Qiagen N.V. (QGEN) Earnings Call Transcript & Summary

Okay. Thanks everyone for being here. I'm Patrick Donnelly with the Tools and Diagnostics analyst at Citi here. [indiscernible] team, including Roland Sackers, CFO. Thank you guys for being here. I guess, Roland, maybe we can start, 3Q was quite eventful for you guys, not only the results, CEO transition, acquisition, share repurchase, a lot was going on. Maybe just run us through kind of high-level those announcements, and we can dive in a little deeper as we go.

Yes. No, you're absolutely right. I think this year was clearly a good year for us so far. Again, we had a strong performance Q1 started off with a year more or less 7% growth rate than the second and first quarter, overall a 6% growth rate, clearly doing better than the industry, clearly doing better in the market. Clearly also a testament to, I think, our overall footprint, particularly around our consumable business, having 85% of our business being related to consumables for quite resilient is a good thing in a more volatile environment. [indiscernible], we clearly were also able to move the company strategically forward. And we announced just last quarter, another bolt-on acquisition. I think Parse is a perfect addition to our existing portfolio, for sure, we talk in more detail about that today as well. And of course, capital allocation is a big topic for Qiagen since 2012 doing. We're doing quite regular share buybacks. We typically did the $100 million incrementals. We then moved to, I think, for the last 2 years to $300 million incrementals per year, and we just announced now a $500 million share buyback to be executed early next year. I think the combination of small bolt-on acquisitions plus share buybacks is something we feel quite comfortable with. I don't want [indiscernible]. And given our overall cash generation, I think it's [indiscernible]. It's clearly also that our CEO and [indiscernible] have sat together and discussed more or less the future of the CEO position. Again, Thierry was the CEO and is still CEO for 10 years with the company, 6 years CEO and including quite difficult COVID times and I think they came together to the conclusion that it's probably a good time for a transition. Nevertheless, of course, he will stay fully committed and on board until a new CEO is identified if that is an internal or external candidate, it's too early to say, but I think the Board gives themselves the time to find the appropriate candidate.

Yes. Perfect. Maybe we can start with the CEO transition. Any -- you mentioned internal, external. I'm sure you look at both, maybe just the timing, the scope, put some context around that and the candidates you guys are looking for in terms of [indiscernible].

Good question to the Board, but I do think from my perspective, I would say in Europe typically takes somewhere between 3 and 6 months. And I do think that it's probably also a time frame I would envision here as well because I'm quite sure that Board wants to review different candidates, different calibers internal, externally. I would not expect -- not leaning a bit out of my window a bit, but any change to strategy because I would assume that investors as a Board believes that -- right now, we are executing quite well. We are clearly doing better than the industry. So I don't think any strategic change should be a driving factor for that. I would rather believe that strong execution and continuation of the successes over the last more or less years is what is envisioned.

And then on the acquisition side, you mentioned Parse. What attracted you to that asset? What's the right way to think about the potential there? Maybe we can start on the growth side and then we can talk a little bit about some of the other things.

Yes, let me kick it off, and then Daniel might add to that. Again, Parse is clearly an attractive business for us because it fits very well in our overall sample prep business. Have in mind that -- again, that is an important part for our growth, not only historically but also going forward. We do believe Parse has a unique feature compared to other companies in that area. Clearly, good growth pattern. Have in mind that in '24, there was around $20 million in revenues we expected for next year, around USD 60 million in revenues. We actually doubling up in R&D. So I would expect that we rather believe that the growth pattern continues for quite some time. It's accretive also in the midterm to our overall margin structure, not only growing, it's also quite profitable while we're investing into R&D over time. So I would say, we see some competitive edge, but [indiscernible].

Yes. So what I might want to add is that first of all it's a very nice business because it comes at the very front end, dealing with intact cells and single-cell analysis is basically opening up a window from turning biology from a very group picture into a very sharp portray of every single cell. And this market is now becoming really attractive also because of Parse, as Parse allows for the scaling up to analyze millions to billions of single-cell data sets. It's a manual technology and you need millions and billions of data sets to be able to feed AI models, which then can predict how a drug is working on organs, how an organ might function. And this is really the part of the single-cell analysis market, which is attracting -- which is most attractive to us. And have in mind that we have with our bioinformatics franchise, QDI -- we have a very interesting technology where we can turn the data generated with Parse into workable biological insights.

