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

Ladies and gentlemen, thank you for standing by. I am Shelly, your global meet operator. Welcome, and thank you for joining Qiagen's Q2 2026 Earnings Conference Call webcast. [Operator Instructions] Please be advised that the call is being recorded at Qiagen's request and will be made available on the Internet website. [Operator Instructions] At this time, I would like to introduce your host, Daniel Wendorff, Vice President, Head of Investor Relations at Qiagen. Please go ahead.

Thank you, operator, and welcome to our call for the second quarter of 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. Domenica Martorana 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.qiagen.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 20-F and other filings with the U.S. Securities and Exchange Commission. We will also refer to certain financial measures not prepared in accordance with U.S. generally accepted accounting principles or GAAP, that provide additional insights into our performance. Reconciliations to the most directly comparable GAAP figures are in the release and presentation. All references to earnings per share refer to adjusted diluted EPS. With that, let me hand over the call to you -- let me hand over the call to you, Thierry.

Thank you, Daniel. Hello, and good morning, good afternoon or good evening, depending on where you are in the world, and thank you for joining us. Let me start by thanking again our teams across Qiagen for their continued dedication and disciplined execution. Their focus enabled us to deliver results above our outlook while continuing to invest in our portfolio and focus on profitable growth. Let me now walk you through our key messages for today. First, we exceeded our outlook for both sales and adjusted EPS. Net sales were $535 million and unchanged on both a reported basis and at CER. This was ahead of our outlook for an approximately 2% decline CER. Adjusted diluted EPS was $0.62 on both a reported basis and at CER again, above our outlook of at least $0.60 at CER. Those results demonstrate the resilience of our business and provide further confidence in our outlook for the year. Second key message, our growth pillars delivered 5% growth at CER, profitably above market growth. Sample Technologies led the quarter, reflecting continued demand for our sample preparation solutions. QIAcuity delivered another solid quarter, driven by healthy consumables demand. QDI, our bioinformatics business also performed well, led by our clinical application. QuantiFERON returned to growth as solid demand across many testing groups more than offset the significant decline in U.S. immigration testing demand. This U.S. immigration testing demand decrease is what we highlighted at the end of our Q1 2026. QIAstat Diagnostic was impacted by a challenging prior year comparison in respiratory testing, partially offset by continued strong growth in our gastrointestinal and meningitis/encephalitis panels with the gastrointestinal panel performing particularly well. Third key message, we maintain a very high level of profitability. This reflects our ability to improve efficiency while continuing to invest for future growth. Fourth, we continue to generate strong cash flow, providing the financial flexibility to invest in the business while returning capital to shareholders. This financial strength enabled us to increase our annual dividend by 40% in 2026. And this brings me to my final key message for today, our outlook for 2026. We are reaffirming our full year outlook and remain confident in stronger growth during the second half of the year. The continued performance of our growth pillars and the progress we are making across our portfolio reinforce our confidence in delivering the outlook we have set for the year. With that, I'll turn over to Roland for more details on the financials.

Thank you, Thierry, and hello, everyone. As Thierry highlighted, we delivered a better-than-expected second quarter, exceeding our outlook for both sales and adjusted diluted EPS while maintaining a high level of profitability. Let me start with our sales performance across the 4 product groups. Sample Technologies rose 9% CER, driven by automated consumables and higher instrument sales compared to the year ago period. Diagnostic solutions declined 2% at CER. QuantiFERON returned to growth at 1% CER as solid demand across most testing groups more than offset reduced immigration testing demand, primarily in the U.S. and Middle East. QIAstat-Dx sales declined 7% at constant exchange rates despite growth in GI and meningitis panels. However, this was more than offset by lower respiratory panel sales against a challenging prior year comparison previously communicated. In PCR and nucleic acid amplification, sales declined 8% at CER. Our digital PCR system, QIAcuity, delivered double-digit growth at CER, driven by strong consumables demand. This is more than offset by weaker OEM demand. [Technical Difficulty]

[Operator Instructions] You may continue.

