Q3 2020 Qiagen NV Earnings Call

Ladies and gentlemen, thank you for standing by I Am Society. Your P.G.I. operations today welcome and thank you for joining key Jones Q3, 2020, <unk> earnings conference call and webcast.

At this time all participants are in a listen only mode. Please be advised that this call is being recorded I teach ins request I would be made available on their internet site. The presentation will be followed by a question and answer session. If you would like to ask a question you May press star followed by the one on your Touchtone telephone.

Please press the star key all the sad to see a roof off pretty sure system.

At this time I would like to introduce your host John Gilardi, Vice President head of corporate Communications and Investor Relations at Kitchen. Please go ahead Sir.

Yes, Thank you very much and welcome to our conference call today. The speakers today are Terry Bernard the CEO of Qiagen and Roland Sackers Chief Financial Officer also joining US Steve you low director of Investor Relations.

Forward the release of the Q3 report along with this conference call in light of the AD hoc announcement issued on Tuesday, with our increased outlook for 2020. We appreciate your understanding for these changes Im glad you could join us today.

Please note that this call is being webcast live and will be archived on the investors section of our website at www tightened dot com copy of the press release is also available in the same section.

Before we begin let me cover our safe Harbor statement, the discussions and responses to your questions on this call reflect management's view as of today October 28 2020.

We will be making statements and providing responses to your questions that state intentions beliefs expectations or predictions of the future. These constitute forward looking statements for the purpose of the safe Harbor provisions under the private Securities Litigation Reform Act of 1995.

These statements involve risks and uncertainties that could cause actual results to differ materially from those projected qiagen disclaims any intention or obligation to revise any forward looking statements for more information. Please refer to our filings with the U.S. Securities and Exchange Commission, which are also available on our web site.

We will also be referring to certain financial measures not prepared in accordance with generally accepted accounting principles.

You can find a reconciliation of these figures to GAAP in the press release and the presentation for this call.

As a last point, you're seeing their kids report that we're planning to hold the virtual deep dive on Tuesday December eight an invitation to registered for this event will be sent out soon.

Further information about the spend will be available on the IR section or just contact the team I'd like to now turn over the call to Terry.

Thank you Joe and good morning. Good afternoon, good evening June or some of your one or where to go Oh you are welcome feeling scorcher did I supposed to remark on be harmful because I didn't see him or her going myself I wish you and your hobbies grew the head on order, but during this period of grid or something.

Oh, what seems like the trend continued to rise to the challenge is looks you brought in the response to this public health crisis.

This underscores the direct <unk> employees.

Hi, Julie Nokone Threed behind and also to constantly work on bids or faster ways to Paris.

These outstanding before is also reflected in the reserves for the quarter and the first nine months to Oregon, and Washington <unk>.

In fact, it reflects not only are we supposed to be spending but also the tremendous impact of initiatives, we have launched to enhance our market leadership and strengthen our with your friendship your position.

Got you I didn't teams are responding to public health crisis in a way that I will solutions are becoming increasingly relevant to customers in their lifetimes I'm ready to talk about that.

These spending and I were you up to date reserves are proving.

That's catching you go didn't 19 relevant.

Got you that's in his notes go get and I didn't dependent.

Let me go through our key messages for <unk>.

First I would it seems far exceeded the outlook for Sears girl came to <unk> well, if I were Rams for <unk> as you have seen sales grew 20.

26% see our true $483 million.

This was a wearable.

Good good I, 16% to 21%.

Our girls.

Adjusted <unk> was 58 cents C.R. <unk>.

She's 61 increased 61% increase from the third quarter of two falls on the nitrogen and again I'd do high end of the range. We had said 452.

<unk> expenses are.

Do you still four months equaled to free comes after catching <unk> outlook said for the second quarter, where we were at 19% see our girls and also did you ever read after the marine mining for Sun Sea, our gross profit for Squawked or.

As you all know we see an ongoing high levered over revenue was in the third quarter of 2020 from provider groups you even go nitrogen piston.

He says reached $164 million and grew more than 300% from the third quarter of two program and like Jim.

Sales in the rest of the book for your decline <unk> percent <unk> two for younger than $20 million from the same period last year. However, this was an improvement sequentially from the second quarter of two falls on twin.

This leads to our second key message.

As you have seen we have increased our wear out coupons are from New York to broken up between.

Based on their work on things trying to delever, not going higher level of sales and.

I just did a p. as growth in the fourth quarter of two 420.

Our updated outlook for 2020 now calls for sales growth of about 20% <unk> are these going to depress your outlook for about 15% to 18% that we gave in July.

For the fourth quarter, we are expecting sales growth of about 24% to 27%.

Over the same periods in my team.

She is based on the expectation for a higher level of Cobiz nitrogen products sales. That's in the third quarter of two program. Brent I've also reasonably good trends in the rest of our book for you on a sequential basis.

For adjusted EBITDA is we I've said to you outlook for 20 over boat.

I don't know seven cents to do that all nine cents see all this would be a 45 increased 45% increase over two program imagine I've also an increased profit.

Outlook for at least two loss per share see all.

Before moving into the final quarter of two 420 with an increasing level of confidence supported by strong demand for cooking nitrogen products.

Moving trends in our business and the benefits of new product launches.

Oh, the next point I got to say by John We are planning to hold yet you won't get back in December you.

It is clear that to focus on and when she has been a euro busy brookman spoke catching this event, we view an opportunity for us to update you on our threat did you have to provide more perspective on the Buffalo Wild.

That'd be good would you spend in the.

The key focus will be providing more insights on how we'll focus on $5 go girl, which really just goes.

Victor.

I would also like to Ah. That's we have appointed a new leader for a more did you love diagnostic business area.

Nope, that's kind of why you were long, it's taking or would you sort of what I'm going to use as a member of the executive coverage.

