Tecan Group AG (TECN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Tecan Group Half Year Results 2026 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Martin Brandle, Senior Vice President, Corporate Communications and Investor Relations. Please go ahead, sir.

Thank you, and good morning everyone. Thank you for joining our conference call this morning. We are pleased to share and discuss our results for the first half of 2026 with you. Joining me on the call today are our Chief Executive Officer, Monica Manotas; and our Chief Financial Officer, Camila Japur. Before we begin, let's quickly go over a few formalities as usual. The press release announcing our financial result was issued this morning at 7:00 a.m. Central European Summer Time. Both the press release and the 2026 interim report are available on our website tecan.com, under the Investor Relations tab. Additionally, the PDF of the presentation slides, which we will be discussing during this call is available for download. I'd like to remind you that this call is being webcast live on our homepage, and the link to the replay will be available shortly after the live webcast on our investor web page. With that, let me now turn it over to Monica Manotas. Monica?

Thank you, Martin, and good morning everyone and thank you all for joining us for our 2026 half year results presentation. As Martin just said, I'm joined here today by Camila Japur, our new CFO. Welcome, Camila. You hit the ground running from your start on June 1, and it is great to have you here and also as part of the leadership team. Together, we will take you through our performance for the first half of 2026, our views for the rest of the year and beyond and also give you an update on our transformation program Rewired. At our Capital Markets update in March, we explained to you how we intend to reignite growth at Tecan with our Rewired transformation program. And I am pleased to say that our solid results with above-market growth in the first half gives us good reason for confidence. Now let me quickly walk you through today's agenda. I will start with a short introduction and the headline financial highlights for the first half of 2026. Camila will then take you through the financial results in more detail. And after that, I will come back to give you an update on our Rewired transformation program, our outlook for the rest of the year and our targets for 2028. As always, at the end, we will have time for your questions. Our performance in the first half was solid. I'm pleased about the above-market growth in both segments. Profitability is sound, yet reflects the cost of our Rewired program and of IT investments. A look at our results. Group sales came in at CHF 427.5 million, up 3.4% in local currencies, with both our Life Sciences and Partnering segments contributing to comparable growth. Order entry was CHF 444.3 million, up 3% in local currencies, keeping our book-to-bill ratio above 1 in both segments. Adjusted EBITDA was CHF 64.5 million, corresponding to a margin of 15.1% of sales, slightly ahead of last year. Basic EPS was CHF 0.99 and adjusted EPS was CHF 2.62, both below last year's levels. Here FX was an important headwind, but Camila will take you through the key drivers. Operating cash flow was CHF 17 million. As Camila will explain in more detail, the significant decrease in the first half of 2026 was mainly due to changes in working capital. These factors are non-structural. Operating cash flow has historically been strong, and it will remain strong in a future-proof Tecan. Overall, a solid first half with good above-market growth. There are areas for improvement, which we are addressing with Rewired, but we remain financially very strong, and this allows us to invest in future-proofing our company while returning capital to our shareholders in line with our capital allocation strategy. Let's now take a look at our end markets. As a reminder on the format of this slide, the slide is intended to show how we expect our end markets to perform this year. The arrows in each customer segment represent the expected change versus last year. There are 2 arrows for each segment, representing the lower and the upper end of the expected range. Overall, in H1, trends developed as we expected. Markets have been largely constructive and continued to recover. Now let me share some color on how we performed in each segment in H1. I will start in the middle with the Biopharma and Diagnostics since they are the most relevant for us. In Biopharma, we grew high single digits. We are seeing the recovery we were expecting. The Diagnostics segment continued to grow steadily, and we delivered mid-single-digit growth in this segment. Now moving on to Academia and Government. There we saw a double-digit decline. Relative to our expectations, our view is that for lab automation, this segment performed on the lower end of the range. And finally, in MedTech, we grew in the mid-single digits. We continue to see healthy growth in the market for this segment. However, concentration of our business among a few customers means our growth can reflect single customer decisions more than the overall market dynamics. Now looking out to the second half of 2026, while we have seen some signs of acceleration in the market, we believe it is too early to call a change in trend. So with that, our assumption is that for the full year 2026, the markets will perform as we anticipated at the beginning of the year. On the whole, I'm pleased with the development of Tecan and of the market environment so far this year. Our performance has been solid. We are confident in our ability to grow above the market, yet we remain prudent. And with this, I'd like to hand over to Camila Japur, our CFO, for the detailed discussion of our results.