Okay. Sorry for that. It looks like we had some technical difficulties, but I do think we are now back on a call. So let me continue. In PCR and nucleic acid amplifications, sales declined 8% at CER. Our digital PCR system, QIAcuity, delivered double-digit growth at CER, driven by strong consumables demand. This was more than offset by weaker OEM demand. In the genomics and NGS product group, sales rose 2% CER. Qiagen Digital Insights delivered solid single-digit growth, while consumables for universal NGS panels used on third-party sequencers grew more than 20% CER. Lower sales of other genomics products moderated the overall growth rate. Regional performance was mixed during the quarter. Sales in the Americas rose 1% CER, led by 2% growth in North America, while sales declined in Brazil and Mexico. In the EMEA region, sales declined 2% CER. While Spain, Belgium and Poland were up in the quarter, Germany, France and Italy were down. In the Asia Pacific region, sales declined 2% CER. Excluding China, the region grew at a low single-digit rate at constant exchange rates, supported by high teens growth in Japan, while China was down in the low teens. Sequentially, sales in China improved at a double-digit percentage rate. Moving down the income statement. Profitability remained at a high level. Adjusted operating income declined 2% and reached USD 157 million. The adjusted operating income margin was 29.4% compared with 29.9% in the second quarter of '25. Disciplined cost management and efficiency gains helped offset gross margin headwinds. The adjusted gross margin was 66.2% in the quarter compared with 66.7% in the prior year period due to changes in product mix. Operating expenses remained broadly stable as a percentage of sales. Sequentially, the adjusted operating income margin increased by 200 basis points from 27.4% in the first quarter of '26 with higher operating leverage contributing to the improvement. Adjusted diluted EPS was $0.62 at constant exchange rates, exceeding the outlook of at least $0.60 at CER. The adjusted tax rate was 18% in the quarter, in line with our target of 17% to 18%. The high level of profitability also translated into solid cash generation. Operating cash flow was $301 million for the first 6 months of '26, unchanged from the same period of '25. This was achieved despite approximately $20 million of cash payments for efficiency and restructuring programs and a planned increase in inventory. Cash generation was supported by disciplined working capital management and a higher level of profitability. Improved receivables collection and other working capital movements helped offset the inventory build. Days sales outstanding improved to approximately 55 days from approximately 57 days at the end of '25. Days inventory outstanding increased to 153 days from 149 days at the end of '25, reflecting inventory build in preparation for new product launches. Our high level of profitability and cash generation continues to support a strong balance sheet. This gives us the flexibility to invest in innovation, pursue targeted acquisitions and return capital to shareholders. In line with this approach, we completed a $500 million synthetic share repurchase in January and paid our second annual dividend of around $72 million in July. The dividend per share increased by 40% to $0.35 from $0.25 in '25. With that, let me hand back the call to Thierry.

