Preliminary Q2 2021 Qiagen NV Earnings Call
Ladies and gentlemen, thank you for standing by I am Keith Your P. G I call operator, welcome and thank you for joining Qiagen preliminary Q2.2021.
Earnings Conference call webcast at this time, all participants are in a listen only mode. Please be advised that this call is being recorded at Qiagen <unk> request and will be made available on their internet site.
The presentation will be followed by a question on answer session. If you would like to ask a question you May Press star followed by 1 on your Touchtone telephone please.
Please press the Star key followed by zero for operator assistance at this time I would like to introduce your host John Mclarty, Vice President head of corporate Communications and Investor Relations at Qiagen. Please go ahead.
Thank you operator, and welcome to our call today, the speakers with us our Terry Bernhardt, the CEO of Qiagen and Roland <unk> as Chief Financial Officer also joining us as for for below senior director of Investor Relations. Please note that this call is being webcast live and will be archived in 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 discussions and responses to your questions on this call reflect management's views as of today July 13, 2021, we will be making statements and providing responses to your questions that state our intentions beliefs expectations or predictions for the future. These.
Constitute forward looking statements for the purpose of the Safe Harbor provisions under the private Securities Litigation Reform Act 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 visit our filings with the U S.
Securities and Exchange Commission and these are also available on our website.
We will also be referring to certain financial measures not prepared in accordance with generally accepted accounting principles.
Before moving on I'd like to remind you that the full results for the second quarter on first half of 'twenty 'twenty are still planned to be published on Thursday July 29th this will be at the usual time at about 22 O 5 Frank for time for a 5 P. M. New York time in light of the call. Today, we are not planning to hold another conference call with that announcement I'd like to now turn the.
Call over to Terry.
Thank you Joe on were to come to a real comfort on score today and for joining goes to discuss the announcement of our preliminary results for the second quarter of this year on that.
For first half of 2 falls on in 'twenty, 1 as well.
On our perspectives on the second half of the year.
Let me get right away to our key messages for this call.
First of all our teams delivered excellent results in the second quarter of 2 falls on on 'twenty 1.
The preliminary results show, we exceeded the outlook for sales growth and adjusted EPS.
Net sales grew 24% at constant exchange rates over the same quarter of 2 folks on on 'twenty.
And at a faster 28 per 28% pace at actual rates to $567 million. This clearly beats our outlook for about 20% CER growth.
The preliminary results for adjusted earnings per share on affordable at 65 to 66 cents C E L F.
And this for both our outlook for about 62 to 64 cents C. R.
My second message.
Is that we are seeing the benefits in the second quarter of our unwavering focus on the non COVID-19 product groups of Qiagen.
Does he faults on positioning our company to emerge from the pandemic has a stronger and more differentiated competitor.
The performance of those non Covid product groups was extremely strong in the second quarter rising, 52% CER to 400 on $8 million and providing 72% of our total sales.
This confirms what you ever heard of sitting before the results show that we are really COVID-19 relevant, but not COVID-19 dependent.
We are seeing a broad business expansion and using these peer you to invest in our 5 pillars of growth.
This is our highest priority for it execution on position in carrier Gen for growth and differentiation.
At the same time, we saw a decline in COVID-19 product group sales in the second quarter as they fell 17% CER to $160 million.
This marks a break in the growth trends seen in the most recent quarters quite frankly this was expected to come at some point we.
We said on our resort called for the first quarter of 2 forgone on 'twenty, 1 that we expected a slowdown in the second quarter and in the second half of 2 follow on on 'twenty 1.
Richard came faster than we qiagen, along with many expert unexpected.
The rollout of vaccination campaigns around the world have been much more successful than anticipated and she says it day to reduce demand for testing, which you are seeing in the data reports for from various organization.
Why do we saw very strong overall performance for Q2, we noticed a change in sales patterns coming for my where COVID-19 testing customers as the quarter progressed and especially at the end of quarter 2.
This leads to the next key message and that is the update for eyewear for your outlook 21.
For the food year, we now expect sales growth for about these 12% C. E. R. Over 1 point if $87 billion into follow on on 20 <unk>.
This compares to our prior range for about 18% to 20% growth C E R.
The updated outlook includes ongoing strong sales trends for non COVID-19 product groups that we expect to be at least 20 per cent for the full year, but also takes an increasingly more cautious view on demand trends for COVID-19 testing in the second half of the year in light on.
What we are seeing currently with market trends.
As for the day, just how Valeant and simplification, we are obviously monitoring the evolution of those delta on those volumes and supporting health care providers around the world in the fight against COVID-19.
For adjusted EPS, We now expect resort for full year, 2 for going on 21, well, but these $2.42 I E. R. This is at the bottom end of the prior range for about $2.42 to $2.46 C E O.
As a last point, we have also announced plans for a new 100 million dollar share repurchase program.
This is clearly a reaffirmation of our convictions about qiagen growth prospect and a signal of our disciplined capital allocation strategy.
And I now would like to hand over to hold on.
Thank you Terry and thank you as well for me for joining this call today.
I'd like to provide some perspective on the sales results for the second quarter and for us half of 'twenty 1.