You are probably aware that there's all bus guarantees are not investing member okay. Yeah. That's what it is you have you went on Europe I know it's been extremely impressive.

Since we're all about where they are stuck with <unk> fitness.

These new remote <unk> partnership we spoke about three weeks for digital PCR.

As a quick summary judgment is therefore on the right track for an outstanding finish to 2020 <unk>.

This is reflected in the improved food your outlook I would now like to handle go through or.

Thank you <unk> Hello, and thank you for me as well for joining US on this conference call.

Like for us to provide some additional comments on our financial results and believe that provide some perspectives on them.

2020, that'd be just to know.

Well, it's not caught on that says <unk>, 26% CR do not include any incremental cellphones acquisition also remaining state not more to act that was completed at the end of September currency movements had a minimal impact on all evolves.

Just mentioned sales on product called <unk> testing totaled 164 million U.S. dollar sales in the so called <unk> that represented about one thought off towards sales rep.

<unk> High school, but not in sales dollars falls into several categories Pos odd.

Its sample technologies can do.

Well, it's a related instruments made up 56% of she's sales from the caught all.

The next category involves PCR testing, that's our kind of statistics and automotive solutions, which represented 23% off these sales the so called <unk>.

The sub category, we have or M., we a job that's a software company for use in their own COVID-19 test.

Sales represented 21% of corporate not important felt this call.

Well the first nine month of 2020 net sales were 1.3 billion U.S. dollar sales and a horse, 18% see Oh, what 29.

Yes sure. It's all it's also it's a high end off the full year I wish we had set for 15% to 18% <unk> Oh, he's talking with all its popped at the Opco <unk> outlook I.

That's for the split of COVID-19, among corporate sales for the first nine months of 2020, Oh, its all charts that corporate nights in sales amounted to 418 million U.S. fell off for the rest of the portfolio just felt well, it's about 81 million U.S. dollar and climbed 12% see off almost 29 incur yet.

Moving down the income statement that justice gross margin fell to two percentage points to 69.6% of sales in the salt caught off 2020 pumps, 71.6% the caught all this.

This was due to a higher shelf instrument sales, that's not a significant cost plus the ongoing expansion plans, which are mainly related <unk> cost which production.

Well lets talk my month, that's just gross margin was 69.7% compared to 70.7% in 2019. It certainly remains at a strong level, but again a flex this change in product mix for the period.

Adjusted operating income was 60% one of about 70.3 million U.S. dollar in the salt caught all the leveling significant improvement or the same period and 29 in New York.

Two factors.

Cost you saw an overall reduction in operating expenses as a percentage of sales. This was partially due to the impact of the current 19th pandemic on sales and marketing expenses given the restrictions due to luck dogs.

The second factor also saving decisions, we have knowledge for what 2019 to change your orientation of our ngs, finishing and implement targeted efficiency programs.

As it was odd said adjusted operating income margin was more than seven Percentish pod was 35.2% for the salt caught off 2022.

27.8% in the prior year period.

Well the first five months of 2020 adjusted operating income was 52% for about 70.3 million U.S. dollar. There's a margin off so I just see part of <unk> percent for the first nine months of 2020. This margin is up significantly from 25.4% the same period of 29.

Moving to adjusted EPS thoughtful the soft caught off 2020, almost 65% or 58 cents T. L. Just again was at the high end of our outlook for 50 to 58 cents the all.

For the first nine months of 2020, adjusted EPS was $1.49 cents at sea, Oh, well, having 55% or about 96 cents in the same period 2019 there.

There was also 2020 extra weight or $1.47 cents or two cents lower due to coffee headwinds.

Moving towards the odds for cash flow for the first nine month of 2020, you saw a decline in operating cash flow to wonder about 88.1 million U.S. dollar up to about 21.4 million U.S. Dawson December 29 team.

Keep in mind that you hadn't bought one about $19 billion off payments for this.

Just continue tend to all fall and also about $50 million of cash payout and 2020 was there was talks taking measures initiated in October 2019. Excluding these two factors operating cash flow was a bought see about $58 million in the 2020 p. or yet.

These two factors also impacted free cash flow, which declined to 101.3 million U.S. The loss of the 2020 period Obama about $75 million the 2019 peer yet.

Moving to the balance sheet, our leverage ratio stood at <unk> times net debt to adjusted EBITDA at the end of <unk> and 2020. This was slightly higher than 1.7 times at the same point in 2019.

We continue to pursue a disciplined capital deployment policy well that has talked about possible reason to yes. This involves investing in businesses, while seeking ways to increase it drops or shall it off.

I would like to now give you an update on sales with AWS for all product groups, all customer classes and all geographic regions.

Jumps off the two product groups sales of consumables and related to the weapon notice was 22% see up to 420 million U.S. fell off in the <unk> and <unk>, 87% of sales. This was well above the trend for the first nine months of 2020, the sales up 14% see a 1.12 billion.

<unk> fell off.

Instrument sales maintained an extra ordinary golf momentum into sought caught all again driven by the COVID-19 pandemic just sales were up 56% tee up and to reach 64 million you asked about the soft caught off 2020.

Presented sub 10% of total itself was a false my mom's instrument sales were up 46% to one and that's it for the one about 78 million U.S. dollar sales was the same period in 2019.

This call is coming on the back of significant demod for many instruments and automation solutions being used as a corporate not you know as part of this loss was calling RTL. That's all I've seen estimates have strong custom applications beyond the pandemic response.

That's an example of that.

Love to one up 19 your placement also kinda Symphony automation system were made in the first nine months of 2020. This was a 50% rise over the same period of 29 10 and builds on all what we're talking five from a cumulative placements at the end of 2019.

We also had about 12, new placements off installments of the kayak you're probably in the first nine months of 2020 because of all this was about double the number of plants in the same period of 29 and.

