Qiagen N.V. Price & Performance (QGEN)

Thank you, operator, and welcome to all of you to our quarterly results call. We appreciate your time and interest in QIAGEN. On the call today are Terry Bernard, our Chief Executive Officer and Roland Sackers, our Chief Financial Officer. Also joining us is Doctor. Dominica Martorona from our IR team. This call is being webcast live and will be archived in the IR section of our website at www.qaijin.com. A copy of the quarterly results press release and the presentation are also available on our website. Before we begin, I'd like to remind you that this call will include forward looking statements. Actual results may differ materially from those projected due to various factors. These risks and uncertainties are outlined in our most recent Form 20 F filed with the SEC and is available on our website. Additionally, we will refer to financial measures that are not prepared in accordance with U. S. Generally Accepted Accounting Principles or GAAP. These non GAAP measures provide useful insights for investors and a reconciliation to the most directly comparable GAAP figures is included in our release. Please note that all references to earnings per share refer to diluted EPS. With that, let me hand over the call to Terry.

Thanks a lot, John, and hello, good morning afternoon or good evening, depending on where you are in the world. And thank you all for joining us. I am very pleased to share that QIAGEN has once again delivered a strong performance in the fourth quarter closing out 2024 on a strong note. Our results reflect both the resilience of our business and the trust of our customers reinforcing our momentum as we move into 2025. We exceeded the targets for sales and adjusted earnings. We are again among the fastest growing companies in our industry. Those results reflect the strength of our portfolio With over 85% of our sales coming from highly recurring revenues. They show as well our ability to deliver solid profitable growth in today's Challenging and volatile environment. I would like to take a moment to recognize the efforts of our teams who have been instrumental in delivering those And I would like also to acknowledge the impact of our customers whose work continues to advance science and improve healthcare across the globe. This being said, let me now highlight our key messages. First, we exceeded our outlook for Q4 twenty twenty four in both net sales [indiscernible] adjusted earnings.

Net sales were €521,000,000 in the fourth quarter, growing 3% CER and surpassing [indiscernible] €520,000,000 CER again. Sales for our core business were up 4% CER when excluding discontinued products in particular, the Pneumodix and Dialunox systems. Adjusted diluted EPS was $0.61 CER exceeding our target of at least $0.6 CER. For the full year 2024, we also exceeded our outlook for at least EUR one point nine eight five billion CER in net sales and the latest upgrade of our adjusted EPS outlook for two point one nine dollars CER. Second, we reached key milestones across our portfolio positioning our company to deliver solid profitable growth towards our 28 targets. First, KIAstat Diagnostics had a very, very solid year with 25 CER growth in Q4 and over six sixteen new system placement in 2024 this exceeded our target. Our teams achieve FDA clearances for four panels for use for the syndromic testing system during 2024. Now we have the full menu for the very important U. S. Market with panels covering the [indiscernible] gastrointestinal and meningitis and syphilis conditions. Second, [indiscernible] The Gold 10 standard test for latent tuberculosis delivered 14% growth in Q4 and eleven percent CER growth for the year on gains in all regions and this underscores the increasing adoption of this solution worldwide.

We continue to see ample room for Quantiferon to grow given that only about forty percent of the global latent TB testing market is converted to blood based So we continue and execute on a clear strategy to drive further conversion. For our listener in The U. S, for example, the recent tuberculosis outbreak in Kansas reminds us that this is a global epidemic also impacting the most developed countries. To put this in context, the Kansas outbreak is the largest documented case of this potentially fatal bacterial disease since the CDC began counting cases in the 50s. Once again, this shows that tuberculosis might be silent but it's everywhere. [indiscernible] Moving to digital PCR, our teams expanded the capabilities of the Kaiaquity system with the launch of our Kaiaquity diagnostic for clinical use.

Here, we are focusing on oncology and infectious disease applications, while also building on greater utilization over the 2,700 cumulative Kay equity placement since launch. Fourth, in our Sample Technologies portfolio, we achieved a significant milestone with over 1,000 cumulative placement of our new easy to connect automated sample pre We continue leading in automated sample processing as we capture opportunities in high growth areas like liquid biopsy, minimal residual disease or microbiome as well. Our third key message for today we continue to make significant improvements in profitability and free cash flow. In Q4 of twenty twenty four, our adjusted operating income margin rose by 2.6 percentage points and achieve 30.6% This was driven by efficiency gains across the business and obviously the decision to phase out the Pneumodix system by mid-twenty twenty five. For the full year 2024, our adjusted operating income margin came in at 28.7%. We also generated extremely strong free cash flow of $5.00 €6,000,000 in 2024. This is up 63% compared to 2023. Those results demonstrate again our ability to deliver growth and improve shareholder returns. As you have seen recently, early twenty twenty five we completed a new synthetic share repurchase of approximately $300,000,000 building on the $300,000,000 we already returned to shareholders early twenty twenty four.