So the preliminary top line results was 24% CER growth to 567 million U S. Dollars. As you know we have implemented an enhanced view on sales by product groups. So let me walk through each 1.
The first group involved sample technologies.
First of all 5 pillars of growth. This sales declined 6% CER in the second quarter to 203 million U S dollars.
This result, overshadows affect us the sales of non Covid consumables kits horse about 30% C. A what was the second quarter of 'twenty 'twenty and represented about 2 sort of softer technology sales in this quarter.
Sales of softer technologies from COVID-19 product groups fell at a double digit C. Our weighted what was the second quarter of 'twenty, 'twenty, which boasts a quarter in 2020 in which we first saw significant incremental growth as the pandemic gained momentum.
As a reminder, our softer technologies sales are led by kits sold for use with DNA and are more weighted to our life science customers. So we are pleased with the underlying growth.
In diagnostic solutions, which involves our product cope sort for using clinical testing sales advanced 71 per cent C. O..2 1 on the 54 million U S dollars.
The key driver was a quantifier on latent TB test.
These cells such 1 of the 9% CER to 72 million U S dollars all regions delivered excellent growth led by the Americas and Europe.
Here, we are clearly seeing a assumption of testing and look forward to a strong trends in the second half of 'twenty, 1, especially for back to school campaigns.
Yeah, it's off the chaos that day X and <unk> solutions were higher than the second quarter of 2020 in spite of reduced demand for COVID-19 testing.
But this will laws that in Q1, 'twenty, 1 and therefore less than we had expected.
While the Covid tests being the major contributor to sales for these 2 platforms. We see that the sales composition will change as COVID-19 testing demand declines and growth emerge from ASIC applications.
We are focusing on developing these platforms for applications beyond Covid testing the top priority is to expand our test menus as you build up manufacturing capacity to support our growing installed base in the coming years and trumps offset installed base. We are quickly approaching 2400 total replacement.
Of course that the X systems, and recently reached the milestone of 2 on a normal X placements.
As our portfolio isn't this product groups and crude oil precision medicine S. S companion diagnostic co development revenues and women's health portfolio, including HBV.
These sales grew at a solid 3% see our pace in the second quarter and included a <unk> 31 per cent see our increase in revenues from companion diagnostic co development projects to 10 million U S dollars as well as double digit CER growth and persistent medicine consumables that are often used to guide.
Cancer treatment decisions.
The P C on nucleic acid amplification product group involves our portfolio of PCR solutions and components for use in research and applied testing.
These sales were up 8% see on the second quarter to 1.9 million U S dealt us.
On 1 hand, we saw very strong sales on off the non COVID-19 products in this portfolio.
The global rollout of Sokaiya acuity digital PCR instruments is building momentum and we saw good sequential sales growth from the first quarter of 'twenty, 1 demand is increasing for a broad range of applications.
On the other hand, we saw weaker sales transfer product uses a COVID-19 response, including oil and products used by other diagnostic companies for their own COVID-19 tests.
The last product group as genomics N G. S. The net crudes are universal N G S products Biopharma <unk> solutions.
Sales were up 110 per cent C. A 280 million U S dollars in the second quarter of 'twenty, 1 after facing challenges in 'twenty 'twenty due to choppy reduced customer demand.
Sales of your deposits solutions for next generation sequencing, Rob was on hand that 50%. That's left swept up activities. This was also enhanced by Valiant sequencing for COVID-19 cases, and all its about sales of technology licenses.
Moving to the next slide I would like to discuss our results and the non Covid and COVID-19 product groups we.
We have seen significant year over year improvement trends in non COVID-19 product groups for 3 consecutive quarters we.
We have set a growth for sales for non COVID-19 product groups to grow at least 20% CER over 'twenty 'twenty and represents the majority of our sales we saw strong non COVID-19 sales growth trends in the first half of 'twenty, 1 and beliefs that we will maintain momentum for a double digit CER growth rate for CIT.
Half of the year and we see this solid growth for it trend for our non COVID-19 sales continuing into 'twenty 'twenty 2.
We expect non Covid sales contributions in the third quarter on an absolute dollar basis at sea, our weights to be at the level between those seen in the first and second quarter of this year.
For the fourth quarter, we expect our non COVID-19 sales level.
Higher zens or see our sales levels seen in the second quarter of 'twenty 1.
As for the COVID-19 product portfolio. These sales was 38% see a to C. N a $63 million on the first half of 'twenty, 1 and represented about 1 third of toilet sales.
Keep in mind that we had through COVID-19 product group sales of 680 million U S dollars in 'twenty 'twenty and this represented for not 75 million. You asked also for incremental sales or was it 2019 levels of about 147 million U S dollars.
On the next slide I would like to review our sales space Geographic region.
I'll always and showed growth in the second quarter of 'twenty, 1 over the same period of 'twenty 'twenty and absorbed lower sales for COVID-19 product groups.
The Americas region delivered the strongest geographic performance of the second quarter of 'twenty..1 just sales were up 44 per cent see it appears for healthy lives as a 40% CAGR off in the first quarter of this year and probably bought 45% of global sales.
Key driver of us quantify on TB, which grew over 50% see a what was a year ago period for gains in the U S more than offset lower sales in Brazil and Mexico.
