DiaSorin S.p.A.

Good afternoon. This is the Coruscant Conference Operator. Welcome and thank you for joining the DIA-Sorin First Quarter 2026 Results Conference Call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Carlo Rosa, CEO of Diasorin. Please go ahead, sir.

Thank you, operator. Ladies and gentlemen, good afternoon and welcome to the Q1 conference call. As usual, I will give some color to the financial results, and then I will let our CFO, Alberto Donati, to take you through the numbers. I'm going to make my comments at constant exchange rate. In quarter one, 2026, as anticipated during our full year result call, the quarter registered slightly negative performance, minus 3%, and mainly as a result of the following factors. First one, as reported Thank you very much. S.p.A. And then last but not least, the qualifier on TB performance that in the U.S. has been driven by the reduction of immigration-related testing, which specifically for us resulted into a one-off event of destocking of some of the large commercial labs in the U.S., that where typically this testing happens. Now, I will now deep dive into the three business lines. Immuno grew 1% compared to last year. Molecular diagnostic declined 12%, and LTG declined 7%. So now let's go one by one. When it comes to UNO, as said, it grew 1% over last year. If we exclude China, the growth was 2%. And North America was growing 1%, and the rest of the world, including Europe, 2%. China declined, continues to decline, 32%, as the effect of BBP broadens now also. is hitting the performance of the company in Shanghai and Beijing that until last quarter were not actually affected by EBP. When it comes to quantifieron, the performance of quantifieron globally was weaker than the previous quarters. The quantifieron franchise grew globally 6%. And this is due to one of these talking events of the QuantiFERON product in some large commercial labs. And this has been driven by a decline in demand for TB testing, which is required for immigration for the visa issuance. We expect this to recover already starting from quarter two. because I said this is related to the fact that some of the large labs have canceled orders in Q1 because they are to bring their inventory level back to where it's needed. We continue to see stable double-digit growth in U.S. and in Europe outside the commercial labs. And this has been driven by the launch of the new high-throughput version of the liaison quantiferon TB Gold Plus 2 test, which has been recently FAA cleared. As QIAGEN reported, we see no changes in pricing or competition. So quantiferon continues to grow double-digit in the hospital market, continues to grow double-digit in Europe, And we saw, again, this slowdown in the commercial lab in the U.S. Net of this impact, sorry, let me just add a couple of things. We also experienced in January and February, but with a recovery in March, of general softness of U.S. testing volume. As reported by some of the commercial labs, due to the severe weather conditions in the U.S., which affected some testing volumes in certain states, and we saw recovery of this from March and in April. The third element when it comes to immunodagnostic is that we continue to see the normalization of testing volume in Europe as we have been anticipated in previous calls. Net of these impacts of immunobasedness continues to grow steadily and perform strongly as discussed before. The U.S. hospital strategy continues to be on track, and we are now approaching close to 550 hospitals by mid-year and by year-end. We should get to the mark of the 600 hospitals, which actually was part of our 23-27 plan, and we are one year ahead. ahead of expectations for this strategy. Again, it's working very well. And the second element of this is that our specialty testing, which clearly goes into this installed base of systems in hospitals in the U.S., continues to grow. And there's a strong momentum in areas like gastroenterology and other, and some of the infectious disease specialty areas. If we look outside U.S. and Europe, as said before, the only geography where we are experiencing slowdown is China. China continues to decline, again, in the quarter, 22%. And what we saw is that on top of the VBP, that is hitting the industry. Now we see that some of the provinces and cities that supposedly were not supposed to be hit by VDP now has a combination of price policies driven by competition and or the fact that hospitals do apply the VDP policy anyway. We see that the price erosion continues to be very strong in China. Again, this, I believe, has been reported by everybody that operates in this sector. When it comes to our direct business, ex-U.S. and ex-China, so we are talking about Australia, India, Mexico, and Brazil, we continue to see a need to enhance these growth. S.p.A. S.p.A. Now let's move to the molecular diagnostic. The molecular