Please once again reaffirms our commitment to return at least EUR €1,000,000,000 to shareholders by the end of twenty twenty eight and that, of course, as we said in New York 2024, is absent of significant M and A opportunities. Last, we are focusing on delivering on our 2025 outlook which is clearly aligned with our path to achieving our 2028 goals. For 2025, we expect net sales to grow by approximately 4% CER, And more important to us, to rise about 5% CER in our core portfolio. This is once again excluding discontinued product like NeuMoDx. Adjusted diluted EPS is expected to be at least at $2.28 CER. Those targets are really backed by our plans to make progress in developing and We continue to see significant opportunities ahead for Qiagen as we target key markets to develop and maintain leadership positions. This is really putting us on the course to achieve our midterm targets for 2028 and they all come down to seven thirty one two, and one. A 7% sales CAGR for 2024 to '28 from our core business excluding discontinued product like NeuMoDIX. A 31% adjusted operating income margin by 2028 and we are very well on our way to achieving this.

A $2,000,000,000 of sales from our group of growth pillars which together already achieved $1,400,000,000 of sales 2024. And at least $1,000,000,000 in return to shareholders and we have already completed $600,000,000 of that goal. I would like now to hand over to Roland for a review of our financial results. Thank you, Thierry. Hello, everyone. Thank you as well for me for joining our call. We are pleased with the results for the fourth quarter and for full year 'twenty four. So let me highlight a few key figures. Sales results for the second half of 'twenty four show 4% CER total growth along with 5% CER growth in our core business that excludes discontinued products.

And adjusted operating income margin in '24 of 28.7%, representing an increase of 1.8 percentage points from 2023 as we set a goal of at least 150 basis points of margin improvement in 2025 to move above 30% for full year. A 63% increase in free cash flow for 24% to million dollars These results clearly put us on a strong course to deliver our commitments for 2025. And the outlook for 2025 is clearly aligned with our 2028 targets for solid profitable growth. Let me now give you some additional insights into our results and sales trends from the fourth quarter and for the full year in 2024. Among the product groups, we saw solid growth in Diagnostic Solutions, along with single digit CR gains in PCR and genomics. In Sample Technologies, sales declined slightly in the fourth quarter 'twenty four as higher demand for consumables used on our instruments and forensic applications was offset by weaker instrument For the full year, the 3% CR decline in some tech sales included the last headwinds from the pandemic and we anticipate a swing to low single digit SEAR growth Important to our midterm growth strategy is increasing the use of kits on an increasing installed basis of Calagen instruments.

We are preparing three important new Sample Tech system launches over the next twenty four months, and this will help to enhance midterm growth. In Diagnostic Solutions, sales grew 10% CER in the fourth quarter and were up 12% CER excluding 14% CR sales growth in Q4 as we saw solid growth in all regions. QIAstat Dx grew 25% CER, driven by double digit growth in Bose consumables and instrument sales. We surpassed our goal for at least 600 new system placements in 2024 reaching over 4,600 cumulative placements since launch. In the PCR product group, sales grew 3% CER, led by a zurals for the cryocuity In fact, consumables for use of Kyocuete achieved double digit CER growth as we added over 100 US's for use on this system and launched the QIAQUED X version for clinical applications.

Like others, we continue to see cautious spending by customers on new instruments. We continue to have confidence in the midterm growth opportunities given the advantages of digital PCR over the predecessor generation of PCR and next generation sequencing. In the Genomics NGS product group, sales grew 2% CER in the fourth quarter supported by growth in the QIAGEN Digital Inside business as well as gains in sales of universal consumables used on the third party NGS systems. The performance in QDI was driven by growth in the clinical portfolio [indiscernible] this more than offset a modest decline in the Discovery portfolio. As we have noted during the year, results for QDI in 2024 were adversely impacted by the ongoing transition to a SaaS software as a service particularly in the pharmaceutical sector from long term licensing agreements. We see this transition continuing during 2025 as we work through converting the remaining licensing agreements into the SaaS model. Taking a look at our pillars as a group. [indiscernible] QIAstat TX, QDI, Sample Technologies and QuantiFERON, these delivered combined sales of $1,300,000,000 in 2024. This in aggregate was 99.3% of our target for the year So we are moving in the right direction towards our goal for at least $2,000,000,000 from our growth pillars in 2028.

Let's now move to results for the regions. Where we are sharpening our commercial concentration we specialize and empower teams focused on The Americas EMEA and Asia Pacific, Japan. In the Europe, Middle East, Africa region, sales rose 4% CER, The top performing countries included France, Italy, Spain and Switzerland, and also in countries like Saudi Arabia and the United Arab Ambulance, In The Americas, sales rose 5% CER, over the fourth quarter of 'twenty three with solid growth in the key markets of the regions in The United States, Canada, Brazil Mexico. In the Asia PacificJapan region, sales were down 5% SEI in the fourth quarter and this was slightly better than the full year decline of 7% CER. China sales declined at a lower low teens CR rate for the fourth quarter over the year ago period and this mirrored the decline for the year. We continue to take a cautious view in predicting a path to market recovery in China, which is moving to less than 5% of total sales 25 Let's now review the rest of the income statement for the fourth quarter. As I mentioned earlier, adjusted operating income rose 12% to US159 million dollars As a result, the adjusted operating income margin improved by 2.6 percentage points to 30.6% over the fourth quarter of twenty twenty three.

