Qiagen N.V.

Ladies and gentlemen, thank you for standing by. I am Katie, your call operator. Welcome and thank you for joining QIAGEN's preliminary Q1-2026 earnings conference call webcast. At this time, all participants are in a listening mode. Please be advised that this call is being recorded at QIAGEN's request and will be made available on their internet site. The prepared remarks will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. please press the star key followed by zero for operator assistance. At this time, I'd like to introduce your host, Daniel Vendorf, Vice President, Head of Investor Relations at QIAGEN. Please go ahead.

Thank you, Katie, and welcome to our call on our preliminary results for the first quarter of 2026. In light of the update to our 2026 outlook, the pre-announcement was issued in line with German disclosure requirements yesterday evening. We are planning to publish full Q1 2026 results on May 6th, 2026. We appreciate your time and interest in QIAGEN. Joining the call today are Thierry Bernard, our Chief Executive Officer, and Roland Sackers, our Chief Financial Officer. Also joining us is Dr. Dominika Maturana from our Investor Relations team. As always, today's call is being webcast live and will be archived in the Investor Relations section of our website at www.investorrelations.com. where you can find the press release and presentation accompanying this call. Please also note that this call will include forward-looking statements. Actual results may differ materially from those projected due to a number of factors outlined in our most recent Form 20F and other filings with the US Securities and Exchange Commission. We will also refer to certain financial measures not prepared in accordance with US Generally Accepted Accounting Principles, or GAAP, that provide additional insights into our performance. Reconciliations to the most directly comparable GAAP pickers are in the release and presentation. All references to earnings per share refer to adjusted diluted EPS. With that, let me hand the call over to Thierry.