diagnostic total franchise declined 12%. And as said before, this is fundamentally driven by the very weak respiratory system. As we have discussed previously, I will comment that different segments, different platforms, the Liaison NDX franchise, and then I will talk about our multiplexing franchise and make a few comments about the Liaison Nest. So let's talk about the Liaison NDX franchise, which annually represents roughly €100 million of revenues. The franchise declined 7%. But as we have discussed, there are different trends in this product line. We have the respiratory, which is declining 40%. Again, it's all volume-driven. We have the targeted specialty, which is growing 41%. And this has to do with the fact that we continue to benefit on the uniqueness of our product offerings. Today the targeted specialty represents roughly 45 million euro. So it's almost half of this franchise. And then we have the ASR. ASR is for us a relevant business. It represents 40% of this basket. It's reagents that we provide to hospitals and commercial labs to develop their LDT. It is highly affected by ordering patterns because clearly hospitals do buy these agents in bulk. In Q1, the business declined 10% versus last year, but we expect that this will normalize and get annualized to small growth starting from Q2 2020. Q2 this year. Then let's move to molecular multiplexing franchise, which is approximately, again, €100 million of annual revenues in Q1 is flat, and it is flat notwithstanding the fact that there is a good portion of this business, which is a respiratory, which clearly is very negative, but it's counterbalanced by the fact that we are growing the TLEX customer base. And so we have additional business and additional respiratory business, although it's, again, from a volume perspective, is not where it's supposed to be due to the weak season. And then we have launched the blood test. and the new panels, which clearly are not seasonal, and they contribute to the net growth. So if we look at the performance of this segment, which, again, is strategic, is flex-based, is flat, but it's also the matter that there is a strong growth, which is compensating the decline of the respiratory component of this business. When it comes to customer split, which is an information I believe we have been starting to provide to the market, by now 90% of the customer type are hospitals and 10% are commercial labs. Clearly, we expect this to shift even more toward hospitals, which is the fundamental market for this technology. When it comes to the contribution, though, to the total revenues, 30% of the contribution comes from commercial labs and 70% comes from hospital labs. And this has to do with the fact that as we have pressed the list, we have signed up and now installed our liaison plex in some of the major large commercial labs in the U.S. We expect the GI panel clearance within days, so I hope that we will be able to provide some good updates, good news, during our analyst day, which is going to happen on the 20th. Now, I was going to give some qualitative comments about the Inelios on this, because it has been just launched. On April 1st, we have both distributors, Thermo Fisher and McKesson, now operating in the U.S. with the liaison desk. Because of the way this business works, there is, in the next few months, we expect to install systems. And then the system's clearly going to generate revenues during the flu season, so starting from late Q3 and beginning of Q4. We're going to give way more color during the meeting on the 20th, but I am happy to report that the launch has been so far very successful. Now, last remark on LTG. As you all know, the LTG business for the Sorin is a B2B business. It's always related to bulk orders that are coming from our diagnostic clients as well as the life science clients. Because of the way of the ordering pattern in 2025 versus 2026, we expect that H1 is going to be lighter than last year, and we expect H2 to show strong growth compared to last year. And overall, we confirm our expectation that LTG will deliver Law to Meet Single-Digit Growth in 2026. One element that I would like to comment on is that we see an improvement of the life science sector. I think as reported by some of our clients in their comments of Q1 2020, Whereas the diagnostic business has always been traditionally very strong and clearly more predictable. I'll now comment on the Investor Day. So everybody is invited to attend to our Investor Day, which is going to happen on May 20th. We're going to host our Capital Market Day at our Innovation Hub in Milan where we're going to unveil our 2027-2030 strategic plan. This event clearly will offer a unique opportunity to experience our innovation percent, including live demonstration of all our platforms, which will be led by Thank you, Alberto. Thank you, Carlo. Good morning and good afternoon, everybody.