These results underscore our commitment to solid profitable growth as we look for additional operating margin gains in 2025 and we could reach our 31% target earlier than '28 The adjusted gross margin improved to 67.1% of sales from 65.7% in Q4 'twenty three. An increase of 1.4 percentage points and a key driver for overall gain in the adjusted operating income margin. A big contributor was Qiagen QIAstatDx. A trend we saw during 2024. This product had a favorable impact on the consumable product mix and we also had benefits from higher production capacity utilization. Additional contributions came from the Sample Technologies consumables business [indiscernible] We also saw here some benefits from the decision to discontinue NIMO DX and more benefits are to come in twenty twenty five. R and D investments were 9.3% of sales up slightly from 9% in the fourth quarter 'twenty three. We have generated benefits from the NoimoDx decision while ramping up programs in other areas. Our target remains for R and D investments at about 9% to 10% of sales. Sales and marketing expenses declined about 1.2 percentage points to 21.8% of sales. Here we saw the benefits of our efficiency programs while increasing our digitalization initiatives with over 60% of sales currently going through digital channels.

General and administrative expenses declined to 5.3% of sales from 5.6% in Q4 'twenty three as we maintain a high level of IT and cybersecurity investments Combined with efficiency gains, Regarding the restructuring for Norway Dx and related projects, we incurred about $21,000,000 of the charges in the fourth quarter in line with our target for about $20,000,000 to $25,000,000 for this period. Some remaining charges may come in the first half of twenty twenty five, as we complete the program in line with the target for our Board $400,000,000 of charges in total, then while we noted the vast majority were non cash items. As we also said, about $100,000,000 are expected to be cash charges, of which we incurred $30,000,000 and expect about $70,000,000 in $25,000,000 For the full year, the adjusted operating income margin was 28.7%, an increase of 1.8 percentage points from 26.9% in 2023. Here again, we have reinvested some of the benefits from our efficiency programs into targeted growth opportunities, while also seeing initial contributions from the decision to discontinue NIMO DX. As for the adjusted EPS, the results for the fourth quarter of twenty twenty four were $0.61 and also $0.61 at constant exchange rates.

This was ahead of our target for at least €0.6 at CER. In fact, we were able to steadily increase our outlook during the course of 'twenty four and we achieved $2.2 at CER compared to the initial targets at $2.1 CER. Turning to cash flow. We delivered strong improvements during the course of 2024. Operating cash flow rose 47% to US674 million dollars from US459 million dollars in 2023, mainly due to reduced working capital requirements. We achieved this growth even after absorbing payments related to the restructuring decisions announced in 2024. We saw a steady improvement in working capital during the course of the year. This fell by about $282,000,000 in 'twenty four to 5.6% of total assets Accounts receivables trends are also contributed to the improved cash flow and stood at fifty five point six days at the end of twenty twenty four. And another contribution factor was a reduction in inventories which decreased to one hundred and ninety three days at the end of twenty twenty four, from two fourteen days at the end of 'twenty three. Free cash flow rose at an even faster pace than operating cash flow increased 63% to $5.00 $6,000,000 For the year, [indiscernible] '23 This is particularly impressive given the higher level of CapEx spending in 2024 over the year ago period and mainly due to the upgrade of our SAP system.

So we are very pleased with the solid cash flow results for '24 and are looking forward to another year of solid results in 2025. With that, I would like to head back to Thierry. Thanks a lot, Thuye. And let's spend some time to discuss a bit some progresses our teams have made across the overall GayoGen portfolio of products. Starting first with Sample Technology, as we have highlighted at the beginning of this call, QIAGEN has surpassed over 1,000 placement of the easy to connect automated sample preparation instrument. This system, easy to connect, is unlocking new possibilities across diagnostic, genomics, cancer research, epidemiology and forensics as well. As we continue to drive laboratory automation, we place more than 1,800 sample prep instruments in 2024 And as Roland said, looking ahead, we are planning to launch three new sample prep system by the end of twenty twenty six. We are also strengthening Our microbiome and liquid biopsy consumable capabilities with the launch of two new sample kits, Those advancements are opening up new frontiers for precision medicine and are further cementing our leadership in automated sample prep. [indiscernible] Moving to QuantiFERON, the market leading test for latent tuberculosis detection.

We said before tuberculosis is still on the rise, not just in cancers. Not just in other areas of The U. S, not just in Europe. But across the entire world. Despite global progress, one in four people in the world carries latent tuberculosis. And skin test an antiquated solution, still account for sixty percent of test creating a significant market conversion opportunity for Quantiferon. At Qiagen, we continue to be committed to expanding access to testing as part of the global effort to end the tuberculosis epidemic by 02/1935. As an example, in 2024, we expanded screening a warmest through our partnership with the International Panel Physician Association in The U. S, which is critical for setting immigration screening standards. Additionally, we secured new American guidelines allowing for the use of Quantiferro in testing children of all ages and this expanded our potential growth of patient for conversion from the skin test. Beyond latent TB, we are still preparing to launch the Lyme disease test in partnership with Diasaurine. We continue to invest in a Chaya rich QuantiFERON solution for emerging markets. Turning now to Kaya Start, our syndromic testing solution that continues to expand its impact globally. As you have seen, we recently received FDA clearance for the KIAstat CI gastrointestinal panel mini BNV And the BNV here means testing for bacterial and viral conditions.

