recognized an impairment charge of $56.9 million related to the long-lived assets classified as assets held for sale.

During the nine months ended September 29, 2024, we recognized an impairment charge of $56.9 million related to the long-lived assets classified as assets held for sale.

Refer to Item 1, “Financial Statements—Note 7.

Assets Held for Sale” for more information.

Asset impairment charge was $0.5 million and $1.0 million for the three and six months ended July 2, 2023, respectively.

Asset impairment charges were $2.2 million and $3.2 million for the three and nine months ended October 1, 2023, respectively.

Other Operating Expenses

Other operating expenses were $9.3 million and $17.3 million for the three and six months ended June 30, 2024, respectively, and $5.8 million and $9.6 million for the three and six months ended July 2, 2023, respectively.

Other operating expenses were $6.3 million and $23.6 million for the three and nine months ended September 29, 2024, respectively, and $7.4 million and $17.0 million for the three and nine months ended October 1, 2023, respectively.

Other operating expenses were primarily related to the profit share expense for our Joint Business with Grifols.

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Interest Expense, Net

Interest expense, net was $41.0 million and $80.0 million for the three and six months ended June 30, 2024, respectively, and $36.5 million and $73.2 million for the three and six months ended July 2, 2023, respectively.

Interest expense, net was $42.9 million and $122.9 million for the three and nine months ended September 29, 2024, respectively, and $37.7 million and $110.9 million for the three and nine months ended October 1, 2023, respectively.

Refer to Item 1, “Financial Statements—Note 9.

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Other Expense, Net

Other expense, net was $4.4 million and $6.3 million for the three and six months ended June 30, 2024, respectively, and $1.0 million and $3.9 million for the three and six months ended July 2, 2023, respectively.

The increases from prior year periods were primarily related to the Credit Agreement amendment fees.

Other expense, net was $0.9 million and $7.2 million for the three and nine months ended September 29, 2024, respectively, and $4.1 million and $8.0 million for the three and nine months ended October 1, 2023, respectively.

The decreases from prior year periods were primarily related to net foreign currency losses offset by the Credit Agreement amendment fees.

Refer to Item 1, “Financial Statements—Note 9.

Borrowings” for more information.

For the three months ended June 30, 2024, we recognized an income tax benefit of $15.2 million in relation to loss before income taxes of $162.9 million, resulting in an effective tax rate of 9.3%.

For the three months ended July 2, 2023, we recognized an income tax benefit of $11.2 million in relation to loss before income taxes of $64.4 million, resulting in an effective benefit tax rate of 17.4%.

For the three months ended June 30, 2024, the effective tax rate differed from the U.S.

federal statutory rate primarily due to Subpart F income and the Base Erosion and Anti-Abuse Tax liability.

For the three months ended July 2, 2023, the effective tax rate differed from the U.S.

federal statutory rate primarily due to non-U.S.

earnings being taxed at rates that are different than the U.S.

statutory rate, operating losses in certain subsidiaries not being benefited due to the establishment of valuation allowances, R&D credits and foreign tax credits, partially offset by foreign exchange losses and Global Intangible Low-Tax Income.

For the six months ended June 30, 2024, we recognized an income tax benefit of $108.1 million in relation to loss before income taxes of $1,961.8 million, resulting in an effective benefit tax rate of 5.5%.

For the six months ended July 2, 2023, the recognized amount of income tax benefit was not material in relation to loss before income taxes of $4.4 million, resulting in an effective benefit tax rate of 0.7%.

For the six months ended June 30, 2024, the effective tax rate differed from the U.S.

federal statutory rate primarily due to goodwill impairment charges that are nondeductible for tax purposes.

For the six months ended July 2, 2023, the effective tax rate differed from the U.S.

federal statutory rate primarily due to net operating losses in certain subsidiaries not being benefited due to the establishment of valuation allowances and Global Intangible Low-Tax Income, partially offset by U.S.

earnings being taxed at rates that are different than the U.S.

statutory rate, R&D credit, foreign tax credits and foreign exchange losses.

For the three months ended September 29, 2024, we recognized an income tax benefit of $8.9 million in relation to loss before income taxes of $28.8 million, resulting in an effective tax rate of 30.9%.