Yes. And just to add to that, and I think one of the features we really like also, particularly in a given environment, is that you clearly can work with the Parse solutions without having -- or using an instrument, which is a significant benefit. If you think through that overall budget situation, particularly for large CapEx investments or a larger CapEx investment is probably still not the easiest one, also probably for some time going forward. So having here the opportunities to kick that on a consumable-based only solution of is what we believe a strategic advantage.

Yes. I guess, rolling to that point on the instrument free side, are there certain areas in the market where you're seeing more adoption of the [indiscernible] because it's instrument-free. And then I think the profile is $40 million double-digit growth, the durability there. But maybe first on the instrument free, are there certain applications or parts of the market where this has seen more traction?

I can kick it up as well, and then Daniel can add to that. First of all, Parse, for example, has a significant footprint in terms of overall customers, but also like, for example, the top 10 pharma customers, all customers and I don't think it makes too much of a difference for pharma company or for life science, academic companies in general, I think both actually like the benefit of not having to use an instrument. Nevertheless, of course, we do believe that the scale impact for Qiagen right now is particularly coming out of the pharma environment because our reach here, of course, is much wider than what they could do as a stand-alone company. So bringing that in our global network on the life science also the pharma side is probably a nice add-on.

What I potentially could add to that is that we have thousands of customers really, and that is also alluding to what Roland just said, Parse is currently dealing with around 3,000 customers. And we have beta global network. And as I said, it fits at the front end [indiscernible].

Maybe sticking with sample prep that obviously the part where it's going to tuck in -- that business came back to growth a little bit. I think it was 3% in 3Q consumables doing well and still a little bit heavy. Maybe just talk through that business, what you're seeing, what the expectations are going forward for Sample tech?

I would agree, sample prep improved quite a lot. It's clearly an important franchise for us. We were slightly negative in Q1, slightly positive in Q2. And then as you said correctly, 3% in the last quarter. And that in a difficult environment, right? The academic franchise, particularly in the U.S., is not an easy one. And sample prep, of course, is a product we sell in the clinical side as well on the research side. So good news for us is, again, the resilience of our consumer business, which is also within sample prep somewhere 80%, 85% is very well proven because of that because even during shutdowns, consumables are getting still sold and utilized in a lab. But of course, it is more difficult for to sell instruments because if you don't know if you have a funding the year after, you don't invest into an automation solution because you might also kick start certain follow-on investments on incremental pull-through to an operator and front of the machine. Nevertheless, what makes us very positive on sample prep midterm and actually also for next year is we have 3 significant instrumentation launches coming up that is also for Qiagen in a significant number of new machines in particular and I really don't want to pick one, but just to kick it off. The Qia's print machine is an important launch for us, why? Because there's a going in the high throughput part of super preparation where Qiagen doesn't have any footprint. That means any incremental sale of the instrument is an incremental revenue opportunity for us. And of course, AI instrument by itself generates an incremental consumable stream. And that is something where we are quite excited of. We just launched a QIAsymphony, just more or less a few weeks ago, we have, I think, a good insight into our books here as well. Clearly, also, we will be incrementally successful for next year. Here, of course, it is probably at the beginning of the instrumentation part of the business. Why? Because we have an existing Symphony, as Symphony is our flagship platform for many years. So we are growing probably at the beginning, replacing other existing instruments. Therefore, we have good instrumentation contributions but I wouldn't expect that the consumable increase here will be significant, at least in the first couple of months.

And you guys did that deep dive on the sample prep business a couple of weeks ago. You mentioned the liquid biopsy MRD part a couple of times, obviously, a nice double-digit growth driver. Can you talk about the presence there, what you guys are doing for liquid biopsy. Obviously, high-growth vertical and diagnostics. How big is that today if you're willing to kind of break down what part of sample prep that is? And again, where could that go? Because obviously, it's a big growth market.

So if you think about Qiagen over the last 3 years, how we've innovated and created the sample prep market here. What you're seeing in liquid biopsy where you're taking blood to be able to do cancer testing. You can also do prenatal analysis type of work. It's an area growing north of 30% for us. We won't size the overall market for competitive reasons. But we're on the front end of Natera, Guardant, these key players in that market and helping them to be able to scale this market, like you said. This is an area where we continue to innovate. We're working on new ways to help them be able to handle the volumes of tests that they have to process. QIAsymphony Connect is the next generation of that, and we'll see how we continue to innovate in that area to help them with automation.

[indiscernible] a little more on some [indiscernible] higher growth areas.

