Q1 2021 Qiagen NV Earnings Call
Ladies and gentlemen, thank you for standing by I am Traci or Peter I call operations.
Welcome and thank you for joining Qiagen. This Q1, 2021 earnings conference call webcast.
At this time, all participants on listen only mode.
Please be advised that this call is being recorded the qiagen <unk> request and will be made available on their internet price.
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 followed by zero for operator assistance.
At this time I would like to introduce your host John Gilardi, Vice President head of corporate Communications and Investor Relations at Qiagen. Please go ahead.
Thank you operator, and thank you to all of you for joining us today for our conference call.
<unk> today are Terry Bernard the CEO of Qiagen and Roland <unk>, The Chief Financial Officer also joining US is Phoebe Loh, our senior director of Investor Relations. Please note that this call is being webcast live and will be archived on the investors section of our website at www Qiagen Dot com a copy of the press release is also available on the same.
Section.
Before we begin let me cover our safe Harbor statement this presentation as well as the discussion and responses to your questions. On this call reflect management's view as of today may 4th 2021, we will be making statements and providing responses to your questions that state our intentions beliefs expectations or predictions of the future.
These constitute forward looking statements for the purposes of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995.
<unk> involve risks and uncertainties that could cause actual results to differ materially from those projected cash.
<unk> disclaims any intention or obligation to revise any forward looking statements for more information. Please visit the SEC website for these filings.
We will also be referring to certain financial measures not prepared in accordance with U S. GAAP you can find a reconciliation of these figures in the press release and the presentation for this call I would like to now turn it over the call to Terry.
Thank you John and welcome all to our conference call today.
As usual before we begin I would like to again wish you and your families and loved ones. Good hands on all the best during those times as you have seen yesterday, the first quarter of two focusing on 'twenty. One marked another strong quarter for us as we move through various stages of the pandemic with vaccines.
Shouldn't progressing in many countries of course, so at a pace faster than we had expected. The U S. For example, no reason right on the U K and slower in other areas such as in Europe.
Demand for our product groups using COVID-19 testing overrode remained at similar levels to what we saw at the end of two program on 'twenty.
But where you have seen G V.
Vary between regions beyond the pandemic.
Research labs have reopened and diagnostic testing in older areas of health care is coming back into play.
Okay agenda teams continue to execute day after day and managed the demands on our product portfolios, while preparing to work through the headwinds that are going to be created by a reduction in COVID-19 testing demand as the vaccination rates increase.
Good.
<unk> is well positioned with our five pillars of growth in those exciting times open change in the molecular testing landscape.
We are poised to make a significant impact with a series of new product launches in the coming years.
Appreciate is reported by menu expansion.
In cardiac Ritchie okay.
Okay, yes that on you.
Your motives.
Now please let me go through our key messages for today.
Yes.
With teams I've once again.
<unk> outlook for the first quarter of two focusing on 'twenty one in terms of sales growth.
And adjusted EPS.
She is now the sixth quarter in a row, where I work, she knows or exceeded our guidance.
Net sales grew 48% at CER rates over the same quarter of two farther on 'twenty.
This beat our outlook of at least 45% CER growth.
Adjusted earnings per share were <unk> 60 cents C E R and above our outlook for about 60 to 62 cents.
As we have said before we put a very serious and tremendous amount of attention on.
Ensuring that we execute on our commitments.
The performance of our non COVID-19 product groups leads to our sick on the key message.
As you have heard the Qiagen say before.
Those results in Q1, two folds in on 'twenty. One are once again proving that we are COVID-19 the relevant but we are not COVID-19 dependents.
Sales in the first quarter of 21 from non COVID-19 product groups reflected an acceleration from the end of last year and grew 16% E. R. Over the first quarter of two forgone on trenching.
Our third key message relates to the ongoing demand for COVID-19 testing solution in the first quarter and remain at a high level on par with the fourth quarter of two folds on in 'twenty.
Sales for those product groups grew 186% C E O two 203 million daus.
From 16 9 million in the first quarter of two falls on in 'twenty, but more importantly.
This also compares to sales of $200 million in the fourth quarter of two follow on on 'twenty.
We confirm however, as we said in our deep dive day.
In December of 'twenty that we expect these to slow down progressively in Q2 and its two two falls on in 'twenty one.
And as a final key message we are reaffirming our full year outlook for two folk on in 'twenty one.
For the full year, we continue to expect sales growth of about 18% to 20% C E R. Olga to fall going into 'twenty.
This is based on the expectation for sales growth from COVID-19 product groups to succeed as the year progresses, but Ann called by continued improvements in demand from known COVID-19 product groups compared to trends in two folks on in 'twenty.
For adjusted EPS, We continue to expect about $2 on 42 cents to $2.46 I E are once again.
This reflects our plans to invest in our five pillars of growth and strengthened our competitive profile to drive sustainable growth.
Once we move.
Through the pandemic.
And now I would like to hand over to hold on.
Thank you Tim Hello, and thank you Isabella from me for joining us for this call.
Like to update you on some key financial results from the first quarter.
Hey, you know what Oh, it's hits results for the fourth quarter was 48% at constant exchange rate.
We were up 52% that extra words from $567 2 million U S. Dollar neutral positive currency movements against the U S dollar, especially with cereal.
Moving down the income statement adjusted gross margin declined about one percentage point to 68, 7% of sales.
This was due to the higher shelf instrument sales, which typically have lower gross margins at orchids Yoga kids in.
In addition, there was an overall increase of production cost compared to the first quarter of 2020 associated Mr. Webb up of capacity to support higher demand.
The golf and sell it's outpaced the increase in operating expenses for the first quarter of 'twenty one.
Adjusted operating income margin rising to a record 34% of sales in Q1 up from 27%.
Gotta go peer yet.