For the three months ended October 1, 2023, we recognized an income tax benefit of $2.8 million in relation to loss before income taxes of $15.5 million, resulting in an effective tax rate of 18.1%.

For the three months ended September 29, 2024, the effective tax rate differed from the U.S.

federal statutory rate primarily due to the utilization of net operating losses previously not benefited due to valuation allowances.

For the three months ended October 1, 2023, the effective tax rate differed from the U.S.

earnings being taxed at rates that were different than the U.S.

statutory rate, R&D credits, foreign tax credits and foreign exchange losses.

For the nine months ended September 29, 2024, we recognized an income tax benefit of $117.0 million in relation to loss before income taxes of $1,990.6 million, resulting in an effective tax rate of 5.9%.

For the nine months ended October 1, 2023, we recognized an income tax benefit of $2.8 million in relation to loss before income taxes of $19.9 million, resulting in an effective tax rate of 14.1%.

For the nine months ended September 29, 2024, the effective tax rate differed from the U.S.

federal statutory rate primarily due to goodwill impairment charges that were nondeductible for tax purposes.

For the nine months ended October 1, 2023, the effective tax rate differed from the U.S.

earnings being taxed at rates that were different than the U.S.

statutory rate, R&D credits, foreign tax credits and foreign exchange losses.

Segment Results

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Total revenues and Adjusted EBITDA for North America were as follows:

Three Months Ended Six Months Ended

(Dollars in millions) June 30, 2024 July 2, 2023 % Change June 30, 2024 July 2, 2023 % Change

Three Months Ended Nine Months Ended

(Dollars in millions) September 29, 2024 October 1,

2023 % Change September 29, 2024 October 1,

2023 % Change

Total revenues $ 436.2 $ 465.2 (6) % $ 1,220.2 $ 1,426.8 (14) %

Adjusted EBITDA $ 233.0 $ 253.4 (8) % $ 625.7 $ 708.1 (12) %

Total revenues were $350.1 million for the three months ended June 30, 2024, compared to $378.8 million for the three months ended July 2, 2023.

The decrease was primarily driven by lower demand for QuickVue SARS Antigen assays, partially offset by an increase in revenues for Sofia SARS Antigen assays.

Total revenues were $784.0 million for the six months ended June 30, 2024, compared to $961.6 million for the six months ended July 2, 2023.

The decrease was primarily driven by a COVID-19 government award in the prior year period, partially offset by an increase in revenues for Sofia SARS Antigen assays.

Adjusted EBITDA was $173.9 million for the three months ended June 30, 2024, which decreased slightly compared to $176.3 million for the three months ended July 2, 2023.

Adjusted EBITDA was $392.7 million for the six months ended June 30, 2024, compared to $454.7 million for the six months ended July 2, 2023.

The decrease was primarily driven by a prior year period COVID-19 government award, along with the corresponding inventory release of $39 million, partially offset by an increase in revenues for Sofia SARS Antigen assays.

Total revenues were $436.2 million for the three months ended September 29, 2024, compared to $465.2 million for the three months ended October 1, 2023.

The decrease was primarily driven by lower revenues for Sofia SARS Antigen assays and the wind-down of the U.S.

donor screening business, partially offset by higher demand for QuickVue SARS Antigen assays.

Total revenues were $1,220.2 million for the nine months ended September 29, 2024, compared to $1,426.8 million for the nine months ended October 1, 2023.

The decrease was primarily driven by a COVID-19 government award in the prior year period and the wind-down of the U.S.

donor screening business, partially offset by an increase in revenues for Sofia SARS Antigen assays.

Adjusted EBITDA was $233.0 million for the three months ended September 29, 2024, compared to $253.4 million for the three months ended October 1, 2023.

The decrease was primarily driven by lower revenues for Sofia SARS Antigen assays and

the wind-down of the U.S.

donor screening business, partially offset by a decrease in employee compensation costs, lower other operating expenses and higher demand for QuickVue SARS Antigen assays.

Adjusted EBITDA was $625.7 million for the nine months ended September 29, 2024, compared to $708.1 million for the nine months ended October 1, 2023.