We also reached over 1008 time, that's true cumulative placements also kinda thought <unk> automation solution.

But that could be advil being much higher drilling 21, once basketball comp cost much manufacturing cost trends.

No more the Ics, we now have about another 10 placements office integrated PCR testing solutions, including U.S. placements Scansource acquisition on hand, <unk> is clearly seeing unprecedented demand that's a wrap up this accelerating faster than all p. pandemic plans.

Moving to our customer classes sales fall molecular diagnostics customers cool. So people said see out to 277 million U.S. fell off into sort caught all over the year ago period. You have you saw solid double digit see our gains in sales of consumables or instruments.

Sales growth was about 80% <unk> Oh.

This was again driven by demand for corporate nitrogen products lot sales in the rest of the business were lower compared to sort caught off 2019. As an example, that's up to close to fill in to be test declined 20% see the so called <unk> compared to the same period and 2019, but did better than the 46%.

Oh, yeah, yeah drops in the second quarter of 2020.

We also saw weaker trends in precision medicine in particular due to a 25% see a drop in revenue was on companion diagnostics core development projects compared to the soft call. It all off 2019.

That's the life science customers also was that a dynamic pace growing 22% see up to about 47 million U.S. dollars under representing 55% auto sales.

Just as in molecular diagnostics, we saw very good demand for corporate Knights in test solutions in particular for Sop, a couple of <unk> products sold to other companies put their own test life science sales outside of corporate not in test recovery compared to the second caught off 2020, but still go mad below levels the soft quality.

Oh 2019.

Moving to our geographic was also the Europe Middle East Africa region led the soft caught off 2020 was a 40% see increased to 164 million U.S. fell off.

Yeah, we saw growth in all areas and in particular double digit CEOC off in Germany, France, the United Kingdom and Italy.

The Americas region also did well sales the reason it was 19% see up to one.

One of the 27 million Youre still lots of the salt caught all excluding quantify there on sales to this region the horse as much as possible. So the person he outweigh it.

The Asia Pacific, Japan region also experienced solid cool <unk>, 25% see ER and reaching 92 million U.S. dollar for the salt caught off 2020.

Shy not delivered growth above 20% see a sharp acceleration from flat sales in the first half of 2020.

Japan continued to deliver double digit gains in the start caught up in a richness nearly 20% see I go off for the first nine months of 2020.

Like to know had back to tell you.

Thank you well and I would like now to give you a quick overview on our where our focus on five p. log up girls rehab.

We have chosen to these important products area as a catalyst to drive our growth in the coming years.

As we have said you know what discussion with you over the last few weeks as we resumed our investor relation activities. We are moving for a while but no. We the new strategy I don't think we need one, but we've sharpened focus I would say even ruthless focus on that were re invigorated <unk>.

We are learning from our experience using the past one of those experience easy that came out yesterday and I said, we'd get company cannot do we talk.

So we must choose wisely, where we want to be the leader and then the reserving the direct I would investment and commercial energy and resources into those areas to achieve our ambition.

These are areas with excellent market potential.

And in addition different waves of growth ahead in the coming years. We believe we have chosen wisely and here you can see our five p. lots of girls.

These are all areas, where kt agenus, where both eastern to capture growth opportunities because we launch differentiated solution.

The first thing we are involved Semper technology here, we want to leverage this trend for about we'll roots in sample prep. The first step as you know we mini lap processes.

Retaining focus here helps to ensure we continue to innovate with our customers in both we certainly didn't like what application and apply those learnings to our downstream application.

The second pillar our Invotas once you feel I would think literally people did you think sort of relates on disease. The primary focus now once you know he's on Cuba ocular disease screening, we squashy feeling and she'd be go deeper.

These continues to build out its position as the modem gord stand up for latent TB testing.

I would have told me shouldn't but no sheep, we certainly bearing fruit, particularly in the United States as customers going after using <unk> own. These automated blood testing platform in a win win situation for both companies.

When all said, they're going to be nice increase the crises you don't use the waiting on latent TB testing sales fell to 420 are expected to be below the 19 labor well get about $240 million at the same time, we have very strong conviction about resuming growth once the pandemic scripted.

Moving to the next two girls <unk>, depending on you guys brought in your emphasis on the importance of more did you got this thing and we are hearing that Nixon in Boise shrink to ramp up come instead, he vision or if I were to.

No votes solution Rehabbing kidney cord PCR system first.

First of all as you saw in our press release, we fully acquired the remaining 80.1% from your projects in September.

These provide direct access to the U.S. market and ideally going blades completes the creation of installed base that we did in Europe, we see U.S. placement, we all know what 100, and then 10 installed system worldwide and we are still growing these newer these platforms across the world are being used or abused.

Could you imagine testing, but the future is clearly going to be about offering a broad range of kidney Cortez.

If you look at Europe, we already have a menu of 15, Oh, there infectious disease test and we are planning investment as we speak to register see me down these strong revenue in the United States in the coming years.

Also for PCR testing I would tell you that diagnostic sees them all being deployed for fuel economy 15 win based on top 54, most important pathogen promising or patient tempered.

As we are moving into the flu season, the recipe right to rebound there on the guidance that diagnostic is being utilized for did extremely well in friends out saw scope.

I'd also around 20 year old various directory Patrick.

This is a truly dynamic market segment, we support them sort of way behind beyond the pandemic, especially as we expand the menu is Gee are you got three that you're not and it was up as well.

Right no forecast that we have to tech or supply chain constraints and invest to make that change is even count freeze production.

These investments are expected to really bear fruit during the first half of 2021.

C B at all.

<unk> family of digital PCR system we.

We are extremely excited about any short just enough feedback, which is way above our expectation and friends that you didn't do a fairly good level of purchase orders already we began coming studies. They spent in September and the first meaningful sales contribution are expected in this quarter.