This mini panel is designed to support outpatient diagnostic for five common bacterial and viral infections. Another test for GI that will this time focus on five bacterial conditions has been submitted and is awaiting FDA clearance. Those developments in 2025 build on the strong year for KIAstat with four syndromic panels with [indiscernible] in 2024. We are now offering a very comprehensive U. S. Test portfolio for respiratory GI meningitis conditions. This really marks another significant milestones as we continue to expand the footprint of KIAstat, on the syndromic testing market.

As you have seen last year, beyond infectious diseases diagnostic, we also advanced companion diagnostic securing partnership with Eli Lilly in Alzheimer's disease or AstraZeneca in chronic diseases. Looking ahead, in 2025 and beyond, the focus remains for KayaStad. On expanding the portfolio, the menu and therefore the market reach. We therefore plan to introduce a new KIAstat Panel In Europe for blood culture testing including pathogens that can cause sepsis, In The U. S. In 2025, we do plan to complete two submission, the GI Mini Panel I just talked about and Again, the Blood Culture Panel testing among others pathogen for some that are causing sepsis. At the same time, our team all over the world continue to work on our current installed base of more than 4,600 system and still the majority of those systems are outside of the American. Meanwhile, we are advancing our high throughput strategy [indiscernible] After a successful launch in Europe in 2022, are now preparing for the launch of this solution in The U. S. Positioning us to enter the high throughput [indiscernible] and therefore drive further adoption syndromic testing. Moving now to Cayaquity, our digital PCR platform, which continues to push the boundaries of precision and performance.

In the fourth quarter of twenty twenty four, we took a very significant step forward by expanding Caya Tuity's multi to 12 targets per sample. This is extremely important in helping our customers to advance their use of application in translational research, microbiome analysis, pathogen detection of cell and gene therapies. Care equity adoption continues to accelerate. And we increasingly believe in the medium potential of this breakthrough PCR system. As you have seen, in 2024, we have also launched our Kayakwiti diagnostic, bringing digital PCR into the clinical world. And we also expanded our assay menu by introducing over more than 100 new digital PCR assays. Looking ahead, we plan to expand the menu with at least again 100 additional assays 2025.

We are now focusing on cell engine therapy and pathogen research. Closing with QDI, QDI, QIAGEN Digital Insight. Our bioinformatics business continue to enhance the power of next generation sequencing data. In 2024, We enhanced our AI driven bioinformatics with a new AI extension for ingenuity Pathway Analysis, that is designed to streamline complex molecular analysis. We also strengthened our role in clinical genomics through, for example, our collaboration with genomics England on the generation study. Here, we are supporting at the scale of an entire country the analysis and interpretation of more than 100,000 newborn genomes to screen for more than 200 genetic conditions. [indiscernible] QIAI, we continue to plan to launch new AI driven application all part of our plan to expand our portfolio to over 14 AI enabled solutions by 2028. And now back to Roland for some details on our outlook 2025. Thank you, Thiry. Let me now provide more perspectives on our updated outlook for 2025 and also for the first quarter. Our ambition is to generate another year of improved operational profitability as we execute our commitment to solid profitable growth. We have initiated a full year outlook for '25 for sales growth of about 4% CER, which reflects 5% CER growth in our core business.

We are expecting an acceleration over full year 2024 where we had a core growth rate of 2% CER. On adjusted earnings per share, our outlook for '25 is for at least $2.28 at CER. This reflects about 9% CER growth in adjusted EPS about $2.37 CER, driven by operational business expansion, which includes about $0.02 of accretion from the share repurchase. On the other hand, external factors present a headwind of approximately $0.05 CER, primarily due to lower adjusted net interest income compared to 24% and an anticipated increase in the adjusted tax rate for '25 For the first quarter of twenty twenty five, we have set an outlook for net sales growth of about 3% CER from sales of $459,000,000 in the first quarter of twenty twenty. This translates to 4% CER growth in the core business. We are taking a balanced view on the challenges and opportunities in the current macro environment. And our target for adjusted earnings per share in the first quarter is for at least $0.5 per share also at CER saw another good improvement over results of $0.46 in the first quarter of twenty twenty four. Let me also provide some perspectives on the currency trends against U. S. Dollar.

For the full year, we currently expect an adverse impact of sales of about two percentage points and about $0.02 to $0.03 an adjusted EPS results. And for the first quarter, we currently expect an adverse impact on sales of about two percentage points and about $0.01 on adjusted EPS results. I would like now to hand back tell you, Thank you, Roland. We are coming at the end of our call. And before Q and A, let me summarize our key messages for today. First, we delivered again the strong performance in Q4 twenty 'twenty four, exceeding our outlook for both net sales and adjusted earnings. Once again, those results are positioning our company as one of the fastest growing [indiscernible] in our industry. Our heavily recurring revenues making up over 85% of our sales, continue to drive growth Even in a challenging macro environment with cautious customer spending on instrument. We were extremely pleased with the strong contribution from our Diagnostics solution, led by QuantiFERON and KIAstat DEX. As well by our growth in our PCR and genomics. Those successes along with FMCC gain, drove a higher adjusted operating margin of 30.6% and very solid improvement in cash flow generation.