Good morning, everyone. Thank you, Monica. I'm pleased to present a detailed overview of Tecan's financial results for the first half of 2026. Let me start with sales and order entry on Slide 6. On the left top of the slide, you can see the reported sales for the group of CHF 427.5 million, representing a decrease of 2.7% reported figures, but an increase of 3.4% in local currencies. Growth momentum was sustained in the second quarter with sales up 3.4% in local currencies. Moving to order entry. The first half reached CHF 444.3 million, up 3% in local currency with book-to-bill ratio of 1.04 and above 1 in both business segments. Important to say that Q2 order growth was stable year-on-year in local currencies despite a tougher comparison base and Q2 orders exceeding Q1 levels. Moving to Slide 7, where we look at segment performance. Let's start with the Life Sciences business. Sales grew 3.1% in local currency, outperforming the broader lab automation market. The growth was driven by continued strong performance in the Biopharma and Diagnostic customer segments with sales in Academia and Government declined as expected. The Life Sciences business was sequential improvement with Q2 sales increase of 4.6% in local currency year-over-year. From a regional perspective, half 1 sales in Europe remained stable, while the U.S. delivered approximated 1% growth in local currency. Both regions experienced an acceleration of growth in the second quarter. Asia was the main growth driver with Japan posting very strong results and China achieving mid-single-digit growth. In Asia, liquid handling instruments, including both standard platforms and our Labwerx customized solutions were major contributions to this positive development. Now let's talk about our Partnering business. Sales increased by 3.6% in local currency, supported by solid growth in Diagnostic and MedTech. Q2 delivered growth of 2.4% in local currencies despite an increasingly challenging comparison base. Looking at our different offerings, we saw a continued growth -- good growth in Synergence services for complete system, and we saw the highest growth in our Paramit CDMO services, which also benefited from a lower comparison base in prior year. In Cavro OEM components, sales decreased again as we had some supply challenge, and we were unable to ship all of the planned backlog. Order entry was solid as reflected by a book-to-bill ratio above 1 in both segments during the first half. Now let's change gears to profitability. Before we talk about EBITDA, I would like to comment about our gross margin and OpEx. Gross profit margin declined year-over-year from 36.2% to 33.9%, driven mainly by material cost inflation, inventory valuation, FX and tariffs. The decline in gross margin was partially offset by a lower OpEx that had a benefit from FX and reduced accrual and improvements from Rewired. Our adjusted EBITDA reached CHF 64.6 million, just CHF 1.1 million below year-over-year. The adjusted EBITDA margin increased to 15.1%, slightly above the 15% reported in half 1 2025. This was achieved despite headwinds from FX and tariffs, which had combined negative impact of 170 basis points. Nevertheless, underlying profitability improved by 108 basis points, primarily as a result of sales volume increase, a favorable product mix and the first benefit realized from Rewired transformation program. Let's move to Page 9. I want to introduce this new slide to provide greater transparency on the reconciliation from reported to adjusted EBITDA, clearly outline the impact of our transformation and IT investments. You can see in the table on the left side that the difference of CHF 17.9 million to adjusted EBITDA is mainly explained by the cost of CHF 7.6 million related to the Rewired transformation program, including restructuring expenses. In the second bullet, we see investments to upgrade our SAP R/3 to S/4HANA and the new CRM system. This project named Elevate was launched in 2024. In the last line of the table, we also have the positive effect from the tariff refund of CHF 0.5 million. As you may saw in the press release, we expect a further refund of around CHF 6 million in half 2. Now let's talk about Rewired. As previously communicated, implement Rewired requires upfront investments. These costs are a combination of cash and non-cash items and are necessary to deliver the sustainable improvements and returns we expect from the program. The total OpEx to deliver Rewired is estimated at CHF 45 million to CHF 60 million. And in half 1, we booked CHF 7.6 million. First savings from Rewired are materializing, increasing our confidence that the program