Thanks a lot, Daniel, and good morning, good afternoon, or good evening, depending on when you are in the world. Thank you for joining us, and thank you also for your interest in the Kaizen. As you saw in our announcement for our preliminary results for the first quarter of 2026, we deliver strong profitability as achieved the outlook despite mixed sales results. Sales were below our target due mainly to significantly lower immigration testing demand and continued caution among US life sciences customers. The important point, however, is that four of the five pillars achieved or exceeded our expectation, and we do continue to believe in the long-term opportunities for quantification. While we are taking a prudent approach to the updated outlook, we see tangible drivers for stronger growth trends in the second half of the year. Let me now highlight some key messages. First, we delivered adjusted EPS of 54 cents at constant exchange rates, in line with our outlook, despite mixed sales trends and a powerful macro environment. Net sales were $492 million, up 2% on a reported basis, but down 1% at CER, and below our outlook for at least 1% growth CER. This reflects the mixed performance, with solid momentum across many areas of the portfolio, offset by the weaker than expected quantifier sales. Despite the lower sales, discipline's execution supported earnings and enabled us to deliver on our adjusted EPS outlook. Second, our growth pillar delivered a solid performance with 4% increase of sales CER. Sample technologies grew 9% at CER and also rose 3% CER, excluding the past acquisition. Diacuity delivered double-digit CER sales growth on gains in both consumables and instruments. Our bioinformatics business, KyaGen Digital Insights, delivered solid single-digit CER cells growth, led by growth in clinical applications. And KyaSTAT diagnostic cells declined 1% CER, facing a tough comparison to a stronger three-year-year quarter. At the same time, for KyaSTAT, consumables were up on double-digit growth for GI and men's anxiety spanase, where instrument placement continued at a growth at a good pace. As I mentioned at the start, quantifier on sales declined, and those were down 5% CER. This was mainly due to significantly lower immigration testing demand in the US and in the Middle East. This impact is exclusively isolated to immigration-related volumes. We did not see changes in pricing, competition on or underlying demand in the key patient testing markets. We continue indeed to see stable ordering patterns and solid growth in the remaining 90% of the quantifier on business. As we have said before, the underlying market for latent TB testing is growing at about 4% to 5% annually, and we now see the U.S. market growing about one percentage point lower at this time due to the immigration situation. Overall, we expect sequential improvement over the course of the years for quantitative testing. Third key message. We maintain a high level of profitability in the first quarter with our disciplined approach to managing the business and making value-creating investments. The adjusted operating income margin is expected to be at about 27.4%. This reflects continued efficiency gains while absorbing headwinds from tariffs and currency as well as the impact from the past acquisitions. Fourth, we have updated our outlook for 2026 to reflect those developments and a more cautious macro environment. Net sales 2026 are now expected to grow about 1% to 2% CER with adjusted diabetes expected to be at least at $2.43 CER again. The updated outlook reflects lower expectations for QuantiFerrand, continued caution among the US life sciences customers, volatile OEM customer ordering trends, and ongoing geopolitical uncertainty for 2026. At the same time, we see very tangible reasons for FATOS's growth of about 4% CER in the second half of 2026. This includes the end of headwinds from the discontinuation of Pneumodyx and Dialinux, benefits from new project launches, a sequential improvement in Quantiferon, and better-than-expected contribution from PaaS, and last, a modest improvement in life sciences demand. With that, I'll hand it over to Roland for more details on the financials. Thank you, Thierry, and good morning, good afternoon. Let me now take you through the financial details behind this announcement and make us more updated outlook. As Thierry said, Q1 was a mixed quarter. The heat of adjusted EPS execution was slightly below target. the preliminary net sales of 492 million US dollars were up 2% on a reported basis and down 1% on constant exchange rates. The positive impact of about 3 percentage points on sales at actual rates was in line with our planning. Same was the case for adjusted diluted EPS of 54 cents on a reported basis and 54 cents at constant exchange rates in line with our outlook. Let me now review the sales results. Scamper Technologies delivered 170 million USD of sales, up 9% CER compared to the first quarter of 2025. Excluding the past acquisition, which is performing very well, this year it rose 3% CER. Growth was supported by demand for automated consumables and instrument placements, as we saw good trends worldwide. In diagnostic solutions, sales were 185 million US dollars and down 4% CER. The main driver here was the 5% CER decline in grant deferred sales, which overshadowed solid trends in many patient testing groups. Chiropractic sales were down 1% CER, which was expected, given the tough prior year comparison to a period with a very strong respiratory season. Diagnostic solutions also included a year-over-year headwind as expected from the mid-25 discontinuation of the non-MODEX system. PCR Nucleic Acid sales declined 30% CR to $69 million. With this product group, Triacurity delivered double-digit CR sales growth. However, we also saw significantly lower sales in other areas, including PCR consumers and the OEM business. as we felt the impact of life science funding constraints. And in the Genomics NGS product group, sales were up 4% CER with $57 million. This was supported by QIAGEN Digital Insights, which grew at a solid single-digit CER pace, driven by growth in clinical bioinformatics. Let me now turn to profitability. We are expecting We are expecting a just operating income margin of about 27.4% in the first quarter of 2026, supported by ongoing efficiency gains as we absorb the impact of tariffs and currency movements, while also investing into the future of the past single-cell analysis business. With that, let me head back to the call to Trini. Thanks a lot, Roland. Let us step back a bit for the quarterly numbers and share a few reasons why, at Kayagen, we continue to feel confident about the portfolio and the path to stronger growth. The message here is that our pillars continue to move ahead and only the 2026 sales target for Quantiférant has been adjusted. As we mentioned earlier, the issue with quantifieron is isolated to immigration demand. Importantly, this does not change our view of the long-term opportunity. Trends in other patient testing groups remain solid, and the underlying market for latent TB testing continues to grow. As you have probably seen, New data published around World Tuberculosis Day further reinforced the role of Quantiferon in detecting latent TB infection, in particular in high-risk and immunocompromised population. We are also advancing scalable laboratory workflows for Quantiferon. A new generation of chemistry for Quantiferon detection on liaison system with our partner Glycerin is now being rolled out in the U.S., in addition to the earlier launch in Europe and other areas of the world. We are also seeing targeted screening initiatives ramp up in various fashion groups, diabetes or dialysis, particularly as well those being prescribed biologic therapies and immunocompromised individuals. Looking ahead, we will host a virtual quantitative spotlight session on May the 7th. where we will provide you with more details on our strategic priorities, workflow automation plan, and the additional enhancements that underscore the long-term opportunity of this product. Turning to sample technology, this remains one of the clearest examples of the portfolio moving ahead as forecasted. We continue to advance our automation strategy with our three new system launches for 2026 moving ahead and receiving positive customer feedback. As an example, KayaStream Connect was launched in February, and we are very encouraged by the first wave of orders with the first sales contribution expected in the second quarter. We also have the first orders for Kaya Symphony Connect after the launch in late 2025. Full IVD commercialization remains on track to begin in the middle of this year. Kaya Mini is also on track for launch later in 2026. We continue to see good traction in strategic high-value areas such as liquid biopsies. where triagen systems are being integrated into the workflows of major players. The PaaS business is also performing better than expected, and we are on track to exceed the 26 sales target