I would now like to give you an overview of the cat you didn't products being used in cooking light interesting and every Sunday Brooklyn.

We have been viewed as being probably the most comprehensive portfolio of cookie matching solution on the market.

First of all I will ever in December technologies are being used worldwide and texting will throw it in both manual and automated phone.

She is now complemented by yeah, well line, Oh, <unk> platform involving system like KFC fun, cardiac cube or easy to watch.

As we mentioned earlier, we are seeing placement rates in 2020 that out dramatically above laborers from recent years we.

We are also expediting did you broke month as a result of new products do.

These include one sample prep keeps that can be used on football <unk> instrument system and help address seem to both their next that that well customers are facing.

It also includes the launch of <unk> and <unk>.

This is a truly nobody protenergy robot yeah were R&D teams that integrate sales.

Good profit and PCR detection.

The bid if it is very clear.

Their work flow helps address key bottlenecks by reducing time to resort and requiring less disposable plastic.

It can be completed in less than one hour.

Compared to about three hours to stand up for standout extraction base PCL profit.

It is also able to address high volume.

Follows in September to December 38, I wish she.

On the PCR Cycler.

We will be seeking see IDBD and if you wait clearances.

It's what she's making us very optimistic is that we do not see manufacturing capacity issues for these programs.

Moving to the next category as I, just mentioned the catalyst that diagnostic and human distribution are being four do you would you do utilize four could be much interesting. Both Oh I've test that include targets for the South go virus you.

When he says you know as the more complex I say already launched in Europe and in the U.S.. We are going to complete that I say Weezer short legs full plagues flu and b. They raise these sales growth in the coming weeks and we also.

Register as Glenn extension for somebody about this.

No they're going to be drilled two I will continue to be that you'd say is I wear business evolving OEM components do.

You seem boards the sales of reagents on enzyme jaws are companies for use in their own test kits. This is a business that exist either way before these crises I know Houston, we continue afterwards.

And that was the last part of the group.

Which would be a new offering from carriers in during the fourth quarter.

We are about to launch antigen and then she bought the reps that have been developed in partnership with Oh spread again that you're going to see company. If you do.

Those tests are processed on the very seaborne catching you hub, which provides automated resorts in about maximum 10 to 15 minutes. We are seeing very good customer interest in terms of using it to scale. This you've got both of capital gets through the.

The fact that reserve a process did you.

Removes a key barrio investors or was there any change in test, meaning those that require someone to moneys told the test program I'm trying to be really determine the outcome of that that I was we said you that's not.

Okay I reach South go through antigen test is expected to be submitted for if you wait into very coming days and the same for CE, marking first revenue contribution that were expected in the fourth quarter of this year.

Moving now to provide some more details on that were coping nitrogen product. Both for you. How it has performed during the course of 2020, so far and some perspective on trends. We currently expect for the fourth quarter.

As a reminder, I've heard on said, we expect dramatically higher sales for the cookie matching product groups in the fourth quarter of two following 20 over the year ago period, We also expect sequentially.

You said in the fourth quarter than in the third quarter of two programs.

This comes after a sequential decline in gold in legend said it in the third quarter of.

Oh twin.

Why this was again you may need to Lewis says OEM products and the reduced demand from manual entering that separate extraction keys that reflects changes in market trends.

Let me give you some more context here as you know during the second quarter of 20, there wasn't dramatic spike in demand for it when they sent vertex has there been any gain momentum.

Demand was mainly focusing on manual extraction.

Given our leadership position in this market got yet then mobilize and rapidly scaled up production capacity photos manually it really makes restaurant there.

Again as you remember 24, seven sheets read it bringing capacity from my words you in December in print, which we have to highlight makes up the vast majority of sample prep kits says you know usually where you are.

However, during the course of the first quarter of 2020, we started to experience a combination of two trends.

First we saw system is once again asking goes to produce no go viewed religion product on the significant the hydro schemes. They will similarly, we tremendous need for DNA extraction of everything and the related product used in areas, such as oncology and ordinarily, but they're not going to be that condition and she is very important.

Because we had to invest here again, you just keep all the growth of catch in the coming years and in the coming months second I was just a more aggressive chicken demand in cooking I didn't this team from my new whatever in extraction George <unk>.

In terms of the customer demand trends for it wouldn't make structure back into second quarter 20 about 70% of the demand was for many were keys.

No. We expect these to swing to about 65% demand for automated you'd keep therefore drastically reducing their share of menu argument.

This means that as we speak we currently have sufficient capacity for many words tempered demand, but we are still expanding capacity for <unk>.

In terms of automated separate from the capacity, we have been working to address the <unk> bottlenecks, especially plastics, we expect those investment to stuff coming online in early 2021, and therefore see continuous improvement.

Improvement.

This increase in auto making capacity is needed as we seek to address the growing demand for automated COVID-19 separate Ricky as well as the recurring demand for the and they keep their.

The game securing these customer relationships for Ginnie Mae he is quickly going forward I, where long term business beyond the pending and.

And this was reflecting the fact that we had to do good she see are getting booked or separate frequent human resources into third quarter on a year on year basis as it went on the sequential basis for the second quarter of two 420.

As we as with every new production.

New product launch I'm, sorry, the first quarter can bring forecasting challenges. However, we still are very excited about the potential for cardiac function and the potential for the antigen testing and we believe that weekends can rapidly to meet demands it.

PCR testing, we forget we presented about 20% of our work will be nice instead of the third quarter, we are actually leveraging to ramp up on your what do you think I guess that biggs.

The plans, we had said photo's acquisition.

Demand for PCL tasting products remain after highly advair in the <unk> and rose sequentially from the second quarter. We therefore expect further increase in sales in Q4.