The decrease was primarily driven by a COVID-19 government award in the prior year period, along with the corresponding inventory release of $39 million, partially offset by a decrease in employee compensation costs, lower other operating expenses and an increase in revenues for Sofia SARS Antigen assays.

Total revenues and Adjusted EBITDA for EMEA were as follows:

Three Months Ended Six Months Ended

(Dollars in millions) June 30, 2024 July 2, 2023 % Change June 30, 2024 July 2, 2023 % Change

Three Months Ended Nine Months Ended

(Dollars in millions) September 29, 2024 October 1,

2023 % Change September 29, 2024 October 1,

2023 % Change

Total revenues $ 84.0 $ 74.5 13 % $ 249.9 $ 236.4 6 %

Adjusted EBITDA $ 6.7 $ 10.2 (34) % $ 30.9 $ 22.7 36 %

Total revenues were $81.1 million for the three months ended June 30, 2024, which increased slightly compared to $80.6 million for the three months ended July 2, 2023.

Total revenues were $165.9 million for the six months ended June 30, 2024, compared to $161.9 million for the six months ended July 2, 2023, primarily driven by an increase in Labs and Transfusion Medicine revenues.

Adjusted EBITDA was $11.4 million for the three months ended June 30, 2024, compared to $5.3 million for the three months ended July 2, 2023.

The increase was primarily driven by higher Transfusion Medicine revenues, product mix and lower operating expenses.

Adjusted EBITDA was $24.2 million for the six months ended June 30, 2024, compared to $12.5 million for the six months ended July 2, 2023, primarily driven by an increase in Labs and Transfusion Medicine revenues and product mix.

Total revenues were $84.0 million for the three months ended September 29, 2024, compared to $74.5 million for the three months ended October 1, 2023, primarily driven by an increase in Labs and Immunohematology revenues.

Total revenues were $249.9 million for the nine months ended September 29, 2024, compared to $236.4 million for the nine months ended October 1, 2023, primarily driven by an increase in Labs and Immunohematology revenues.

Adjusted EBITDA was $6.7 million for the three months ended September 29, 2024, compared to $10.2 million for the three months ended October 1, 2023.

The decrease was primarily driven by (i) product mix and (ii) foreign exchange net losses resulting from re-measurement and settlement transactions, including loans transacted in non-functional currencies.

These decreases were partially offset by (i) an increase in Labs and Immunohematology revenues and (ii) net gains realized on foreign currency forward contracts.

Adjusted EBITDA was $30.9 million for the nine months ended September 29, 2024, compared to $22.7 million for the nine months ended October 1, 2023, primarily driven by an increase in Labs and Immunohematology revenues and product mix.

Total revenues and Adjusted EBITDA for China were as follows:

Three Months Ended Six Months Ended

(Dollars in millions) June 30, 2024 July 2, 2023 % Change June 30, 2024 July 2, 2023 % Change

Three Months Ended Nine Months Ended

(Dollars in millions) September 29, 2024 October 1,

2023 % Change September 29, 2024 October 1,

2023 % Change

Total revenues $ 80.4 $ 81.1 (1) % $ 238.1 $ 233.0 2 %

Adjusted EBITDA $ 36.9 $ 37.3 (1) % $ 97.4 $ 96.0 1 %

Total revenues were $81.6 million for the three months ended June 30, 2024, which increased slightly compared to $81.3 million for the three months ended July 2, 2023 driven by an increase in Labs revenues, offset by a decrease in Point of Care revenue.

Total revenues were $157.7 million for the six months ended June 30, 2024, compared to $151.9 million for the six months ended July 2, 2023, primarily driven by an increase in Labs revenues.

Adjusted EBITDA was $35.8 million for the three months ended June 30, 2024, compared to $30.2 million for the three months ended July 2, 2023.

The increase was primarily driven by higher Labs revenues and the impact from changes in product mix.

Adjusted EBITDA was $60.5 million for the six months ended June 30, 2024, compared to $58.7 million for the six months ended July 2, 2023.

The increase was primarily driven by higher Labs revenues and the impact from changes in product mix.

Total revenues were $80.4 million for the three months ended September 29, 2024, which decreased slightly compared to $81.1 million for the three months ended October 1, 2023, driven by an increase of 6% in Labs revenues, offset by decreases in other business units revenues.