In addition to production scale up activities.
But draw five pillars of growth also involved on the expenses.
I had to implement plots to expense test menu capabilities, because it not more integrated PCR clinical testing system. That's a cash start to X solutions for synthetic testing.
We are also building on the test portfolio based on our collective scale on technology, which kept the use of diagnostics to detect diseases.
We continue to see a positive impact on our business activities as we benefit from increased capacity scaling and leverage efficiencies in sales and marketing expenses, which declined to 20% of sales force clots off 2020 from 26% in the same period of 2020.
We are using these advantages to develop our digital customer channels and support our global operational response, he was a part of it.
As we mentioned earlier adjusted EPS waged 65 cents a.
Sure.
Significantly faster than sales.
Our adjusted tax rate of 19% of sales.
The above our guidance.
So on into cash flow trends.
Saw a significant increase in free cash flow to about $82 million in the first quarter of 'twenty, one textures of robust sales growth, that's absorbed about $46 million of investments into property plant and equipment.
The developments at the operating cash flow also came with a reduction in days of sales outstanding which declined to 54 days compared to 56 days in the fourth quarter of 2020, and 68 days in the first quarter of 2020.
This was most felt in countries of EMEA and <unk>.
Asia Pacific, Japan regions as collections have steadily improved since.
All in 2020.
It drops off our balance sheet.
Our net debt increased to one part what ability you asked all off that's the end of last quarter and this compares to a $1 billion at the end of the first quarter of 2020.
This modest change reflects about $498 million of net proceeds from the issuance of zero coupon cash convertible notes last year against payment of about $296 million for the settlement of the convertible notes.
In 'twenty one.
As well as about $41 million paid out for the mature of true trough just of our job private debt instrument.
What is a short shot.
This was highlighted at a level that's ratio of one three times net debt to adjusted EBITDA. That's added up the fourth quarter of 'twenty, one compared to one six.
The end of the first quarter of 2020, and one five at the end of 'twenty 'twenty.
I would like to now provide a more detailed view of our 21 sales for the fourth quarter.
In terms of sales by product groups.
Sales of softer technologies Wattup, all five pillars of growth was 42% CER to chew on a 27 million U S dollars just was particular.
Particular strong demand for extraction kits excellent waiting since late 2020.
Also continue to experience ongoing solid demand for automated sample.
Sample preparation kits used in COVID-19 testing.
The threat from automated too manual on a kids that you saw in the second half of 2020 has now stabilized.
That's a mind on Sop the technology sales on that.
On the like basis, excluding pandemic sales led by D. N. A testing and all are also moving weighted to our customers as a life science.
So we are seeing a assumption of these trends so $5 21.
That's a diagnostic solutions were on that 50 million U S dollars and it was 52%.
These involve our molecular testing solutions for use in clinical house GAAP.
But if you want to be sales reached $57 million in the first quarter and were up 22% led.
Led by the strongest demand in the U S. S testing assumes after 'twenty 'twenty slow at all.
This performance also marks a sharp improvement from the 20% decline in the fourth quarter of 2020, and only 3% CER growth in the fourth quarter last year.
Yeah, it's off the chaos that to X and Onboarding solutions remained at high levels.
On track for the year.
We are closely monitoring COVID-19 testing demand trends in various regions, but these platforms have applications that will be on COVID-19 testing.
The top priority right now is to expand our test menus, that's really building up manufacturing capacity to solve the growing installed base.
As a portfolio of this product group includes our precision medicine.
Companion diagnostic co development revenues.
And women's health portfolio, including HBV.
We see mixed sales. This yeah, yes as activity is affected by the pandemic. So I think at valuing speed.
The PCR nucleic acid amplification product groups represents P C. Our solutions and components for use in a as such and applied testing. This.
Net sales were up 84%.
Last quarter and reached one on about 17 million U S dollars.
It's also reflect the ongoing high level of COVID-19 sales, including for what products you were spot on.
Most of the companies.
Another driver of US ongoing sales expansion of Sakai acuity digital PCR platform that was launched in the second half of 2020.
The last product group is genomics N G. S and includes all universal edge as products of buyer from batik solution.
This sales returned to growth after challenges due on 2020, Wising, 17% T ought to 50 million you have the loss of the first quarter.
Of bio informatics, we saw good income mentor growth applications for clinical oncology this results on.
Also include growing contributions from the newly launched chaos seek and she asked portfolio plus creating a positive COVID-19 samples for vial volume.
I would like to now discuss our results by non COVID-19 at COVID-19 product called.
That's what I've been saying the results for this quarter emphasis emphasize the strong performance of our non COVID-19 portfolio and give us confidence for growth once we move beyond the tailwind of the pandemic.
On COVID-19 groups grew 16% the August quarter over Q1, 2020, that's cause such activities and molecular diagnostic testing shortfalls that increases.
In addition to what John of high demand and software technologies and quantify on consumables.
Strong performance from our core portfolio.
Jordan Universal and she has kids, which grew a solid 2% over Q1 2020 from non COVID-19 to led applications.
Okay. That's of precision medicine assays, which we tried to prepaid debit growth levels and the solid contribution from non COVID-19 applications of kayak.
Yeah.
We have seen significant improvement in non COVID-19 product groups, the last two quarters and see it as a signal of improving trends.
Expect during 'twenty one.
Yeah, it's in our COVID-19 solutions remained healthy in the first quarter with levels similar to Q4 2020.
He saw on ongoing solid demand for sample preparation technologies Pcr solutions.
So on part D, We adjourn and.
And as mentioned also some incremental sales of next generation sequencing products.
For variant analysis.
On the next slide I would like to review all our sales biogas by geographic region.
For the second quarter on a role the Americas region delivered growth of about 40%.
T O double digit CER gains in sales and quantify on TB boosted the performance for this region.
