Q1 2022 Qiagen NV Earnings Call
Ladies and gentlemen, thank you for standing by I am Alain Your P. G I call operator.
Welcome and thank you for joining <unk> first quarter 2022 earnings conference call webcast.
At this time all participants are in a listen only mode.
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Would be made available on their internet site.
The prepared remarks will be followed by a question and answer session.
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At this time I would like to introduce your host John Guiliani, Vice President of corporate Communications and Investor Relations at Qiagen. Please go ahead Sir.
So thank you very much and welcome all of you to our call. The speakers today are Terry Bernard our Chief Executive Officer enrolling Soccer's, our Chief Financial Officer also joining us today is Phoebe loh from the IR team. 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.
They will first have some remarks from Terry and Rolling and then move into the Q&A session. A presentation with details on our performance is available on the IR section of our website along with the quarterly release that you saw earlier. This week, we will not be showing slides during the call, but you have the slides from the website as a reference before we begin let me cover as usual our safe Harbor state.
This conference call discussion and responses to your questions reflect the views of management as of today April 28, 2022, we will be making statements providing response to your questions that state or intentions beliefs expectations or predictions of the future. These constitute forward looking statements for the purpose of the safe Harbor provisions under the private securities.
Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected qiagen disclaims any intention or obligation to revise any forward looking statements for more information. Please refer to our filings with the U S Securities and Exchange Commission and those are also available on our website.
We will also be referring to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP all references to EPS refer to diluted EPS. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is available in the press release as well as the presentation.
Again these are both on our website I'd like to now turn over the call to Terry.
Thank you John and welcome to our conquer on score today and thank you once again to everyone for joining us.
We are very pleased to report strong results in the first quarter of 2022, which exceeded our outlook and reflects a solid performance in our non COVID-19 products.
14% CER growth.
In this current environment.
This once again demonstrates the resilience of the port for yourself.
And the strength of our company as well as the relevance of our strategy.
So again, it's a dynamic global situation, we have taken a very proactive approach to shoring up our business.
This has enabled us up to this point to effectively manage supply chains and keep products on the running to ensure delivery of our products.
At the beginning of the year brought further economic uncertainty on a macro scale. Our teams did an excellent job of staying focused.
So everything that we are very proud to highlight is the fact that upon the Roche, yes envision into your cranes.
He knows all over the world.
Banded together in Shreveport of Ukrainians Azar will it seems all over the world donated funds.
Closing on food and even opened their homes to those in need.
During those unprecedented times, we see the true culture of Qiagen with a dedication to taking care of one another while remaining disciplined to world execution, although of course.
For that I read.
We would like to thank all our teams for their unwavering commitment.
Nowhere lumi to move to our key messages for today.
First of all we exceeded the outlook set for net sales growth and adjusted EPS for Q1 2022.
Net sales for the first quarter of 2000, 1922 grew 15% at constant exchange rates to $628 million over the same period in 2021.
This was well above the outlook for at least 7% growth C. R.
Our non COVID-19 product sales continued to deliver solid growth at 14% CER, which was ahead of our expectation.
COVID-19 related product sales were also better than expected driven mainly by surgeries omicron outbreaks in Europe .
Adjusted earnings per share in the first quarter grew to 83 cents C. R, which was above the outlook for at least seven to 72 cents.
Second key message.
We had strong profitability and increased cash flow in the first quarter, which further reflects the strength of our business.
Operating cash flow for the first quarter of two for going on 22 rose, 61% to $207 million, while free cash flow more than doubled.
Two $178 million over the first quarter of 2021.
Those results demonstrates our ability to support future growth through smart investments.
While managing a rapidly changing cost environment.
As a last message we have increased our outlook for the full year two fold in until 'twenty two as a result of our performance in the first quarter.
Although we are in a time of international economic uncertainty.
We feel optimistic that that was strategy is robust.
And execution by our teams is on track.
Therefore.
We now expect sales of at least $2.12 billion.
For the full year two folds on in 'twenty two.
To be mainly driven by double digit CER growth coming from our non covered portfolio.
And as for EPS, we now expect at least $2.14.
E R Ford adjusted EPS.
We remain focused on advancing our non COVID-19 product groups and.
And we are still taking a conservative view on COVID-19 testing demand for the year.
Of course.
As always we remain ready to support Covid testing as needed in case of any outbreaks in the future.
We will provide more details on the outlook later in this call and I would like now to hand over to Orlando, Florida will final sort of abates.
Hello, and thank you as well for joining this call as to you indicated we had a very good start to the year and feel confident in delivering on the goals we have set for 2022.
Let me begin by walking your school loss yields and the results in more detail.
For the first quarter net sales school, 15% at constant exchange rates against the tough comparison to the first quarter of 2021 .
We saw a solid performance from our non COVID-19 product groups growing 14% CER.
This represented.
Golf widely spread it across the portfolios and in an environment still impacted by the pandemic.
Our COVID-19 protocols testing did mod is the first part of the quarter resulted in 80% see alcohol and sell in sales when we brought actually expanding it expecting a decline.
Consumables and related revenues for the first quarter were up 70% see a what was the same period in 2021 and represented 89% of sales.
Instrument sales was slightly at 2% see but this was against the highest level of quarterly instrument sales for 'twenty, one and the year ago period.
The Q1, 2022 level of $17 billion of instrument sales at CER was in fact higher than sales in any quarter of 'twenty one.
Key drivers for this growth the record placements of chaos start in automotive X systems, along with solid trends for the kayak acuity chaos Symphony Kayak cube and easy to connect instruments.
In terms of sales amongst our four product groups, let's start with softer technologies. This.
<unk> was 22% see AR and VR driven by high demand for the kind of PREPA and absolution for COVID-19 testing, particularly in Europe .
Instrument sales force at a low single digit C. Outweighed supported by placements of the recently launched easy to connect instrument as.
As well as Sky that Symphony and kayak you connect.
Consumable sales for non Covid product scopes faced headwinds against the very strong demand in Q1 'twenty one.
Period, when many customers returning to work after lockdowns and back orders without being with us.
We expect more favorable trends for this portfolio in the second quarter and so rest of Citi.
C. Its and diagnostic solutions was 21% CER for the soft quarter of 'twenty two.
The key driver of us quantify it on the sales rising 41% CER to 78 million U S dollars with strong growth across all regions.
Yeah, its treads for Kai I'll start the eggs and I'm with the X systems went live is our full year expectations for this growth pillars, which are both still in the commercialization ramp up phase.
Our position medicine business benefited from a assumption of many pharma R&D projects and revenues from companion diagnostic co development projects were up 26% CER for the quarter.
In the PCR nucleic acid amplification product group cheered schools, 1% CER for the first quarter of 'twenty two.
Yeah, we saw a high single digit CER decline in corporate product called says that vastly overshadowed a double digit increase in the non COVID-19 pollack hopes.
This product group was supported by sales of the kind of acuity digital PCR system as well as O N E jets used by other companies for their own products.
Genomics and U S sales were up 16% see a what was the first quarter of 'twenty, one and led by a strong performance.
<unk> digital insight bioinformatics business. We also saw a double digit CER sealed scoffing universe of consumables used on any next generation sequencing platform for non COVID-19 applications.
Moving to the regions, we saw good results in the EMEA region.
In EMEA with 24% C arguable.
This was led by strong growth in a number of countries, including Germany, Spain, the Netherlands, that's United Kingdom.
The Asia Pacific Japan region also grew at a solid pace with 25% see arguable and here, we saw China growing above 10% see along this dynamic gains in Australia.
That's driven by instrument placements.
The Americas regions C. S was 4% CER against Covid headwinds from the first quarter of 'twenty one.
The U S and Brazil delivered single digit C alcohols supported by higher sales of both consumables and instruments, while sales in Mexico declined over the year ago period.
Moving down the income statement, it's adjusted gross margin stood at 68, 6% of sales in the fourth quarter of 'twenty, two and largely unchanged from the year ago period. This is despite absorbing costs the fourth quarter of 'twenty two for investments made last year to build up consumables production capacity.
Especially for KAR stock in <unk>.
The investments we've made at a high level.
In terms of dollars, but declined as a percentage of sales to seven 4% compared to $8 four per sentence, a year ago quarter due to the strong sales growth.
Our target where it is at least eight or 9% of sales being invested into R&D and for a significant share to be in our five pillars of growth.
It's the same time, we gain further leverage other operating expenses.
Marketing expenses declined to 18, 9% of sales in the first quarter of 'twenty two from 'twenty one in the same period of 'twenty one.
We are ramping up our digital customer engagement capabilities and building on the new habits that customer develop that customer developed drugs, a pandemic and are showing signs of continuation.
And his last point General and administration expenses stood at five 5% of sales in the 'twenty two quarter compared to 6% in the year ago period.
Efficient see gains are being used to support investments in our two systems and cyber security.
Based on these factors adjusted operating income was 19% to $231 6 million U S dollars and its adjusted operating income margin improved by about 10 basis points to a record $36 9% of sales.
Adjusted EPS for the first quarter was again, well above our outlook and was 83 cents see off versus the outlook for at least 72 cents a.
There's lots of extra words were 80 cents due to the stronger than expected currency headwinds.
The adjusted tax rate was 19% and the buffs outlook, we have given for a tax rate of about 17% to 18%.
Turning to cash flow trends for the first quarter of 'twenty. Two we saw dynamic performance in both operating and free cash flow operating cash flow increased 61% to 207 million U S dollars from $129 million in the first quarter of 'twenty one.
What's driven our strong business expansion that led to higher net income and adjusted adjustments for noncash items.
Operating cash flow include a decrease in operating assets and liabilities, primarily due to increased accounts receivable and inventories to meet the increase in demand and decreases in accrued and other liabilities and accounts payable.
As for the free cash flow, we saw that about 60% increased $178 million in the first quarter of 'twenty. Two from 82 million you asked us in the year ago period. This reflects a decrease of purchases of property plant and equipment in the first quarter of 'twenty, two compared to the year ago period and additional investments were.
Matrix spent product capacity for key Wolff product at sites in Europe , and the United States in terms of our balance sheet. Our total long term debt is $1 9 billion at the end of the first quarter of 'twenty, two and remains relatively unchanged from the balance sheet, that's a year end.
As of March 31st $469 million of this debt is you lot later this year as portion of pools or U S and John private placement stepped into the private placement debt instruments that mature in October while our total debt level remains in line business end of 'twenty one.
Our net debt has decreased due to higher levels of cash cash equivalents and short term investments held at the end of this first quarter.
The decrease in net debt combined with higher adjusted EBITDA was the highest it into a leverage ratio of one seven times at the end of the first quarter.
Our continued solid cash flow performance along with the value we are creating in our portfolio through our investments into the business give us confidence we are well positioned for waves of Wolfe into coming years.
It allows us to continue exploring options for capital deployment, including bolt on acquisitions alignment with our goals to create greater value for shareholders and all stakeholders.
Our ongoing commitment to increase returns to shareholders as evidenced through the Chicago process program completed last year, and we've repurchased a total of one 9 million shares 400 million U S dollars.
Like now to hand back to Teri.
Thank you all and please as usual allow me to give you a quick update on our work keep our tortillas and here again I would say that the keyword is execution.
Sample technologies first of our new easy to connect system will launch at the end of 2021 as part of our program to upgrade our automated sample preparation instruments with the launch of the latest consumable keeps Ford extraction.
Aaron.
Aaron may from cells and tissue easy to connect is covering a wide range of key application and enhance our human identification solution H I G.
And you walked through on the easy tour, along with Leucadia Koichi digital PCR at least three months offers treme line bedroom marker profiling from liquid biopsies and paraffin embedded centers, enabling quantification of viruses bacteria or ozone disorders, including where the cancer mutations.
Yeah.
In diagnostic solution quality film TB gold plus as reached a new milestone with over 100 million patients screened for latent TB.
We anticipate the next few years to be a growth period from modern latent TB testing in emerging market as the carrier reached TB test makes its way into high burden low resources areas.
Third.
Okay, yes that diagnostic rise the new higher throughput version of the chaos that diagnostic Syndromic testing platform is on track for launch by mid year.
As a reminder, this system features random access we skipped a city to hold up to 18 different test and includes a new liver or walk away efficiency.
This comes at the same time as we expand them and you forecast that diagnostic with D. C. With these three shouldn't of dominion's JC Penney and submission for <unk> two dee.
Yet for approval of the gastrointestinal panel at the end of 2021.
In PCR and nucleic acid amplification, okay, yeah creature digital PCR is making good progress in expanding the application of the range for those systems.
The recently launched digital PCR micro by your DNA detection assays little raised a simplicity on precision of carrier quitting the fast workflow for the rapidly growing area of microbial analysis.
In genomics, we are building grow through partnerships as we have signed an agreement with NHS, England for a two year licensing contracts, Okay agenda bioinformatics solutions to support work in the 100000 genomes project.
Also a new collaboration with element Bioscience partners, leveraging the flexibility of carriers in Geneva, Sudan's, yes, consumables with validation on the element a V T sequencing system.
G suite include a complete workflow employee and Qiagen sample prep custom made assays and industry, leading bioinformatics solution. So as you can see we continue to make progress and I will go for targeted expansion of our portfolios as part of our strategy to drive sustainable growth in the coming.
I know back to order.
Let me provide.
Some additional perspectives on the outlook for full year 'twenty, two and also for the second quarter.
Based on the strong start to the year, we have increased our outlook for full year sales to Norwich 2.12 billion in U S dollars at constant exchange rates. This outlook reaffirms our expectations for double digit CER growth in the non core product groups building on the 14% see outperformance.
The fourth quarter. However, we do continue to take a conservative view on the cross of the pandemic and still expect a significant decline in sales from the 21 levels of $7 4 million U S dollars and product groups using COVID-19 testing.
An important amount of these cells for 'twenty two have come in the first quarter for.
For the second half of the year, we expect these product groups to deliver sales in line with the 2019 one right.
Also taking into consideration ASIC.
How's the current inflation in microeconomic trends. This includes the adverse impact of anticipated lost sales in 'twenty, two from wash yacht with crate and barrel hours, which represented approximately 1% of net sales in 'twenty. One you're also taking a more cautious view on China due to Chicago Lockdown situation.
In terms of profitability, we now expect adjusted EPS of at least $2.14 at T. O. This takes into consideration continue plans for investments into our portfolio and in particular as our five pillars of growth. It also takes into consideration some adverse impact on costs related to cost inflation.
With which we are trying to offset with a second wave of price increases this summer.
Based on exchange rates as of April 25th 2022 currency movements against the U S. Dollar reporting currency I expect it to create an adverse impact of about four percentage points on net sales and about eight to nine cents per share when adjusted EPS for full year 'twenty two.
For the second quarter net sales are expected to reach at least 510 million U S dollars and adjusted diluted EPS is expected to be at least 46 cents at CER and members that we had one time revenues of about 20 million U S dollars. The second quarter of 'twenty, one related to the sale of <unk>.
Gnomic patents and technology licenses.
We also expect currency headwinds in the second quarter against the U S dollar and for an adverse impact of about four to five percentage points on sales and about two to three cents on adjusted EPS I would like to now hand back to you.
What else. So let me provide you with a quick summary, before we move into the Q&A Fisher.
First.
Our teams continued to deliver strong results this quarter with sales growth and adjusted EPS exceeded outlook.
This was driven by solid growth in non COVID-19 product groups as well as higher than expected sales from COVID-19 related demand.
Thicker.
We maintain an attractive level of profitability.
<unk> cash flow enabled us to continue to invest in our growth drivers.
Digital customers engagement platforms, while disciplined spending give us liberal rage in our operating expenses.
We are obviously proactively thinking about our capital deployment strategy, including evaluation of bolt on acquisitions.
Phil.
We continue to advance our portfolios with the launch of key products and platforms to a grade that were instrument systems and broaden the menu of our growth drivers.
And as a last point.
We have increased our 2022 outlook for sales and EPS.
After a very strong and solid start of the year.
We therefore confirm our commitment for double digit growth of our non covered portfolio in 2022.
Our performance in the first quarter set a solid stage for continued exactly should in an increasingly volatile environment, while our proactive initiatives helped us to build resilience into our business.
All over the world.
Our teams of poets carry agendas are highly focused on delivering on our promises for future growth.
We continue to believe in our focus on execution.
Cost to arrest a quarter from says to project development.
Okay, yes, it is more than ever well balanced between life science and molecular diagnostic well balanced geographically.
And well balanced between our five pillars of growth and our core business.
With that I'd like to hand back to John and the operator for the Q&A session. Thanks, a lot for your attention.
Thank you 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 one on their touch tone telephone.
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To ensure we can accommodate as many people as possible please limit yourself to one.
Question, only and if necessary one follow up.
Your microphone will also be muted after finishing asking your question.
Anyone who has a question May press star followed by one at this time.
One moment for the first question.
We will take our first question today from Patrick Donnelly of Citi. Please go ahead.
Hey, guys. Thanks for taking the questions Roeland, maybe one for you on the margins and I have a follow up on some longer term stuff, but on the margin side, you know pretty nice performance here can you just talk about the moving pieces, obviously cost inflation wage inflation or big topics you guys seem like you're passing price along pretty well to customers in this environment.
Can you just talk about the levers there and expectations going forward, how we should think about particularly the gross margin piece going through gone through the year here.
Yeah. Thanks for the question Yeah, you have seen that Victor you had a good start into the year also in terms of profitability and clearly pricing was helpful. For us as you know we typically do at a.
Our regular price increase.
And in that period, and I would say, it's got well accepted by our customers.
But it's also clear that our we'd when while we were able to increase our guidance for the full year, but clearly also reflected some of the inflation driven cost, particularly on NRG on logistics, which are at least partially affecting us as well and then took careful with it. So I do think we have affected that.
That is well I think one of the benefits of being a strong brand.
Really recognized for the quality of the product is also that we do have a pricing power and that we are in continuous discussion with all our customers. So we have to see how it moves for the rest of the Oh.
I do think what is also important to note is that overall I think.
We call it that from prior years, we have I think very well all our hands or want a cost structure. So we clearly.
Using some of the extra while we're able to increase our guidance, but clearly also using some of the extra proceeds to reinvest into certain R&D and marketing activities to be a I would say a strong gone faster with some upside activities over the course of 'twenty, two and I think that.
I suppose a forever right.
Okay. That's helpful. And then maybe just kind of a longer term one I know you know a lot of investors focus on kind of trying to break out.
Go ahead.
Still carry the right way to think about kind of that core business growing somewhere six 7% and then that Covid you, obviously had the preexisting $150 million or so the rest of that you know maybe declining pretty healthy next year, and then kind of put those two together and you can kind of get to a 23 number I'm just trying to think you get the free.
Work the right way to think about as we work into next year again, you guys are a little unique in the fact that you had kind of a stable.
Covid revenue before Covid.
So again I'm, just trying to kind of think about the core versus COVID-19 and kind of building that bridge as we work.
Work our way through the next couple of years here.
Yeah, Patrick I think we have given several dozen indications over the recent years of what we were thinking about the coming years, we without giving her a formula.
Mid term guidance.
During this call. We also mentioned to start with the coffee that we expect basically in the second half of the year.
To have.
Or coffee business basically normalized to.
Good over that we had pre Covid clear you remember that we always mentioned the 150 million base. Once we enter into a more normalized phase I mean D. C is going to grow with what it was growing pre COVID-19 , which is really in the in the low single.
Did it. So this is called the question under under under Cookies comparison pre Covid and.
And post Covid.
We always said since December .
Eight when we did the Qiagen day that.
Four of our growth drivers were expected to have a double digit growth.
We always say that quantify them, obviously, it's not going to stay at those liver.
Forever, but we always normalized once you feel on the let's say midterm basis around basically 12%, 12% to 15% growth rate and we maintain that.
We always said that because they are basically new platform in dynamic markets. Obviously, you got a quick T K I start.
And <unk> post headwinds of the coffee it forecasts that the annuities are double digit also dimension.
We always said also that the sample is a business that you could expect to grow to a low too from a low single digit to meet.
Mid single digit depending on the new application that we cannot so we confirms.
So the thing that I would like to highlight or so today is that sometime I believe that that when we talk about the five pillars of growth. Some people are considering that what he's not a few dollars of growth are not growing business and we prove you again with our Q1 result that it's absolutely not the case so too.
Give you some details.
We expect for example.
Our companion diagnostic business to continue to grow at double digits, I, where you'll need us all a N G. As solution had a profile of double digit growth before COVID-19 . There is no reason that post COVID-19 .
They go to see them, but did you to and growth and last but not least our wood.
Again that our valuing informatic activities, what we call Qiagen digital insight.
In our assumption also continue to have a double digit profile growth profile there.
Does it answer your question.
Yes that was great I appreciate it.
Thank you we move to our next question.
From dawn areas of Stifel. Please go ahead.
Good morning, guys. Thanks for the questions to two and if I may number one theory. When you think about the outlook for Cai is that what do you envision the mix looking like a few years out when it comes with the installed base for that system and its 85 million still the right target for Cai is that in 'twenty two.
And then number two for Roland I, just wanted to check in on the Covid related margins assumption I think at the end of last year.
The view is that.
Absent the leverage that you'll get from the above average volumes coming from Covid testing Covid testing revenues shouldn't actually come through the door at a meeting with different profitability level than the rest of the sales base is that still the view thanks a bunch.
Thank you then so regarding chaos thoughts, yes of course Uh huh.
As of today reconfirm or his D G outlook for 2022.
And to your broader question, Oh, I'm going to use that and the market share that we are targeting Q.
We continue to believe that Syndromic market is a very dynamic market we'd.
We believe that kind of agenda. This market is already around one point to $1.3 billion market.
And our assumption is that this market grows at around 15%.
So a year.
I highlight that some of our competitors are thinking that the market is already bigger because they sometimes say $2 billion market and they also sometimes said that according to them to market is growing at 20%, but anyway, it's a dynamic market.
We confirm that our ambition forecast that.
Is to take.
At least a 10% market share of that market clearly.
And we have a number two ambition. So you know who is the number two at the moment.
If I would tell you we will be the number one it will be completely S. P restaurant or because we are basically are behind by your failure, but they came to number two on the market is our clear ambition for the coming for years.
It's difficult to tell you in term of platform does it what what what it means.
But pre Covid on average we had quarters between 250 M 300 placements per quarter.
As we are going to continue to increase the menu. So you have just seen the meningitis now approved in Europe , we expect the.
Approval of <unk> in the U S to come at the end of the year and then we will obviously submit meningitis. So we expect meningitis tubular approved next year in the U S.
It means that by 2023 mm mm, let's say around hopefully.
Free of 'twenty free that you we have two regions in the World Europe and the U S. We have a very decent menu already for it seemed very impressive pretzel respiratory with or without COVID-19 .
I mean, that's essentially yet and we have also development as we showed you we are preparing a development for the pneumonia. We also are working on our direct identification of positive blood culture, and we confirm that we are also working on the.
See a U T I a M a C.
So if we execute on that menu there should be no reason, that's basically quarter. After quarter. We are all really wrong that lever of platform that we are a quarter that we had pre COVID-19 . That's in our assumption does it answer your question.
It does thank you and then just roll it on the margins if you could.
Sure.
Yeah.
I think it's fair to say that we have actually a broad bandwidth on different thousands of other corporate products in that.
The mix is sometimes even shifting quite a bit. So for example in the first quarter you clearly have seen that we ought to have good contribution overall from a grow over from sample prep products particular prevalent M, which I would say, it's probably a somewhat higher gross margin product at the same time. We also had a good contribution from some of.
Products was in Covid, which have typically a significantly lower gross margin.
So I think there is some fluctuation of isn't that are I would say average I will eat into that that COVID-19 , probably is somewhat under average gross margin for us, but again there is some volatility you want that.
Thank you we now move to our next question from Derik de Bruin of.
Bank of America. Please go ahead.
Hello, and good morning.
So two questions I think the first one is you're you're.
0.7 times net leverage and you've alluded to some potential use of cash for acquisitions can you sort of update us on your capital deployment outlook right now and you know and sort of like a balance between share buybacks doing incremental share buybacks and M&A and just.
Anything in terms of.
The outlook on the market and you know it.
Potential.
[noise] augmentation to your portfolio.
Well I can take the first box and and I would like to point toward onto chime in or shore, especially on the balance between equity share and she'll buy back orders or tools.
I think we said the direct during the scored that G ambition is to create value for the shareholders shareholders also stakeholders of the company.
So are we.
We are obviously actively considering different tools.
M&A is one of our focus at the moment and we are strictly.
Trying to execute on what we have toward the market for the last two years.
Priorities on bolt ons.
But not only on Bolton on bolt ons that are really fitting into the core.
Or the five pillars of growth for Qiagen.
We would probably have to.
Expand our ore expense I'm, sorry, 100 million in opex or capex to bring it to the market no. We want to focus on bolt ons that all rapid plugging in our portfolio.
We always say it also especially last year. When we were asked was about bolt ons that we want also to pay the same price in the market, which is sometimes slightly overheated.
So.
You can therefore think about ease of reinforcement reinforcement about oh overwhelmed with T corridor.
Trends.
Raw materials components for US is you can think about menu addition for some of our existing ease the core activities or few dollars of growth do you see is what we call direct T extra newborn and obviously, we are targeting a acquisition that should benefit quickly.
From an accretion standpoint.
Right now what you see there are user tools are you asking Kevin doing a share buyback program in the past and I would like to invite hard also to give his point on on the balance between M&A and share buybacks, all rose up to all of them yes.
Yeah, Thanks to you.
I think once you buy that.
Of course, it's somewhat depending on the bolt on acquisitions. We are looking into is of course the size. Nevertheless, I would say kind of planning.
That we are most likely in the situation that we can actually can do both for a continuation of a since 2012 kept it allocation policies are doing bolt on acquisitions and continuing with our share buyback policy I think it's worked out.
Right now I see over the last two years.
In addition to that just have in mind that we also have a larger repayment in the second half of the Oh I think it was around 470 million U S dollars sourcing all of that has to be seen together.
Did we answer your question Derrick.
Yes, you did thank you very much.
Thank you we move to Mac Sykes of Goldman Sachs for our next question.
Thanks for taking my questions. Good morning, first one just on you might ask you've talked in the past about the pit.
The long term potential of menu expansion, particularly in U S and the longer term side, but just can you kind of give US a reminder of what that menu expansion plan looks like and when we can expect to see some offset I know they're covered revenues rolling off at this point, but as that menu expansion starts coming through when could we see some reacceleration.
Numerex, specifically as we look through this year maybe into next.
So rather than expansion, it's a geographic expansion of an existing menu because sometimes.
It seemed that he freeze just speak about menu expansion and people are thinking that we need they're getting to spend development money to expand them and you know what we need to spend is kidney code ourselves on clinicaltrials menu and more.
I am sorry to bring what is existing in Europe , which is 15 assays that are CE marked between blood borne viruses sexually transmitted diseases.
Respiratory issues to the U S and it's a mixed bag of effect in care approvals and also FDA PMA.
PMA approval.
So we have always towards the market that we believe given the accessibility of clinical trial yours. Given also the backlog, which is a quite a way to know what the idea of D. At the moment that those 15 assays of pneumonia you should be.
Approved idea G eight by the end of 2024.
So of course.
It gives us some years during which we will not always have the menu that we have in Europe does it mean that we cannot compete in the U S absolutely not true.
The award.
Because.
Every year, you will see new U S.
I say its coming at you.
In Europe in the U S. You have already obviously COVID-19 you have coffee don't merit on their shop flex.
But also on single Plex, you have all sorts of U B S.
We are going to go to see T. N G. So every year that would be something gifts.
But tinder U S. One of the big relevance of pneumonia is that he's the only automated platform.
We tweet or laboratory can use at the same time in a random way rigs.
Regardless of the center, they're going to use either regulated that says if you approved or what we call laboratory developed test.
This is unique there is no all the platform on the market able to do that.
And as you know.
The U S albumin market for energy teas in the world.
So.
We have two main strategy or what you see in the U S. First is to make sure that we can become attractive for those sites using L. D T and move them between your medics.
While at the same time complete their 82 approach by respiratory by Native for example, like Covid and Baidu menu that rehab like as I said before G. P. H E B S.
<unk>, yeah that even when you as we go that's the strategy.
And this is why you saw we told you very transparently last year that that because.
We are not the board with the Covid headwind.
To watch how the cookie the headwind with the rest of the menu in the U S. D. C Y Nordics numbers are lower this year than in 2021, where you achieved 100 million revenues in 2021, and we gave a guidance for 80 million plus in 2022.
Once we have eliminated this COVID-19 head wind in the U S essentially.
Once again, there is no reason why <unk>.
It shouldn't be growing at double digit and where we are and where there is no reason why we shouldn't be taking more customers. Both in Europe in the U S. But also in those geographies. This is exactly what we are seeing currently in Europe as we are moving.
Out of the Covid impact.
Does it answer your question, Matt Yes, no that was very helpful. Gary. Thank you very much just one more quick one I know you're your newly raised guidance incorporates adverse impacts potentially from China and Ukraine in regards to China. Just wondering if if you also kind of baking in a recovery in China in the back half of the year I think most expectations already.
It's sort of focused on Q2, but just would love to hear how you're thinking about China for your business specifically over the course of this year.
We have different models for China.
First of all we anticipated.
What has happened, especially for the last four weeks.
Because we saw this coming via Hong Kong. So this is why we can show those numbers in Q1, because we anticipated by shifting over to China, a bit more than usual.
I wouldn't model to the new guidance.
Assume that this lockdown of some cities because let's not forget but as you know that not all the cities are locked down in China bid genius working quite normally at demand Shanghai, He's not and so I will comment more that is thinking that these various tweak.
Lockdown or Shanghai, he's going to remain in place for four to six weeks.
This is what is in our current forecast.
If it remains long if it stays on longer the impact on our cash and we'd be fully manageable for the managing board.
So we do not factor or specific.
In Q4, I don't want because clearly there is absolutely not factor.
During that this might happen.
Now, let's not forget also Matt that in China.
Our agenda is not only the prisons rescheduling product, but you might remember that we ever saw a second brand second brand, which is fully Chinese with dedicated salespeople did you get in marketing people geek activities. So it does give us and knows our agility.
In this country.
When it's a bit more default for the product of China, because he's out of logged on the Rosetta rehab Tianjin, our second brand invite that size web. So this is why I believe that the current guidance is factoring completely.
What could happen in China, if the lockdown continues a bit more we do not believe that he's going to be a big impact material impact, we'd find ways to compensate but two of them.
You see we leave that situation like you would day by day, everybody you expect that to go round monkeys go into we lose a beat there are there what do you see especially in some cities like Shanghai, because it's not sustainable for the local population and felt their business either.
Yes.
Much.
Thank you we take our next question from Dan Brennan of Cowen. Please go ahead. Your line is open.
Great. Thanks for thanks for taking the questions guys.
Maybe the first question on the guidance if you will so you are.
Posted 14% CER growth in <unk> head of your 7% guidance I think it was like a 40 million CERP.
You raised the full year CER I believe by $50 million. So just wondering is.
Is the upside in one queue not sustainable for the rest of the year or you just being conservative or is it. These other factors, namely China, Russia, Ukraine that is maybe mitigating some of the underlying base business guidance rates.
I think I think our hurdle is underlining is present, they shouldn't that Ukraine, Russia.
Both markets combined there are reasons for that matter are not really material for catch it and you'll have understood that we are talking about small numbers over there has done 1% of our revenues are fully factored. We we do not expect any activity in Russia or in Belarus are for the rest of the year.
D guidance factors.
The new guidance factors, obviously, the stronger quarter factors, what and where we have visibility on we are extremely satisfied by the fact that despite a very strong at least in January and February .
Push and surge of Covid, our noncore portfolio performed so well.
We always told you that this was due for cruise pushing that portfolio at a double digit growth. So I will new guidance factors are better than expected non course of Covid in Q1.
Our visibility of what we see currently in Q2, and that's what I said in the second half of the year, we do not.
Take more assumption on the coffee business there.
And just as far as the number of sick Hum, you'll recall that we got a $5 67 in Q1, 'twenty, one, adding a 7% guidance or guidance does it and compare to the $6 54 C. O. We're having now is a 47 million delta.
That's funny.
Okay.
Maybe second one would just be on quantify on a really strong number accelerated on a two year stack basis. So its borders reopened.
Low double digits, the right way to think about the full year for that business. If you kind of said something about the full year guide I missed that I apologize, but just wondering how to think about the full year for quantifying that.
Well, we gave or we even gave a number for once you feel or what we want to achieve on the we are currently confirming these numbers then it would be at the budgeted growth in 2022, we ask Kelly yeah.
But the strength that you're seeing here is is there conservatism baked in there just wondering if you can walk through a little bit about like what's implied in the back half.
I think the best way to describe it.
Please go ahead.
I think the best way to describe it of course as you said, we got it Oh, yeah. This year C N a $10 million or quantify them, but clearly had a strong start of the year.
And that's what he said he couldn't believe is going to continue.
The comps getting a bit more difficult. Nevertheless, we are we are starting to believe that we are I think it had a very good chance to make them probably to beat it let's take let's leave it there.
Thank you we take our next question from Casey Woodring of J P. Morgan.
Hi, guys. Thank you.
Can you talk about the low single digit decline in non COVID-19 sample check in the quarter I know it was a tough comp, but just wondering if there was anything else that you'd call out maybe Ali Claude.
No doubt some some customer a lot of activity.
And then going back to Patrick's question on Slide 23, it looks like you think the back half of twice the run rate for 'twenty three non COVID-19 consensus.
Consolidated revenue growth next year isn't below double digits. So I'm just wondering if that's the right way to think about things on the non covered side longer term. Thank you.
The first question that we can take this one to two hours I can start with simple take if you want to know we clearly see a.
The soft Q1, but it's clearly a comparison as you highlighted is here with Q1 last unless you want to follow on in 'twenty. One that was the situation for the non COVID-19 temporal thick.
We were coming out.
Over very half 'twenty.
From a coffee perspective customers, we're reallocating ordinary 14 through COVID-19 , especially acute youku free.
But some customers will you see starting Q4 started to say guys, we need to come back into some non COVID-19 activities, we still need to have some kudos.
<unk> testing so most of our infectious diseases and therefore in Q1 of last year, you had basically a pent up demand for many customers in sample take non cookie DNA mean, and this is what you see here I don't think that he sees a trend on the contrary what I highlight is remember last year, we highlighted many times.
That we were in more active growth in 2021, four simple take non COVID-19 done pre COVID-19 doesn't preclude pre 19 a pretty.
Pre Covid 2019, so I believe it's going to be normalized in Q2 Q3 Q4.
Back to the normal classic core growth of sample tick.
And then just on slide 23.
Yeah, I think on 'twenty to 'twenty three I think all of the other non corporate side I think you all have a set of you was I believe Oh, we haven't given any official guidance, but I do think U S. You see U haul we start into the year that'd be also reconfirmed today also for the full year.
Double digit non corporate cool fit are we.
Significant placement numbers in the first quarter particular in chaos start and also knowing what he is oh.
Actually started person numbers that's all.
<unk> instruments as well so I do think we have a lot of reason to believe that our non corporate number should be higher than what you indicated before you go if you actually quite strong and I would say that Q1 is probably even.
Extra the weighted sum of issuers as well.
Thank you our last question today comes from Jack Meehan of Nephron Research. Please go ahead.
Thank you Hello, guys.
My question I know, it's only April but was hoping you could provide a little bit more perspective on the exit rate into 2023, just looking at your back half kind of implied guidance is around 40 cents a quarter of E. P. S.
Just talk about like the leaping off point as we think about 2023 I know again, it's early but just any thoughts on puts and takes would be very helpful.
Yeah, probably some perspectives on that.
Well I don't think it was 40 cents. Nevertheless, if you do the math to what we have right now, but the guidance for the second quarter, it's higher but having said that I do think I want to make two remarks here. One is a first of all what we said before why do you believe that we are.
Covid relevant we do not want to be caught with dependent what that means is that there is no incremental COVID-19 , our revenues and our guidance for the sort of first quarter and our other than what we had already underway in 2019, which was pre COVID-19 . So, let's see if that becomes true or not or if there's still some COVID-19 related.
Revenues.
Second I think I would just sit in some of my prepared remarks is that we're clearly also going to take some off the extra flexibility. We're gaining this year again, we're able to increase the guidance.
The first quarter and let's see what we're able to do in the next few quarters. We have also taken some upset our money and reinvest that in this year, particularly on the R&D and some marketing activities.
I do think that should have a beneficial impact on boss.
Midterm revenues.
Probably also on midterm cost structure, because you might get a lot of things initiated.
We have shown in the past that we have all hands right.
Well on what our cost structure. So I don't think that the you shouldn't look at the second half we should look at the full year. If you look also what is the kind of are starting to wait for next year.
Okay. Thank you Roland and I think with that we're going to end the call right on the hour. If you have any questions. Please get back to Phoebe and me and we really appreciate your participation in this call.
Thank you, ladies and gentlemen that will conclude today's conference call. Thank you for your participation you may now disconnect.
Yeah.
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