The Europe Middle East and Africa region continued to strong trends from 2020, and the first quarter of 'twenty, 1 growing 15% CER and providing about 36% of global sales for the second quarter of 'twenty 1.
For the United Kingdom, Italy, Switzerland, and Turkey, all grew at double digit C AD words, while Germany delivered low single digit C. All she had schools and this came against a double digit CER decline in France.
Sales in Asia Pacific, Japan region was 4% Seattle was a second quarter of 2020 and represented 90% of global sales Shinar generated the most growth in this region with sales up 17% see out on a broad product portfolio gains tiers.
Yeah, it's in the region, excluding shine on however were down 2% C. O and included a single digit C. R declined in Japan, and a double digit CER drop in India.
Like to now hand back to 3 years.
Thank you all and as we have updated our full year outlook. We would also like to provide an update on our expectations for our 5 pillars of growth.
That will deep dive in December we gave you for your sales expectations for each of our growth P dolls and now obviously, we would like to give an update on how we see them developing given our views for the second half of the year.
Crystal ball to.
For the sales trends for sample thick and cash equity are perfectly on track with our previous expectation.
We are seeing solid non COVID-19 sales trend in dose Pilatus in terms of instruments. For example, we are on track for over 200, new placement of chaos for new system building on the more than 2900 cumulative placements at the end of 2 falls on on 'twenty.
Is what all are you did joint chaos that diagnostics has seen solid placement trends and driven by used for respiratory and COVID-19 testing and we continue to be optimistic about converting those instruments for us beyond the pandemic at.
At the same time.
Keep in mind that for the next few quarters, we anticipate the peer you'd be for consumer board sales for you we presented a transition to non COVID-19 testing application.
The updated set expectation for cash that diagnostic he's now for over $16 million 6 zero for 2 falls on that 'twenty 1.
We I've said before we obviously do not judge our growth drivers on the basis of 1 quarter or even 1 year. This is especially the case early in the life of a product we still expect guidance that the agnostic to deliver sustainable double digit CER growth after working through the pandemic effects.
We are for example, or where you're seeing growth picking up for sales for the gastrointestinal or putting it in Europe and we are right on track in our plan to submit the Spanish 2 day every year just sure. We are also on track with the C. E. I V D submission for the meningitis panel on chaos that our pro.
So on capacity expansion plans are also on track to enable us to provide consumer reports to support future growth.
<unk> will also enter a phase of transition to post pandemic testing here as we have said before we are building on the extensive menu in Europe now always 15 C. E. I V G. Mark test and 1 of the broadest available to customers. We are working on the menu expansion plans for the U S.
And greater utilization of their laboratory developed test capabilities for those systems for 2 falls on on 'twenty..1 we all know we're expecting $100 million in sales for the full year in light of day, new Covid testing trends.
And finally for quantity film, which has been delivering robust growth for the last few quarters. We have increased our expectation for sales of this product group to over 255 millions for 2 falls on in 'twenty..1 building on the very strong growth of Q2 of 100% C E O.
We will also be launching Carryout reached Qs T. Jabil kudos here in the second half of the year, which would further boost says in addition to the return of immigration programs and that's what Al said day back to school testing.
The key point is that we are reaffirming the midterm girlfriend and be sure that for you announced at our Investor day in December each of our 5 pillars of growth are well differentiated and they are set to deliver sustainable growth in a post pandemic market.
And I would now like to hand over again to hold on.
Thank you Terry So next slide provides you with a bridge on what has changed in the sales outlook for 'twenty 1 on the.
Left side, we took the low end of the previous outlook for 'twenty, 1 which was for 18% to 20% CER sales growth.
As Pete noted earlier, we are now expecting the COVID-19 product group sales to be down a thought wound up moving U S. Dollars was a non COVID-19 product groups are doing better than expected and just buy an amount of approximately 90 million U S dollars.
<unk> to the new outlook for at least 12% CER sales growth for 'twenty, 1, whereas on non Covid performance is helping us to offset a significant part of the rebalancing of our portfolio.
As noted earlier, we have updated our full year outlook for net sales to be at least 12% CER growth.
And for adjusted EPS of at least 2 dollar on 42 cents at constant exchange rates.
This reflects our plans to invest in our 5 pillars of growth and strengthen our competitive profile to drive sustainable growth.
Using this peer to change the way we are we work in particular stepping up digital engagement with customers and enhance our profitability growth in the coming years.
As for currencies based on rates as of June 30 is 21, we now expect a currency tailwind on full year results at extra width of about 2 to see percentage pods for.
For adjusted EPS, the currency tailwind of about 2 to 6 cents per share is expected for the year.
For the third quarter, we anticipate see ourselves to be at the same level of 483.8 million U S dollars in the St. Pete of 2020, and adjusted EPS of about 52 to 53 cents see and this compares to results of 58 cents and QC Twenty-twenty.
In terms of suggested tech sweat, we expect a rate of about 16% in the third quarter and up about 17% to 18% for the full year of 221 for average number of shares outstanding as of on 231 billion for the QC wild level for the full year is about $232 million with <unk>.
I would like to add back to 2 years.
Thank you on we are coming to the end of our call. So let me provide you with a quick summary.
Before we move into the Q&A session for.