Zyla, Mexico also delivered growth at high levels of sales in both countries.
Outpaced the weight in the region as a whole.
The Europe Middle East Africa region continued the strong trends from 2020 and lets the performance for the first quarter on 'twenty one.
With Enzo region, Germany, France, Italy, the United Kingdom experience Love Us robust Ralph as did moderate chart for non COVID-19 product groups and was complemented by ongoing sales for COVID-19 testing solutions.
Yes, that's in Asia Pacific Jakarta, we each have a ball its debt by more than 70% CER growth in China due in particular to our life science customers.
India, South Korea, Japan, all experienced an uptick in sales as customer walk in non COVID-19.
Increased over the year ago period, when the pandemic began.
All from these countries offset weaker trends in Australia.
I would like to now hand back to you.
Thank you all and I'd like to invite you for a quick update now on the progress Qiagen teams have made regarding our five pillars of growth in this slide for example, you can see a brief overview of our portfolio expansion goals for 2000 on 'twenty one.
And I wish that's yours after the first quarter, we are continuing to focus on our roadmap and on providing a robust menu to support strong growth in all areas beyond COVID-19 testing.
In sample technologies for example, in which case you Jen as a large portfolio of market, leading sample extraction solutions, we continue to leverage our experience and innovate to bring new solutions to the market. As an example in the first quarter, we launched <unk> connect for a multitude of diagnostic and doing that and on U K.
And Keith I will give you more details on these new products in the next slide.
As we continue to successfully rollout with kayak Ritchie digital PCR platform. Our teams are working to expand the field of research applications for those systems for.
For example, when you.
Work flow for integrating digital PCR and exhaust zoom based liquid biopsies for the detection of bladder cancer from urine samples is being released into clinical trials.
And chaos that diagnostic Syndromic testing system now feature a new connectivity solution that we call care, yes fear he sees a cloud based platform, allowing users to money to test an industry months removed.
We continue to be focused on menu expansion and capacity scheduled to ship broader use of installed platform beyond COVID-19 testing needs.
On your Moody's our integrity PCR 15 platform from core Labs. We are also on track for Q M. D. As submissions planned for this year.
In the first quarter of two follow on on 'twenty. One as you can see our U S. Menu is a good one with the receipt of the emergency use authorization photo fault Blake's test, we simultaneous detection of flu, a and B RSV and South Dakota.
You know where quality if you're on franchise, we are moving forward with planned launches with the recent release of the lime detect assay on digester India's on platform.
This assay was developed as part of our ongoing partnership with W. Starting to leverage our proven quantity of technology on day, a large installed base of 15 platforms I, we'd share once again more details on these opportunities in the next night.
Let's go back to the central technology.
As you know I was simple technologies product group has continued to perform weighted throughout the pandemic and since Q4 two for 'twenty. We are seeing significant demand returning from sample preparation kits used in applications outside of COVID-19 says you know well known COVID-19.
Kids grew over 22 percentage in Q1, 'twenty, one versus Q1 2020, Jim on switching once again, destroying from our sample technologies business and proving that we are not depending here from depend on independents.
On this slide.
Like to highlight a few launches in this product group.
As noted before the cash.
Our cube connect instrument for automated sample processing has now been launched globally for diagnostic application.
This system is the latest addition to the <unk> family of instruments and builds on the successful launch of the cash connect in research application.
The new placements in clinical labs to.
To over 9800 system installed from the Kodak Q pardon me the worldwide.
We are also expanding our appropriate I recall, you prep on portfolio with newly launched us to South Dakota to prep kit.
Which has been CE marked and he's not was submitted for emergency use authorization in the U S.
The carrier print.
And then technology if you remember.
Was initially launched in October last year, you know keep for viral load at PNM euros.
And we have seen significant demand for this product to automate rapid processing of ore and the viral centers on standard labs equipment.
The new keep launched in April combined liquid based sample prep with PCR assay technology to enable clinical labs to rapidly scale up until the COVID-19 testing.
I would also like to highlight the coming launch for the new generation of cash easy one sample processing in three months.
Which is extremely well known worldwide for this.
Ease of use the easy to go next instruments will feature connectivity much like the carrier Cuban chaos that Dx is three months using the cloud based <unk> solution popular for remote monitoring.
In the third quarter platforms will be launched for research and pharmaceutical application as well as in forensic labs for human identification application.
On clinical platform.
Is planned for launch early two fold on in 'twenty two.
And for this I would like to remind you what we explained in our Qiagen deep dive day in December that Avery automated sample prep solution from Qiagen.
Has already.
Net great automation launch on the market got you a cube easy one easy to catch a cube connect.
And we are still working on an upgrade of our flagship instrument cause you assume from.
Looking for work in 2000 on 'twenty, one we expect continuous exited return of a non COVID-19 sample technologies product quarter over quarter.
Here again, we are focused on executing on a solid roadmap toward this portfolio to drive our post pandemic business.
While of course being also prepared for any future pandemics.
And then spend some time unquantifiable.
As you have seen.
We have relied recently you announced.
The CE, marking of our new Lyme disease test for use on day, yes, sorry, yes on platform.
This new test addresses an unmet need for early detection of these very debilitating disease.
It has been designed to support early on these eye disease detection, which is critical for those suffering from Lyme disease with the goal to prevent CEVA severe illness in those infected with these bacterial disease.
Yeah. So we can once again is the perfect partner for this test and to take over the commercialization given their portfolio of more than 8000 instruments installed worldwide.
The combination of quantity I won't take minerals.
For the detection of T cell response with <unk> existing.
Existing assets to detect B cell response offer a new level of clinical did picture and a very innovative new level of clinical detection D.
This is indeed, an attractive market as Lyme disease cases are constantly on the rise, especially in the U S on Europe.