For the full year, we achieved our targets for total net sales operational profitability and product development milestones while delivering another year outstanding cash flow. KalyaGEN continues to deliver This gives us confidence that we can achieve our goals for 02/2025 and position CAGNYEN for solid profitable growth in the years ahead. We even believe that should our environment become less volatile This outlook to 2025 offers some potential for upsides. Before ending the call, I would like to let you know that we will be having more virtual deep dive session in 2025 highlighting our growth key bar. We received excellent feedback on our inaugural deep dive on the QDI business in December, And we want to continue and keep that format going into 2025. With that, thanks a lot. And handing back to John and the operator for Q and A session. Thank you.

Ladies and gentlemen, To ensure we could accommodate as many people as possible, please limit yourselves to only one question and if necessary, one follow-up. The first question comes from Tycho Peterson of Jefferies. Please go ahead. Hey, thanks. First question on QuantiFERON, terrific growth there. Are you willing to underwrite double digit growth this year? And then obviously, you had a key patent win in the German courts earlier this week. Could this effectively block newer entrants from the EU? And then the second question is just on Kyocuity and some of the pharma traction. I think with the 12 Flex launch you're maybe taking more share from NGS. Can you just talk a little bit about the sustainability of that? And when you think instruments overall may pick up for pay acuity? They were a little soft in the core. Thanks.

Thanks, Taiko. And very quickly, yes, I mean, we are extremely pleased with the double digit performance [indiscernible] Another example of the performance and positioning of this solution is again a quarter at above $100,000,000 revenues And therefore, indeed, to your point, We are forecasting a double digit growth this year as well, low double digit, but this is what we want to execute. Now as far as the IP, the recent press release from QIAGEN, is just showing that we have a strong IP and we really want to execute on it. [indiscernible] we have been saying for the last two years that we believe that this unique solution because of its differentiation automation and cost of ownership for our customers is positioning QIAGEN to become the number one in digital PCR. The 12 Flex solution is helping like increasing the menu for life science customers, is definitely helping like introducing that solution into the clinical world is also definitely helping. We are really on our way to execute on our target of $250,000,000 revenues for digital PCR by 2028. Last but not least, Tycho, We acknowledge in full transparency that, yes, we were impacted by a softer capital expense context in many labs, especially life science labs.

But let's also consider facts. In Q4, QIAGEN has been able to put once again more than 200 digital PCR system on the market. That shows the strength Despite that difficult environment, of that solution.

The next question comes from the line of Michael Ryskin with Bank of America Securities. Please go ahead.

Great.

Thanks. I'm going to ask both upfront. First is just something you just touched on at the end there in terms of the market in 2024, how that impacted QIAQuity. I just want to get a sort of a big picture view, your thoughts on how that trends into 2025? I mean, especially on the instrument side, I know you have a lot of exposure there, but that's where you saw some of the weakness this past year. Just any early indications or maybe just an update on what your expectations are for that instrument CapEx spending from pharma throughout this year, expectations for improvement or anything like that, that'd be helpful. And then second question would be, on the margins, you're talking about over 30% operating margin in 2025, really nice step up Seems like that's a combination of both Neumontics and just efficiency gains. So maybe you could expand on that a little bit. But also you reaffirmed 31% greater than 31% in 2028. So you're 30% in 2025. So [indiscernible] Just is there any reason that it can't be significantly above that? Just seems like you're only giving us 100 bps for the next three years. Just unpack that a little bit longer term margin trajectory.

Thanks.

Those are two fair questions, Michael, and I will let Roland answer on the margin and give you his our view on our potential of our upside there as well. But first on the market condition. Michael, I always repeated the same. We always repeated the same for the last four years. The fundamentals of our markets both clinical and research or academia. Are still very solid for many reasons that we covered in the past. Aging population, increasing power of technology, increasing application, microbiome, liquid biopsy, minimal disease. The fundamentals of what is really under control of KIAGEN are very solid. I'm more worried and I'm more concerned by the challenging volatile political or financial environment. And this what is driving what some of you sometime are considering like a cautious guidance for 2025. I still believe that achieving 5% growth sales, in our core business, excluding Pneumodix, would be a very solid performance and one of the best of the market. But we have said also in 2024 that, yes, we were like many other companies impacted by a kind of sluggish capital expense environment in many labs, especially life science. We explained that this was probably driven by the fact that in 2024, more than 50% population of the population in the world was under reduction.

This always creates uncertainties. Therefore, we said that we see capital expense in labs normalizing progressively especially starting in H2 of 2025. We always said as well if this is taking more time, that might create some delays for KIAGEN, [indiscernible] the fundamentals of the growth are still there. So that's what I can say and I confirm that state Now moving on the margin and the margin potential, I hand it over to Roland.

Yes. Thank you, Taieh, and hello, Michael.

Yes, as I said, before, it's clearly I think a strong commitment of Caixin to improve profitable growth. And as we said before, it will be it was 180 basis points for last year. It will be at least 150 basis points for this year. So clearly going nicely around 300 basis points on a twenty four months basis. I think it's important to know and I think that's for a very value question you asked that probably only around 45% of that margin improvement for the two year period is driven by the Nomodex decision. The majority is actually coming from quite a number of efficiency projects we are doing within the company plus, of course, underlying improvement in gross margin for Carcajitin, which we believe is going to continue. Also important to realize that we do believe that margin improvement does not stop in 2025. We rather believe that we have a very solid track record and pass in front of us to improve margins significantly even beyond that. And if we going down in the revenue growth rate as the plan to do, I do see not any reason that it's shouldn't be a double digit operational profit improvement also beyond 25%.