And I'd like to repeat this we had excellent results in the second quarter of 2 falls on on 'twenty, 1 and also for the first half of the year, our resorts BD outlook set for sales and adjusted earnings per share and were driven by the dynamic growth from our non Covid product group.
This is the seventh quarter in a row, where we are beating expectations, both on sales and EPS.
It leads to the second message and that is their laser focus on about where it seems on driving further growth from those non COVID-19 product groups. As a reminder, dose groups, representing nearly 70% of total sales in the first half of 2 further on in 'twenty, 1 and they grew tripped, 53% C E R.
And that's all I'll say it we have a goal of at least 20% CER growth for the full year for the non COVID-19 related product.
Rosie faults, we did pay off to position Qiagen for further strong growth beyond the pandemic driven by our 5 pillars of growth.
For a point, we have decided to take a more cautious view on COVID-19 testing trends.
This comes after the faster than expected uptake on success of vaccination campaigns, which we are or certainly welcome I will teams obviously remain on the frontline of supporting the global response to the pandemic and we are ready for any future pandemic testing needs keep on increasingly volatile situation we use there.
They'll stop audience Orozco variance, but we have not factored in our numbers for 2021, the second half any search into our forecast for.
Fourth we have updated our outlook for full year 2 falls on in 'twenty, 1 based on the COVID-19 testing trends net says on the <unk> on that we expected to grow at least a 12% CER and for adjusted EPS of at least $2.42 and that's what that's the point, we really believe in our future growth prospects.
And this is confirmed with plans to start on U 100 million dollar share repurchase program with that I would like to thank you for your attention and hand back to John and your peer at all for the Q&A session. Thanks a lot.
Okay.
Ladies and gentlemen at this time, we will begin the question and answer session.
Anyone who wishes to ask a question May press star followed by 1 on their touch tone telephone.
Which to withdraw your question you May press star followed by 2.
To ensure we can accommodate as many people as possible. Please limit yourself to only 1 question.
Your microphone will also be muted after finishing asking your question.
Anyone who has the question May also press star followed by 1 at this time.
1 moment for the first question please.
The first question.
It comes from Mac Sykes of Goldman Sachs. Please go ahead Sir.
Thanks for taking my questions I appreciate it and I just had 1 question on and a follow up could you just help us understand the margin progression through the back half of the year as we just try to reconcile the decrease in revenue growth guidance for the year versus the at least 242 in EPS for the year just help us understand how how the margin should progress maybe relative to the previous year or.
Or your expectations.
Yeah. Thanks, Matt for the question Yeah, what now we expect the margin for the second word or probably slightly above what we have seen in the first quarter.
And probably then growing a somewhat lower in the third quarter, and then again being higher in the fourth quarter. So overall for the full year, it's probably on the sort of 3 plus percent operating.
Operating income margin.
So quite clearly our overall it's for margin development.
If you look at someone's on their composition on what is driving our margin over the next couple of months. It is quite clear that are on the 1 inside our gross margin is probably a slightly improving compared to what we have seen in the first quarter.
But it's obviously that a particular odd day level stays polio wants a level in absolute dollars. What we have seen in the second quarter well efficiency clearly comes from digitalization, we see in sales and marketing activities, giving us leverage opportunities. In addition to that there's also.
Non operational level, that's what we're seeing are coming from from a couple of effect for us from la financing cost.
Next words, and I think that has the biggest drivers for wall EPS accretion.
Great. Thanks for that very helpful. And then just do you have in mind that a durable COVID-19 revenue stream you know I think about the the variant work being done on the genomic side, but do you have in mind, what what could potentially be somewhat durable into 'twenty 2 in terms of COVID-19 related revenues.
Thanks for the question as you have understand understood with our new outlook are we would prefer not to have our forecast depending on any bets on G. COVID-19 trains I think it's highly volatile.
What is worth to stress is that should we see any new outbreak once again delta variant or ozawa audience, we we'd be ready to supply you with customers, but we would prefer not to take on not to bet anything on Qiagen on COVID-19 evolution for the rest of the year or for 2 falls on in 'twenty, 2 and beyond.
Okay.
The next question comes from Scott Berg Bardo of bearing Burke. Please go ahead Sir.
Yeah. Thanks, very much for taking my questions. So just on on costs that Nemo Dx day, it seems that placement rates should still be going pretty well here, but clearly, bringing your revenue expectation down sharply in the course of the last.
On a few months given that the correction in COVID-19 testing seems to be helping a little bit early a more deep than you expected I wonder if you could in the shed some sense on that the 2022 outlet Q suggests sustainable double digit growth.
We now assuming that as of next year you can grow these franchisees positively or do you expect for there's still some COVID-19 collection to come next yesterday's franchisees. So if you could clarify that please.
I'd also like to understand plays a very strong number in genomics at 80 million how much of that would you clarify classify as being COVID-19 and somewhat 1 off and how much is sustainable on last question. Please.
Profitability for the company is strong on.
Healthy and it sounds like Youre, maintaining a similar margin outlook for the beginning of the year. Despite the softer top line I Wonder if you can provide some sense swollen as we think forward for Qiagen do you think you know mid to high Twenty's margin that we've seen in the past is something we will see again for the company or has the company now reached a new structural level for profitability.