of about $40 million. As you remember, PaaS gives us an entry into single-cell analysis, a highly attractive area where researchers need scalable workflows and high-quality data generation. This was also reflected at the recent AACR cancer research meetings, where we showcased applications across our oncology workflow. This includes our expanding capabilities in sample preparation, single-cell analysis, and digital insights. For Kayakriti, we continue to see strong momentum in digital PCR. Our focus, as you know, this year includes expanding applications such as gene expression while continuing to develop a portfolio of companion diagnostics with our pharma partners. Turning to chiostat diagnostics, we continue to broaden the panel menu and strengthen the platform for syndromic testing while also advancing our pharma partnership in companion diagnostics. In the first quarter, for example, we received U.S. clearance for the GI panels on the Kyostat Rise, which is, as you remember, the high-throughput version of this modular system. We now have the respiratory and GI panels clear for the Rise version. Kyostat is also being expanded into bloodstream infection testing. In Europe, we launched the first of the new blood culture panels in January, we also submitted the first panel to the FDA, and we are awaiting a decision. This marks a very important expansion beyond respiratory, GI, and meningitis to support better, faster clinical decision support. Finally, ThiaGen Digital Insights, our bioinformatics solution, continues to strengthen our sample-to-insert strategy with its status as a leader in bioinformatics. Within QDI, clinical bioinformatics remains the key growth area, double digit in this first quarter, as we are building capabilities through the integration of the Franklin platform from the recent acquisition of Genox. So across those areas, the message is very consistent. We are addressing the quantifieron immigration testing demand issue, while the rest of the portfolio moves ahead as planned. And now, back to Roland to discuss our outlook. Thank you, Thierry. Let me now provide some additional perspectives on our outlook for 26 and for the second quarter. As we have said, We are taking a prudent approach to reflect the developments in the first quarter and the current macro environment, while remaining focused on delivering solid, profitable growth. For the full year 26, we now expect net sales growth of about 1-2% at constant exchange rates, compared with our previous outlook for at least 5% CER growth. Adjusted diluted earnings per share are now expected to be at least $2.43 at CER compared with our previous outlook for at least $2.50 at CER. The updated outlook reflects two main factors. First, transference sales in 26 are now expected to be steady at a CER basis at around $500 million. This compares with our previous target for about 6% CR growth or about $535 million. We have reduced these expectations in light of the immigration testing demand. This customer group represents about 10% of total contrarian sales or about $15 million. We reduced this by about $35 million for 2016. and we have not seen changes in demand for the remaining $15 million, which is largely European immigration testing. This impact from Quantiferum reflects about 1.5 percentage points of headwinds to full year 26 growth compared to our prior year outlook. Second, we have taken a more cautious view on mainly US life science customer spending for a total of about $40 million, or about two percentage points of headwinds. This involves three components. About $15 to $20 million of headwinds comes from research customers in the US. Another $20 million comes from volatility in customer ordering in our OM business, which also includes government agencies in the US. And lastly, a few million dollars of pressure comes from the Middle East conflict and the broader geopolitical uncertainty that has developed since the start of the year. Turning to the second quarter, net sales are expected to decline approximately 2 percentage points CER compared to $534 million in Q2 2025. these sales trends take into consideration that 20-feron sales continue at a largely unchanged level from the second quarter of 2025. While we believe in the full-year target for Kyostar DX sales, we have purposely taken a more conservative view on these product sales for the second quarter in light of the strong year-ago comparison. The pillars as a group are expected to grow about 4-5% CER in the second quarter compared to the 4% CER growth in the first quarter of the year. And as a reminder, the second quarter will be the last period with headwind from the discontinuation of Noemod X and Dynalunox. For adjusted diluted EPS, these are expected to be at least $0.60 at CER in the second quarter compared to $0.60 in the prior year period. Operational efficiency and disciplined cost control remain a key priority for GIAGEN and continue to support profitability despite lower expected sales. At the same time, Earnings in Q2 will absorb a diluted impact of around $0.01 from the past acquisition. Let me now address four drivers for faster sales growth in the second half of about 4% CER. About 2 percentage points of incremental growth come from the roll-off of headwinds from the discontinuation of NeumodX and Dynalunux and unchanged from our prior expectations. Second. About 2 percentage points are expected to come from new launches including the sample prep instruments and additional offerings for Piastat, AX and PiA-QLT. This is also unchanged from prior expectations. Third. About one percentage point is expected to come from improving year-over-year growth from 20-serum as we anticipate growth in the second half of 2026 compared with the first half. Finally, about half a percentage point of improvement is expected from a combination of the past acquisitions transforming better than our target for about $40 million of sales in 2026 and modestly better trends in US life science funding as the year progresses. Taken together, these factors explain the expected bridge from sales declining about 1-2% CER in the first half to a growth rate of about 4% CER in the second half to reach our target for about 1-2% CER growth in the year overall. And looking ahead, in terms of mid-term growth, we see very positive trends for collagen as she works through a period of rebasing on the fair-on-demand. The pillars of the group are expected to grow about 7% for 26, and we see this continuing at a healthy pace in the future and supported by quantifiering returning to a more normalized growth rate in 27. With a series of new product launches on the way, in particular the new instruments and sample technologies, this provides even more confidence in delivering faster sales growth. The pillars are also increasing as a share of total sales. They are now at about 75% of total sales and rising, and we are taking actions to stabilize the base business. Let me also briefly address currency trends. For the full year, we currently expect a tailwind of about 1 percentage point on sales and a neutral impact on adjusted EPS. This is unchanged from our previous assumption. For Q2, we expect a tailwind of about 1% points on sales and a neutral impact on adjusted EPS. Overall, we have taken a prudent approach in updating our outlook, reflecting current market conditions and known headwinds. At the same time, we remain focused on disciplined execution, protecting profitability and returning to growth in the second half of 2026. Last but not least, We also confirm our adjusted EBIT target of 29.5% CER for the full year. I would like now to hand back to Thuyen. Thank you, Roland. Before we go to the Q&A session, let me go over a brief summary of this call today. Q1 was a mixed start to the year, but we delivered adjusted EPS in line with our outlook through discipline execution. The sales shortfall was driven mainly by the quantifiable immigration testing demand we set, and we are addressing this directly and proactively. We continue to view this as a way but absolutely not a chance in the long-term opportunity for latency testing. Trends in older patient testing groups remain solid, and we expect sequential improvements during 2026. The rest of the portfolio continues to execute on target. Sample technologies, CalAquity and CalAgen Digital Insights delivered solid growth in this first quarter of 2026. New product launches and portfolio additions support our confidence in stronger growth trends in the second half. We have updated our 2026 outlook to reflect what we are seeing in Quantiferon immigration testing trends as well as ongoing caution among US life sciences customers and the broader macro environment. But at the same time, we see tangible reasons for faster sales growth in the second half of the year. So in closing, we are updating expectations prudently and we are staying really focused on delivering solid, profitable growth. With that, I now would like to hand back to the operator for the Q&A session. Thanks a lot.

Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to withdraw your question, you may press star followed by two. To ensure we can accommodate as many people as possible, please limit yourself to one question and, if necessary, one follow-up. Your microphone will be muted after you finish asking the questions. Anyone who has a question may press star followed by 1 at this time. One moment for the first question, please. The first question comes from Michael Riskin with Bank of America.

Great. Thanks for taking the question. Appreciate the color you provided on the slide deck and on the call. I want to dive into a little bit more of the difference between what you saw in the first quarter versus how you're updating the guide. If we look at your reported results for the quarter, you know, you missed consensus by about 9, 10 million. And if we look at quantifieron at, you know, down 5% CER, it seems like the majority of the miss was specific to quantifieron. Maybe 8 of the 10 million was quantifieron. For the four-year guide update, you know, 35 million is quantity you're on, but 40 million is that U.S. life sciences. So, I want to really focus on that. It just didn't seem like it was that much worse in the quarter itself. So, is it something that deteriorated in March later in the quarter? Is it order trends you're seeing? Just, you know, you commented 15, 20 million from research customers, 20 million OEM. Just didn't really seem like that played out in the quarter itself. So, why such a steeper vision for the full year guide there if you didn't see it in one queue?

Thanks. So thanks a lot, Michael, and I think that you are nailing it indeed for the first quarter. Out of the 10 million shortfall, quantifierons indeed represent at least 8 million of that. Now for the full year, we take a realistic but also cautious view based on many factors. We believe indeed, as you said, that the total impact, we base on the manual basis for QuantiFerron immigration testing is around $35 million. In addition to that, we take the closest approach to the current US life sciences customer environment and kind of wait-and-see attitude that we have seen in the quarter one. This represents roughly 20 million of cautious expectations. And then we also take, and this is not new if you remember our previous call, the prudent approach for our OEM activities. By definition, OEM activities are more volatile because they are based on deliveries of big bursts of product one time. And so, year-on-year, you have that volatility, and for the year 2026, we believe it's another impact of around 15 to 20 million. So, overall, between countries around immigration testing and those two events, cautious life science, kind of wait-and-see attitude, especially in the U.S., and OEM, you get the difference to the re-forecast for the year.

Okay. All right. Appreciate that. And then for my quick follow-up, on Fondafir on itself, you know, you kind of alluded a couple times in the call to this is a rebasing year, and you expect it to improve in the second half, and you expect it to improve going forward. Just sort of what gives you confidence in that? You saw Fondafir already slow a little bit in 4Q25 to about 5% CER. You know, why do we think quantifieron is going to reaccelerate? Why isn't this a low-to-mid single-digit grower going forward, given the robust growth you've had over many years? And, you know, the fact that some of these immigration pressures are very likely to persist.

It's a fair question. You can imagine, Michael, that we have done a lot of analysis in the most recent weeks. And this is why we came to the conclusion that it's an immigration isolated event. And we don't imagine and we don't expect this event to happen again with the same magnitude in 2027, for example. The reason is very clear. Once you have reset the basis, because you have lost a market of immigration that you are not going to test anymore, the impact on the following year obviously is not happening with the same magnitude, first. Second, because when we look at other applications for , immunocompromised patients, diabetes patients, dialysis patients, for example, we still see very good growth. To give you a precise number, internally but also with external experts, we have analyzed again our growth expectation for this market. And the conclusion is the following. In most of the world, the testing demand for AT&T continues to grow at around 5%. In the U.S., you indeed lose that immigration testing base, but the rest of the market continues to grow at around 4%. So it's still a healthy market to be in. The second reason why we are confident, and this is why I confirm our invitation for the spotlight session on May 7th, is that we continue to invest on this range of products. We have a new, more efficient workflow together with Biasurin. It's what we call the PIA2. And on May 7th, we are going to show you enhance automation investment, and also progresses into patient scoring to show that we have still a potential to target probably around 5% growth for this kind of product.