Thank you, Roland. And let me now highlight some of the recent progress of our teams in our portfolio. Let's start with Sample Technologies. We continue to make good progress with our automation strategy as more laboratories transition from manual to automated sample preparation. With the commercial launch of QIAsymphony Connect, our new IVD compliant automation system, we reached another important milestone in expanding our automation portfolio. We have started also placing QIAsprint Connect and are pleased with the number of placements, the high level of customer acceptance and the very positive initial feedback, especially from pharma company. QIAmini, our third launch for this year, remains on track for launch this fall with beta field testing beginning in North America in the coming weeks. We are also making very good progress in single cell analysis with Parse. We recently launched the next generation of immune profiling solutions, further expanding our single cell offering. Parse was also selected for a NASA supported research program aboard the International Space Station, supporting research into new treatments for cartilage injuries. Together, those developments show how we are broadening our portfolio while enabling new areas of research in latent tuberculosis testing. As latent tuberculosis screening continues to expand, laboratories are looking for more efficient ways to manage growing testing volumes. Together with DiaSorin and our new automation partner, Inpeco, we plan to launch the first fully automated Sample to Insight workflow in the second half of 2027. This combines sample handling, incubation and detection into one purpose-built automated workflow for QuantiFERON testing. We are also developing an AI-enabled tool to help assess the risk of progression to active TB, providing clinicians with additional insights beyond the detection of latent TB infections. This is how we continue to innovate around QuantiFERON, creating additional value for laboratories and clinicians. On QIAstat, we continue to expand the menu into new testing areas. Bloodstream infections require rapid treatment decisions. With the launch of our 2 new BCID panels, QIAstat now expands into bloodstream infection testing in Europe, providing laboratories with broad coverage across relevant pathogens and antimicrobial resistance markers. Together, those 2 panels detect 33 pathogens and 28 antimicrobial resistance markers in about 1 hour time to result. The next step is to bring those panels to the U.S., and we are confident to get our FDA approval by the end of the year. We are also seeing the value of menu expansion for QIAstat in the field. An example is that during the ongoing cyclospora outbreak in the U.S., our large gastrointestinal panel is helping laboratories respond to increasing testing demand. Turning to digital PCR and QIAcuity now. We continue to advance digital PCR across research, biopharma and clinical application. As more customers are moving from qPCR to digital PCR, they are looking for workflows that are scalable, automated and easy to standardize. This is why we continue to expand the QIAcuity portfolio. This year, in the second half of the year, we are launching new gene expression assays together with a high multiplex kit for the analysis of up to 12 RNA targets in a single reaction. We are also expanding our cell and gene therapy offering with new software and broader workflow automation through our collaboration with Hamilton. We recently demonstrated again the flexibility of QIAcuity during the recent Ebola outbreak, where we rapidly introduced custom digital PCR assays to support infectious disease research and surveillance. Finally, let me touch on Qiagen digital insights development. AI is becoming increasingly important in biomedical research as researchers work with growing amounts of data, but AI is only as valuable as the scientific knowledge behind it. This is where QDI, Qiagen Digital Insights comes in. We combined more than 25 years of curated biomedical knowledge with AI to turn complex biological data into meaningful insights. We, for example, recently announced a new collaboration with NVIDIA. Together, we are combining our curated biomedical knowledge with accelerated computing and graph-based AI. This will help researchers all over the world accelerating drug discovery. With that, let me hand it back to Roland with the details of our outlook for the second half of the year.

Thank you, Thierry. Let me now provide an update on our outlook for '26 and the third quarter. For the full year, we are reaffirming our outlook for total net sales growth of about 1 to 2 percentage points at CER. We also continue to expect adjusted diluted EPS of at least $2.43 at CER. For the third quarter, we expect total net sales growth of about 1% to 2% CER and adjusted diluted EPS of at least $0.62 at CER. I would like to give you some additional perspectives on the expected performance in the second half of the year. We expect CER sales growth to improve from minus 1% in the first half to about 3% to 4% in the second half. This represents a sequential improvement of approximately 4 to 5 percentage points. There are 3 main drivers behind this development. First, the end of the year-on-year headwinds from the discontinued NeuMoDx and DIALUNOX portfolio is expected to contribute approximately 2 percentage points to the improvement in the second half. Second, we expect approximately another 2 percentage points from increasing contributions from new Sample tech systems and other recent and planned product launches. This include QIAsymphony Connect and QIAsprint Connect in Sample Technologies. The rollout of our new BCID panels and continued momentum in companion diagnostics for QIAstat-Dx and additional offerings for QIAcuity. As mentioned earlier, QuantiFERON delivered a stronger second quarter. We continue to believe that we are tracking towards our $500 million target for '26 with easier comparisons expected to support performance in the fourth quarter. Third, we expect approximately 0.5 percentage point from the combined benefits of Parse, which is performing ahead of our original '26 sales target of about USD 40 million and modestly improving trends in the U.S. life science environment. Within the second half, growth is expected to be weighted towards the fourth quarter, which benefits from the incremental contributions from the previously mentioned product launches and an easier prior year comparison following the disruption caused by the U.S. government shutdown in the fourth quarter of '25. The expected allocation towards the second half is also consistent with our historical sales phasing. Approximately 47% of our full year sales are generated in the first half and approximately 53% in the second half of the year. On the topic of tariff repayments, we foresee for the full year. Net of customer refunds, this could be a benefit of about $0.02 EPS at CER. This is already included in our outlook and any additional benefit would be incremental also to our guidance. Finally, let me 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 diluted EPS. This is unchanged from our previous assumptions. For Q3, currency is expected to have a negative impact of about 1 percentage point on net sales, but be neutral on adjusted diluted EPS. With that, I'll now hand it back to Thierry.

