Ladies and gentlemen, thank you for standing by. I'm KD and I’ll be your conference operator. Welcome, and thank you for joining QIAGEN's Q2 2024 Earnings Conference Call Webcast. Please be advised that this call is being recorded at QIAGEN's request and will be made available on their Internet site. At this time, I'd like to introduce your host, John Gilardi, Vice President of Corporate Communications and Investor Relations at QIAGEN. Please go ahead.

Thank you, KD, and a welcome to all of you today who are joining in our call. We appreciate your interest in QIAGEN. Our speakers today are Thierry Bernard, our Chief Executive Officer, and Roland Sackers, our Chief Financial Officer. This call is being webcast live and will be archived on the investors section of our website at www.qiagen.com. You can also find a copy of the quarterly results press release and presentation on our website. We will begin with some remarks from Thierry and Roland, followed by a Q&A session. Let’s go over the Safe Harbor statements. I’d like to remind everyone that we will be discussing statements. Actual results may differ materially from those projected in any statements that we make. The factors that could cause our actual results to differ materially are discussed in our most recent Form 20-F on file with the SEC and also available on our website. Additionally, we will refer to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. All references to EPS refer to diluted EPS. You can also find a reconciliation to the most directly comparable GAAP measures in our press release in the presentation. Now I would like to hand over to Thierry.

Thank you, John. And hello and very good morning, good afternoon or good evening depending on where you are in the world and thank you once again for joining us. Our teams at QIAGEN executed well in the second quarter, delivering growth over quarter two of 2023 as well as sequential growth from the first quarter of 2024. In fact, our results position QIAGEN as among the fastest growing companies in the diversified tools sector. They also signal our conviction to accelerate our performance and achieve our updated outlook. Executing on our 2024 targets will put us on a good trajectory to achieve the new midterm targets we outlined at our Capital Markets Day that are underscored by our commitment to solid and profitable growth. Let me get you to our key messages for the quarter. First, QIAGEN marked another quarter of exceeding our outlook for sale and adjusted earnings. Net sales were $496 million for the quarter, an increase of 1% at constant exchange rates over the second quarter of 2023. Most importantly, results at constant exchange rates of $502 million were $7 million ahead of the outlook for at least $495 million. And sales were up 2% at constant exchange rates excluding NeuMoDx, and also up 8% at constant exchange rates in our Diagnostic Solutions Product Group, in light of our decision announced in June to phase out the NeuMoDx system. Our highly recurring revenues business led the performance, with consumable sales rising 3% at constant exchange rates and making up nearly 90% of our total sales. A trend that we have observed in the industry this quarter was the impact on instrument sales. In quarter two of 2024, overall, our instrument sales were down 10%. And if you include NeuMoDx, they were down 6% at constant exchange rates. Customers are indeed still cautious about capital investments, which include larger scale instrument purchases as well. Adjusted earnings per share were $0.55 and also $0.55 at constant exchange rates. This is $0.03 above our outlook for at least $0.52. Second key message, our teams delivered important product advances in our portfolio serving customers from life science to clinical diagnostics. Let's start with QIAstat, our system for syndromic testing. Our teams delivered a very strong 12% growth at constant exchange rates in the second quarter. We see this trend improving in the second half of the year on the back of two important product launches in the United States. First, our teams launched the new Gastrointestinal Panel 2 in record time in early July after we received FDA clearance in June. From marketing to operations to the sales force, this was tremendous execution. Second, we also received FDA clearance during the second quarter for our upgraded respiratory panel, which now covers 21 pathogens, including the SARS-CoV-2 virus. Those milestones are important catalysts to attract new customers in the US, and more new tests are on the way. The meningitis and encephalitis panel are on track with US submissions this year, along with three new many panels, one involving respiratory targets and two for the gastrointestinal targets. We are also extremely excited about the expansion of QIAstat into new applications with our pharma partners for companion diagnostics that will help guide treatment decisions for patients. If you remember, we noted at our Capital Market Day that we now have in place the first pharma collaborations for the QIAstat diagnostic, and those involve panel tests for chronic diseases. Our goal together with our pharma partner is to offer tests on QIAstat that can be done rapidly while the patient is still undergoing a clinical examination and could live with a prescription system for candidates for a given medicine. This indeed embodies our approach to clinical molecular diagnostics decisive when it matters. On QuantiFERON, we welcome the recent update to the American Academy of Pediatrics guidelines in the US for latent tuberculosis screening in children. Children of all age groups are now eligible for testing using QuantiFERON, and this could open incremental latent TB tests to be converted each year. In any case, the potential for further growth in QuantiFERON is strong, given that skin tests still make up well over 50% of the global annual latent TB testing market, including in the US. As a key element of our strategy also involved reviewing our portfolio in light of market trends. You saw this this year again with the announcement in June about our decision to phase out NeuMoDx. This was indeed a difficult decision involving what we see as a great system and a great platform. But the market dynamics changed after the COVID-19 pandemic, and we did not see a realistic pathway to developing this system in a value-creating way. These decisions underscore our unwavering commitment to focus where we can develop profitable leadership positions. And last message, we have updated our 2024 outlook based on the solid core business performance in the first half along with the NeuMoDx decision. Our sales for the first half of 2024 were about $15 million at constant exchange rates above our outlook. This played a key role in our decision to update the full year sales outlook for at least $1.985 billion at constant exchange rates while also considering our decision on NeuMoDx. We have also raised the outlook for adjusted EPS by $0.02 to $2.16 as we step up to our commitment for solid profitable growth. This is also underscored by the adjusted operating income margin target at 28.5% of sales and the outstanding free cash flow generation. And now I would like to hand over to Roland for a review of the financial results.