will generate long-term value. My focus in the coming months will be on establishing disciplined cost base tracking and developing a comprehensive understanding of all underlying cost drivers to position Tecan for sustainable growth and improved profitability. Then I will be happy to share more quantitative progress of our Rewired execution with you. Turning to Project Elevate, I would like to stress that while Rewired is a comprehensive transformation program, Elevate is our ERP and CRM modernization project. Elevate non-recurring costs in the first half were CHF 9.9 million. Differently from Rewired that we are investing in the first year in the reset phase, for Elevate, we are moving to the final stage of the project with go-lives anticipated in the first half of 2027. Both Rewired and Elevate are critical to strengthening our foundation and supporting our strategic ambitions. I hope this view helps to increase transparency of our strategic investments. Now moving to our segment profitability on Slide 10. Let's start with Life Sciences business. As illustrated in the chart in the bottom of the page, the adjusted EBITDA margin was 13.8% of sales. This segment absorbed most of the negative impacts from FX and tariffs that were partially offset by positive contribution from higher volumes and operational improvements under the Rewired program. In the Partnering business, the adjusted EBITDA margin increased to 18.7%, driven by higher volumes, a favorable product mix and operational improvements resulting from Rewired despite adverse FX and tariff impact. On Slide 11, we will talk about net profit and earnings per share. Before talking about adjusted figures, I want to explain the factors that impacted the non-adjusted earnings. All reported earnings figures include EBIT, net profit and earnings per share were affected by higher costs related to Rewired transformation program and Elevate project. Reported net profit of CHF 12.3 million was also impacted by negative effects from FX hedging below the operating profit line. Now I will talk about the adjusted numbers that you can see in the chart. Adjusted net profit declined by 3.5% to CHF 32.5 million. Adjusted earnings per share were CHF 2.62, down CHF 1.5 year-on-year. The decline in adjusted earnings per share is lower than the decline in adjusted net profit as the number of outstanding shares was reduced through the ongoing share buyback program. In my last slide on Page 12, I will talk about cash flow. Before diving into the numbers, I would like to highlight that Tecan maintain a strong financial position to continue investing in our transformation program to future-proof Tecan, while also returning value to shareholders through dividends and our share buyback program. Let's start with operating cash flow that is positive, but significantly lower at CHF 17 million with cash conversion also declining compared to previous period. This was mainly due to higher accounts receivable for increased sales late in the period, and inventory buildup to enhance operational resilience amid supply chain challenge and higher payments, including tax payments related to prior period. These factors are non-structural and operating cash flow has historically been strong. Days sales outstanding increased slightly from 45 to 47 days, mainly reflect the higher accounts receivable concentrated in the end of the quarter. The change corresponded to a normal fluctuation. I also wanted to reinforce the message that cash flow generation is a key focus area for me, and we will continue to drive actions to maintain healthy working capital. Now moving to investments. In the first half, it amounted CHF 4.3 million. This includes CHF 25.7 million invested in property, plant and equipment and other intangibles, which cover the new consumable production line in the U.S. and investments related to Elevate project. Cash flow from finance activities in the first half included the dividend payments of CHF 37.2 million and the purchase of treasury shares of CHF 30.5 million. This reflects our commitment to attractive shareholder returns while ensuring the capital strength to transform and expand our business. I also want to talk about net liquidity in the last 12 months comparing June 2025 versus June 2026. We saw a decline to CHF 73.5 million in the first half, reflecting the combined impact of all mentioned effects. Before I hand back to Monica, I would like to reiterate my confidence in Tecan's strong position and our ability to successfully navigate this transformation journey. I'm confident that as part of Rewired, we can deliver sustainable, profitable growth. Thank you.

