Release Date: February 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: The forecast for free cash flow conversion is at 25% to 30% of adjusted EBITDA. Previously, it was closer to 50%. Can you discuss where you think this can go over time and what a more normalized level might look like? A: Joseph Busky, CFO: We ended 2024 at 20% free cash flow as a percentage of EBITDA. For 2025, we expect it to be between 25% to 30%. Our goal is to achieve at least 50% conversion of adjusted EBITDA to free cash flow over the next couple of years, aligning with our margin improvement goals.
Q: Can you provide an update on the China region, given some market uncertainties? What is your view on pricing and exposure to any VBP programs? A: Brian Blaser, CEO: China remains an attractive but complex market. We believe the risk of additional VBP pressure has largely passed for 2025. We have seen some impacts on cardiac reimbursement, but no significant actions on VBP or reimbursement are expected. Competitive intensity has increased, so we are tempering our growth expectations to mid-single digits.
Q: Can you discuss the cost savings initiatives and how they are impacting EBITDA margins? A: Joseph Busky, CFO: EBITDA margins are expected to improve by 250 basis points from 2024 to 2025. This includes $50 million from previously implemented cost savings and an additional $30 million to $50 million in 2025, primarily from procurement. These savings will mostly impact OpEx, with direct procurement savings benefiting gross profit in 2026.
Q: What are the expectations for respiratory revenue in 2025, and how does Savanna fit into this? A: Joseph Busky, CFO: COVID revenue is expected to decrease due to non-repeating government contracts and lower retail sales. Professional COVID revenue is expected to remain flat, indicating an endemic level. Respiratory revenue is projected to grow in the low single digits. Savanna trials have started, and while no significant revenue is expected in 2025, it will contribute in the future.
Q: Can you provide more detail on the procurement savings and their impact on margins? A: Brian Blaser, CEO: Procurement savings are broad-based, covering supply chain, logistics, travel, IT services, and more. These indirect savings are more actionable in the short term, while direct procurement savings, which require design changes and regulatory submissions, will take longer to realize.
Q: What is the outlook for the labs business, and are there any factors that could impact growth? A: Brian Blaser, CEO: The labs business is stable with mid-single-digit growth, supported by long-term customer relationships and high renewal rates. While China is dynamic, we do not foresee major swings in our labs business. Menu expansion could drive incremental growth in the future.
Q: How are you balancing cost structure improvements with funding innovation for long-term growth? A: Brian Blaser, CEO: Margin expansion efforts are directly linked to our ability to invest in new product development. We are defining innovation roadmaps for each business, focusing on assays and new systems. The stable business model supports mid-single-digit growth, with new systems and assays providing additional opportunities.
Q: Can you provide guidance on the U.S. Donor Screening business for 2025? A: Joseph Busky, CFO: We expect U.S. Donor Screening revenue to be $40 million to $50 million in 2025, down from $115 million in 2024. The business is winding down, with minimal residual revenue expected in 2026.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.