This is driving an increase in testing volumes year after year.
In Europe alone for example, more than 250000 people are estimated to contract Lyme disease every year on a global basis on your all market opportunities are about $400 million to $600 million for Lyme disease.
And as a next step as we already announced we are now going to work on the U S submission and we will obviously keeps you in full.
The second part.
Although our agreement with day assuming.
He is obviously.
The continuous automation.
Although work quantitative on solution.
As a reminder, we have developed option for customers to create fully automated workflows for the quantity on TB test using the use on system.
This lowest qiagen to reach new customers through new commercial tenants.
While offering at the same time day, yes, so when we say differentiated test to embed in their broad menu.
Beyond your existing successful cooperation on G. Yes zone, each sellings treatments the larger volume system.
And in Dallas, where we have commercial actions now centered on the lower volume zone each.
<unk> sales platform.
Partnership with day yesterday ease.
He's really really gaining traction in the U S and we are looking for recovering strong trends in Europe as well once the pandemic chipsets.
The latent TB market is returning to growth after the pandemic pressures in 2020.
And as you have seen.
We sales rising 22% at constant exchange rate in the first quarter of 2021.
The real competitor is the Jabil kitting skin test given that only 25% of day more than 70 million global latent TB test that converted to modern blood based testing.
So they are still significant greenfield conversion opportunities.
Our automation strategy enables us to target the wide range of mid to high throughput laboratories in any market.
Also the launch of our work area reached Tvs coming out soon for this year, which is a version of our quantitative on TB test for low resources high Bill didn't countries.
And this test we run on a small device.
That can be used in the field with battery power.
So we are on track to achieve our 21 sales growth for over $230 million for the quantitative on franchise.
Our partnership with <unk>.
Is bearing fruit and helping us to expand in both industrialised and emerging market.
Moving now to the appointment of a new supervisory Board member.
I'd like to introduce you to our newest supervisory board member and welcome Thomas a building to Qiagen.
Goodness joined the board in February already and brings with him a wealth of experience in international management, particularly in healthcare given his previous roles as CEO of the German media company Prosiebensat.
Division CEO roles at Novartis involving pharmaceuticals, and consumer health.
With the addition of two months the supervisory board of Qiagen now eight members.
I'd like now to hand back to order.
Thank you Terry.
As noted earlier, we are reaffirming our full year outlook for net sales to rise about 18% to 20% CER.
Our adjusted EPS, we expect $2.42.
Dollar and 46% at constant exchange rate.
This is based on a weighted average of about 234 million shares outstanding for the year.
For the second quarter, we anticipate sales growth of about 20% see a pump on that $43.3 million. The same period of 2020 and adjusted EPS of about 62 to 64 cents T. R from 55 cents in Q1 2020.
As for currencies based on rates as of April 21, we now expect our car T tell of it of about two to three percentage points on full year sales at extra words right.
Adjusted EPS for 'twenty, one we expect a currency tailwind of about two to three cents per share.
For the second quarter, we expect a currency tailwind of about three to four percentage points on sales at extra wet bar.
For adjusted EPS for Q2, we expect a currency tailwind of about one cent per share.
We are expecting continued improvement in non COVID-19 product groups drugs, a year, especially in the second quarter of 'twenty, one compared to the year ago peer yet. We are all also anticipating sales for COVID-19 solutions to be in line with year ago levels in the second quarter of 'twenty one.
The outlook for full year 'twenty, one as well based on expectations for software sales for COVID-19 product Cogs for the second quarter second half of CEO.
These expectations include cloth for investments in R&D and clinical trials.
It was a competitive profile of all five pillars of growth.
On the pandemic was that I would like to hand back to you.
Thank you went on and now it's time to go to our Q&A session, but before these let me provide you on with a very quick summary, first we had another strong performance for the first quarter executing once again on both sales growth and adjusted EPS coming in above our outlook our teams all over it.
The world continued to deliver on our commitments to secure growth from our portfolio in particular, our five pillars of growth.
Thicker still.
Strong sales trends in our non COVID-19 product groups with sales growth of 16% CER in the first quarter of 'twenty, one demonstrate once again the strength the sustainability of our business.
As we prepare to move beyond the pandemic in the coming quarters.
Baird.
We continue to invest to strengthen our five pillars of growth.
That's all set to underpin our growth trends.
These include.
Menu expansion plans forecasts that diagnostic and your medics shooting the commercialization of the cash equity digital PCR is three months.
And securing our leadership in sample technologies.
And as a last point, we are reaffirming our outlook for sales and adjusted EPS growth in 'twenty, one anchored by improving trends in non COVID-19 product groups.
As we also continue to serve customers as the pandemic evolves.
In closing.
We are off to a strong start you know dynamic here and well positioned to emerge in a more competitive position beyond dependent with that I'd like to hand back to John and European retail for the Q&A session. Thanks, a lot for your attention.
Okay.
Ladies and gentlemen at this time, we will take index the.
A question and answer session anyone who wishes to ask a question press star followed by the one on your Touchtone telephone.
If you wish to withdraw your question you May press star followed by the two.
To ensure we accommodate as many people as possible. Please limit yourself only to one question and if necessary one follow up.
Your microphone will also be niche after finish asking the question.
Anyone who has a question May press star followed by the one at this time.
One moment for the first question please.
The first question.
It comes from Patrick Donnelly obsession.
Please go ahead.
Great guys. Thanks for taking the question on theory, maybe just on the guidance can you just talk about your comfort level on the guide compared to three months ago. When you gave it I'm. Just wondering was there a cushion back then and now that COVID-19 trends are coming down a bit in that margin for error is a bit smaller so just looking around at pretty much every other.