Thank you. We will take our next question from Tycho Peterson with Jeff Rees.

Hey, thanks. A couple here. So, you guided 6% to 7% growth in quantifier on in February. You know, that was after the immigration policies were in place. So, I'm curious, you know, were you expecting a reversal of the policies or did something get worse in the quarter? It'd just be helpful to hear about the guidance philosophy because we knew about the immigration policies then. Second, you know, to Mike's question on life sciences, you know, sluggish academic spending is not a new dynamic. NIH grants were flattened January, down 9% in February, actually got better in March. So, Did something deteriorate in your order book? Is the environment getting worse relative to what you were thinking before, or were you just previously too optimistic on the recovery? And then lastly, just get us comfortable with the margin ramp. You know, you're maintaining full year on margins. Get us comfortable that you can actually hit 29.5 for the year.

Thanks. Thanks, Taiko. Those are good questions. Let me address first the question on quantifieron. Taiko, as usual, in full transparency, This is probably where I blame myself the most. And what do I mean by this? As you can imagine, Tyco, we follow sales in our customer base on a daily basis. Sales of quantifierons to address the migrant testing market are done in different kinds of labs, what we call our key accounts, LabCorp, Quest, or normal labs in the U.S. we didn't see any inflection in growth until December, which means that probably our customers didn't see that immigration impact either. And if you remember when we reported the Q4 result, we highlighted that softer December months. Should we have seen earlier that that trend on immigration softer demand would amplify in January and February, that remains a good question and that remains a question where I blame myself. But nothing until early January was showing us that this would amplify. Second cycle, if you remember, this current administration in January announced an expansion of forbidden countries. up to 49 countries, if I remember now. This created a second impact. So, yes, I blame myself because I wish I would have been more proactive with the first signals that we saw end of December of early January. And this is why I said that we are taking very proactive actions. And this is why we decided to reset the market potential for Quantité Ronde. because we know now that it's a solid trend. Second, life science and academia. We are not more impacted than most of our competitors. And indeed, Taiko, I would agree with you, and I said that for many quarters now, that we have more visibility now in Q1 on funding, especially in the U.S., compared than, for example, six months ago. This is a fact. At the same time, it is also a fact that money is not flowing back as quickly as expected, and this is not just impacting chiasm. When I look at our competitors' results in math science, for example, you clearly see that it's negatively flattish. So it's nothing new, but what is new is that everybody, I believe, was expecting the money to flow back quicker, and this is wild. I mentioned that kind of wait-and-see attitude. I don't think, in addition to that, that the increased geopolitical tensions in the Middle East did help positively that kind of wait-and-see attitude. So, basically, we are a bit more cautious. We still expect a rebound. It's half of a point of growth in the second half of 2046, but it's taking a bit more time. And now on the margin forecast, I'm going to ask Roland to chime in here. Hello, Taiko.

Quick question on margin development. You will see already that within the second quarter, we will deliver an adjusted EBIT margin of 29%. So we go very quickly into the selection of our four-year target. And then the second half, we will . Again, compared also to last year, you see some developments here.

I think there's a couple of drivers so that you know and from prior discussions we had we clearly continue with our roundabout 40-carrier efficiency project and therefore I would say they were clearly supposed to help us to overachieve our margins.

Right now I would say for this year at least they will help us to achieve the 29.5%.

Cross margin in addition is going to be helpful. You have seen that also in Q1, sample prep was being very helpful for us in general and we do believe that trend continues in particular with some of the new launches. There's even acceleration dollar wise expected. I think it's no surprise that sample preparation is one of our higher, probably in highest cross margin. So I think there's also clearly a certain factor coming from the gross margin side in addition to operational leverage.

Big step, just to finish it up, is mid of this year actually another significant step in terms of launching our next wave of our implementation of the ERP system. which again really takes a lot of incremental cost out of the system. So overall, I would say the 29.5% is well on its way. And again, you will see that number already quite close in the second quarter.

Thank you. Thank you.

Thank you.

Thank you.

Thank you. We'll take our next question from Casey Woodrig with J.P. Morgan.