And I do think it's even more important, as we said before, unfortunately, in 2025, some of the external factors are most likely Qiagen against that on interest rate and on tax rates. I would consider them rather one ops for 25%. So it should also drop down to EPS starting in 2026 and beyond. [indiscernible] our next question from Patrick Donnelly with Citi.

Hey, guys. Thank you for taking the questions.

Maybe I'll just ask the two upfront as well.

Maybe first, Ro, maybe it'll be for Terry. On Sample Tech, it seems like the guidance is for flattish growth for '25 Can you just talk about what you're seeing there? The moving pieces obviously a large part of the business hasn't been the growthiest recently. So just want to talk through the moving pieces and then the right way think about that one going forward.

And then the second would just be around some of the administration changes here. Any implications you guys have seen to start the year, whether it's U. S. Academic or on the China side, it would be helpful to talk through those pieces as think about '25?

Thanks, Patrick. And obviously, if Roland wants to chime in, feel free. But on the SampleTech guidance, I will insist on two things, Patrick.

Our strategy for the last four years is really to invest into automated Sample Tech. This is why we are continuing to take market share. This is why we are strengthening our [indiscernible] And if you look at the growth pattern, throughout our portfolio, manual or automated in 2024, you see that automated sample tech is growing in 2024. And this is our bet. And therefore, we continue to invest into automation, We said today and we confirmed that we will be launching three new instruments in the coming two years. At the end of twenty twenty five, you will see the succession of the leading Sample Tech instrument in the market, which is [indiscernible] six, we will launch a high throughput automated system we call it Kaia Sprint.

And around mid-twenty twenty six, we will launch a very small throughput bench top one shot sample tech system. We call it Kaya Mini.

So '25 is a year of transition. Stabilization on manual sample take, continuous growth on automated [indiscernible] with the launches of the new instrumentation, I believe that we are on our way to execute on the guidance we gave for Sample Tech for the twenty twenty four-twenty twenty eight Moving to the political environment or what you qualified administration change?

I'm really calling for keeping a cool head. We continue to believe that it's too early to judge We are in a change of an administration. Many of the decisions that have been taken by the Trump administration are classical decision. In a transition Topic, some expenses wait and see, putting in place the new people. It's far too early to say that many budgets will be cut forever. By the way, if you look at the first President Trump administration, a significant budget like the NIH budget has systematically and every year increase in this first term.

China, as you know, Kiajen has a small or relatively small exposure to China. Between 56% of our business. We always said over the last three years, that we do not believe that the Chinese market will bounce back before 2026.

We consider China as too big of a market and the potential to be ignored but too specific of a market and two, let's say, dedicated to local champions to become a focus of investment. We don't believe that this is going to change its 2025 and therefore on China, we plan on negative slightly negative to flattish growth. Roland, would you like to add something?

Probably a bit on the European perspective. As you know, there's clearly also here would say, overall, some momentum Germany in few weeks has an election. If you go to, for example, here in Germany to the programs of the major parties, there's clearly always an quite an innovation focus. So I would assume also once we have here the clarity and again elections are down to three weeks here.

I really do think that some of this weight and seed alternatives, particularly on the CapEx side, is not an consumable topic, might rather get into a more supportive environment. The next question comes from Doug Schenkel of Wolfe Research. Good day, everybody. Thank you for taking my questions. I have two. First, what are your growth assumptions by end market in 2025?

What's embedded into guidance And then secondly, if market conditions become more challenging, do you have the levers available to protect the 150 basis points of margin expansion that you're targeting? And conversely, if the top line is better than expected, should we expect margins to go higher? Will you let it flow through?

Doug, thanks for the two questions. I think we can take those two questions. The two of us, Ronald and I, on the end market still believe, as I said five minutes ago, that the fundamentals of our market, the diagnostic and the research market are very solid. For the reason I explained still believe that we are in a recovery process because we are expecting capital sales to accelerate. I said before that I [indiscernible] In H2 2025.

And so the market, I think, is bouncing back progressively and seeing a market growth at the moment. Between 4% to 5% I think it's a reliable number. Growth happens clearly, As I said before, if our environment the political financial volatility is getting clarified. I said at our guidance 2025, offers some potential for upside, but we first need to execute on our current guidance for 5% growth core and for €2.28 EPS here. But Roland could also expand on the potential for margin expansion depending on the market condition.

Yes. Hi, Doug. Do think the best way to answer your question is actually just reference what we did in the past.

Right? And I think if you go look backwards and I know that you're following Kaijin offer quite some time, I think we always had the benefit of cost structure being quite variable. And therefore, we very typically were always deliver on our profitability goals. And I have no reason to believe that 25% should be different. But I think it's also important to note that we are on just look on last year, we started into the year with an EPS guidance of two ten We increased it three times. We ended a finished the year as a two twenty EPS guidance. While we were still keeping a very high level of R and D investments. I do think that is the way we look at our business.

The next question comes from Dan Arias with Stifel, Please go ahead.

Hi guys. Thanks for the questions.