Thank you, Camila. I would now like to give you an update on our Rewired transformation program and share our outlook for the remainder of 2026 and beyond. As a reminder, we launched Rewired in the first quarter to future-proof Tecan and to help us excel in both innovation and execution. This 3-year program is designed to generate more than 4% CAGR versus our 2025 baseline, taking us to our 2028 target of CHF 1 billion in sales and 20% adjusted EBITDA margin. It's built around 3 pillars. First is portfolio discipline. We're building on our strengths, investing in scalable differentiated segments and exiting non-core businesses to drive focus from a talent and innovation perspective. Second, commercial excellence. We're building an organization that outperforms the market through sharper segmentation, value-based pricing and a more agile go-to-market approach. And third, operational excellence, creating scalable, resilient operations on a lower cost base and which convert growth into margin and cash. And underpinning all 3 pillars is a performance culture. Successful execution relies on ownership, accountability and collaboration across the organization. Now let's look at the progress we have made against each of the 3 pillars since our last update. And here are some highlights. On portfolio discipline, we closed our Boston design site in April. This was the site we acquired in 2021 as part of the Paramit acquisition that house dedicated early-stage design functions for medical devices. We have also advanced the planned exit from selected Tecan Genomics activities with the process progressing as planned and our customers continuing to be served seamlessly throughout. On commercial excellence, we're building out the ecosystem to position Tecan as the partner of choice for AI-powered labs. The first concrete milestone is Agentic AI for Introspect as part of our NVIDIA partnership. We're also collaborating with NVIDIA on the further development of physical AI capabilities. In parallel to the NVIDIA partnership, we are advancing a growing portfolio of AI-driven initiatives with technology partners and customers where we position Tecan products as key enablers of AI-powered laboratories. For example, in Japan, Tecan collaborated with a customer to develop a biofoundry, which is a highly automated factory for biology that integrates robotics, AI, synthetic biology, genome engineering, high-throughput testing and data analytics. Tecan technology serves as a core component in this innovative setup. In terms of geographic expansion, in May, we expanded our direct presence in India with a new local sales and service team based near New Delhi, an important step in one of the world's most dynamic life science markets. Operational excellence is focused on scalable, resilient operations that convert growth into margins and cash. Efficient operations and a lower cost base are a priority for us. At the end of March, we divested our precision machining site in California and consolidated that manufacturing capability in Vietnam. Our U.S.-based pipette tip production has been operational since Q2, giving us more responsive, resilient supply for the U.S. market, including a meaningful reduction in CO2 emissions. And we continue to advance on our previously initiated investment in a harmonized SAP enterprise architecture. The project is an important step. And as Camila explained, its cost is recorded under the Elevate program. To drive the work on all 3 pillars, we have also made progress in strengthening our performance culture. Examples from the first half of the year include clear P&L ownership by the businesses with aligned incentives, ownership of the innovation road map by the businesses also with aligned incentives and tighter cost discipline. My first year as CEO has clearly confirmed the potential of Tecan. To realize this potential, to future-proof the company and to drive long-term value, we launched our Rewired transformation program in the first quarter of this year. Following the implementation of initial measures in the second quarter, we expect these to contribute to our full year performance and serve as the foundation for accelerated growth and profitability. We will continue to share proof points as we progress with Rewired. With this, let me turn to our financial outlook for 2026. We continue to expect sales growth in the low single digits in local currencies for the year, and our aim is to grow above the market. Our results in the first half confirm our confidence in our performance and in our adjusted EBITDA margin outlook of 15.5% to 16.5% for the full year 2026. We now expect a slightly lower negative impact from tariffs than previously assumed. At the same time, we expect positive effects from higher sales volumes, a favorable product mix and the initial benefits from our Rewired transformation program. Based on these developments and based on what we delivered in the first half, we currently expect to close the year towards the upper end of our guided range. And now looking forward beyond 2026, we also confirm our outlook and targets for 2028. CHF 1 billion in sales, representing a CAGR above 4% from our 2025 baseline in local currencies and a 20% adjusted EBITDA margin. Beyond 2028, we confirm our ambition of mid- to high single-digit sales growth and an adjusted EBITDA margin above 20%. Now to sum up the first half, I am pleased about the progress we achieved. We grew above the market. We have good momentum in Life Sciences and Partnering is on track. We have a significant opportunity to realize the full potential of Tecan. Rewired is progressing well, and we expect it to contribute materially in 2027 and 2028. While I'm pleased about our performance in H1, I'm still prudent about the market recovery and continue to expect it to be gradual. What I am certainly confident about is our ability to execute and deliver on our commitments. We're now very happy to take your questions.