Thank you, Thierry. Hello, everyone. Thank you as well, for joining our call. It was a pleasure to see many of you at our Capital Market Day event. Let me also go through some highlights and provide some perspectives on our performance. As a first point, our results for the second quarter show the improving sequential trend from Q1 2024. These results put us on the trajectory to achieve the goals we have set for the year. Compared to the first quarter '24, there was no material change in our operational results. The adjusted tax rate was at 19% and the share count at 224 million, both in line with our guidance. As a result, adjusted operating income and adjusted net income both grew at the same rate of 4%. Our outperformance in the first half of '24, both in terms of sales and profitability, played a key role in our updated outlook for the year. For the second half of '24, we are on track to see an acceleration in the year-on-year sales growth rate along with an improvement in the adjusted operating income margin. Let me dig into some of the highlights now. The adjusted operating income margin rose by one percentage point to 28.4% of sales for the second quarter over the year-ago period. This gives us confidence in achieving the target for at least 28.5% for the full year and a step towards our goal for an adjusted margin of at least 31% in 2028. On cash flow trends, free cash flow rose 56% in the second quarter to $129 million over the year-ago period and was up an even more impressive 86% to $225 million for the first half of the year. We are seeing the impact of measures to ensure a high level of cash conversion from the rising level of adjusted net income. These actions include upscaling our accounts receivable and accounts payable to teams at our hubs in Wroclaw and Manila. While keeping an eye on inventory levels, we are taking steps to ensure that we have adequate supplies to avoid disruption, especially in light of concerns about the current macro environment and supply chain stability. Let me now give you some additional views on our results for the second quarter. Among the product groups, we saw higher sales in the second quarter on sample technologies, diagnostic solutions, and PCR nucleic acid amplification over the year-ago period. In Sample Technologies, the 1% growth at constant exchange rates came from consumers and particularly strong growth in kits used in our automation systems. This comes after the launch of upgraded systems, in particular QIAcube Connect and EZ2 Connect. While we saw some weaker sales transforming in manual kits, the increase in automation consumables is a testament to our conversion ability. In Diagnostic Solutions, we were pleased with the ongoing strong performance of QuantiFERON, with sales up 11% at constant exchange rates marking the fifth consecutive quarter above $100 million in revenues. QIAstat-Dx also rose at a robust pace, growing 12% at constant exchange rates over the second quarter of '23 on significant gains in consumables and an ongoing good level of instrument placement. The recent expansion of the U.S. test menu gives us increasing confidence in exceeding the '24 sales target of at least US $100 million. In the PCR product group, QIAcuity delivered robust growth in consumable sales. We continue to see good demand trends for instruments as well. We are especially pleased with the demands for the higher throughput QIAcuity 4 and 8 versions that are popular with biopharma manufacturing customers as well as larger academic research facilities. We believe this will translate into an even higher consumable proposal. In the Genomics NGS product group, sales of the QIAGEN Digital Insights business hold at the highest single-digit pace and here we saw good sales trends for both the research and clinical portfolios. However, we faced a tough comparison to the strong results in the year-ago quarter. At the same time, we anticipate improving demand trends for our NGS portfolio in the second half of the year and for this product group to return to growth as we saw in the first quarter. Let's now move to results for the regions. Sales were 7% higher at constant exchange rates in the Europe, Middle East, Africa region with a top performance in Germany, Italy, and the United Kingdom. QIAstat-Dx sales in this region were robust with double-digit growth in both consumables and instruments. We also saw growth above the global average for QuantiFERON on continued conversion from the tuberculin skin test. In the Americas, sales were stable compared to the second quarter of '23 as single-digit consumable growth was offset by the cautious spending environment for instruments. In the Asia-Pacific Japan region, sales declined 3% at constant exchange rates in the second quarter and were led by higher sales in Japan, Australia, and India. Results for China showed a single-digit decline at constant exchange rates over the second quarter of '23 but grew at a significant double-digit rate sequentially from the first quarter of '24. We currently anticipate the challenging market conditions in China to continue. Let me just remind you that China makes up less than 6% of our global sales. Let's now review the rest of the income statement. The adjusted gross margin was 67.2% of sales, an increase of about 30 basis points from the second quarter of '23 on beneficial changes in the product mix towards higher consumable sales. Additional margin benefits came from lower operating expenses in R&D, selling and marketing expenses, and administration in the second quarter over the year-ago period. This led to the adjusted operating income margin expansion by one percentage point to 28.4% from the second quarter of '23 and a marked step up from the 25.7% margin in the first quarter of '24. The favorable trends show the impact of our initiatives on effective cost management while making targeted investments to fuel growth and supports our targets of at least 28.5% for the full year of '24. As for NeuMoDx, given that the decision came in June, we did not see any material impact on operational expenses other than the restructuring charges taken in the second quarter that was excluded from adjusted results. The restructuring charge for the second quarter was $351 million, of which 80% was noncash. About $280 million was included in the cost of goods sold and about $70 million in operating expenses. We continue to expect the restructuring charges to total approximately $400 million through the completion of the program in 2025, with about 75% involving noncash items. As per the third quarter of 2024, we currently expect the charges to total approximately $30 million to $40 million related to this decision. As for adjusted EPS, results at constant exchange rates were at $0.55 and $0.03 ahead of outlook for at least $0.52. The adjusted tax rate was at 19% and the average number of diluted shares at 224 million were both in line with our expectations. Turning to cash flow, results for the second quarter were a continuation of the good outcome seen in the first quarter of 2024. Operating cash flow for the first half was up 63% to $300 million over the same period in '23. In terms of work and capital management, account receivables fell by nearly $30 million since the end of '23, while our days of sales outstanding was 58 days and has remained within this recent trend. Another contributor was the reduction in inventories by about $80 million since the end of '23. This was partially due to the decision to discontinue NeuMoDx, but also improvements in other areas of the portfolio. Free cash flow also improved in the first half of 2024, rising 86% to $225 million from the first half of '23. At the same time, we saw increased capital expenditure levels for software development, including for the upgrade of our SAP system that is tracking well against our plans. For the second half of '24, we anticipate an ongoing strong level of underlying cash flow generation, largely in line with levels seen in the first half of the year, excluding one-time cash charges related to restructuring. The same is true for free cash flow levels, with similar levels of capital expenditure spending as in the first half. As for our financing, we had a payment of about $100 million for a German private placement that reached maturity in the second quarter. We also have $500 million of convertible notes reaching maturity in September and anticipate having to repay another $500 million of convertible notes in '25 as well. I would now like to hand back to Thierry.