Thank you.
Thanks, Scott Thanks for those a question I would propose to take the first 2.1 and then on can also speak about the profitability of each day. So first of all cash that annuities. Yes, you are right to highlight that we still consider that we have a healthy level of placement that means that there is still a strong interest for these 2.
That's for them on day market.
Because of the nature of the menu, we believe that obviously once we have absorbed dependent.
Picked those 2 platform of clearly as we said in December of 2 folds on on 'twenty with double digit growth profile I believe in this case that I see chaos start growing again, obviously, starting 2020 to where for newmont <unk> because of the different situation menu.
Between Europe, and North America, I would say reservoir or more.
More slightly.
Flattish I would say into forgone on 'twenty, 1 to absorb basically genpact over of the Covid testing. This is for those 2 platform as regard to the genomic performance. Most of it is really driven by non COVID-19 application. The COVID-19 part of sequencing for Covid testing.
You see the rather limited in our revenues as most of the governments have not clearly invested major funds into it we have the solution. We have ready again to supply customers. If there are more on needs, but it's mainly non COVID-19 driven.
No.
Yeah. Thank you Terry in terms of profitability I think is.
Alluded to before we expect the Saar.
Quarter, even somewhat better in Trump's.
Of our adjusted EBIT margin at what we have seen.
In the first quarter Pablo was quite similar gross margins are so overall profitability is clearly quite strong and as I said before for the second part of the it's probably going relatively a slightly lower well, it's growing slower than the third quarter before.
What gets again better on our fourth quarter and probably for the year ending at a 33 plus percent adjusted EBIT margin in terms of mid on long term outlook I think for me. It's quite obvious that are on a lot of the margin profile going for but Oh, what is driving that.
Margin profile is something but this day mid and long term is a the overall utilization of our franchise is as well as on increasing not decreasing the net don't think that's going to change we do probably wasn't all more than 65 per cent of all transactions in a digital way leading to revenue as if a competitor.
It was 3 years ago, where it was well above 20% a significant difference in a way for cell that has lots of tool for for other areas. I also believes that while we continue to expand our portfolio of particular on and knowing what it takes and that comes with this incremental R&D spending.
That is probably something what over the course of 'twenty to is going through a stabilized on a on a certain level. So this or its margin expansion is M. C. What is reasonable.
What is the overall level I think it's clearly also dependent on what is the Covid a revenue number for 'twenty 2 beyond while we for you quite comfortable on the non COVID-19 business and that debt is expecting to have as a healthy double digit growth with mid and long term I think that is.
So you said before something what they still have to see what is happening here for 'twenty 2 it depends very much also how we leave the year.
To a 21, the 1 thing where I feel comfortable on is.
That we will have post pandemic, a higher margin than we had free pandemic I think that is something where if you're comfortable given that its newest truck shop meru environments and also a totally new beds of of revenues are so I think that it's a way to think about it.
Okay.
Our next question comes from Jack Meehan of Nephron Research. Please go ahead Sir.
Thank you good morning.
2 follow ups back on genomics, Jerry I was just hoping for a little bit more color. The business has done $40 million to $50 million of sales per quarter since for being in 2019, So wasn't COVID-19 in the quarter, but what in the market caused that business jumped at $80 million this quarter and then a clarification.
On the antigen side I see that you know.
$70 million of sales pulled out of the guide how much did antigen contribute in sales in the first half of the year. Thank you.
Jack I apologize, but your voice was a little bit blur can you can you repeat the second 1 I got the first 1 but not the sick on what I'm sorry.
Sure sorry about that hopefully this is better just how much did antigen contribute in sales in the first half of the year.
So very quickly for the first start for the year. It Snuffing Ah I remind you that our anti Gen solution developed together with <unk> is not approved by the FDA we are.
And serene currently the question of the agency so we'd see what is happening and I think as we have shown with our hold on we are not factoring in the sales for the second half of the years regarding genomics. This is mainly driven by the fact that oncology testing are coming back to a much more normalized.
Quasi to a pre pandemic level as you perfectly know funds have been reallocated during 'twenty I would say we're against federal kitchen to oncology testing on this season that we're coming back do you see is what is.
In majority driving I wear a N G S. Our selves.
Again, we have enough for her.
On on soft Covid genomics civilians, but those are not the main numbers to account for these performance in each 1.
Yeah, just just to add on that Jack for the third quarter on genomics, we probably expect a somewhat lower number compared to the second quarter, it's probably a bit higher than what we have seen in this first quarter I think that helps your volume modeling.
Our next question comes from Doug Schenkel of Cowen. Please go ahead.
Yeah.
Good morning, and good afternoon to everyone on the line and thank you for taking my questions on Mike.
I wanted to follow up on a couple of things in a bit of a more direct way.
Not to be difficult, but just just to make sure that everybody kind of understands what's going on here and we will get the models cleaned up. So we don't have that kind of do this again later in the year you know obviously with the intent of.
Putting the stock in a better position moving forward.
So my first question and then I'll I'll I'll come back to my follow up but but on 'twenty 'twenty 2.
Many investors with whom we've spoken with have asserted that consensus EPS expectations for 2020 to look quite high considering uncertainty regarding the outlook for COVID-19 testing and ancillary products you've addressed this in your prepared remarks as well as in response to.