and thank you again for joining the Q1 2026 NINCS call and also for the continuous interest that you're all showing in our company. In the next few minutes, I'm going to walk you through the financial performance of the first quarter of the year and then I will turn the line to the operator for the usual Q&A session. As we navigate through these results, you'll see that while we faced some expected headwinds this quarter, We also remain confident that we're gonna be achieving our full year guidance. So let me start from the revenues. Q1, 2026 total revenues came in at 287 million Euro, which is down 3% at constant exchange rates compared to Q1, 2025, which is in line with the trend and guidance we shared in the previous conference call and as Carlo just outlined. At current exchange rates, Current exchange rate revenue declined 8%, reflecting a significant forex headwind of around 17 million euros. As a reminder, Q1 2025 benefited from an extraordinarily strong U.S. dollar with an average of around 1.05 compared to an approximately 1.17 in Q1 2026. which is a difference of more than 10 cents. So overall, Q1 2026 was particularly impacted by the exchange rates, so given a very tough year-on-year comparison. Moving to profitability, Q1 2026 adjusted gross profit came in at 186 million euro, down 5% at constant exchange rates compared to Q1 2025. At current exchange rates, the decline was 9% with a headwind of €10 million due to the exchange rate. The adjusted gross margin remained, however, quite stable at around 65% at both constant and current exchange rates, slightly down from the 66% of 2025. and this is primarily due to the negative impact of the tariffs in Q1 2026 which as you all know were not yet present in Q1 2025. And this is also despite the unfavorable leverage of fixed cost which is also demonstrating the continuous capability of the company to deliver a diligent and rigorous cost management measures in order to maintain profitability. The Q1 2026 adjusted operating expenses S.p.A. S.p.A. S.p.A. which we commented during the last call and accounts for north of $10 million for the full year. Q1, 2026 adjusted EBIT came at 67 million euro, which is down 17% at constant exchange rate, while at current exchange rate, the decline was 20% because of a forex that went up 3 million euro. The margin, the EBIT margin was 24% S.p.A. S.p.A. S.p.A. S.p.A. S.p.A. Year-to-date adjusted net result came in at 49 million euros, which is 17% of revenues, and decreased by 16 million, or 25% compared to the previous year. Now let me move to the EBITDA. Q1 2026 adjusted EBITDA totaled 90 million euros, which is around 31% at both constant and current exchange rates. And this decrease compared to last year reflects some of the headwinds that were previously mentioned, namely the BBP carries as well as the decision of investing for the success of the next commercial launch, but most importantly and significantly the unfavorable operating leverage due to the lower revenues in the quarter. Turning to the balance sheet and the cash flow performance, we delivered a solid result despite the challenging revenue and macro environment. Our net financial position showed net debt of €711 million at the end of Q1 compared to €580 million at the end of 2025. These are variants of €131 million that primarily reflects on one side the good operating cash generation S.p.A. S.p.A. S.p.A. S.p.A. S.p.A. For sure, the remunerations for a total cash outflow not exceeding €250 million. As of today, the company purchased over 3 million shares, completing roughly likely above 80% of the total program. Now, in light of the Q1 results, we are confirming our full year 2026 guidance at constant exchange rates for 2025. We continue to expect revenues to grow between approximately 5 and 6%, with adjusted EBITDA margins in the range of 32 to 33%. Please note that, as we mentioned already during the last call, this guidance does not account for further potential negative impacts from the prolonged military conflict in the Middle East, which could further impact the group. It excludes the possibly indirect effect of extended logistical and distribution difficulties, and most importantly, the potential future inflationary effect on material costs on one side and supply chain on the other, which were not significant in Q1. Now, before turning to the operator, allow me a quick update on tariffs. Because, as you all know, the U.S. government adopted an exceptional tariff framework in S.p.A. S.p.A. S.p.A. S.p.A. I will now hand it over to the operator for the Q&A session. Thank you. This is the Coruscant conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press