On the guidance that as we said before we are overrun by demon from kids to eat is not a demand issue. It is a supply issue for us we now have over 1800 placements in diffuse instead.

Instruments supplies are going well I was we were able to secure significant supplies going forward. However, I will close friends is the ongoing expansion of our <unk> manufacturing, where we do expect a significant change in the first half of up to 421.

We expenses and to 420 reserve on $50 million of fares <unk> profit.

Turning to new monies here also we are seeing very strong demand for the different solutions.

We are sitting now that we have acquired your projects. These projects on a global basis. We are now integrating your mood you seem to get your Gen and are implementing plans to significantly scale not only production capabilities, but also the test menu, especially for the U.S. Gobi Nigel I'd. These moments on your <unk> is clear.

The girl driver, but as we said before we have a very broad menu in Europe, and we we'd have just where are you in the U.S. that's where.

We are investing to ramp up production capacity for both consumables and she's thing.

No for OEM products.

She is by nature, and we highlighted that in different communication volatiles business driven by tenders to those are companies and can also in bi <unk> large government alternatives under OEM brands as.

As we noted earlier, we saw Lewis said during the third quarter that came after a significant percentage of sales in the second quarter.

All those can be received on your regular intervals.

That's what I wouldn't use in an antibody test we want first to getting to give you an si IBT markings before giving more concrete supply expectation.

At the same time, you have to remember that that will partner. If you will as we seem to see me become grant from the NIH to EPS ramp.

Rental projects from capacity again, what makes us optimistic is that the initial feedback from customers is extremely encouraging disease are differentiated test filter market that is growing in.

In summary.

We are really looking for a strong showing from my work of uniting both where during the fourth quarter and indeed, a sequential improvement from Q3 to 420.

We will share more on did you broke means you know a portfolio I do deep dives isn't back.

Back to hone in on that.

Thank you <unk> I would like to know if you all increased outlook for 2020 and provide some perspectives on the outlook for the fourth quarter.

As noted earlier, we have increased the full year outlook for net sales to about 20% see I call and this compares to the prior outlook, how far about 15 to 18, 18% T. alcohol.

<unk> adjusted EBITDA as that increased the outlook to $2.07 to $2.09 C.

And based on a full year weighted average of about 235 million shares outstanding.

The fourth quarter, we anticipate another call I thought was very elevated sales school of about 24% to 27% see them by dynamic gains from Corbett 19th test sales adjusted diluted EPS I expect it to be about 58 to 60 cents and this is based on two on the Saudis 7 billion.

<unk> outstanding that's.

As for QAD piece based on rates as of October 26, 2020 on a fully full year basis, we expect the currency headwind of about 1% the spot on sales because odds that extra away its for Justin <unk> for the full year. We expect accounts he had spend of about two cents per share.

For the fourth quarter. However, we expect a tailwind on net sales of up to 1% to support and a lotta neutral impact on adjusted EPS, Yes.

I would also like to know what's the what's the outlook for adjusted EPS for Q4 and for full year 2020 extra what's a pretext kept a gain from cadence minority investment in <unk>, which was acquired by invitation Dr., What 2020 times and held an investment since it's funny 18 <unk>.

Based on the current share price of EBITDA Cogent estimates of Creditex kept again could be approximately 110 million U.S. dollar well bought 75 cents per share on an after tax basis pageant also has survived to receive up to pause button budget. Additionally, British S. Upton achievement of certain.

<unk>.

I said I would like to hand back to tell you.

Thank you all and we won't you have enough time for the Q when they saw as a quick summary.

First we had outstanding results for the third quarter as we exceeded young to <unk>, 26% <unk>, our sales group and we were at the very top end of the range for RG Tdps I P. Eight times. This was the second part of your renewal with very high sales contribution from Gabi mentioned, but we also sold.

Encouraging signals for the rest of our business.

Second.

We are very energized to see both the global response to COVID-19 pandemic in line with our directive to leave no country behind.

Well forecast going through high Koby 19 cents in the fourth quarter and a sequential improvement from the third quarter.

Yep.

We are laser and they insist on laser focused on making the right investment to support the cooking nights in response, but the game.

Well, yes, it could be 19 relevant company, we all know to Govies Nigerian dependent company.

And we need and we are also positioning kinda agenda for the day when depended imig subsidies. This is why we are prioritizing investment into the five pillars of growth once again, some pretty thick <unk> got yes that pneumovax under cardiac we'd you did your door PCR platform, we will discuss this more in detail.

At our upcoming deep dive event.

And as a last point, we have increased our outlook for full year 2020, we are optimistic Judy.

And to this forecast and this year. We said those are cost out about outstanding reserve and had to achieve full year sales growth of about 20% see our and our GDP is between 2.7 dollars to 2.9 dogs.

In closing our commitment to value creation for our shareholders and stakeholders remains as strong as ever, especially as we navigate through a year of significant changes for all of US that's always stay safe and with that I'd like to hand back to Joan and you'll pay retail for the QNX session. Thanks very much for your attention.

Ladies and gentlemen.

Last time, we did begin the question and answer session anyway.

Anyone who wishes for asking a question press the star.

And one on your Touchtone telephone if you wish to withdraw your question you May Press Star followed by two to make sure we accommodate as many people as possible. Please limit yourself to only one question and if necessary one follow up your microphone.

After finishing asking the question anyone has a question. Please press the star followed.

The one time.

We will now take our first question Daniel Wendorff from.

Commerce.

Please go ahead.

Yeah. Thanks for taking my question and so in order to limit this to one and I had a question on on the cartridge manufacturing constraints to talk about it can you maybe provide a bit more detail how you want to take that and how should we think about.

Relief to that.