Company with testing exposure is pulled down guidance over the past few weeks, obviously, we're seeing what's happening in the U S volume that you touched on I just want to talk to your confidence level in the guidance today as you discussed during the call clearly execution on numbers is a big focus for you guys. So just wanted to get color on on this piece.
Yes, Thanks for three full day Christian and.
Obviously, I mean, we are on the market and we follow the evolution of <unk>.
Duval kept every day.
The we didn't see as Don a couple of things a couple of points first of all there is a wide diversity of situation on the COVID-19 1915 front.
It is true that demand has been softening in some geographies the U S. Israel for example.
But the demand is still extremely strong in some other geographies in Europe in some countries in Europe or U C. G. Examples or on Brazil, Russia, or India are showing us that there is still room for significant testing demands.
What I mean by this is also the second point your debt regarding testing volumes I mean, we are entering.
The phase three D of increased volatility.
Is that taking qiagen by surprise no because we always said from 2020 that we were expecting numbers in 'twenty one to assume.
Still a significant level of COVID-19 demand in each one.
And then plateauing.
With the lower demand in H two.
And at the same time.
Quarter by quarter acceleration, although it wasn't on COVID-19 solution and this is exactly.
On what we are executing as we speak.
So.
Yes, there is volatility.
We are coming.
From Q1.
With a strong acceleration of the non COVID-19 portfolio, which is.
What we and where we focus our attentions.
We believe that.
The COVID-19.
<unk> needs will continue to be diverse psephite I mean geographically geographically.
Yeah, Jim a solution for all those needs. This is also a very strong message we have not only testing solution for detection of the virus, but if you want to do civilians program with Ngls or waste water. We have a solution. If you want to test for the efficiency of vaccine, we harvest solution with our <unk>.
T cell testing, so we have a solution covering the old range of potential COVID-19 beyond our current situation. So that's why we are confident in eyewear.
Forecasts or used.
As we say for net GTT is increasing but at the same time, we have solid numbers that are proven but yeah, well Q1 results and now we took two execution quarter after quarter until the end of the year.
Our next question comes from Daniel <unk> from Commerzbank. Please go ahead.
And I have one and then a small follow up on the on the financial side and my first question on looked at when you installed instrument basis cash.
Can you maybe.
I meant on how the growing installed base of instrument.
It's already Haiping consumable sales, maybe also how it potentially has already influenced on Kobe sales growth in Q1.
And they put me on my first question and then a question on your strong operating cash flow development in Q1, and how should we think about capital allocation over the next quarters, maybe also going into 2022 on the basis of your actually it strongly rising cash flow. Thank you.
So to your first point and then I will let also Oh launch I mean on the cash flow results.
And then yes to your first question, we continue on in Q1 as well.
<unk> increased the size of our installed base for very relevant instrument, we have increased the numbers on.
Our new module on the sheet increases the number of <unk> debt on the field, we have increased the number of cardiac Richie as well.
Sure this is going as per plan and.
And therefore this ease of use can you give us a good expectation because as you knew <unk> carriers that numerous on not cookie dependent those on a menu or application plays and once we have those in store based on the shield. The game now in Q2 in Q3 Q4 and beyond the pandemic.
Just to make sure that day menu that we have available on carrier start the menu that we have really available on <unk>.
He's going to be to be consumed by those that baidu is in storage system and the same for carriers.
So it's always difficult to compare.
Through the first quarter of the year with a fourth quarter over the previous year. Because you know there is almost always with acceleration of our.
Capital sales at the end of year over year. This is no more disease, where hospitals are sometime using their last budget, but the good thing for US is that we have seen a continuous progression of the installation of new mode U K equity a carrier that just to speak about those systems.
Does it answer your question Daniel.
Yes.
Yeah, absolutely. Thank you.
How long do you want to think about.
That's true.
Yeah on the second.
Part of your question Daniel.
You said, we had a very strong start it does yeah Alton drops off.
Operating on free cash flow more or less on about $34 million of operating cash flow $82 million in free cash flow out of significant up on V. Also believes that he's talked about for the remainder of the year compared to last year.
Debt clearly puts us in a very comfortable position to still anticipate both on the wall.
On site kept our location in jobs of.
They are enhancing bolt on acquisitions.
Clearly still screening the market for value enhancing bolt on deals.
Same time, clearly we have a good track record since 2012.
For share buybacks and boss is clearly on the table.
We will now take our next question from Scott Bardo from current break.
Yeah, Thanks, very much for taking my questions. Good afternoon.
So the first question please.
I think there's some withholding evidence now of pretty strong demand for low plex testing on all sorts of COVID-19, where some of the Syndromic multiplex testing has somewhat disappointed in the competitive landscape.
This is a dynamic that you are also seeing on whether you. After this past quarter have any need to change your placement on financial goals by surprise that a new multi X. So that's question number one please in second quick follow up.
We see now another competitor enter the market for latent tuberculosis testing I know you've expected. This for some time they are claiming certain what flow.
Vantage is a one day, if you expect to see any debt in your quantum.
Quanta fail on tuberculosis franchise as a result of these new entrants.
Very good so thanks <unk> for the two questions are first the demand for low Plex testing I mean, what I would highlight first and foremost is debt we have a solution.
Or any kind of flexing on COVID-19.
I mean, if you want just to have a single plex, we have it on your Moody's and on those solutions.
If you want to have a low plex as you have seen we just got our approval for the fourth place on your medics, we have it.
You want to have a larger place we have it on cash so basically we gogo day needs and we follow on you see.
The evolution of those needs. This is why we believe it was extremely important to go beyond a single place and they have a short flex.
And we think at this moment.
That new margin should do good.
The answer for that.
Sure.
What the next winter will bring is difficult to say I believe there are still many labs that are very interesting in larger and shows than just shocked and shows and the jury's still out there on the market for these the good thing is qiagen as the breadth of portfolio that covers all those.