[indiscernible] What's the right way to think about new products in terms of what they could contribute into next year, [indiscernible] for as an example, is a research application product [indiscernible] is a research application product as well that's designed for the small academic bench where you're working with up to 10 to 15 samples in a run. I think it's 12 actually where you're helping people to move from -- with a machine the size of an espresso machine to be able to automate work that used to have to be done by hand. Where is the QIAsprint the other the market where you're doing about 190 samples of a similar type at the same time. Then QIASymphony Connect, like you brought up earlier, this has been optimized even more for liquid biopsy applications but that's primarily clinical market, even though you have some research customers for Symphony, but that's kind of the split of the market. Remember, in terms of growth going forward, the Parse sales next year, $40 million will come on top of the sample prep. So it's probably a good 2 points of growth for the group even more for our sample prep number and these instruments will start to kick in, in the second half of '26 in terms of incremental growth.

Okay. Got it. And then maybe pivoting over QuantiFERON, obviously, you've been a great part of the story durable double-digit grower. I know you guys have a [indiscernible] as well. If you can start with that [indiscernible] does that open up market [indiscernible] test is ongoing. It's still a big opportunity. But maybe talk about the next-gen test, and then you can dive a little bit on QuantiFERON.

Yes. Let me fill out a bit because I do think, as you said, QuantiFERON is clearly a wonderful business for us for many, many years. And I still recall getting [indiscernible] how could you pay $300 million for the business in 2012. If it only delivers $20 million in revenues. In the meantime, I think we have now $2.5 billion of cumulative revenues, nice margin. So clearly a success story. But I do think, and you pointed to that, Patrick, I do think the #1 message is still 60% of the overall market is not converted, 60% is still a literally 120-year-old skin test and even that 60% business is still growing at 4%. So if we go in with our IGRA business, let's say, double we barely convert in the existing market share. And I think that describes nice this opportunity we're having we see clearly more and more areas, government, states, starting with mandatory testing might for health care workers might be -- so there's a lot of opportunities where we can still gain momentum. What we're doing right now with first generation is improving the workflow automation support because as you said correctly, volume is still increasing, and therefore, customers clearly want to have a better integrated what we're trying to address because at the end of the day, it is still a lot of volume, what customers have to move. There's still [indiscernible] you have to operate. And if you can make that less hands on hands-free or more hands, we've seen as an advantage.

And a few pieces to dive in there. I mean in terms of the immigration side, here in the U.S., there's obviously been some noise there on the border side. Has that changed the business much in terms of that opportunity? I know it is a go in a little bit of waves with the immigration side?

Just being European staying outside your politics here. Again, when we are talking about immigration where we start typically legal [indiscernible] right? So it's really -- if you apply for a visa any or whatever, you have to go at that goes from students to workers, but it's a global business for us. So I think that any change in the U.S. so far has affected our business either way. It's actually sometimes aware around people go in a different direct [indiscernible].

And then you guys have out that long-term target. I think it's the $600 million for QuantiFERON. You've been outgrowing it with a double-digit growth. What's the right way to think about this longer-term opportunity? How durable is every time you guys put out LRPs, it's slow down, but it really hasn't. So what's the right thought process around the durability of the growth here?

Yes, you know that our CAGR for until 2028 was a 7% CAGR. So we're clearly doing better than that by now, and we would like to continue with that. Nevertheless, I think, of course, is getting as overall number gets [indiscernible] it's not getting easier to achieve the double-digit growth rate. Nevertheless, from today's perspective, I do think it looks like that they're going to beat the $600 million. I think that is one of the areas where we probably better, similar to QIAstat others. So I would say we feel quite comfortable, again, by definition of [indiscernible] double digit [indiscernible] right now had a tough comparison last year because Q4 last year was quite strong. We always feel good about the business and the business again, 50% of the business [indiscernible] .

[indiscernible] it comes up to [indiscernible]. And so far, [indiscernible] off that we'll see some update from the large [indiscernible] worried about. Doesn't seem like the [indiscernible] there. But I guess what's the latest on the competitive side and how confident [indiscernible] what would it be if a large competitor did come out with a test what [indiscernible]

It's probably question from another company. But again, what we see is more or less what I described before, we are doing quite well. We're working with our customers. I think we entered into many, many long-term multiple year contracts. By the way, most of them actually with increased prices. So I would say it also speaks for the quality and the workflow of our solution. So yes, we always have seen that rumors affect our competitive situation. But again, what we shouldn't forget, it is competitive from the beginning. Other companies like [indiscernible] are the markets since ever, and they haven't really outperformed Qiagen to say the least, right? We have seen our French partners, competitors are in the market for many, many years. Sometimes you have to take it off the market, now they are back in the market, they haven't gained momentum either. So again, we are watching that market environment. But as I said, number one, competition for us is literally 120-old [indiscernible] test.