Two of these manufacturing constraints and and maybe also enter into it with regards to two cost which revenue was maybe looking into 2021, how should be think about Scott to trip and he was the <unk> cochise pace kind of stuff in 2021. Thank you.

Well, thanks for the question and I I I assume as you just said that you refer specifically to chaos that diagnostic. So you think you can imagine that that fans that youve got threed, which is combining amplification and detection for not one but two gen, but 20 pathogens senior calories isn't.

It's not easy to fully automate so what we have done already into fall going in twin cheese that we have doubled their lines of manufacturing both in Germany and in Spain, but those that do you see me manual automated line, we want to move to a greater automation capacity and he's going to be.

Okay, Russia known by Q2 of 2021.

So the way you should see is that.

As we said before.

We wanted to double our production capacity by Q4.

I have two follow them and 20 and deliberately to gain.

In Q2 of two to 421. This is what we want to it.

Well that would help us.

First of all.

And serving the growing demand for those kind of seem to me test driven by Koby 19, but.

But it will also help us answering the demand beyond could be 19, because let's not forget that we have also gee I got three g.'s I thought were a menu in Europe, we want to launch it in the U.S. by the end of Q2 of 2021.

We also want to launch.

The meningitis east countries by the end of Q2 2021 in Europe, and then by the end of the year in the U.S. show combining.

First increase the production capacity, we are going to continue to grow the consumption of of countries you don't care about that well.

Wait on the first semester of two program 21, and then he depending exercise. So she's I'm. Sorry, then we will have the relays the waves of growth coming from the GE I cant reach both Europe and in the U.S. and then de minims eighties, mainly in Europe in 2021 and by the end of 221 in the U.S. has way.

We are.

Our next question from.

Heiko Peterson from JP Morgan. Your line is open. Please go ahead.

Hi, This is Julie on for Tycho. Thanks for taking the question so maybe starting off.

Hi.

How much of the current sample prep.

Do you expect to come back to it.

How quickly do you expect that to happen I know you're in the in the flight deck. You said 80, you know 65% of that.

Demand is shifting to integrate it testing just wondering if that's that approximate mix that you expect to come by your own existing sample customers as well and also do you expect sales. It then you cant to be mostly to third party platforms or do you expect this can you catch you also significantly accelerate placement up your own.

Hi, Anthony instrument, particularly I took your model.

Well I I believe it's going to be a mix of all the Oh Jeez you did on your question I mean first of all I mean.

We are currently launching that product, it's under and evaluation in more than 50 customers over the road to both in Europe and in the U.S. was extremely good feedback the way we see it first of all it's not necessarily cannibalization of what we have on the market already there might be some but the demand of that.

She is a growing so these he's answering basically these new demand first or sometime so it can be interesting and we have concrete examples of customers. Using for example in human disease, where we do not have the possibility to supply as much as they would want in govies that.

PCR and even with these days and then we complete I, we're offering we used <unk> and then we have civil cases in Europe, because as we said during this quarter, we seem to have constraints on manufacturing on your Moody's. So do wish you. We gave a manual automated 60 fives.

55 in favor of Oh go damage. It we'd probably continue with GE has booked a yard catch up revenue and we'd probably move through more than let's say 70 30.

All depends I would say that the <unk> at the moment that she's it's riser and serene mixed towards demand than cannibalizing I will go into our current Oh, yeah, we'd be some cannibalization no doped or actually they were sort of why we're only three months, yes of course, or we are relying on that but.

So again, we can see that the overall launch of the <unk> and including watch it could have as a consequence, where I'll take you for example.

We will now take our next question from Doug Schenkel from Cowen. Please go ahead.

Hi, Thanks for taking my questions. This is Chris on for Doug Today first can you just talk about the recovery trajectory of course, if you're on would it be reasonable to believe that it can return to at least 2019 revenue levels in 2021, and just given the logistical advantage.

Yes, do you believe the kind of pandemic could help catalyze conversion over from skin tests and whats your longer term view.

Revenue now and for somewhat unrelated follow up can you just update us on the status of your sales and marketing infrastructure for comp stat, and Nimo de acts in the U.S.

Incremental investments do you need to make on this front. Thank you.

Well first to call in tier one thanks for the question you have seen already given the improvement in the quarter for your reserve trend I compared to Q2 significant improvement I think as you are aware and we explained that in previous calls that we are well.

Turing on a daily basis in every state in the U.S., but also in every major country in the world. The Daily shipment. Then says of course, you feel more or I would say Oh every non cobi and we see since the end of Q2 that the GE. Many is back on Contv I won't look to Delever Oh.

Oh, two fold and then my team Oh, you see because but of course, you feel with his team you driven by immigration pitching or by some massive community. This thing such as University, well school students distinct disease not happening as we speak but there is an improvement so to your question we see there.

The gain and the improvement in Q4, we just didn't finish the year of 2020, Nic achieve on quantitative than compared to 19, but you will see that the magnitude of that you've got your growth rate is really going down and we expect indeed to come back to our 2019.

Liver into falls on and 21. This is part of our plan first thought second.

And this does this team on these a range of products. We are still optimistic why first of all the partnership with I guess the reason was the right partnership it is working and he's working giving win win a reserves for both companies. So automation was good.

Second as you know, we said we would launch new products, what comps you feel well, which we called the quantity people reach which is.

Based on our partnership with a view to access the highway Bill done low resources country, you will see the surgeons back Oh, just throw that in 2021, we are on track for their launch.

Well the overall cost you feel franchise, you remember as well that we decided to take care of you and that does do you need over Lyme disease the gain in partnership with.

Ah, Yes, sorry, we are on track to launch that lime solution on guidance you feel into 421. If we didn't backed also I were received in Europe. So I would see as a summary compared to what we disclosed in New York in our last Investor Day I see no reason to go to work on what we said at that time.