Great. Thank you for taking my questions. So you left the five pillars unchanged outside of quantifier on for the year, meaning that the life science capital spending headwind is seemingly not hitting sample tech or high acuity. So can you maybe just elaborate on where exactly in the portfolio you're taking a more cautious stance here outside of the OEM business that you talked a little bit about? but purely on that research side. And then I guess what gives you confidence that the life science capital exposure that you do have in sample tech and high acuity won't be impacted this year from the weaker market that you're adjusting for elsewhere. And then just as a quick follow-up, I would also be curious to hear your confidence level in the new product launches. You know, you maintain the guide of 200 basis points of contribution for the year from those, despite calling out a weaker capital market. So just maybe walk through the order book for those visibility into that contribution guide for the year. Thank you.

Thanks, Casey, and I'm going to start with the second half of your question, which is the confidence in our new product launches. The confidence is based, Casey, on the buildup of the pipeline as we see it. If you remember, for KS Print, for example, we told you that we were receiving purchase orders even before the system was officially launched. Yes, we launched it earlier in the year. And when I see the building of the pipeline, it's above our expectations. That's why we are feeling good about it. We continue to acknowledge the softer or the less quick or less quick stabilization of the capital expense trend in labs, especially in the U.S. But when you, we continue to believe as well that if you bring a differentiated solution, value solution, you have opportunities. And it's the same for KayaSymphony Connect. Our relation with our biggest customers, Bidem Natera, Guardant Health, NEO, for KayaSymphony Connect are very strong, so confidence as well. KayaMini, it's a bit too early to say, but the timeline for KayaMini is fully on target, and we know that it's going to answer a need for automation in San Francisco. And it's not going to be an expensive instrument. Second, the new panel on blood culture and bloodstream infection. It's a need in many European countries. As you know, it's not going to impact the sales for the U.S. because it's going to probably be approved around November or December, but it's going to be mainly Europe. So the combination of new solution because indeed there is more visibility on funding. That doesn't mean that it flows back, as I just said before, but there is more visibility, allows us to confirm the number that we gave you earlier in the quarter. I think those answer both of your dimensions. We continue to acknowledge that money is not circling back as quickly as we expect, but we believe that this is going to sequentially improve.

Thank you. We'll take our next question from Jack Meehan with Nefron Research.

Thank you. Good morning, afternoon, guys. I wanted to spend a little bit more time on quantifier run. Could you remind me the breakdown across different test categories and the size of the immigration testing pool? I didn't realize there was so much exposure to specific regions. Maybe just talk about the magnitude of the weakness you're seeing there. And I'll squeeze in one follow-up at the same time, which is you mentioned you don't think any of the weaknesses, competitive related, just any more color you can share on this topic, even close your latest thoughts. Thank you.

I do apologize, Chuck, because the second half of the question, there was a lot of background noise and your voice was extremely muffled. And so I couldn't get the second part of the question. Could you repeat the second part, please?

Sure, can you hear me okay now?

Yeah, no, the first part of the question I could get it, I will answer it, but the second part of the question I didn't get it, I'm sorry.

Yep, no worries. Sorry about that. It was just, you mentioned you didn't think any of the quantifier on issues were competitive related. I was curious what your latest thoughts were on that topic.

Okay, two good questions again. I mean, I'm a bit surprised because I really believe, Jack, that in the past, we segregated the different components of the quantifieron applications, trying to make a balance between normal testing, immunocompromised patients, and new buckets of growth, such as, for example, diabetes patients and so on. So our best estimation, based on, obviously, actual numbers, is showing that around 10% worldwide of our quantifieron testing is based on immigration testing. And it's not just in the US. It's in the US, it's in Europe, it's Middle East. Look, remember, if you have in mind the contract that we won in Oman, on Quantiferon, where the state of Oman gave Quantiferon the testing, it was the testing of all their immigrants. And so, with the current policy in the US, with the fact that the geopolitical situation in the Middle East is not favoring movement of people, you have that in mind. We believe that The Middle East situation is a bit more short-term, short-lived. In the U.S., we believe this is going to be a remaining and a recurring number, and this is why we prefer, and I think it's a transparent decision, we prefer to reset the base. It goes across legal and illegal immigrants. In a one-to-one, I can give you more details if you want, but that's the explanation. For the competitive pressure, look, we are like you. First of all, we've never been in the business of bad-mouthing our competitors. We are used to competition in Quantiferon. We have many on the market. The recent publication I saw recently from the potentially coming competition is just showing that it's an equivalent to our third generation Quantiferon. We are ahead of that already as far as we are concerned. So I'm not benefiting it. I said we are prepared.

Thank you. We'll take our next question from Aisha Noor with Morgan Stanley.

Hi, everyone. Thanks for taking my question. My first one is on sample tech. Could you unpack the 3% organic growth a little bit, so instruments versus consumables, U.S. versus Europe, Could this accelerate further to a mid-single-digit type of organic growth in the second half? And then my follow-up, which I'll also ask in this question, is on the strategic review, given it's top of mind for investors at the moment, if you could give us some color on how that's going. And based on the headwinds you're seeing in the U.S. market right now, whether it's immigration or life science weakness or flu, does this change the direction of your strategic review and how you're thinking about the future of this business and how soon you could be to an outcome of this review? Thank you.