And then maybe last one on QuantiFERON just the Lyme program. What's the latest on that? What should we be thinking about in terms of time lines and expectations?

So on Lyme [indiscernible] who is our exclusive partner to work with on the QuantiFERON technology platform. They're responsible for the submission with the FDA and once we are working on that for us, we're an OEM partner, where we're supplying components to them for the test. So it is not a revenue driver for us as part of our 2020 charges or longer term for the QuantiFERON franchise. It's a nice related growth. We'll see how the FDA responds to [indiscernible].

And then maybe the next [indiscernible] nice story as well. Obviously, placed a good amount during COVID. And then the question is, can you continue to expand the menu. It's a relatively crowded market. You guys have obviously done pretty well. Maybe just an update there. The placement numbers probably look good. You expanded. I think you got 4 FDA approvals recently. So maybe just talk about the evolution there and then expectations on QIAstat.

Yes. Let me kick it off and Daniel can add a bit of on the future launches. As you said correctly, it's clearly a significant double-digit grower for us. And as I said, [indiscernible] the areas where we are well ahead of our 2028 targets. So I don't think that is going to change. As we traditionally said, if we place more than 150 placements in a quarter, in a given quarter, we had a good quarter. I think it's fair to say, as of today, Q1 was a very good quarter. Q2 was a very good quarter. Q3 was a very good quarter, [indiscernible] same for Q4 when we talk about it in January. So placements are going quite well. Of course, is also being very helpful for us is that what you described before. So we are still continuing expanding a big step forward for us was the FDA approvals we got in particular on gastro and [indiscernible] because now we can offer a full menu in the U.S. market which opens up the door for the tender business, which is an important step. Fortunately, unfortunately, tender business always means it is a multiple-year business. So you can probably apply only to 1/3 of the tenders every year because need some more time to let others are opening up. But also that shows that we rather should expect a continuation of a double-digit growth rate for some time because we can just again add here as well. But at the same time, we are also not standing still on expanding our menu.

Correct. And what we still aim to achieve this year is to submit culture identification, both in the EU and the U.S. for next year, then we will have a complicated or attractive action. And the material submit in the European in the U.S. And don't forget that [indiscernible] offers something unique, which is a mitigation of CT value calculation. And so we get increasing traction also in the area of companion diagnostics. As you know, [indiscernible] and this is also a nice area of how we think of growing that franchise for the [indiscernible].

I mean in terms of the menu side, what are the biggest opportunities for you guys going forward? Are there certain menu pieces that panels that the feedback is you need to get these 1 or 2. And you really see even more of a take-off you guys at the core ones? But when you look at the menu, are there a few that you're really focused on over the next few years that are important to get on board?

As you said, I do think we have more or less [indiscernible] have now, but we continue to work with the pharma partners on companion diagnostic because again, if there's a product you get approved. They're not necessarily big in numbers, but clearly big in value right. So the reimbursement for [indiscernible] is significantly different, therefore, also quite profitable. Nevertheless, we should have in mind that there is still a lot of greenfield opportunities, right? This sometimes are here, we believe that there is a penetrated market. That's absolutely not true for the decentralized solutions. And we see that in the number of placements we're having also just look at the pipeline moving into next year, I would say it was never as good. So I would say, overall, the combination of rolling out the machines to still new customer segments having also know a good number of customers who want to sell bigger machines, as you know, we launch machine because there's customers who would now have 4th and 5th QIAstat machine and the other say we want to optimize [indiscernible] machine as well. I do think there are opportunities for us, which continue to grow.

[indiscernible] another interesting growth vertical for you guys. Consumables doing well and other one were instruments, maybe a little bit pressure. How do you think about the dynamic between the 2? What loosens up on the instrument side? And what have you seen there? Obviously, it was a competitive market. You guys have done quite well relative to the competitors [indiscernible].