Hum.
Needs.
Sticking on the latent TB and Youre right board of new competitors.
Scott.
Out wanting to sound arrogant I believed that latent TB is the perfect example of a company not being arrogant or complacent.
While being the number one in the world.
We have prepared.
For the arrival of competition for the last three years.
We as being the only company.
Fueling a full integrated automated workflow from from the hand.
Remember the agreement that we have with automation companies, such as chicken or have you done and backend resorts, which day of surgery.
And when you look at our partnership with <unk> as we explained.
Today, not only can we cover the high flu put on mid throughput needs, but we can cover also the low throughput needs.
We used the day you certainly is on exits.
So.
I continue to welcome your arrival of.
Specializing fixtures D disease competitors, because they will help us.
Proving the efficiency of latent TB testing they will help us.
Probably showing that we need to convert from skin test because again make no mistakes could do really competition is nothing new.
Goodness East you just keen interest and this is clearly our main focus on.
Our competitors going to put a dent in the market shows or are changing our view on what <unk> should be for qiagen over the long run not at all I'm, not saying that some customers are not going to choose the competitors, but I believe that we viewed net.
By year, two entry to make our market share and that will position still dominant and once again I'm much more obsessed in trying to convert the skin test market.
Baidu arrival of new competitors.
Does it answer your question Scott.
Thanks Derek.
The next question comes from Doug Schenkel of Cowen. Please go ahead.
Hi, good morning, and good afternoon everybody.
On my first question is on guidance.
Guidance I guess, it's a two parter. So the first part is earlier. This year you provided guidance for quantity you're on quiet Ks that you bought X.
You have specific targets for each of those line items I just want to confirm that debt targets. There are unchanged and then I was hoping you could also comment on quarterly revenue pacing for the year you guided Q2 revenue flat to down slightly sequentially on I'm. Just wondering if your expectation is for linear improvement over there.
Balance of the Europe, we should assuming we should be assuming on a really backend at year, beating both the balance of the revenue was in Q4.
And then on separate from guidance.
Your net debt to EBITDA is below two times I think coming out of the quarter and continue to throw off a lot of cash.
In part because of all the high margin COVID-19 revenue, but also because of the core I'm just wondering how you're thinking about capital deployment over the balance of the year. Thank you.
Very good and I think that Oh hold on I can can try to answer you on different question dog.
Are we starting to also ask a two point went on to China first of all on the targets for quantity of on forecast that on debt and pneumonia as we have said Uh huh.
Doug we believe clearly that our target for quantitative on this year, especially when you look at such a strong quarter, one at 22% growth.
He's really are in our hands. So we are confident in this one.
For.
<unk>.
And chaos that reach out to product reach our board both extremely relevant for COVID-19 at the moment, but as we said they are a menu play there are no depend on on COVID-19.
We have also said, yes, there is an increased volatility on the market, but between the two platform. We also believe that altogether, we can reach our target might be debt, we are going to be you'd be above in one of those would be below end users, but the progression of market share still is happening the progression of in store.
I see this happening and we are here as well I'm confident.
Again, Doug I really I insist on that.
We are also managing those two platform clearly post pandemic, obviously, we have our solution for COVID-19, but this is not our main opposition of demand you have tissue on is to make sure that we first of all deliver on pneumonia the menu available in Europe in Europe, I'm, sorry to the U S on time.
And we also want to deliver G. I on chaos that for the U S. We want to deliver them a meningitis on carrier start for Europe on time I spend on our plan and this is currently what we are doing once again execution is key so we are confident yes photos to platform.
On the basically.
Framework of base of quarter after quarter.
On the gains while highlighting debt increased volatility we have.
It kind of over over stood.
Strong belief.
Debt if you consider for Q2 for example.
COVID-19 expectation they will be very much similar to what we achieved in Q2 of last year Q2 to follow on in 'twenty and if you consider a day non COVID-19 business for a Q2 for example, we expect strong confirmation of the recovery and the strong addition of revenues coming from Danone.
And again just prove exactly on this confirmed what we said last year now on the capital deployment I'm going to let her know also chime in here.
I just would like to highlight that we.
We are a publicly listed company, we are I think cheap to any potential opportunity.
On the market at the same time, we also confirm what we said some months ago that we have a lot to execute on organic.
There are inorganic opportunities, especially bolt on acquisition to reinforce our five pillars of growth, we will obviously not hesitate, but I'm sure that Ford also as interesting perspectives here.
Yeah, it's a set.
I'm going to ask the question before I do think we will.
We clearly keep you on Hyatt flexibility.
It's quite obvious that we carefully.
Cash and share price.
Also.
It goes into our evaluation, because clearly two beliefs that.
Again, it's a strong performance fee.
Net qiagen and we want to see a reflection on the shelf price as well.
The next question comes from Tien Peterson of J P. Morgan.
Hi, guys. This is Casey on for Tycho I guess more broadly speaking on COVID-19 product revenues, how much downside risk is there on the back half of the year now given what has been described by several of your competitors as imminent shifts and PCI volumes toward those highly automated high throughput platforms. How do you see this dynamic playing out and how much what.
This effect the COVID-19 revenue portion in sample technologies, and maybe the OEM portion.
I would just repeat what we have said many times, we have built our guidance for two fold on in 'twenty, one and our budget assumption of progressively.
Throughout the year, Q2, and especially H two there will be a snowfall softening and wrote off of demand for COVID-19 testing, but again there is volatility the market can change very very quickly. We don't know what the volumes are going to come are going.
To bring and we don't know what the flu season is going to.
Green related to COVID-19. So it can goes up as well and very quickly. We are prepared because we have solutions for every need related to to to COVID-19.