[Operator Instructions] Our first question comes from Aisyah Noor from Morgan Stanley.

My first one is on the Rewired program. Could you give us a feel for the sustainability of the cost savings you generated from this program? And could there be upside to this program versus when you first announced this program? And what are the one-off or restructuring costs you've earmarked for the period versus the CHF 8 million you booked in the first half? And then my second question is a bigger picture one on AI, which I noticed you've highlighted a lot more in this quarter presentation with this NVIDIA partnership, which all sounds very exciting. How are customer conversations trending here? Do you see this resulting in, for example, higher automation requirements, expanded project discussions, et cetera? And when do you think this could materialize more concretely in your order growth?

Thank you for the questions, Aisyah. Let me start with the Rewired piece, and I can give an overall context and maybe, Camila, you can add some perspectives as well there. So overall, I am happy with the way things have started on Rewired. On your question around sustainability of savings from what we've seen so far, if you actually take a look at the first savings that we've seen have been really through the exits of the businesses that we talked about also in March and what we've started to execute. So those costs come out of the system, those are certainly sustainable. So that's a permanent kind of cost out that we will see out of those. As we continue to execute, you will start to see more of those coming through. I mean, as we've said, we launched the program in Q1. So we technically really just have one quarter under our belt. And yes, you're right. I mean we do continue to review the program to see if there are other opportunities to be added, obviously, being careful on ensuring that we don't miss kind of the focus of the team on the execution side. It's a balance that we're playing. But overall, very, very happy with how things have gone. Camila?

Yes. So just to complement this, before you mentioned the AI piece. So on top of that, I want to highlight that the focus in coming months will be to establish a disciplined cost base tracking and develop a comprehensive understanding of all underlying cost drivers that we have in the company. This will also enable us to give more transparency about the numbers, how they trend, right? But I need a bit more time, right? And then you also asked about the cost, the restructuring cost. I would say, for Rewired program 2026, it will be similar level in the second half. So it will be, we reported the total cost. And for 2026, it's a bit lower than the average for the 3 years. That's it for now, yes.

And then I'll turn over to the second question around AI. This is a really, really exciting topic for us. And certainly, we see it on the side of the opportunity of how automation can play a role and just seeing the excitement from a customers' perspective. And I would say maybe 2 sides. I mean, certainly, what I see on the customers, primarily on the clinical diagnostics side, they have been really excited to see the capabilities that we've added to our Introspect tool because these customers tend to have larger fleets in their labs, and they really are focused on kind of efficiency and automation. They don't have the ability to have manual processes, just something relative to the volumes that they handle just wouldn't work. So they definitely rely on automation and a tool like this really allows them to truly understand all the opportunities from an efficiency perspective of the fleet that they have. We have more things coming as part of the collaboration with NVIDIA. I mentioned physical AI, but there's another piece that we're talking about that we're calling Discovery Introspect that will allow for faster processing of larger subsets of data. So again, something very much targeting this subset of customers. And then on the side of our biopharma customers also, they are very excited to see how they embed AI in their drug discovery process. And here, we help them by ensuring that we make the validation of the results as optimal as possible. Again, there is no way for them to be able to manage all of this if they are accelerating the in silico bit, if the validation doesn't leverage automation and AI as well. But the connection of those 2 to create that closed loop is where our value add from an AI perspective comes into play, and they're interested in the concept of autonomous labs. So all of that is certainly in the conversations. You asked how much of this is truly maybe converting to business. I would say, it is at the very, very beginning of the process. But I'd say all of the customers have this in mind because they see the benefits in different ways in what they do. And stay tuned because we have more things that we're working on from an AI perspective to continue to partner with our customers. I hope that helps.