Thank you so much. On sample tech, I mean, this 3% organic is confirming the strategic decision that we took some years ago. It's moving as quickly as possible manual customers to automated. So it is supported by all the upgrading automations that we have done in the past. If you remember, we saw EZ1, EZ2, KayaTube to KayaTube Connect, for example. This is what is in our numbers in Q1. Why are we confident in Q2, Q3, Q4 is that as we have said this morning, you still do not see the impact on the new automation, the Kaya Spring, the Kaya Symphony Connect and the Kaya Mini in the Q1. This is going to come starting Q2, Q3 and Q4. Can we push it to five? That's a good question. I'd rather to say, step by step, we took a commitment to you in our capital marketing in New York two years ago to bring sample tech back to 3%. We are there. If we can beat that, we will, obviously. And I think in this regard, the acquisition of parts is a very smart acquisition. Second, the strategic reviews, they are not impacted by our environment. I think we have always said that management and both together are always open to work on options that could create more value for our shareholders. And that remains the mindset.

Thank you. Thank you. We'll take our next question from Doug Schenkel with Wolf Research.

morning good afternoon uh two topics and thank you for uh taking them uh the first is a follow-up to the last question uh terry any update on the ceo process and uh any you know obviously if there's something material we'd know it at this point but i'm mostly just curious on how that's progressing and what the timelines are so that's the first one uh second is on uh life science spending Could you give us a little bit more detail on which segments, you know, really which product categories is what I'm trying to get at, were the ones where you saw a notable weakening in demand? Yeah, so I'm trying to get at, yeah, obviously there's the issue on quantiferon, but, you know, putting that aside within life sciences, what product categories weakened the most over the course of the quarter? And was that weakness largely U.S. academic and government, or were there other dynamics that were surprising in areas like SMIDCAP biotech, pharma discovery, any other areas? Thank you.

So very simply for the first question, this is probably one of the most important decisions of the board and the process of the CEO succession is still ongoing. We expect this to be sold in H2 but it's going very well and we are paying extreme attention obviously to this process and as you know I will be serving the company as long as needed but H2 is our timeline. For the life science, I think, first of all, to the different part of your question, we see softness mainly in pure research and academia, which is confirming what I said before. Yes, there is more visibility on funding, but money is not flowing back as quickly as expected. Where do we expect and we see the main weaknesses? It's in traditional, what I would call a bit commoditized PCR and other components, for example, enzymes or oligos. Our sales, for example, to some major U.S. institutions like the CDC or the NIH, they have decreased in Q1 around enzymes and oligos, for example. So components and traditional PCR. And third... We confirm that it's mainly pure academia, pure research. We are satisfied with our pharma business, especially on the companion diagnostic. This is going very well, and we do not see specific increased weaknesses in the biotech environment.

Thank you. We'll take our next question from Odysseus. with BNP Paribas.

Hi, thanks for taking my questions. On Quantiferon, I wanted to ask out of the rush launch, there's a few claims that have been made on our industry conference that there's a big automation improvement here. I wanted to get a sense of how much of your Quantiferon sales are generated from your fully automated workflows using TCAN and Hamilton. And secondly, on your margin, considering you maintained your target for the full year despite the lower sales growth, Roland, you did touch on some kind of efficiency programs doing better than expected, but is there any mix effect involved as well that we need to know regarding Quantiferon or the OEM sales? Thanks.

Very good. I will, since you asked Roland, I'm going to ask Roland to take the point and then I'd come back on the . And I'm happy to go first.

I do think, again, as I said, there's a very good level here on the margin development. I don't think there's, at least from our perspective, any reasons that we are not able to achieve that.

actually some of the drivers are exactly the ones you are referring to. Nix will be helpful for us because as we said before sample prep is clearly a significant opportunity for us, it is clearly a high margin product for us and some of the new launches will also clearly generate an increase on the consumable side because again just think about Being a high throughput machine, that means by definition there's more consumers going to this kind of a machine than to any other kind of instrument. So therefore, also not only the implementation part, but particularly also the consumable revenue stream should increase. Therefore, I think, again, a good driver. Second, some of the product areas which right now are not developing as planned are clearly coming with a lower margin contribution.

I do think that is clearly in brackets somewhat helpful relatively as well. So I would think that is a component. I do think nevertheless the single largest component is actually the activities we started.

Now it's more or less 18 months ago.

with the efficiency program. Again, I talked already about what we're doing on the EIP implementation. We still continue our activities around business shared service centers.

We're moving here from 15 to 20% over time of employees being in business shared service center. We're talking about significant AI implementation programs within Kaizen, not only to the customer side on the QDI side, but also for internal processes for customer services,

in the finance area, again, in coding, right? We have significant opportunities around software development internally.