Now moving to get U.S. diagnostic and numerous in new ways first we are integrating human descendant even with these people. So the minimum of these people that are relevant to.

To continue to grow from that product as we speak into catch it.

We believe at the moment that we do have.

He says and marketing network news this week to address.

Pneumovax.

And can you ask that in the U.S.. We've yet you shouldn't have done with these people plus investment rigid or before forecast that a in the U.S. first point, where we have invested starting end of Q3 and you end up Q2 EPS you free you don't just a mess you booked because anytime you place.

You see or read the forecast that and any time you. We place monument <unk> you need to make sure that you have the field service engineers. So this is where we have to invest so I believe that we do have the in fact, when we will be coming out with up to 420, we we don't have the infrastructure to.

Poodles product, but we also clearly said in their latest meetings, we had with you since August 15 that if we see.

Any opportunity.

To accelerate the growth of one of our five pillars of growth beads marketing investment, maybe quite a fair investment or regulatory investment, we not easy to to do it and come back to you with numbers to justify it as long as it accelerates one nobody.

Our five pillars of growth and therefore, they have stopped on your projects as well.

We will now take our next question from Scott.

Dan Burke Your line is open. Please go ahead.

Yeah. Thanks for the questions. So I think that by the end of June you communicate to capacity of around 10 million.

Okay. So all in I extraction, and I think the broader messaging with the ramp up to $20 million and extraction kids can you help us understand please how much demand of that capacity. So in the third quarter and what the expectation is for the fourth and as the world has become more automated he said anything to see if.

Youre put additional DNA extraction kits.

Quick follow up then so Roland please I appreciate lots of moving parts, but given all of the new launches you refer to in some of the ramp up plans discussed is there any reason to alter your early assumptions for Twentytwenty, one which included then double digit topline growth from around 18% and these guys. Thanks.

You want to take that one on onto our leverage these corridors that can help with the question on that we think the manufacturing output that sounds good.

I like to think that can kick it off no I do think.

Fair question I I do believe set before we see clearly exploration outs in the fourth quarter compared to sought caught off Nevertheless, I do think there is no particular on Europe.

I think a good reasons to be a little bit more cautious we see a lot of regional luck downsize or coming up or at least being discussed and that guy Mr. oleanna caught off so I do think having here something called a cautious view is probably reasonable on a on a quarterly level.

Tom for next year.

I do believe given lucky all discussed and I think that's a cool <unk> five golf pillows and particular, given all the growth is still experiencing oh from from corporate and public law bombs, along got Tom provide us like class stopping automotive Ics, but still quite optimistic it's caught up to us that.

There is a lot of moving parts in that environment and against hospice vaccination and again again goes down all the way to political reaction.

ER with Ah.

Mr Vista guidance, what knowledge of revenue goal for next year I would say this as of today very comfortable.

So to go on your question on manufacturing output. So first of all I'd like to see that when we say twin Ti media, we were talking to talk to a simple <unk> capacity. If it has to be a total a need for example, we would not be able to do it that's what that's how you need to see the twin Ti media we are not.

20 million yet we are you know that we have to show through a a a 13 to 15 million and as we have said because we have seen two movements.

The war Customising guidance, we have more needs now for DNA, we need to start again pitching for oncology and so on we readjusted do patterns towards more DNA.

And also it is clear that customers know for Aaron its team are moving much more intuitive to me. If you don't do you see is what we are readjusting or to be a boat shoes and showed that demand for automated solution. So this is the way you should see and if you look sequentially.

Where we declining says Q2 to Q3 for manual.

Oh, the 19th tempered profit we increased already.

For ultimate team could be 19 sample prep and we expect that increase to continue in Q4 and Q1 of next year as we are improving busy.

Basically some of the challenges for example to plastic supplier and it didn't they.

Bob We continue also to increase in Q4, but also we need to 421.

We will now take our next question from John areas from Stifel. Your line is open. Please go ahead.

Yeah. Thanks for the question, just maybe going back to kind of that you guys have a sense for the utilization levels that you think customers might see once we get past the worst.

The worst of the respiratory season and flew cobot differentiation needs this year.

I'm kind of curious about the extent to which you have.

We have confidence in a multiyear pull through rate just given that you're presumably starting off at a pretty elevated level here in 2020.

Yeah, but what we have to keep in mind is that all these needs to be balanced with the improvement of the menu again kept your studies and when you play and it would be 40 to believe that we can just have a recipe right where do you find that even reserve could be 19 times. So what is can we always said that is that we need to continue.

The reason of launching new menu I said four to 421, G.I. I mean, invitees Gee I use already in Europe, we've come to the U.S., meaning that you can you speak to be launched perch in Europe and in the U.S.

And then we will continue after we have plan for 2022 wrong. For example, pneumonia. We are planning a wrong you T.I.E. we apply the wrong also what we call. Our direct have you factored identification of positive blood culture.

So when you play clear sicker.

As we said we are currently constrained by supply or we could be selling much more of a of a of kind of that as we speak. So currently our model is thinking around.

Ah Onez average or Q3, G.'s pre kept three g.'s pure installed base, but they are this is what we hog because they'll buy will supply capacity the way we see it in the in the in the in the future. Once we have a more complete revenue.

Is that when you are not you know a a flu season for example in the winter season, you will be able to leverage our between true I would say three and four cap reaches a day and he can move up to six seven calories a day on the given she's done when you will be you know you know kind of a winter season. That's the one that you should put your mind you.

Hi, Mike.

Hi.

Question from Brian Weinstein from William Blair. Please go ahead.

Hey, guys. Thanks for taking the question I'm actually a couple of them that are the first is let's talk about about no country behind them. I'm curious you know as as we're sitting here in the states and a little bit more U.S. focus what you are seeing in key countries in terms of products that they're using how things are developing their price point differential.