The next question comes from Harry Gillis from Berenberg.

Just as we start to think about 2027 growth, I have some sort of related questions on what we're seeing on the order entry side. So I guess, order growth slowed from 6.7 in Q1 to stable in Q2, although I appreciate the book-to-bill is above 1 and there was a sequential improvement. But just trying to understand with tougher comps in the order side also into H2, how should we think about orders as we move into H2 with -- we're seeing the underlying improvements in certain areas of the market, but also the tougher comps? And then maybe by division, I noticed you said Life Sciences orders accelerated in Q2. So is the sort of broader slowdown maybe to do with your largest customer in Partnering or does it reflect any sort of underlying slowdown? Really just trying to get a sense of confidence in terms of the orders and the backlog in H2 as we start to think about '27 growth.

Thank you for the question, Harry. I'll give you an overall view. So a lot to unpack there. But I would maybe start by saying, I feel good. When I think about the launch point into H2, I feel good about what I'm seeing, a combination of kind of the order behavior, but also the continued expected recovery of the market. Maybe that is at a high level. You're right in what you're saying that sometimes you have to take into account the comp that is slightly different in the different segments. So when I think about Life Sciences, maybe as a start, I'd say that definitely, we saw an acceleration. I think you mentioned and we mentioned it in the prepared comments in Q2 versus Q1. And I think the kind of underlying that is, it goes to the recovery that we are seeing in the market because we did see better results out of the instrumentation part of the portfolio. So with orders accelerating in Q2, I feel good about the second half. Of course, we want to keep an eye on how the markets continue to recover. And there were a couple of things from a comp perspective, particularly consumables side as customers prepare to take advantage of the new capability in the U.S. We know that they placed some orders in the first half that perhaps we're going to see -- we're not going to see in the second half. So I still expect consumables to grow higher than the overall average. But I know that there are some dynamics there that will have an impact in H2. But overall, feel good, I guess, particularly on the side of what we're seeing in terms of acceleration of the instrumentation part, I think that's a good signal for market recovery. On the Partnering side, you made the point around the largest customer, that is definitely playing a role. We always knew that this year was going to be a little bit skewed from a growth perspective, just given how the comp worked out in 2025. So H1 was always going to be stronger than H2, and I think that is reflected in the order entry levels. So no surprise there. We continue to stay obviously very close to that customer as we think about H2 and then, obviously, the prospects going forward. When I think about what we're seeing on the Synergence side, I feel good that our customers are seeing also the recovery that we're seeing. And I feel good about the expectations for the second half. We see some of our big customers having strong success in the market. So that's going to reflect well for us. And then as Camila made the comment around Cavro, we have backlog that we couldn't ship in the first half. So that would add to our -- the expected results in H2 is that we have a catch-up that we need to do there. So that will help overall the H2 results. And it's exciting to see what some of our customers, both on Diagnostics and Life Sciences are doing in terms of components. So I feel good about that business as well. I hope that gives you an overall sense of how to think about H2.

Can I just ask one more question and then perhaps I can join the queue again? Just it was helpful saying you sort of expected to deliver towards the higher end of the margin guidance. So that's the sort of base case. However, I noticed the sort of underlying improvement you've tweaked down from 50 to 150 to 40 to 140 basis points. Is there -- like I was just wondering if there's a specific reason on that, just given H1 seems to progress very well on the adjusted EBITDA side of things.

So we are very comfortable with our guidance now. And I think the first results of Rewired give strength our confidence. So this is why I also mentioned that we expect to be more in the upper range of that guidance. But as I joined in June, right, so -- and my focus now is to really have a very good grip and understanding of our cost base and I track this in a very disciplined manner. And then we believe that with the solid results in the first half that this will continue in the second one, but I prefer to take a more like a conservative approach here for guiding the upper range of that bridge, but not change the guidance.