Other question for thus far.
But just could be more pointed about it. It's been noted that with few exceptions for U S. Analysts have much lower estimates than European analyst and again that numbers were just too high for 2022, given everything we heard from you and from others. When it came to Covid testing. So with that said could you comment on how you're thinking about <unk>.
<unk> 22 or at least how you think the street should be forecasting COVID-19 revenue in 'twenty 'twenty 2 I I heard you. When you commented on taking the numbers out, but just to be more specific.
If it helps the all volunteer we have been assuming that total COVID-19 revenue drops from where we were before at 600 million in 'twenty 'twenty, 1, which obviously now it is too high for something like 250 million in 2022 and that would translate into I think an EPS headwind for about 40 cents.
Year over year.
Are those reasonable expectations or should we be going further than that when we think about the 2022 headwind and I'll come back with the second question in a second.
And thanks for the question, Doug I mean, once again I would like to insist that I think it would not be a.
Very fair you saw commodity bought on our side to better gain on expectation for 2 falls on in 'twenty 2 lever of Covid.
Hum.
Hold on once again and part of the presentation on the started to remind that our we have a base, which is at 147 million into fallen in 19 and since then you've seen the bridge in our deck.
I I really would like to stay away from any forecast on on these free gold I mean, I prefer really to focus on the perspective of growth for the non Covid business, which we have said to be at at least 20 per cent for the full year 'twenty, 1 and continuing at a healthy double digit.
For 2 folds in on 22, this is where I would prefer because here we have clear visibility for Europe's for all you want to add something to that.
No I think.
Not much to add I would say again says to you said it.
There is a part of our business which has.
Is gaining momentum and we have all hands are on and it fits well on its way and I don't think there's anything to change I think typically we also have all hands on quite available on profitability, but again.
You can plug in scenario, if you assume a drop in and Covid revenues as you said before that for sure has an EPS impact you could see what's the EPS impact was through Fatwas because some of those products again. It for example, if you think on the antigen product as you know they have a clearly partner on products for us with Cigna.
Difficult laws in average gross margin for us so but there's.
Again, I would say 6 months before the year end at a in.
In the summer season, where are most of the COVID-19 issues on this broad seem to be addressed I think is a little bit too early for for looking into 2022.
Yeah.
Did I get that guys and and totally appreciate all that it's just you know heading into earnings season consensus was up at $2.27 for 2022. So I wouldn't expect you to guide on that but I mean, it's not helpful for you or for shareholders to have numbers that high given everything we've talked about so the only reason on price.
For you on that.
To put you in a position where you don't have to keep correcting the sell side on this so that that's why I'm asking I mean, it's the logic.
Okay, I mean and should that number then is a number that's closer to you know a lot closer to 2 than to 30 seemingly reasonable based on the math that we talked about already.
Again, everybody has its own model on B C. A lot of different models. If your assumption is.
Covid goes Dod as a significant for of course it comes with a visit Avis pleasure that there is no question nuance it but I'm not going to tell you that no as of today as being 10 send more or less but again, yes to Saudi would sell on tight there's no question.
Our next question comes from Falko Friedrichs of Deutsche Bank. Please go ahead.
Thank you good afternoon, and so the first question coming back to your adjusted EPS guidance for this year to your new guidance can you elaborate a little bit.
To what extend on the flexibility of your cost in the model that you flagged before is helping you here and in that regard on.
Did you have to postpone certain investments over the other.
Okay here that helps you to to keep this EPS guide on.
Pretty much unchanged on the.
The previous guidance and then a brief follow up the share repurchase program that you announced.
Reflected in this new guidance. Thank you provided us.
So starting with the second 1 yes on a million share buyback as reflected on that but of course as you can imagine it's only a on a per rational 1 year parts, where it's quite minimal on a on a 6 months period.
On.
On your on your first part of your question I do think what is important to understand this.
What I tried to allude before 1 thing is.
Sutton a significant policy for revenues, which we believe are most likely will not come into this year. Our wishes for antigen product again is a product with a significantly lower gross margin for that clearly is helpful for us in terms of covering the overall situation.
It was always quite clear I think for everybody and of course auto for us that Oh for Covid situation has a has a timing impact on therefore, we clearly setting up a cost structure also more or less addressing that topic. So we've worked a lot with this valuable cost also.
Was rather cost truck shows when we were adding people for example into production day was clearly that we are that you are a good partner.
Time contract in place. So I think that is helpful for us in addressing that on the 1 inside the.
The second is nevertheless, something what is important also the way we act and interact with our customers not only worry about asking for also so overall industry has changed.
Somewhat on that is clearly being helpful and Scott is we don't have necessarily to reduce cost to and what we're going to do here, we are more or less maintaining as it increases 1 weighted which we have seen while it's in the second quarter. So we are well on track on all of our R&D projects, what nowadays nothing what we are net.
Selia to change we feel quite comfortable with for run rate. We have today are roughly a.
250, a C&I more people on bullets on pre Covid, mainly also into on D to a sudden extended for sales and marketing structures. So I think we feel comfortable with the existing structures work, we're not going to ramp it up more.