Just thinking a little bit about Caustad and the portfolio expansion here. Roland Artiri, I know it's probably tough to compare because you launched the product in this weird post COVID period that we're in here. But for the higher throughput, QIAstat RISE instruments, how would you compare annualized pull through for that system in Europe to the mid throughput system once a customer is up and running? And I asked just because I'm trying to understand how the consumable stream might change here as the menu has built out? And then the bigger question is, can we think about overall consumables generation on KIAstat moving higher from an annualized pull through standpoint? Is that something that you think happened as you push towards the end of the year?

Well, it's a fair question that but the way I invite you to think about it is that anytime we think about [indiscernible] when you compare it with a normal KayaStat, it's an equivalent of eight KayaStarts. That's the way you should see it.

And I'm not going to give numbers of pull through because it heavily depends on geographies and condition, but obviously, that helped increasing one, obviously, the pull through per system and second, obviously, the volume generated on KayaStad consumables and we insist to today to show that one of the impact on the improvement also on our operational efficiency is the improvement of the Kayastat Last but not least, Dan, I will insist on something. Why is QIAstat growing so fast? Above 20% in 2024 after the next election year in 2023? Because it is by far the simplest instrument to use on the market. Between collecting the sample and putting the cartridge on the system it's less than two minutes.

So imagine when you are implementing that efficiency and unique differentiation in higher throughput system. And this is why we are confident Anytime we are bringing the rise into high volume customers, they're even more than normal customer see the significant workflow differentiation compared to competition.

The next question comes from Dan Brennan with TD Capital. Please go ahead.

Great. Thank you. Thanks for the questions.

Maybe I'll just ask the two right here. Just on DPCR, you obviously called out the weaker instrument trends. That were, I guess, the culprit this year for the coming in below plan, but you also cited really strong placements. So I'm just could you help walk through the 30% type growth that you're expecting for next year? Is that the second half instrument recovery? Is it pull through? Is it clinical? So maybe some color on that And then just be high level, nothing from the new administration on EU import tariffs but just any way to think about your exposure to the extent we see a 10% or 20% import tariff how we think about the impact to QIAGEN?

Thank you, Dan. So I'm going to start with the Digital Producer question, and I will ask Ronald also to share the views that we have explained already on the potential tariff decision in the U. S. Administration. [indiscernible] you look at 2024, even if we acknowledge that capital sales were a bit weaker, the growth coming from consumables is remarkable We are way above the double digit mark for the full year.

And therefore, this will continue and what is fueling this? Is the progresses we are making every year by either increasing assays or developing new applications. 100 new essays for life science and research in 2024 development of solution for what we call the biopharma application or cell and gene therapy. We said today that in December, we launched that new increase plexing capabilities from five to 12. This is giving you even more opportunities in the pharma world once again cell and gene therapies.

We are launching now the system into the clinical world with some achievement in oncology and also offering that solution for labs wishing to do LDT, Laboratory Develop Test. So this is the bulk of our growth. Obviously, this will even be strengthened if we see, as we said before, a normalization of capital expenses In labs.

But do not forget that in clinical world, this is probably a solution that we will have to place rather than sell. So indeed, in Life Science where we are mostly selling, an acceleration of capital sales in H2 will help us achieving our target. [indiscernible] Yes.

I do think with the new administration, there's a most likely a lot of different impacts which are discussed, right? And I do think one of the most likely one, which is important for us, is actually on the corporate tax side because as we all know, we have a significant foot in The U. S. We have not only roughly around 50% of our revenues here. We have also more or less the majority of our people in the meantime in U. S. So any reduction in terms of corporate tax rates should be actually beneficial for us, particularly in an environment where we so far rather have to plan with an increase in tax rate. So I hope that gets done. On the other hand, of course, the tariff situation is very young [indiscernible] that people differentiate between and I know that it's not easy for people who are on the outside There's a significant different where you produce and where you create your values, particularly in very different. I do think it really comes down to how the tariffs structured and how things are getting implemented. We do think clearly that we plan in a lot of different actions and actions, but so far it's hard to get for us.

The next question comes from Matt Sykes with Goldman Sachs. Please go ahead.

Thanks for taking my questions. Just two quick ones. Terry, first for you on QDI.

What is your expectation in terms of timing to get through that transition to SaaS from licenses? And could we see an acceleration in growth in the second half of twenty twenty five? And maybe any commentary on potential exit rate for that business in 2025? And then Roland, just on the margin expansion target, are you thinking about the level and phasing of OpEx in 2025 assuming R and D sticks around that 9% level. So specific on SG and A, how should we think about that over the course of the year?

Yes, Matt. Those are two valid questions. So first on QDI, the first thing we continue to believe in that market. You remember that we triggered an investment plan dedicated to More than a year ago, we called it the Golden Gate investment plan. We are still investing in adding marketing capabilities sales capabilities, product development capabilities. And as I said during this presentation today, [indiscernible] solution.

As we have been saying for the last four months, we see the transition to the SaaS business normalizing progressively starting and impacting really our performance in 2026. And then I believe that this is again high single double digit market potential growth, I'm sorry, potential low double digit.

The next question comes Exactly. Just on the margin expansion, I do think it's important to note that we expect that we will actually see already quite an increase here in the first quarter compared another first quarter. So I wouldn't be surprised if we already see in the first quarter an EBIT margin north of 28% and then you're going quickly into the direction maybe even above the 30 already in the second quarter. So is it very typical allocation, H1, H2 So therefore, I would say, something what rather is earlier than you probably would have planned [indiscernible] The next question comes from Casey Woodring with JPMorgan. Please go ahead.