And specifically on your situation on your question regarding HIFU system. I think you understood that we have launched carrier preplanned and and he still extremely high.
High throughput solution its an extremely quiet.
Our rapid also solution for COVID-19, and it's very well considered by many markets in the world. If you see our sales of flip on that from Q1 day already increased compared to Q4 of last year. So again I mean, we have a very broad portfolio potentially the broadest portfolio for COVID-19 salute.
<unk> on the market and we think if we need both.
The pandemic, but at the same time, we clearly built out with numbers.
Assuming that this would basically slowed down through how do you.
[noise] assumption and we confirmed all on would you like to add something to that.
Well I think perfectly Seth.
The next question comes from Dan Brennan from UBS.
Hi, This is John <unk> on for Dan Thanks for taking the question.
China growth recovered pretty strong at 70% in the quarter and can you talk a little bit on the geographic outlook for 2021 and what specifically you are seeing in China and with regards to China can you describe any changes you've seen in your business there since 2019.
And then just on COVID-19 could you provide a little more color on what is the outlook in durability for your total revenues beyond 2021. Thanks.
Sure.
I will or we'd have to raise directly your last part of the question, which is COVID-19 driven solution beyond 'twenty one.
I think I would refer to what we said on December eight we confirm this we do.
Do not rely on significant numbers on our side.
To ensure the growth of qiagen beyond that depending week beyond the pandemic qiagen ease of non COVID-19 dependent qiagen.
Company I'm sorry.
Therefore, if we think that would come if there is a resilience in some geographies because of volume because of Suez, we we'd be ready, which is far too early for me to give numbers. We would have the solutions. We are ready to act we are ready to answer customer needs are.
So that's the first part.
On the AR on the.
A question on the.
The geographic.
Situation in China first.
First of all you probably know debt because we have communicated on debt we have changed our managed you mentioned China.
We are obviously, taking advantage of the change of management to continue to trend strength for our distribution network.
And China is a good example, once again of our situation being able to move very quickly we have more COVID-19 related sales than expected in China in Q1, especially thanks to what we call our second Brian Tianjin.
But again, we are managing China completely post COVID-19 do.
Key success factors for us.
Our first of all.
And we need to ring in.
In a very granular way our commercial partners network, you know that most of the sales in China as Jim made for distributors very strict management of those distributors is a key success factor for us.
Yeah.
Click on is to continue to find solutions to bring on.
We're different sort of extraneous fishery in Mdx, where you need the registration to what we call an NPA, which is the equivalent of the FDA in China, we need to find solution to bring those students from faster because it takes a long time. It takes some time more than two or three years to be reduced debt, we need to find the fastest solution. We are we.
Working on that it can be for example through OEM with Chinese companies. We are working on debt. That's the second key success factor.
For Us and third is continue to invest on this market, which is already the second in vitro diagnostic market in the world. So this is where we are we believe China is a market that should bring us with double digit growth. This is the expectation we have on this market and this is what we are working on.
Does it answer your question.
Yes, that's very helpful. Thank you.
The next question comes from Parker, Patrick from Deutsche Bank.
Thank you. Good afternoon. So my question is on the 16% growth in the non COVID-19 business.
On pretty impressive number how much else. This force was pent up demand or catch up demand from last year and how much of this can really be sustainable throughout the year on your view.
And then a quick follow up is on your COVID-19 N T gene test and.
Do you still plan to go ahead with that launch and if yes. When do you think that this can take place.
Thanks for the question.
What's your best shoes are recovered.
It's extremely difficult to give you numbers on debt questions. What is clear is that volumes.
For for example, TB testing.
For oncology testing.
Just two examples.
I would say patient needs.
For those testings.
Coming back quite to deliver of what they were in 2019, and we have seen that sequentially Q3 of last year Q4 and confirmed in the in Q1. So yes I believe this is sustainable.
And those are an example, which is key to catch it.
Because we have been challenged on this last year for example.
When we post a growth of our DNA sample prep solution.
At more than 22% in Q1. This really shows what we have been seeing last year, even in sample prep, we are not COVID-19 dependent.
The vast majority of our sample prep market shares.
Coming from DNA testing and not everyone at testing and seeing it growing at 22% Q1 is extremely encouraging and we do not believe that is just to catch up with last year is cleared you're recovering off of the market demand.
I hope it answers. Your question is very difficult to give you percentage of what was catch up with what no I think it's a no go to a recovery because basically people needs to be tested for oncology needs to be testing for latent TB.
And we are doing for example, last but not least this recovery on quantity fever, while most of the borders are not open and while most of universities or schools. In many countries are not open and you know the two growth drivers for coffeyville or have used Ebola testing and also handle COVID-19.
<unk>.
Now to the antigen.
You need to understand that we now have two antigen solutions.
We have a solution that we are basically dedicating.
To Europe at the moment.
Which is a decision that we took in Q1, which is proving us with at Qiagen.
Remains a very agile company.
Some markets in Europe like Germany.
Not only Germany, but.
We're asking for significant antigen testing and we found a solution with a partner to be able to bring that sort of shows it's mainly Ah in Europe. The product is CE, marking in some emerging countries.
We call it moderate price antigen testing.
The product that you are referring to is what we call our carrier reach and T. J on is the partnership with debt.
We have resubmitted.
This <unk> solution, which is by the way as you remember combined with an antibody solution <unk> perfectly on time, as we said to the market.
We are now in the phase, where we are constantly exchanging at EOG, We do review, where and I cannot speak on behalf of the agency, but yes, we have expectation to have this product approved before the end of the.
H, one and so yes, we have these products in our assumptions and you never members forage too.
Does it answer your question yes.
Yes, it does.
Thank you.
The next question comes from Brian Weinstein from William Blair.