Thanks a lot, Roland. Let me now give you an update on some progress across our portfolio. First, on QIAcuity, we are ramping up our commercial presence as we seek to drive dynamic growth and gain share in the digital PCR market. If you remember initially, we started with academia and then biopharma and now we are targeting new markets, including forensics and clinical applications. In forensics, where we have a top three leadership position driven by our sample prep portfolio, we have a new partnership with the U.S. Federal Bureau of Investigation (FBI) to develop a first-of-its-kind digital PCR assay designed to enhance DNA quantification in human samples. This boosts forensics analytics and ultimately contributes to improving public safety. For the clinical market and digital PCR, the launch of the QIAcuity diagnostic version is perfectly on track for later this year. The first assay for FDA submission, a BCR ABL assay for use in hematology patients, is also on track for approval in 2025. We still have ample room for growth in the academia and biopharma markets, and our teams are ramping up customer activation campaigns. If we move now to QIAGEN Digital Insights, powerful analytics to understand genomics, our bioinformatics portfolio harnesses the power of AI-driven content combined with human curation to provide the industry-leading bioinformatics portfolio. Customers rely on QDI by QIAGEN for results in minutes, even seconds, that would have taken days and weeks with other options. This speed is possible today. At our Capital Market Day, if you remember, we outlined the accelerated investment going into QDI to strengthen this portfolio. This is distinguished in our industry, given the high level of profitability. We are deepening our commercial teams with new sales specialists and further investing in research and development. This will help us to deliver at least 14 AI-enhanced products to our customers by 2028. In Sample Technologies, this is the foundation I remind you of our offering in life science and molecular diagnostics where QIAGEN is enabling endless possibilities with DNA/RNA from the first step in many lab workflows. We are making progress. We plan to launch two important instruments, an upgrade with the QIAsymphony Connect, planned for the second half of 2025. Our entry into high-throughput automation will be anchored with the launch of QiaSprint Connect early 2026. The introduction of this instrument will increase capacity to process nearly 200 samples in a few hours. A host of new kits are being developed and ready for launch, including new kits for free circulating DNA and microbiome target isolation. Across our portfolio, you can therefore see that QIAGEN is stronger than ever before. We have a differentiated portfolio targeting growth above the market we serve, and we will continue to invest in strengthening this differentiation. Now back again to Roland with the details on the outlook.