Total revenues were $238.1 million for the nine months ended September 29, 2024, compared to $233.0 million for the nine months ended October 1, 2023, driven by an increase of 7% in Labs revenues, offset by decreases in other business units revenues.

Adjusted EBITDA was $36.9 million for the three months ended September 29, 2024, compared to $37.3 million for the three months ended October 1, 2023.

The decrease was primarily driven by a decrease in other business units revenues, partially offset by higher Labs revenues.

Adjusted EBITDA was $97.4 million for the nine months ended September 29, 2024, compared to $96.0 million for the nine months ended October 1, 2023.

The increase was primarily driven by higher Labs revenues, partially offset by a decrease in other business units revenues and the impact from changes in product mix.

Total revenues and Adjusted EBITDA for Other were as follows:

Three Months Ended Six Months Ended

(Dollars in millions) June 30, 2024 July 2, 2023 % Change June 30, 2024 July 2, 2023 % Change

Three Months Ended Nine Months Ended

(Dollars in millions) September 29, 2024 October 1,

2023 % Change September 29, 2024 October 1,

2023 % Change

Total revenues $ 126.5 $ 123.2 3 % $ 366.9 $ 359.0 2 %

Adjusted EBITDA $ 31.7 $ 31.2 2 % $ 97.8 $ 89.3 10 %

Total revenues were $124.2 million for the three months ended June 30, 2024, which decreased slightly compared to $124.4 million for the three months ended July 2, 2023.

Total revenues were $240.4 million for the six months ended June 30, 2024, compared to $235.8 million for the six months ended July 2, 2023, primarily driven by an increase in Labs revenues.

Adjusted EBITDA was $34.1 million for the three months ended June 30, 2024, compared to $36.3 million for the three months ended July 2, 2023.

The decrease was primarily driven by higher operating expenses.

Adjusted EBITDA was $66.1 million for the six months ended June 30, 2024, compared to $58.1 million for the six months ended July 2, 2023, primarily driven by an increase in Labs revenues and product mix.

Total revenues were $126.5 million for the three months ended September 29, 2024, which increased slightly compared to $123.2 million for the three months ended October 1, 2023, primarily due to an increase in Labs revenues, partially offset by a decrease in Point of Care revenues.

Total revenues were $366.9 million for the nine months ended September 29, 2024, compared to $359.0 million for the nine months ended October 1, 2023, primarily driven by an increase in Labs revenues, partially offset by a decrease in Point of Care revenues.

Adjusted EBITDA was $31.7 million for the three months ended September 29, 2024, which increased slightly compared to $31.2 million for the three months ended October 1, 2023.

The increase was primarily driven by an increase in Labs revenues, partially offset by a decrease in Point of Care revenues and product mix.

Adjusted EBITDA was $97.8 million for the nine months ended September 29, 2024, compared to $89.3 million for the nine months ended October 1, 2023, primarily driven by an increase in Labs revenues, partially offset by a decrease in Point of Care revenues and product mix.

Liquidity and Capital Resources

As of June 30, 2024 and December 31, 2023, our principal sources of liquidity consisted of the following:

(Dollars in millions) June 30, 2024 December 31, 2023

As of September 29, 2024 and December 31, 2023, our principal sources of liquidity consisted of the following:

(Dollars in millions) September 29, 2024 December 31,

Cash and cash equivalents $ 143.7 $ 118.9

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Working capital including cash and cash equivalents and marketable securities, current $ 385.3 $ 476.7

As of June 30, 2024, we had $107.0 million in Cash and cash equivalents, a $11.9 million decrease from December 31, 2023.

Our cash requirements fluctuate as a result of numerous factors, including cash generated from operations, progress in R&D,

capital expansion projects and acquisition and business development activities.

As of September 29, 2024, we had $143.7 million in Cash and cash equivalents, a $24.8 million increase from December 31, 2023.

Our cash requirements fluctuate as a result of numerous factors, including cash generated from operations, progress in R&D, capital expansion projects and acquisition and business development activities.

We believe our organizational structure allows us the necessary flexibility to move funds throughout our subsidiaries to meet our operational working capital needs.