But last but not least is of course also shorten non operational factors, which are helpful. Helpful. For us, it's probably somewhere on a 2025 to 1 sort of equation.
Meaning as I said before we have now a better financing our involvement with a slightly improved tax environment.
So there's a couple of things, including auto shack on which I hope for for us.
The next question comes from Derik Debruin.
Of Bank of America. Please go ahead.
Hi, good good morning, good afternoon, so 2.
2 quick questions.
The first 1 is.
Can you talk a little bit about price environment and sample prep.
We've had a number of companies obviously enter the market during COVID-19.
And this is the market usually dominate by Qiagen can you sort of talk about what you're seeing for pricing and sample prep and the other 1.
So up on Doug's point, and you have like $147 million.
In 2019 for Covid related revenue and no other life Sciences kind of beta we cover certainly had anything in your models for 2019. So I guess the question is what is that and why isn't that sort of like a base number in 2022.
Or are you, saying that that's got to come out as well out of the numbers. Thank you.
Sure. Thanks, So first on the pricing environment for example take a.
First of all as we said last year. Many times, we do you don't try to take advantage of the pandemic to basically burp on prices. We also adjusted our prices. According to the different geographies and we havent seen specific pressure either on automated solution on menu or solution.
And we do not foresee a specific krisher here and as I explained in many calls before you sketch on strategy to systematically bus a price increase as much as we can every year the first point.
Hum.
A question again on on on the.
COVID-19 base, what you have seen in pre pandemic is to make sure that you can compare products that are of a similar categorization on classification that doesn't mean, obviously pre pandemic that they were obviously directed to the COVID-19, so to your point.
It's obviously difficult to imagine that these base would vanish anytime soon because it was not related to the pandemic before the pandemic. So if you want to use it as a base I mean, you know modality. So decent numbers just what we don't want to do is to take a knee bet on.
They need a growth compare to that on the numbers, which is proving to be extremely volatile. That's that's what I could provide you as I was on indication with.
The next question comes from Patrick Donnelly of Citi. Please go ahead.
Thanks for taking the questions guys. Yeah, there's obviously been a few on the margin front Roland can you maybe just talk about how you balance you know cost savings to protect the bottom line inflate the bottomline will revenue coming down here. This year, while also continuing to invest in some of the growth platforms you've discussed.
Talk about that balance again, obviously important for you guys to continue to invest given the given the growth outlook, but at the same time the bottom line not really moving much the margins are hanging in there just just wanted to make sure we understand that piece.
Hi, Patrick.
I think we fully agree we clearly want to invest particularly on R&D, particularly on menu Buildout for <unk> start and then in particular for normal day X that is key for for post Covid strategy and.
There is no no if and when it's the same time, we shouldn't forget that again pre COVID-19. We clearly have a couple of hundred million dollars in incremental revenue base, which by itself brings leverage.
Peer to pre Covid, we have literally tore.
On the small platform in the field, which brings us significant efficiency gain to the company because instead of fighting for for sudden on what else you clearly have recurring revenue streams, we might know sees that certain COVID-19 related revenue streams.
Avid increased volatility or even might go down but it is quite obvious that the installed base is this there we see over the next couple of quarters as customers convert away from Covid into more regular lab testing, but there's again, what we shouldn't forget is over the last couple of quarters, we sold compared to a prequel.
But scenario, probably as free plus placement number of instruments in a in a 12 months' period into that market that will be helpful. For US also in terms of efficiency and so I think that is probably the way to address it.
Okay.
The next question comes from Tycho Peterson of J P. Morgan.
Yeah.
Hi, guys. This is Casey on for Tycho on cash.
I sat in Numonyx that the revision in guidance there how much of that is a function of the fastest slowdown on COVID-19 versus potentially.
Increased competition in the market and I'm, just asking that since the last time. We spoke you had talked about how qiagen COVID-19 testing is over index to O U S markets that really haven't seen the same type of decline in testing. So maybe can you just talk about the competitive the geographic dynamics at play here for both of those platforms.
Yeah.
Yes of course or on the competitive environment. So far does not change I mean, we have seen obviously potential newcomers with the acquisition of adjourn Mark of margin, maybe Jack but.
I mean, the readjustment for US is on your question of the volatility of the Covid testing.
In fact, I think it's fair to say that at the moment are between 80% to 90% of our base for our wedding store base for new margin. Okay. Yes that is very much driven by Covid and now at the point now that we have this installed base is to move them to the rest of the menu we insisted to day.
That we are on track on executing on what we committed to you which is the G. I suddenly turn on Covid I start for the U S. On Dominion Jt's submission on Covid I start for us.
Europe. We are also are edging on human you you'll have seen the price the press release on your margin squeeze the adenovirus the way I see clearly dependent Mickey is that dependent on <unk> load us to probably accelerate our market sales by your euro or more and now we have a solid base.
Instrument, which continues to grow we have disclosed some numbers for H, 1 as well I know the place to convert them to the non COVID-19 part of the menu.
It takes some time by customers I mean, we have said that he's going to take some quarters to do that to fully absorb the a D a impact.
In fact over of COVID-19, but once again those 2.2 and 3 months on not COVID-19 driven those on our menu.
For non empty seats, where we are pushing currently our customers. This is why we highlighted on this call that Gi for example, Pearland in Europe. You show you can get very interesting and encouraging growth trend starting Q2, we need now to push that in Q free we need to.
Launched meningitis and obviously bring G. As soon as possible to the U S.
Yeah.
[laughter].
The next question comes from Peter Welford of Jefferies. Please go ahead.
Hi, Thanks for taking my question just with regards to thinking about 'twenty 'twenty..2 again this time with regards to the knowledge in and I guess, rather than us specifically on the margin when we try to understand I guess, if you can just put in context, the I guess on the SG&A side the manager sales.
He liked the we still see this year.
Due to the pandemic and each the absence of travel et cetera.
Didn't think should come back to <unk>.
Next year above the normal sort of inflation and equally on R&D should we consider that the rate of investment given the menu expansion is going to ramp up again in 2022 or do you feel that this isn't a amount of investment we're seeing at the moment are on R&D E. William on the thanks.
By the pandemic and she said she'd be sustained into 2022, just to give us some sort of idea of I guess in terms of the how would we take a view that on Tuesday, we can sort of multiple the margin impact 3 on it.
In 2022 numbers. Thank you.
Yeah, you bet.
First of all I think just to remind you while our overall operating income margin looks high it's quite obvious that a main driver for that is that we ought to have superior gross margin. So if you just look on the operational expense basis, I think there are still areas where.
Well, it's a compare to peers there is room for improvement Nevertheless.
As I said before we feel comfortable with the investment level. We're having we increased in terms of headcount peak, a pre COVID-19 or 1 to 50 to see her notes, which is where we use the boat we have increased and stepped up significantly on do you have in mind that we went through a significant change and of 2019 in terms of on B.
How we invest into on D. A.
Time, we stopped a significant R&D program for developing a next generation G. Nevada and was over focusing on all 5 pillars of growth for and I think that was and is still the right track to go.
It sales and marketing days leverage opportunities for us we have to deliver on that and given on what I was alluding before there's a significant number of placements plus or it's a wall to get utilization environment that will be helpful to I believes that there is some inflation based cost increases.
Next year, I think that it's fair to assume.
Do I believe that there is a cost environment, which goes back to a pre COVID-19 level I don't see that as things are days, where.
People, who are going to Michael Island, and having big marketing events and that kind of style I think it will be different going forward.
The last question comes from Liza Garcia of Wolfe Research. Please go ahead.
Hey, guys.
And just a couple of product 1.
Are you backing off.
Eric a question on I don't know if you'd just be comfortable providing maybe some examples of what was a net 2019 with COVID-19.
B G.
Just to kind of give us some context and then.
Just for Quanta and good day share.
They've already achieved about 50% and on average.
There are credit.
$5 million goal and historically this has been kind of like a bank.
Strength in it.
I just want to make sure I'm not missing anything in terms of seasonality the share for quanta.
Yeah.
Those are 2 good questions. So basically what you were seeing in the Covid AR category pre 19, Oh pre I mean, you have some error in it this thing get I mean, you don't do Irina testing dress for Covid. Obviously, you'll have also viruses decision on examples for example, they're all on.
So those are projects related to what we call our extraction on that where purification on purification and nucleic acids. Some some enzymology as well. So this is what you hadn't got a category.
On quantifying what don't you are right normally in a normal year, we have for some time and acceleration.
Especially in the quarter for <unk>.
But do not forget that our at least 1 of the main growth drivers for quantify won't even though theyre on happening into falls on in 'twenty, 1 which is the migrant this thing as what I said in our presentation. We believe that if you do this we'd stop again progressively probably starting next year, but we don't have it.
Sure so.
Given the summer time in Europe, given the very strong performance in our in our Q1 and Q2, what we see on quantity only nowhere forecast at the moment is a or forecast for Q free basically slightly be.
Low Q2 over Q1 of 2 wells on in 'twenty, 1 and again, an acceleration of Q4.
Those are what we have achieved either in Q2 or in Q1.
Okay. Thank you very much to all of you to also to Terry enrolling for your time today.
With that I'd like to close this conference call and wish you all a good day bye bye.
Ladies and gentlemen, this concludes the conference call. Thank you for joining and have a pleasant day Goodbye.
Hum.
[music].
Yeah.
Okay.
[music].
Yeah.
[music].
Yeah.
[music].
Yeah.
[music].
Okay.
[music].
Yes.
[music].
Okay.
Yeah.
[music].
Okay.
Yeah.
[music].
Yeah.
Yes.
[music].
Okay.
[music].
Sure.
Yeah.
Yeah.
Yeah.
Yeah.
[music].
Yeah.
[music].
Okay.
[music].
Yeah.
Yeah.
Yeah.
[music].
Yeah.
[music].
Yeah.
[music].
Yes.
Yeah.
[music].
Yes.
[music].
Yeah.
[music].
Yeah.
[music].
Yes.
[music].
Yeah.
Yeah.
Yeah.
Yeah.
Yeah.
[music].
Yeah.
[music].
Yeah.
Yeah.
[music].
Okay.
[music].
Yeah.
Yeah.
Yeah.
Yeah.
[music].
Yes.
[music].
Yes.
[music].
Yeah.
[music].