Thank you, Roland. And now let me briefly summarize before we move to the Q&A session. First, we delivered a quarter above our outlook for both sales and adjusted EPS. At the same time, we maintained a high level of profitability while continuing to invest in our portfolio. Our growth pillars continue to perform well, delivering above-market growth, led by Sample Tech, QIAcuity and QDI, while QuantiFERON returned to growth. We are making good progress in our product launches, supporting our growth ambition for the second half of the year and beyond. Together, the performance of our growth pillars and the progresses on new launches reinforce our confidence in a stronger second half of 2026. So in closing, we remain focused on achieving the outlook we have set for this year and delivering solid profitable growth. With that, I would now like to hand back to the operator for the Q&A session. Thanks a lot once again for your attention.

[Operator Instructions] We will now take the first question comes from your line of Casey Woodring with JPMorgan.

Maybe just walk through the updated guide for us. I think the back half, you took down from 4% to 3% to 4%. Just maybe walk through kind of what's changed? And then any sort of seasonality that you're assuming from 3Q to 4Q, the step-up that you talked about a little bit Roland in 4Q. Maybe just walk us through the drivers there.

Thanks, Casey. I can take the first half of your question and in Roland's comments, we described also the weight of H2 and the traditional seasonality beyond Q4. But -- so first of all, we believe in that acceleration for the reasons that we highlighted. And by the way, we also highlighted the same reason in our Q1 release. You have obviously some positive impact coming from the stop of headwinds coming from the discontinuation last year of NeuMoDx and DIALUNOX. And we expected -- we expect also a significant input from our new launches, especially in Sample tech, but also the new panel that we described today for QIAstat. But at the same time, we want to remain cautious. There is no doubt in our view, Casey, that, for example, funding, especially in the U.S., is improving sequentially. We see indeed an improved funding, especially for research and academia in Q2 compared to Q1. At the same time, we need to highlight that if you consider, for example, the funding coming from NIH in the U.S., it is still below in H1 of 2026 compared to H1 2025. So we see improvement, but we remain also cautious because, as you know, the lack of funding sometimes reflects on capital sales and abilities from labs to invest into new instruments. At the same time, we will benefit definitely from an easier comp from Q4 '25 compared to Q4 '26. Remember that last year, we started the year quite strong in Q1 '25 at 7% growth. We finished the year in Q4 '25 at 1% growth. This is why we have an easier comp. Roland, do you want to give more details on the weight of the different quarters?

Yes. And probably a couple of different perspectives. First of all, just on some of the products, right? What we just described, Casey is, again, you heard that sample prep is doing quite well, improving quarter-over-quarter. We had now in the first half, 9% growth rate. Again, that will move double digit in the second half of the year, right? QIAstat, we just talked about that for the first half, there was clearly a significant headwind coming from the respiratory business last year. We do believe that business also, again, will turn probably high single, more likely low double-digit growth rate as well in the second half of the year. QIAcuity is probably even accelerating while it's already high double digit in Q1 -- sorry, in H1. So I think there's a lot of things where we, I would say, also have reasonable visibility in a given market environment. So I would say there's things like that. But one thing to you mentioned it before, that is one thing this product launches, right? It takes some time that they gain traction, sample prep, you see it. But of course, every quarter, having instruments on the market, customers getting used to that is being helpful. There is, I think, the natural reason that the fourth quarter will be a stronger one. And have in mind also QIAmini is going to hit within the third quarter, the market. So there's clearly also contribution coming in the first quarter as well.

We'll now take your next question coming from the line of Jack Meehan with Oberon Research.

For Thierry. So you've announced the strategic review and still have the CEO search going on. I was wondering how should we view the status of the strategic review when a new CEO is named? Does that mean the review stopped? Or could that continue as a separate topic? Any thoughts would be great.