Between various countries just any kind of color that you're seeing about COVID-19 testing dynamics across the globe and then one for you Alan can you talk a little bit about long term margin improvement opportunities and where those come from adipose COVID-19 world. Thanks, guys.

Well the only allowed to do that that's why I'm confident that <unk> Yep Yep, Yeah, Let me kick it off the second no I think it's quite obvious that we have seen a steady margin improvement over the last two quarters I know, it's a false caught off yes.

That's kinda give us extra or guidance are on track for again and there's a a outstanding performance sales.

On top of causes up here. So what are you just discussed and I think we have all this quiet a pompous status. We clearly are paying off portfolio also for post pandemics and now youre since f., all but decline and I'm Arctic side. We're building on the portfolio. We do believe the other guys talk portfolio what do you.

Ready for Europe, but there are still missing a couple of opposed suppose yes. It does it will be a focus by the onset the next couple of quarters.

Other than that again, this clearly leverage opportunities for us just thing about them all as incremental cost me a lot now facing with the kind of stuff that out and then again all devaluation of the latest consulting dog and so on so you can see once we have that all way that that should have an impact same is true I.

I also believe that Oh I'm all set up we have four for sales and marketing is quite efficient a there will be a I think also a chance approaches.

After the times Oh for pandemic scenario.

Meaning but that as we have circuits you know instrumentation number was a significant number of placements done over that time period, which could lead to ongoing like calling revenues, which by definition a again will be very helpful. In getting more efficient because your sales force can do a lot of other things.

And again I'm talking all eat but not all of the calling sales. So they out where we're going to invest is dedicated on on the bus to living giving us enough room profit margin.

And to your question on basically geographic diversity, you regarding consumption no regarding pricing so I'm trying to make it a simple as I can the way you should see it when you consider extraction of nuclear you can see the U.S. and Europe, I've definitely moved to automated solution and I.

Do not expect increases even if there is still increased caseys and increased contamination de Sweden, not be primarily and so by manual extraction.

Emerging countries Devry still potentially more opportunities we use manual but those countries are also moving very quickly to automated the structure, we need to be clear on that so the needs or the increased need if there is new waves of contamination, we'd have to be on.

But you have to make the product monkeys menu you.

If you look at PCL Festival, you still do Gordon choice in every geography.

I know that many people are saying he's engine can you busy there will be a bit of anybody they shouldn't be that much more believed that it will add the two that this team capacity because again needs are increasing I see it was believed it appeared in the developed countries Europe and us.

Oh 50 per cent MTGE and 50%.

Piece.

PCR into falls on and 21.

And price wise I see Nokia difference use of prices for extraction worldwide.

They're all de France use of prices in PCL between.

Or did you broke market and the less developed market, but to get you to that can you imagine doesn't want to play on prices and on on T.J. and there are significant differences of prices between developing countries and the rough market, but the gain on that word antigen launch we will play on ease of use.

Ms equalizes value rather than on pricing.

Oh.

We will now take our next question from Steve Beuchaw from Wolfe Research. Please go ahead.

Hi, Thanks for the time here I want to follow up on two points that have come up a number of other places here in Q and I just want to be really <unk>.

Simple about a in the way that I tackle it one is on Stat T X. So there's clearly a lot of demand here, it's difficult to know, though given the supply constraints that you're addressing here for one age 21, just what the volume demand looks like I wonder and I appreciate the $59.

Just like that you gave earlier, but what do you think that 50 would be if in the current operating environment you had on the limited supply.

Supply of cartridges. So I appreciate its a hypothetical but I think would be really helpful. For us as we think about let's call. It two age 21, and then I think there's and this has come up on this call and in other calls.

A bit of a.

Confusion or concern as it relates to your competitive positioning in automated versus manual extraction I Wonder if you could speak to that and say Hey, you know if the world goes more and more automated.

Oh, we just to pull it all the way down in a stronger competitive position or is that something where we have some work to do to address our position relative to where we sit here today. Thank you very much.

[noise] you know.

Yeah. No question. The question is for clear I'm not sure I got dropped off [laughter] question. I mean, so so I was just you know nine drone or can we continue on that yes. We're here we dislike Steve let's keep it's the last one very good show so.

Very very very quickly on automating manual. It is very clear that are we don't have no tomiichi extraction solution that is clearly board very quickly I will spin Colognes mine yours, I'm very scalable quickly.

Well its we don't have for example, just kill ability that a company like or are there more back you never could have you know to me to teach them and therefore it poses the strategic question for carriage and for the coming months and years. It's a long term investment she smelters will depend to me to see whether it.

We should add to raise that how your throughput extraction automated system you know what both for you, but you have seen that simplistic is not well five pillars of growth. So having an extra investment here, we are perfectly perfectly fit in our strategy over ruthless focus.

On the five pillars of growth.

To the question on studies I would quickly say that.

What do you feel we would have at the moment from a volume standpoint, we would city, let's be very clear, we would city I'm not going to they are getting the numbers, we could be much higher than that doesn't mean that we are losing opportunities that we we know threeq over I don't believe so easily is first of all because this market. We asked you needed.

He made <unk> at $800 million, a couple of years ago talked our growing up 20% each.

Probably already at 1.3 $1.2 billion still growing up 22% 20 person and you know she shouldn't do that that pandemic is showing the need for what was the size of this things that I'm not sure how going to disappear. After defending the pack. The fact that you kind of have testing solution in that pool includes.

Company in leisure activities and so on so I believe that the market for a product like that especially when he's differentiated is due to extremely dynamic.

So with that I would like to end the call here and thank you very much for your participation. If you have any follow up questions. Please do not hesitate to contact me and we can do a follow up with you that ends the call.

Ladies and gentlemen, this kinda tastykake. Thanks.

Thank you for joining and have a pleasant day goodbye.