Great.

Thank you guys for squeezing me in. I'll just ask too quickly upfront. So on Kiastat, you guys placed more than six sixty instruments in '24, following up on more than 700 placed in 23. So can you you continue to see strong placement demand post pandemic. Just curious what you expect for placements in 2025 there and if gastro and meningitis approvals have unlocked new placement opportunities And then my second one is just can you touch on the reorg going to two functional teams that are centered around product portfolio and innovation and then commercial operations, just the rationale there? And what sort of incremental benefits do you expect to see from these moves in the near end? And longer terms? Thank you.

Thank you, Casey. I think that taking into account my previous comment on always making sure that we are comparing April to April, now that we are all accelerating the launches of our Kaya STAT [indiscernible] Anytime we put a rise, it's an equivalent at least of eight units on the normal KiaStats. So take this into account. But if we can be in that rhythm, especially now that we have more menu in The U. S, of more than 600 system per year, I would be satisfied. It's a good growth trajectory. At Kaizen, we do not believe that there is a bad or good organization. This company has been organized around business unit for many years and it served its purpose. We had a Life Science business unit a Clinical Diagnostics business unit, and the Bioinformatics. We are just considering now that the market is changing. Our customers are changing. In many sites, it's very difficult to define whether the customer is purely a research or it's a clinical. In many, many situations, those are hybrid customers. Therefore, for me, being organized still into business unit was not the right way to answer our customer needs. Another example, we said in New York, that beyond addressing needs, for life science, research and academia, or four clinical What CiaGEN does is building sustainable leading ecosystem that are covering many needs.

Needs in research, needs in academia, needs in pharma needs in biotech, needs in clinical labs, also needs in crime investigation, for example. This is what we mean [indiscernible] successful sustainable ecosystem. [indiscernible] is a clear ecosystem. You can give it to a academic lab. You can give it clinical labs. Digital PCR The importance for digital PCR for KIAGEN is not to waste time thinking should it be a life science or a clinical application. What is important for us is to prove the value of digital PCR against, for example, QPCR on next generation sequencing. And therefore, a common investment here Makes sense. Latent tuberculosis, what is important is to push it beyond [indiscernible] just latent tuberculosis, If you look at KIAstat, it was mainly clinical. Now it's becoming also a pharma added value solution because of the companion diagnostic agreement that we signed with AstraZeneca [indiscernible] Eli Lilly. So this is where I invite you to see our priorities. This answer the needs of our customers much better.

The last question comes from Hugo Solve with BNP Paribas. Please go ahead. Hi, hello. Thanks for taking my questions. I have a couple of follow ups. First, on Numodix, Roland, maybe can you give us the numbers the sales number that you expect for 2025? That's too much for. On the 2028 targets that we must one question. Can you maybe expand a bit on the levers from incremental margin progression that should drive double digit growth? Beyond 2025 and I guess the trajectory for the gross margin here?

Hugo, I'm glad to see that you solved your IT issues and I will have Roland getting the second question on Pneumodics. It's very Paul, see it like this. By 2025, H2, the second half of the year, there shouldn't be any sales of Pneumodix. And we expect the MAX €120,000,000 between €8,000,000 to €10,000,000 for 2025. Roland, on the margin expansion, Yes. And also margin expansion, as I said, there is a couple of drivers, which are I think we're just elevating even more on that and one which I think is very critical for us is around our IT infrastructure. And there's actually both. It is on the one hand side our ERP system, as you know, in the middle of [indiscernible] go from two instances to one global setup but at the same time, of course, a significant digital infrastructure. As you know, we have now roughly about 60% of our revenues coming in, getting more or less handled fully digitalized. And we do believe we can expand on that as well. And of course, that has a significant [indiscernible] very resilient consumable sales because they are very much recurring and having a sales force who rather can focus on lead generation instead of writing monthly reordering for consumables is a big spin for a company like that.

I think one thing we shouldn't underestimate is actually also the underlying trend for our gross margin improvement because while I would say, particularly last year, the larger part of the margin improvement for the company on EBIT level came from the operational side. I do think that particular looking forward, a significant incremental contribution comes from the gross margin side. One has to do with the mix. It's quite obvious that some of the diagnostic products go faster than the life science product. And typically, you have a somewhat higher gross margin contribution. And here, But we also have some extra situations here. Most important for us is the volume growth on Kaya Startix. As you know, we clearly are still here not on a margin where we believe we have anywhere close to what is a company average. So there is a nice room for us to grow. And that is much more volume growth and utilization stories than anything else. And of course, the portfolio expansion helps you a lot because if you can use the same kind of production lines for just having instead of two product items, four, five different topics that makes a significant difference.

Another important topic for us that some of our instruments also have been QIAQIA Instruments. As you know, we do believe will do much better going forward. And that is, for example, VolOps Instruments, which was a high gross margin contribution So I would say a lot of piecing heading up, giving us the confidence on overall margin improvement not only on the operational expense side, but also with gross margin contributions.

This concludes our question and answer session.

Thank you, operator. I'd like to thank all of you for your participation in the call. And please keep in touch and contact Dominikimi if you have any questions. Bye bye.

Ladies and gentlemen, this concludes the conference call. Thank you for joining and have a pleasant day.