Hey, guys. Good afternoon to you and thanks for taking the question here. So I appreciate the commentary on the year over year growth and how that's improving but really when we look sequentially here.
On the Q2 guide is flat to down sequentially and record I know this is sort of somewhat asked on a prior question, but it would make three straight quarters, it's sort of that $3 $65 million to $370 million range also this quarter we saw.
On the monarch is down about 3 million sequentially on a larger installed base Qantas to your on is actually down a little bit I think a million dollars or so sequentially. So I'm just trying to understand how you guys are thinking about kind of the sequential.
The movement here because it would it would appear to us that Q2 would likely to have to have some conservatism in it or is it really just a flattening out of the actual dollars here I know it was somewhat asked before but I wasn't quite clear on the answer so I wanted to kind of go back into the kind of sequential growth.
Kind of what you guys are seeing there.
Sure.
Yes, I will.
Yeah hold on.
Go over and then I will let me.
Just let me be very straight Taiwan.
Again, just very clear, we expect sequential growth quarter over quarter on the non corporate side more or less what you also for the second quarter to the first quarter on non COVID-19.
We shouldn't forget that that gets provided quite off because I think you said it very clear before.
We feel very confident about.
Confident about the full year guide.
It's really again on the quarterly allocation because there is no doubt volatility on the coffee pots of business and two on the US can tell us if something is happening.
Soft quarter or so.
From a month on the fourth quarter of her first month of a quarter or two I think a certain flexibility is key to take I don't think that is necessary on the full year.
Is this most important isn't justice emphasizes again.
Quite well that I would have expected in the first quarter all in all the gods and we shouldn't forget again six eventually talking Q4 was clearly a very strong finish off the year. We all know that the fourth quarter of a year is that all of our industry are different qualify if it comes to instrumentation allows us. So I think a very straightforward year to year comparison basis.
This quarter is not totally fair.
But that fact, we have seen a good growth good growth with so I do think we feel good about that.
Thanks, a lot.
Does it answer your question.
Yes, it did.
And you know where.
I hear what you're saying on the full year in your confidence there and whatnot and that's comforting I just wanted to follow up on one other thing is just your broader thoughts on the multiplex space, becoming more crowded Roche day, so on and Hologic all made moves in the last few months here and just your thoughts on.
What that space it looks like with these bigger players now making moves to compete here.
I think those moves first of all.
Moving to things.
The first is that Qiagen is an extremely disciplined acquirer.
We acquired study agnostic.
For $150 million.
Roche spent $1 $8 billion for Denmark.
And hold on close to 1 billion dollar from a video.
And they clearly.
Believe and we see it in the size of the installed base already under worldwide presence.
Net chaos Todd is a superior product.
Compared to those two solutions.
So a disciplined acquirer and basically proactive acquire there.
The second key message for me is that it simply proves that the syndromic market is exactly what Qiagen said, which is.
Very promising still a growing market we.
We said when we acquired that you're agnostic on that we believe the market was already at $800 million growing at significant double digit we said, 20% at that time most of the publication on that we're showing.
Debt is 213 to $1 $4 billion market, probably moving to $2 billion market and we still believe at Qiagen and it seems to be confirmed by the publication of our competitors that it's Tito double digit growth market. So there is still a lot of room to play.
Debt.
The key success factor for Qiagen is execution on menu, we have a differentiated platform. There is no platform easier to use than chaos debt.
There is no real platform able to deliver on what we call semi quantitative results not just yes or no answer the key success factor is executing on the menu and as long as we will deliver the menu we saved in 'twenty, one 'twenty two and beyond there is no reason why we shouldn't be successful here.
Does it answer your question.
Absolutely. Thank you very much.
Okay.
Our last question comes from Hugo <unk> of Exane BNP Paribas.
Hi, guys. Thanks for taking my questions I ask too on cash.
<unk>.
I remember last year, you had a fair shelf placements and a reagent rental model just wondering if you're seeing any change here since the beginning of the year or do you see a place for that.
I mean instruments with a certain degree on the EQM consumable sales.
And the second question I think a key.
Gary in your prepared remarks, you mentioned that the trends from manual to automated had liked.
Can you just.
Just give us an indication on where it's tough to be light compared to what you were expecting a <unk> hundred 20 <unk>. Thank you.
So to your first question on Hugo. Thanks for the two question first of all I don't know if you use placements just for the installed base because we.
We are still really are selling much more than placing chaos debt and by the way is the same phone your margin and we said that last year or so.
Capital sales over placement is still on the trend at the moment, but as we said before we have still place they're healthy.
Put on the market, where as I said, a healthy number of chaos that system in Q1, and therefore, obviously, we continue to make sure that those carriers start on not just COVID-19, driven once again, we push our team to two things engaged customers Asap.
On assays, such as E. G. I mean in San Jose and Silicon is try to bring customers to scene to sign poorly annual contract to make sure that they do not these are peer obviously once the pandemic subsides.
That's number one.
For automation versus manual two things I would say, we confirm what we said last year that progressively automation will prevail in the carrier churn.
A level of sales over menu all and we are now at a ratio, which is roughly 65% to 45% between automated and manual 65% automated 45 that you are too.
Uh huh.
55, <unk> to Oh man, you would I'm, sorry, which is showing two things.
First of all that Qiagen is extremely relevant in automation of simple take as well seeking that we still have very decent number of manual workflow. Because these will flow is proving to be quite useful for many countries, especially in the emerging world.
Does it answer your question on Yugo.
Very much yes. Thank you.
Okay with that with.
With that to reinvent on I'd like to end the call and thank all of you for your participation again, if you have any questions or comments. Please do not hesitate to reach out to <unk> for further discussions. Thank you very much.
Yeah.
Ladies and gentlemen, this concludes the conference call. Thank you for joining and have a pleasant day Goodbye.
[music].
Okay.