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Our Credit Agreement consists of a $2,750.0 million Term Loan and an $800.0 million Revolving Credit Facility.

Availability under the Revolving Credit Facility, after deducting letters of credit of $13.0 million and $253.0 million borrowings outstanding, was $534.0 million as of June 30, 2024.

Availability under the Revolving Credit Facility, after deducting letters of credit of $13.0 million and $230.0 million borrowings outstanding, was $557.0 million as of September 29, 2024.

On April 25, 2024, we entered into the Amendment, by and among us, the lenders party thereto, and Bank of America, N.A., as administrative agent, which amended the Credit Agreement.

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The Credit Agreement contains a minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of 3.00 to 1.00 as of the end of any fiscal quarter for the most recently completed four fiscal quarters.

We were in compliance with the financial covenants as of June 30, 2024.

We were in compliance with the financial covenants as of September 29, 2024.

Capital Expenditures

Capital expenditures, including investments, were $101.4 million for the six months ended June 30, 2024.

Capital expenditures, including investments, were $147.9 million for the nine months ended September 29, 2024.

We continue to make capital expenditures in connection with the expansion of our manufacturing capabilities and other facility-related activities.

Cash Flow Summary

Six Months Ended

(In millions) June 30, 2024 July 2, 2023

Net cash (used for) provided by operating activities $ (98.6) $ 158.3

Nine Months Ended

(In millions) September 29, 2024 October 1,

Net cash provided by operating activities $ 19.3 $ 199.8

Net cash used for investing activities (112.0) (132.5)

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Effect of exchange rates on cash (0.5) (3.3)

Net decrease in cash, cash equivalents and restricted cash $ (12.0) $ (114.3)

Six Months Ended June 30, 2024

Cash used for operating activities was $98.6 million for the six months ended June 30, 2024, and reflected a net loss of $1,853.7 million and non-cash adjustments of $1,971.1 million, primarily associated with a goodwill impairment charge and change in deferred tax assets and liabilities as well as depreciation and amortization, asset impairment charge and stock-based compensation expense.

In addition, we benefited from collections on accounts receivables, which contributed cash inflows of $24.2 million, offset by other changes in working capital, including $95.2 million cash outflows for inventories.

Cash used for investing activities was $55.5 million for the six months ended June 30, 2024, and was primarily related to $101.4 million in purchases of property, plant, equipment, investments and intangibles.

Net increase (decrease) in cash, cash equivalents and restricted cash $ 24.5 $ (144.0)

Nine Months Ended September 29, 2024

Cash provided by operating activities was $19.3 million for the nine months ended September 29, 2024, and reflected a net loss of $1,873.6 million and non-cash adjustments of $2,099.8 million, primarily associated with a goodwill impairment charge and change in deferred tax assets and liabilities as well as depreciation and amortization, asset impairment charge and stock-based compensation expense.

Cash provided by operating activities was also driven by $110.9 million cash outflows for inventories.

Cash used for investing activities was $112.0 million for the nine months ended September 29, 2024, and was primarily related to $147.9 million in purchases of property, plant, equipment, investments and intangibles.

We also sold $63.1 million of marketable securities.

Cash provided by financing activities was $144.0 million for the six months ended June 30, 2024, and was primarily related to net proceeds from the Revolving Credit Facility of $253.0 million, partially offset by payments on long-term borrowings of $103.7 million.

Six Months Ended July 2, 2023

Cash provided by operating activities was $158.3 million for the six months ended July 2, 2023, and reflected a net loss of $4.4 million and non-cash adjustments of $243.7 million, primarily associated with depreciation and amortization, stock-based compensation expense and accretion of interest on deferred consideration.

We benefited from collections on accounts receivables of $214.5 million, primarily due to a COVID-19 government award, offset by other changes in working capital.

Cash used for investing activities was $111.2 million for the six months ended July 2, 2023, and was primarily related to $117.3 million in purchases of property, plant, equipment, investments and intangibles.

Cash provided by financing activities was $117.7 million for the nine months ended September 29, 2024, and was primarily related to net proceeds from the Revolving Credit Facility of $230.0 million, partially offset by payments on long-term borrowings of $107.0 million.