[indiscernible] for digital PCR. The next generation of the standard technology [indiscernible] laboratory we're working on the digital PCR is that we are working in [indiscernible] pharma environment right now to do things at PCR, in particular areas that you're talking about earlier, like residual disease testing, like biopsy analysis where this is where digital PCR can add as many [indiscernible] technologies environment as well, primarily in oncology and infectious disease testing use of [indiscernible] applications we see there where the leading to the game [indiscernible] pitches for the clinical market. What we see is an environment right now in the research environment where the [indiscernible] makes it very difficult to wait for funding [indiscernible] slowdown in the demand on the system will continue to do very well, but since as this year even though [indiscernible]

This is the clinical market challenge right now is trying to drive people from [indiscernible] PCR can provide much more information with a higher [indiscernible] and the opportunity in areas you mentioned liquor biopsy, MRD, I mean, how easily can that be transitioned? Obviously, historically, it's been a little more sequencing based and then tied to that. I mean, how easy is it to transition to some of those customers how real is that opportunity? What's the right way to frame that?

Advantages to TRS, but [indiscernible] And again, if you look on sequencing -- sequences still needs days and weeks, right? And again, they're on fully loaded is [indiscernible] or in digital PCR, you can do [indiscernible] hundreds of dollars. So I would say there's 2 simple advantages do not move away, but while I get it planned. And the reason why [indiscernible] right now, we do quite a bit pharma companies, right? And because it is big topic for them if you do certain developments. So again, I'm quite optimistic that once we see other, I would say, [indiscernible] for other areas for the digital environment, digital PCR.

And on the instrument side, is it just budgets loosening up? What are you guys hearing on that front? What would cause maybe instrument side to loosen up a little bit?

Like you said, Patrick, it [indiscernible] is about the issuance return capital investments in the systems right now, is very constrained in the end markets serve side. But what we see is competition [indiscernible] at competition, even though there's a less retail opportunities [indiscernible] .

Okay. And the competitive side, feels like you guys are holding serve at a minimum, but what's the conversation in the market? What is your expectation in terms of what the share shifting?

The best [indiscernible] is always looking at the numbers [indiscernible] and if you see what we are releasing every quarter, we are growing the business. I'm not sure that you're hearing that from many other companies right now as well. So if you do the math, it probably means that we're gaining some market share. We clearly also believe that we pushed forward quite nicely our menu expansion. As you know, we are adding more or less 100 different panels year-over-year. We will do the same thing as well. So I think the combination of still positive instrumentation placements plus building out our menu as we speak, will help us to also gain future market share going forward.

Yes, and then QDI I think is the last pillar, $100 million business now obviously an acquisition kind of tucked in there. Maybe talk about both the acquisition within core business, what you're seeing in there and the expectations for [indiscernible] ?

[indiscernible]. But I see from our perspective, as I said, it's a $100 million business, a nice margin profile, what's always helpful. But I do think what is really good for us is that we know move through this transition into a SaaS kind of business. As you know, when we started that business, it was very much a license modeling, pharma companies, [indiscernible], sometimes even 5-year license agreement, couple of hundred thousand dollars. So it was a bit more lumpy. Now there is an ongoing transition into the SaaS kind of business, clearly has a onetime revenue impact because you can't recognize it upfront, but you do it rather now in the quarterly installments. But we are -- again, we are moving through that. Genoox helps us quite a lot with certain customer segments, which is rather smaller customers, meaning they have a nice front-end solution which is quite attractive for smaller scale customers strong.

So earlier this year, we bought a company called Genoox out of Tel Aviv that operates a business platform called Franklin. And this is a very nice application, especially for hereditary disease analysis in a clinical environment that's helping us to grow. If you look at our bioinformatics business that we've built over the last decade, about 60% of the sales are targeting research type applications, where it's about 40% or discovery -- sorry, in the clinical. The clinical side of the business is starting to really grow at a nice double-digit rate. And that's where the Genoox application will help us to be able to reach a lot of smaller, medium-sized labs that want to be able to do their own genomic data analysis.

And then Roland, you mentioned kind of the SaaS transition. So where are we in that piece? Where can that get to over the next few years? Is there any shift on the economics? What's the right way to think about that entities?

Again, because of SaaS edition, we are also looking very much on order income. And I think that's still a quite stable number. So I would assume that, that business also next year is probably low double-digit growth opportunity for us despite that ongoing transition. So if that normalizes over time, we are probably a bit more than halfway through I think it has even some upside potentials. So I would say, given the transition still being somewhat double-digit grower is quite cooky for us.

And then maybe on some of the numbers, 4Q gave that guidance a few weeks ago, you baked in some impact. I think there's a little bit of a step down due to the government shutdown. I guess now that the shutdown is over, how did that track row to the expectations? What do you guys take in versus what we saw on that?