So there's a lot of areas where we see improvements coming up, and they come faster than most people believe right now. Again, as I said, AI is clearly changing the world to a certain degree, clearly also in our environment, and we're riding that as well. And to your first question, look, I would take it like this because I cannot speak on behalf of competitions. What we have seen are slides that are showing a product which is by no means differentiated to the quantifieron. It has even less features than the current quantifieron. But from an automation standpoint, what I'm going to say is that there is at this moment, only one full workflow and one fully flexible workflow on the market. And this is what is provided by Kyatlet. When I say full, it's that when you start with a Tican or a Hamilton, then the Pontiféron and Diasolin in the back end, or you can perfectly pick and choose and say, I'm only interested in the front-load automation, or I'm only interested in the back-end automation. So we have a mixed-up situation. What we want to show you on May the 7th is that beyond this, we want to even enhance automation further, make it even smoother, more integrated, and leveraging the full power of what we call the PLEA-2 from diethylene, and we want also to improve the product from a medical and patient scoring standpoint. So stay tuned, but I can guarantee you that you will see that once again we are taking a step ahead on what we are going to present on May the 7th.

Thank you.

Thank you. We'll take our next question from Harry Gillis with Barenburg.

Thank you very much for taking the questions. Just following up on the previous questions relating to the step up in your margin through the rest of the year, I was just wondering if you could maybe discuss whether the Middle East conflict is having any impact on your raw material freight or energy costs. and what's your exposure there should the conflict persist for maybe for a significant part of the year and then just a second a very quick one I noticed your restructuring adjustments increased from 25 million to 45 what you guide to for the full year could you touch on what that incremental 20 million is and where in the business you're taking some measures there thank you

Yeah, thank you. I would say more or less in the Middle East conflict. The good news is, of course, it doesn't affect us directly in terms of production, whatever.

Again, thanks to the whole COVID environment at that point, we had to change more or less our whole energy infrastructure a lot. So we are totally flexible there.

where it clearly impacts us as many other companies is on logistic cost because it's quite clear that the big logistic providers and forwarders are charging surcharges to us.

As you know, to a larger extent, we're able to share that with our customers, but probably not to the fullest extent, of course, particularly on the intercompany side.

We still hope that there is a certain normalization come up at some point in time, what we do not expect that short term. Nevertheless, I don't think that that is too much of an impact for our overall margin situation.

I'm quite sure that we see, as I said before, that is not too meaningful from the outside perspective, but just to give you the complete picture here.

And the restructuring effort, as I said, there's a couple of efforts which we are doing right now, I was referring to them. Some is around our current ERP systems, there's changes coming up, some has to do with some other topics I was referring to building out on the knowledge we accumulated over time in our shared service centers. So that's clearly something that we want to strengthen over time.

Thank you. We will take our last question from Catherine Schulte with Baird.

Hey guys, thanks for the question. I guess just going back to the life science caution, thanks for giving some color on those product categories. But just given it's impacting only that more commoditized side and kind of the non-pillar side of the portfolio, is what gives you confidence that this is market related versus, you know, share or product issue on that non-pillar side of your business? Thanks.

Well, I would say, Catherine, that over the last six to seven years, we clearly said that this company was focusing, focusing on where we are relevant and we can take definitive market shares on growing markets. And therefore, from a strategic standpoint, it is no surprise to say that Kyogen becomes more and more a digital PCR company rather than a PCR company. It's perfectly in line with our strategy. We focus our Salesforce attention as well on products where we bring differentiated value and where we know that the margins over time are going to be the most interesting. So this is why also you see also that kind of result. The rest, I mean, as I said, enzyme, odigos, those are normally products that you sell in Big Bird, so they are depending on older patterns, so it's not surprising. We have always said that OEM was volatile by nature. I think it's wise in any kind of model to model the OEM business at Kayagen between 70 and 80 million dollars per year of revenues, give and take, you see. So, and then, I think this is, and I think it's wise for a size, for a company of our size to continue to focus our people. We cannot be everywhere, and I prefer them fighting for sample tech, pushing for digital PCR, pushing for Quanticleron, for Kayastat, and for QDI, We have enough with those products and it represents already 70 to 75% of our revenues. With this being said, I think we need to end this call. I would like to thank you for your attention and repeat again before closing that we have a virtual quick spotlight session on May the 7th on Quantiferon and I'm sure that you will find it quite interesting. Thank you very much.

Thank you. At this time, I'd like to turn the call back over to Daniel for any additional or closing remarks.

Yes. Thank you, Katie. Thanks, everyone, for joining our conference call today. If you have any further questions or comments, please do not hesitate to contact us. Thank you very much for your participation, and goodbye.

Ladies and gentlemen, this concludes the conference call. Thank you for joining, and have a pleasant day. Goodbye.