The next question comes from Jan Koch from Deutsche Bank.

I would like to come back to the phasing in H2. And could you help us to better understand the phasing of especially sales and order intake in Q3 and Q4? Given the tough comparison in Q3, do you expect order intake growth to improve sequentially? And then secondly, yes, great to see the sequential growth acceleration in Life Sciences. Aside from exposure to the Academic and Government channel, are there any Life Sciences businesses that haven't returned to a more normalized growth rate yet? And could you also update us on the current sales exposure to the A&G channel in both the Life Sciences and the Partnering businesses?

Okay. Do you want to take the phasing? I can take -- maybe I'll start on the first part is on the phasing of the numbers. So I guess maybe as a general comment, I expect this year to look more as how the business was looking before all the ups and downs during the pandemic and following, which means at the very high level, we tend to have a bit more weighting on, from a sales perspective, on the second half than we do on the first half. So that's kind of the expectation overall. And then there's really nothing to highlight third quarter versus fourth quarter other than maybe keeping an eye a little bit on the comp that we saw primarily on the Partnering business. And it was -- for part of the business, it was a little bit higher in the third quarter. And for the other part of the business, it was a little bit higher on the fourth quarter. So that would be the only watch out as we think about the second half. But as I said, I feel really good about what we're hearing from our customers in terms of the prospects and how they are doing in the market to deliver on our commitments in the second half. So I hope that gives you a little bit of color from a phasing perspective. And then if I take the second part of the question, which is on the Life Sciences, I think you were asking what are the areas where perhaps we're not yet seeing a recovery. And certainly, I would say maybe 2 aspects there. One is on the Academia and Government, as I mentioned in my comments, I think this is the area that is lagging from a recovery perspective. We saw weakness, quite honestly, pretty much across the board in all geographies, perhaps except JPAC or the kind of the Asia region, except China. When we look at what is going on, it is clear that it's not even throughout, right? There are certain institutions that have funding. So it's really a matter of kind of looking where the funding is and really supporting those customers in that perspective, and that's really the work that the team has been doing and that we're following very closely the sources of funds and ensuring that we start to see that flow and keeping an eye on that. Maybe the second area in Life Sciences, we're keeping a very close eye is the development of the growth in instrumentation. And there, as I mentioned, we did see quite a difference in the first quarter versus the second quarter. So it's really nice to see how that has improved in the second quarter. And I think that's really a good testament of the overall recovery, particularly what we're seeing in the Biopharma segment.

Yes. One quick follow-up, if I may, regarding the supply chain issues that prevented you from shipping all orders. Could you quantify that impact? And have these issues now been resolved?

Yes. So the issues relate particularly to supply with a couple of major suppliers that we have within Cavro. We do -- we see an improvement overall, but we expect that recovery to kind of take place throughout the second half. So I think it's going to be a gradual one. That's what I would say. And I mean it from the perspective of the size of it, maybe just to give you a sense and for you to have a sense of the size of Cavro, it did put Cavro in total negative. So you should see that going back to positive territory as we recover overall.

The next question comes from Sebastian Vogel from UBS.

I've got 2 questions. The first one is on the margins, if we -- I mean it's not easy, but nonetheless, to think about like how margins were looking in June or May compared to the average of H1 that you gave us. Is there any sort of ballpark indication that you can provide us? The other question I would then take afterwards.

It came strong more in the end of the quarter, but this is because of the fluctuation in revenue that we have more concentrated in the end of the quarter. So that's the main reason. And the volume helps, right, so yes.

Sure. But do we talk like whether 50 basis points higher than the average or more like 100 basis points? Or is it -- just some sort of, yes, granularity would be great.

We don't disclose on that detail level, Sebastian.

Then my second question is with regard to the underlying improvements that you were showing into the waterfall chart. And as you have said, right, you have like 180 basis points in the first half. You guide for 40 to 140 basis points for the full year. So is that just outright overall massive conservatism or is there something to be expected to see this 180 basis points to going something like the midpoint maybe in the 90?