Yes. So I think you need to consider that those are 2 complementary but also independent processes. The CEO search, obviously, is one of the highest duty of the Board. We are progressing. We confirm that the transition will happen in H2 of 2026. But at the same time, we have always outlined that our company is always open to consider options to increase shareholder value and stakeholder value. And the Board and management are also fully aware of their fiduciary responsibilities when such discussions might happen. And so it's a constant process at Qiagen where we are constantly looking at the best way to improve value for our shareholders. So I think this is why I continue to say that those processes are natural, long-lasting processes. And the transition with the new CEO should not be viewed as an obstacle to constant improvement of shareholders' value, obviously not. So the 2 processes are going together.

Your next question comes from the line of Tycho Peterson with Jefferies.

I want to start with QuantiFERON. You came ahead this quarter, but then you did soften the language on the full year target to "working towards $500 million." Are you baking in incremental headwinds from competition here in the back half of the year? I guess what's changing in the guide on QuantiFERON? And then a follow-up -- just a follow-up on Jack's question. On the strategic review, what's really on the table here? Is this portfolio changes? Is it restructuring? Is it a different mix of capital allocation? I mean you've done a lot. You've gotten rid of NeuMoDx, you're paying a dividend. You have good margins. So I'm just curious how you think about the option set as you do the strategic review.

Let me start with the second part of your question, Tycho, and then I will move to QuantiFERON. We are having constant broad strategic reviews. First of all, as you know, we have always said that this company should focus, and we focus where we can gain the most market shares and when we can establish leadership position. This is why we are constantly reviewing the profitability and the return on investment of our different developments in R&D. So it does include the constant assessment, obviously, of our different pillars of growth. Second, it involves also, as I said before, to be always open for discussion as long as we see that it can create value on the long term for our shareholders, for our stakeholders and also when we see a feasibility to a potential basically alliance for another -- with another company. So it's basically a very thorough analysis on everywhere we can make progresses to create more shareholder value. On QuantiFERON itself, I believe we took the right decision at the end of Q1 when we saw the real decrease of migrant testing to take out $35 million of revenues. We said at the end of Q1 that we don't believe that this situation will change drastically in the coming months, the second half of 2026 or even beyond that. That was the right decision to be taken. At the same time, Tycho, we continue to very much make progress in other applications and the development of market shares. First, we continue to convert TST customers to blood test with our latent TB testing. Second, we continue to enter into new applications. We told you 2 years ago, for example, that diabetes was becoming an interesting testing field for latent TB. And if you remember, we said in 2025 that we believe that patients ongoing dialysis were also a significant application potential for latent TB testing. We are starting to implement that. For example, with significant testing labs in the U.S. with the group DaVita, for example. As regard to competition, the fact that new competitors are coming to the market is showing that Qiagen was right many years ago to decide to invest into latent TB testing because I remind you, there is a significant need worldwide for this kind of testing. We showed clearly in our IR session last year that 2 billion people in the world are impacted by latent TB. So the fact that new competitors are entering the market can be seen also positively because it will increase or continue to increase awareness for this kind of testing. And therefore, for me, it's probably going to increase the total available market for latent TB testing worldwide. For H2, now more precisely to your questions. The first thing, first of all, to highlight is, as we highlighted with Roland, Q2 returns to positive growth. We also highlighted in our press release that in Q3, we are going to be slightly impacted by a very strong comp of Q3 2025, especially in the U.S. But overall, we believe that H2 will return to growth, and then we can achieve our target to keep $500 million revenues for QuantiFERON overall. Growth will strengthen as we move into 2027 with our 2 new major development, the partnership with Inpeco and the AI scored results that we are going to launch towards the end of the year next year. Competition has always existed Tycho. Our main competitor is the traditional skin test. We had an existing competition for many years with Revvity, and we have seen the market new entrants. At the moment, we do not see an impact on our market shares. We are prepared to compete commercially and product-wise against any new entrants. But I repeat, the main competitor remain the TST and our main objective remains to continue to convert more TST customers to blood testing.

Your next question comes from the line of Michael Ryskin with Bank of America.