Well, I think it's a fair comment. I think we clearly gave an apples-to-apples growth expectation for the first quarter of 2% and that was clearly driven by the fact that you will still have a shutdown, right? And yes, the shutdown is over. I'm not 100% sure that, that means that things are back to normal because we still don't have an approved budget, might be as early as January next year. And while we always had a quite normal consumable business, I don't think that is going to change. . I'm a bit more reluctant to believe that because just you don't have a shutdown that people are going to spend on the instrumentation side because I do think to do long-term investments, which instruments are typically are you have -- you also have to have the confidence that you have a budget the year after because you might have to invest into an incremental operator. You might have to invest into incremental consumable stream. And therefore, you need, I think, a certain confidence. So I would say it's good news that the shutdown is over for a lot of reasons. But I'm not sure that we lease a lot of incremental instrument placements in the short term.

And then looking ahead to '26, TRE gives a high-level [indiscernible]. But it sounded like mid-single-digit growth on the table if conditions remain the same, obviously, some variables out there. So I guess when you look at next year in terms of just the variables that could play into the year, how do you think about the key things that you're keeping an eye on as we head into, again, the formal guidance at the start of the year?

I think we are quite optimistic for next year. There's clearly some volatility ongoing. If you talked about China, again, we just talked about the NIH budget situation in the U.S. We hope that we have some more clarity, particularly on the later one sooner than later. Nevertheless, I think we did, hopefully, the right thing by moving into this year that we rather took out a more careful guidance for the first quarter. We're able to beat that. And then again delivered and overdelivered and increased, I think, now 3x our guidance. I think that is a better way than the way around. And I think there's a kind of philosophy we would like to continue with.

And then obviously, given the CFO [indiscernible] of margins, it's been a [indiscernible], you may you guys [indiscernible] the margin front had some tariff impact here into year-end and into next year. When you think about, again, those moving pieces heading into '26 of the margin front, you guys are tracking -- you have it tracked well ahead of the LRP for some time. What are the things you're looking at on the margin front? I assume tariffs are one of them, but why don't you talk a bit about the bridge?

Yes. No, I think it's also single observation that we improved our margins already quite nicely over the last more or less 3 years. But I do think it's also fair to state that we do believe that we will continue our margin development going forward. As you might recall, we have right now a midterm plan out there, which calls for an EBIT margin of at least 31% in '28 [indiscernible] have been [indiscernible] quite vocal that we are going to update that number and that we will increase that number because we do believe that, that is easily doable for us. If you now look into next year, we clearly have to observe a couple of facts. We just did a small acquisition, as we said in Parse, which probably will have a 100 basis points headwind in terms of margin. Also currency as of today is probably not a positive factor for us, but rather also 50-point headwind as well, plus some tariff headwind as well. Nevertheless, I think if I look as of today into next year, I would assume that we have enough optimization room that we overall have the margin at least on the same level as this year. And there might be upside potential, as I said, we will give formal guidance early next year. Afterwards, meaning a '27 and '28, we believe we still can nicely increase our margins beyond that level. Let me give you a couple of examples. First and foremost, we still will see better utilization for our QIAstat production equipment. As you know, we built out that production environment during COVID. So there's still a significant underutilization just a better utilization with a business, which right now, as you know, is growing 10%, 15%, will decrease standard cost and, therefore, improve our margins. In general, we're also growing in the product areas faster where we have higher gross margins. So the mix is also positive developing for us. I would say on the R&D side, we feel comfortable on 9% of revenues going to R&D as a mix between in and output. At the same time, we see quite some leverage opportunities on the SG&A side, digitization in our industry is still going on. We have more and more revenues coming to us through digital channels. We're also looking into smaller footprint benefits. So I would say there's a good pathway for us to improve our margins also all the way up to '28 on a very regular basis.

That's really helpful. And maybe in the last minute here, just the capital allocation. Obviously, you talked [indiscernible] talk the share repo. Is there still capacity to do more deals, share repurchases? What's the current [indiscernible]?

Yes, we did $300 million last year. We did $300 million this year. We are going to do -- or we have just announced to do $500 million early next year. I'm quite sure that we will ask AGM next year, we do more because we feel we have a very solid cash flow generation. We clearly right now have opportunities to also work on our leverage. I don't think there's -- you should expect a fair mix between bolt-on acquisitions and share allocations. As you know, we also started this year to pay dividend. For sure, the Board is going to review if that is something that they should increase or not. So I would say we feel very comfortable with the cash generation of Qiagen, and therefore, should have opportunities to optimize our capital structure as well.

I think we're out of time. Thank you guys so much for being here. Appreciate it.

Thanks for having us.