Nine Months Ended October 1, 2023

Cash provided by operating activities was $199.8 million for the nine months ended October 1, 2023, and reflected a net loss of $17.1 million and non-cash adjustments of $366.6 million, primarily associated with depreciation and amortization, stock-based compensation expense and accretion of interest on deferred consideration.

We benefited from collections on accounts receivables of $124.1 million, primarily due to a COVID-19 government award, offset by other changes in working capital, including $146.0 million cash outflows for inventories.

Cash used for investing activities was $132.5 million for the nine months ended October 1, 2023, and was primarily related to $160.7 million in purchases of property, plant, equipment, investments and intangibles.

We also purchased $50.6 million and sold $68.3 million of marketable securities.

Cash used for financing activities was $159.3 million for the six months ended July 2, 2023, and was primarily related to payments on long-term borrowings of $123.8 million, payments for deferred consideration of $30.3 million and payments of tax withholdings related to vesting of stock-based awards of $12.5 million.

Cash used for financing activities was $208.0 million for the nine months ended October 1, 2023, and was primarily related to payments on long-term borrowings of $175.7 million, payments for deferred consideration of $30.3 million and payments of tax withholdings related to vesting of stock-based awards of $13.0 million.

Liquidity Outlook

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We believe that the shift in our sales strategy will grow our installed base, thereby increasing sales of higher-margin assays, reagents and other consumables over the life of the customer contracts and enhancing our recurring revenue and cash flows.

During the six months ended June 30, 2024, we transferred $69.2 million of instrument inventories from Inventories to Property, plant and equipment, net, further increasing our investment in property, plant and equipment.

During the nine months ended September 29, 2024, we transferred $99.4 million of instrument inventories from Inventories to Property, plant and equipment, net, further increasing our investment in property, plant and equipment.

Long-term Liquidity Outlook

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Recent Accounting Pronouncements

There have been no accounting pronouncements issued or adopted during the six months ended June 30, 2024 that are expected to have a material impact on the Company’s financial statements.

There have been no accounting pronouncements issued or adopted during the nine months ended September 29, 2024 that are expected to have a material impact on the Company’s financial statements.

Critical Accounting Estimates

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A comprehensive discussion of our critical accounting estimates is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Other than the following, there have been no significant changes to our critical accounting policies and estimates during the six months ended June 30, 2024:

Other than the following, there have been no significant changes to our critical accounting policies and estimates during the nine months ended September 29, 2024:

Goodwill Impairment

We test goodwill for impairment on an annual basis on the first day of the fourth quarter and monitor throughout the year for impairment triggering events that indicate that the carrying value of one or more of our reporting units exceeds its fair value.

During the first quarter of 2024, we concluded that (i) the sustained decline in our stock price and market capitalization occurred during the first quarter of 2024, (ii) the faster than expected decline in COVID-19 and flu markets, and (iii) the recent delay in the timing of expected commercialization for Savanna were triggering events requiring an interim goodwill impairment assessment for all reporting units.

Based on our interim goodwill impairment assessment, we concluded that the North America reporting unit’s carrying value exceeded its estimated fair value.

During the first quarter of 2024, we concluded that (i) the sustained decline in our stock price and market capitalization that occurred during the first quarter of 2024, (ii) the faster than expected decline in COVID-19 and flu markets, and (iii) the delay in the timing of expected commercialization for Savanna were triggering events requiring an interim goodwill impairment assessment for all reporting units.

Based on our interim goodwill impairment assessment in the first quarter of 2024, we concluded that the North America reporting unit’s carrying value exceeded its estimated fair value.

As a result, we recorded a non-cash goodwill impairment charge of $1.7 billion in the first quarter of 2024 for the North America reporting unit, which represented a full impairment of the goodwill allocated to the North America reporting unit.

The decline in the estimated fair value of the North America reporting unit and the resulting impairment was primarily driven by revised short-term and mid-term forecasts for revenue and EBITDA expectations in North America.

The decline in the estimated fair value of the North America reporting unit and the resulting impairment were primarily driven by revised short-term and mid-term forecasts for revenue and EBITDA expectations in North America.

The estimated fair values of our EMEA, Latin America and JPAC reporting units as of the interim testing date exceeded their respective carrying values.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis