Q1 2023 Qiagen NV Earnings Call

[music].

Ladies and gentlemen, thank you for standing by I am Katie your call operator, welcome and thank you for joining Qiagen first quarter 20, twenty-three earnings conference call and webcast at.

At this time all participants are in a listen only mode. Please be advised that this call is being recorded at Qiagen request and will be made available on their internet site.

Pardon my remarks will be followed by a question and answer session. If you would like to ask a question you May press the star followed by one on your Touchtone telephone.

Press, the Starkey followed by zero for operator assistance.

At this time I'd like to introduce your host John Guardi, Vice President head of corporate Communications and Investor Relations at Qiagen. Please go ahead.

So thank you operator, and thank you as well to all of you for joining us today on the call. We have Terry Bernardo Chief Executive Officer enrolling soccer is our Chief Financial Officer also joining us as Phoebe low for any Investor relations team.

Please note that this call is being webcast life. It will be archived on the investors section of our website at Www Gaijin dotcom.

Copy of the quarterly results press release and presentations are also available on this website.

They will first have some remarks secretary enrolling and then move into the Q&A session. Before we begin let me briefly cover our Safe Harbor statement. This call discussion and responses to your questions reflect the views of management as of today may 4th 20, twenty-three will be making statements and providing responses to your questions that state intentions build.

These expectations are 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 actual results may differ materially from those indicated by these forward looking statements as a result of various factors. These include those discussing or filings with the U S Securities and Exchange Commission. These.

Thank you very much drawn under very warm where to come to all of you. Obviously you. Thank you for joining goes well.

How'd you I've seen from my were released yesterday K agenda has had very sordid stopped in the first quarter.

Oh, it seems all over the world remain focused.

Uncertain Macroeconomy insurance and did a great job executing on I work goes delivering 12 cause some C E O Grove, and I were non Kobe product groups, even better than expected.

Now, let me get to the top messages for today.

Trust.

[noise] exceeded our outlook form it says Grove and I'd just D E. B S driven by strong says in the known Covid based business.

On the other hand, jus to Q1 2022 being an exceptionally strong walked her for Kobe testing, we had sides of the border headwinds unexpected in Kobe product says in the first quarter of 2023.

As a result.

Total sales declined 20 per cent C E R two $485 million odd actual rates.

Adjusted earnings per share were 52 cents C. E. R. Also will go over the outlook for at least 47 cents C E R.

I was taken message.

With teams are executing on now where $550 off Grove strategy.

In Central take first we are pleased to report dober digit C. E. R Grove, continuing in the non Covid portfolio.

Quarter of Dover D. G C E R Grove with Trent.

Ah, yes, the diagnostics, so significant says games for the G I and meningitis Spanners in Europe .

Okay, Yeah, queasy portfolio of digital Pcf's system and application kids. They leave a double digit C. E O sales growth, we saudis in three months placement and an increasing uptake of consumable all across the region.

As a film message.

We are maintaining a good level of profitability.

We continued to make investments into our business organically or non organically.

Well actively managing cost with a high level of discipline.

We are reaffirming our food your outlook for 2023.

Four 2023, we continue to expect says over at least $205 billion at C. E. R and four adjusted EPS of at least $2.10 C E. R. A game.

Two d's outlook is that will go to deliver for the food your double digit C E ourselves Grove in the known Kobe portfolio.

Remember that those sales compared to the pre pandemic liberal over around $150 million of sales in 2019 from those products.

We do have a strong portfolio.

And the Saudis customer knowledge to ship water will girlfriend Bichons.

Many of you know Steve from his long 10 years, after chairman President and CEO of Queers diagnostic.

Steve as indeed remarks keyboard career in the diagnostic industry and we look forward to evaluate bold contribution to the future success of Kaj.

Thank you I'll tell Ya Hello.

Hello, everyone and thank you as well for me joining us today on this call.

These were supported by solid Crawford says a few new Russell and she has kids for use by any secrets. So and then the cage and ditched inside P O matic business.

Mayor region.

Adjusted E. P. S for the first quarter of Tennessee was 52 cents at constant exchange words and adopts the artwork for at least 47 said CER.

Among the recently broke months, we launched a group of chaos seek targeted self free D and the huge rapper and therefore to use on any sequencer.

As I mentioned earlier, we have we have up to full yourselves I'll look for at least 2.5 million U S dollars at constant exchange rates and for the other digits he ourselves cough and the non Corbett Pollack whoops.

The shelf sales from Vancouver product is clearly going as she walks through the pandemic headwinds.

One of our strengths is all portfolio is a high shelf talker avenues for consumables misrepresent over 85% of total sales.

What's your thought from other companies. We are also seeing some caution among various customer groups it drops of instrument purchases.

At the same time, we are seeing positive trends and placements and the level of customer interest.

Clearly due to the value proposition that our new platforms have to offer.

In terms of regions, we are keyed Ah.

We are keeping an eye on trends in China.

How has it developed during the year.

And that's what we are watching closely as or web business. Since it involves larger orders from other industry supply us unless we have seen as a pass this as a business we're ordering can be volatile.

In terms of profitability. We also we have thumps artwork for adjusted EPS at about $2.10 at constant exchange words. So this includes the sweetened sense of dilution for the voucher acquisition.

Move into the second quarter, we have certain artwork for net sales of at least for about 90 million U S dollars at constant exchange rates.

Adjusted earnings per share I expect it to be at least 50 cents per share ultra at constant exchange rate.

Outlook for the second part of that history has to be seen against the healthy non core which results in the same period of 22, which was marked by increased customer demand after pandemic restrictions where it is.

That's four currency movements and based on rates as of made for us. They expect a neutral impact on boss that sets and adjusted EPS for both the second quarter and for the full year 23.

I would like to head back to Ya.

Thanks, a lot hold on once again that we are coming back through the end of our preliminary comments. So let me provide you with a quick recap of our key messages before we move into the queue indecision.

Huh.

Results for the first quarter sure. So did start of the year.

We exceeded the outlook for sales driven by double digits C. E. R gains in the non Covid based business.

As a reminder.

Did you see the ninth Walter in the rule, we have delivered double digit C. E. R Grove, well known Covid product.

We also exceeded our outlook for adjusted earnings per share.

While continuing of course to invest in key areas of our business.

Chicken.

Our teams are focused on the executor shown and committed to delivering on that what goes we have a number of important developments or head of our product across our portfolio for 2023.

True, we are maintaining a strong profitability profile and using I wear a healthy balance sheet to strengthen our business.

I would discipline capitola location policy as proven its value in supporting Internode investment, but also target emanate and increasing returns to shareholders.

And lastly.

We are reaffirming our 40 your outlook for 2023.

We continue to expect food you double digit C. E. R says grove in the non Kobe bought for you or against a significant decline in COVID-19 product groups says.

In closing we are off to a strong start this year, while addressing uncertain macro trends we've as usual.

Ah on coast management, and disciplining our investment.

Well it seems are following through on the goals for the year with determination and agility to deliver.

We see these programs is important to sitting on course for a sordid meet them growth trajectory.

And with that.

I would like now to hand back to Joan and you'll pay right off of the queue indecision. 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 my trash star solid I want on their touchtone telephone if.

If you wish to withdraw your question you May Press Star father died queue to ensure we can accommodate as many people as possible. Please limit yourself to only one question.

Anyone who has a question May press star followed by one at this time one moment for the first question. Please.

The first question comes from Andrew Brachman with William Blair.

Good afternoon to you. Thanks for taking the question and maybe just to start on guidance here I. Appreciate all the all the commentary I think it's straightforward and no real surprises but.

Maybe if I could just ask them ample tech, obviously nice nice growth in the corner, but how should we sort of think about some of the durability of that low double digit non kobe growth I think he called out instrument upgrades and just getting there, but maybe help quantify where we are in that upgrade processing how much runaways left there. Thanks.

Thanks, a lot and ruined as a very quick comment I would say we have no reason to change what we have been saying for your.

First of all sympathetic as a part of it with your name.

Well, we have a clear leadership.

On manual and also an automated solution.

And therefore, what we said back in 2021, which was expecting.

Meade Ah Ah Ah.

Fingers good over for the sport for Ya.

Perfectly I will target.

Why.

Festival.

Because of COVID-19.

Ah strengthen our leadership and help those to gain market share.

Take them.

Because we have probably the only companion domain.

Where we have systematically a great deal I.

I will instrument offer for the last four years and we will continue to do so.

As a reminder, kayak queue became kayak connect.

Easy one became easy too.

And every time, we'd differentiated features for our customers.

We we don't have an upgraded version.

Okay. That's important yeah reflection gets treatment as well.

And food because we have continued to launched innovation.

Covid for example gave us the opportunity to launch a completely revolutionary Likud ways protocols.

We continue to invest in very useful research application microbiome for example sample take for liquid biopsy plant analyses soil analysis. So this was all at all I believe we have to strengthen our.

I wear central thick.

Dominance.

With COVID-19, and post COVID-19, we continue to believe in the mid single digits girl for the sport for Ya.

Thank you we'll take our next question from West.

West Morgan Stanley .

Good afternoon. Thanks for taking my question just one on pricing could you comment on the policy level it looks pretty cool in the courtyard and separately in Japan six to launch in April what kind of pricey you are expecting for <unk>.

Thanks for the question of San yet so on the pricing Festival.

12, highlighting a game that.

Price increase is a tradition that cage every year.

It starts in preparation around November December and it's past and communicated to customers on January each year.

Last year was it would be the exception all because we had an inflationary also specific context.

Therefore in addition to the traditional 2.53% price increase that we passed every year around January last year.

June July we passed and knows the price increase much higher around 6% to 7%.

And in January of this year, we passed when you more normalized price increase of around 2.5% to 3%.

And this is paying off we have a clear.

Deep in.

The numbers for the year decent.

This number of useless full effect of guidance for 2023, and we monitor our progress is against these guidance.

[noise] week until kingdom price subject to Ya.

To your question in Japan.

<unk> says on innovation and on quality.

I will syndromic panel for respiratory has a lot of value.

But an unprecedented level of automation for syndrome existing as you know.

The ability to deliver city values compared to just yes or no answer.

So there is no reason, we would basically decrease the prize in Japan, and the pricing, Japan, we'd be basically Ah in the Ah Ah Ah framework of the global price, which is as you know for a respiratory panel between 90 euros $200 per per minute.

We'll take our next question from Dan areas with Stifel.

Yeah, Hi, guys. Thanks for the questions theory or rolling on your motive.

This is a platform is obviously in the middle of the transition from from heavy Covid used to lower COVID-19 use but it does sound like you are making some progress with the non COVID-19 adoptions, though would you be able to put some context.

Utilization today, or just where you think you end up for the year compared to the levels that you saw at the <unk>.

I know you don't talk about things in terms of annualized pull through but it would just be really helpful to get understand.

You know where usage is on a relative basis and what to January back up looks like for that platform. Thanks a bunch.

Thanks, a lot done and.

As a quick reminder festival.

Number one.

<unk> addresses.

Me too high throughput volume.

In laboratories in P. C. R in fixtures D V D's mean.

Which means that 40.

40 G D vision.

Oh and your mortgage system.

Is she both of you sleep to bring meaningful proof pool fruit first.

Then I'll come back to that.

Thicker.

We already are in there.

Positive situation in Europe , where we already have one of their largest available menu for infectious diseases on your mortgage.

Each includes blood borne viruses, HIV hepatitis b, but ATC sexually transmitted diseases and those are the application.

It is true.

As we already these clothes for the last two years.

The humor.

Was obviously.

Very much driven by Covid utilization.

In 2021.

In 2002, but we saved in some geography's, especially in the U S that up to 70% of the performance of Numonyx during Covid worth refund by cooking.

This is why we are very pleased to see the non COVID-19 uses progression.

Which is.

By more than 50% or if you see where we have the menu which is in Europe .

In the U S.

We continue.

True forecast submissions every year.

For example, at the moment or C. T N G in the U S. As we speak.

But do not forget that in the U S.

We can liberate drove toward the fantastic feature on your mortgage which is.

To be the only system.

On the market at the moment.

Customers can use randomly the platform either for regulated assays Oh for laboratory zebra. So that's the strength.

And obviously.

We want to continue to submit every year.

That's the key success factor for me.

No priest.

Precisely to your question.

And you need to understand that we have two configuration of the 19.

1960 stem meet volume and a 288 system higher volume.

Between the system is.

As in the food you T D. They showed over complete menu, which once again starts to be the case in Europe , it's still not the.

The case in the U S X.

Expecting whenever rich food flew on the number of on a on a normal platform of Iran Hunt.

$100000 per year, plus is what we should have in mind.

Thank you we'll take our next question from Derek.

Great. Thanks for America.

Hi, This is John on for Gary.

I wanted to ask on the margin progression could you update update us on your expectations for that.

And for the rest of this year and how should we think about that going into 2020th boy and in terms of China, you you're seeing headwind.

How how old is your score that compared to your expectations and if you have any outlook given that you're reinvesting in the region that'd be great. Thank you.

Thank you Dear what they propose a hold on would you like to take the question on margin and then I can chime in on China.

Yeah happy to do so hi, John Yeah, I know, it's quite obvious that we do expect actually a healthy margin improvement smaller sick eventually or was it cause of C E O.

I do think what we have said before is that.

Clearly leverage opportunities for us in general odds operational side on D weeks, nearly continue to invest into off patterns of cool. Nevertheless, also you're a coupon was probably a bit higher than what you should expect to be normal for the cause of the year. So.

I think that is going to normalized a Honda, let's say 10% of awful avenues.

10 years to see operational benefits aren't SG&A.

Or do you think italianization strategy is still Ah assembling way to go and they'll have an impact and of course scale in general.

And for US So we clearly expect margin progression not only moving into 24 Ah, but clearly all over the course of 23.

Thank you hold on regarding China first of all I mean, we need to remind everybody that.

Exposure to China, which is around 6% to 7% of global says he's probably more muted than some of our appeared.

However, we do consider China as an important market.

He's probably the second markets in the world.

In size, but.

It's a very specific market.

It's a market which is under significant pressure.

From view authorities.

To make sure that people aren't localizing activities in China.

So it's not about selling to China.

It's about manufacturing and even more doing research and development in China.

How do we address that that got you a gym.

First of all.

We do have a site in <unk>.

For local they Randy and manufacturing so we are equipped.

Two localized part of our portfolio.

Chicken, which is probably a bit more.

Specific under originally known and differentiated.

We also have a second Brian .

In China, selling it made in China products.

It's a second Brian which is fully consolidates eating our global revenues, which which is behaving from a sales and marketing standpoint completely independently in China.

[noise] carrier Jameson.

So.

To come back to pure one.

First of all.

We have a basic fact.

We had a quite some impact in Q1 of 2022 in diagnosed but also in library science from some Kobe.

In China He says.

Pretty much gone down.

If you look at the non Kobe says in China.

It's slightly positive for Q1, but he doesn't compensate you see the basic fact of been uncovered.

However.

We remain positive.

That the non cookies activities should improve sequentially quarter after quarter.

Two reasons.

First of all because of the nature and strength of our portfolio locally.

And second because we believe that the overall.

Overall Chinese economy, we'd also improved second shortly quarter after quarter.

So.

Attention.

I just meant to local specific cities.

And literally exposure to herbs and don't have the market. This is how I would summarize.

Thank you we will take our next question from outer space.

Bamberg.

Hi, Thanks for taking my questions I've got three please.