Thank you, Thierry. Let me now provide more perspectives on our updated outlook for '24 and also for the third quarter. As we mentioned earlier, the new outlook for net sales is for US $1.985 billion at constant exchange rates, which compares to the previous outlook for at least US $2 billion. This takes into consideration the strong first half of '24, which was ahead of our outlook by $15 million at constant exchange rates, especially with a solid performance from QIAstat-Dx and QuantiFERON. It also reflects an update due to the NeuMoDx decision, as we now expect these sales to be about US $25 million at constant exchange rates compared to a previous target for at least US $55 million. Consumables and related revenues are expected to continue driving growth while larger scale instrument sales remain challenging. For the third quarter, we have set an outlook for net sales of at least US $495 million at constant exchange rates, an increase of about 4% at constant exchange rates from the third quarter '23 sales of US $476 million. This includes a headwind of about one percentage point from the NeuMoDx decision, amounting to an underlying 5% growth at constant exchange rates over the third quarter, '23. This confirms our expected sequential growth that we anticipate for the second half of '24 over the same period in '23. On adjusted earnings per share, our updated outlook for the year is for at least $2.16 at constant exchange rates, which is an upgrade from our previous outlook for at least $2.14 at constant exchange rates. I want to also note that this is an increase of $0.06 from the initial outlook at the start of '24, as we double down on our commitment to solid profitable growth. Adjusted earnings per share for the third quarter are expected to be at least $0.55 per share, also at constant exchange rates compared to $0.50 in the third quarter of '23, which is a nice improvement. As for the impact of currencies, based on recent movements, we are now expecting a negative impact on full year net sales of about one percentage point and an adverse impact of about $0.02 per share on adjusted EPS results. I would like to now hand back to Thierry.

Thanks a lot, Roland, again, and we are coming to the end of our call. So before we move into the Q&A session, let me quickly summarize today's key points. First, we are very pleased with the results for the first half of 2024 and what we see as a company delivering among the fastest growth and improvement in profitability in our industry. The solid results for the first half give us increasing confidence in achieving the updated 2024 outlook. Second, our strategy of balance and focus is proving its value as we roll out new products and strengthen our offering to customers from life sciences to the molecular diagnostic field and capitalize on our broad global presence. A key element is the fact that nearly 90% of our sales are coming from highly recurring revenues, which bolsters our business in a challenging macro environment marked by those days of slower capital investments. We have focused on our sharpened growth drivers, QIAcuity, QIAstat, and QIAGEN Digital Insights as areas where we are accelerating investment for growth. We also invest in our proven leadership in sample technologies and QuantiFERON. Those major focuses do not prevent QIAGEN from having all the significant growth potentials, such as genomics, precision medicine, companion diagnostics, and HID (human identification) and forensics, where QIAGEN is already a top player. Above all, the QIAGEN of today is about delivering sales growth combined with improved profitability, in line with our commitment to solid profitable growth for the coming years. This is what we have demonstrated with our results for the first half of 2024, and we are determined to do so in the second half as well. With that, I would now like to hand back to John and the operator for the Q&A session. Thanks a lot for your attention.

The first question comes from Catherine Schulte with Baird.

Hi. Thanks for the question. Maybe just first, as we think about the back half guide, third quarter looks like you're getting back to about mid-single digit growth and probably exiting the year in the solid mid-single digit range. How should we think about that as a jumping-off point for '25 and maybe compare that with your 7% long-term CAGR that you laid out at your Capital Markets Day last month? Thanks.

Catherine, I would say that what it shows is that we are perfectly executing on what we said at the beginning of the year. You remember we signaled clearly to you and to the market when we got our guidance for 2024 that we would have a slower H1 and then progressively accelerate. Coming back to a performance in H2 that would be very comparable to our performance in 2023. This is why you have our Q3 at 4% growth. If you exclude NeuMoDx, it's 5% growth and 5% also growth in Q4. Q3 will be driven by, first of all, the input of new products in our portfolio. In H1 of 2024, you had no impact from the GI approval in the US, and you had no impact from the QIAcuity diagnostic approval also in the US. This is impacting the second half. Second, in H2, you have also the confirmation of the investment that we are doing for now a bit more than six months in our bioinformatics QDI business, and this is going to show acceleration. Third, you probably know that traditionally, the second half of the year is always stronger and faster in growth for QuantiFERON, because it's impacted by impactful marketing activities, especially in the U.S. with our back-to-college, back-to-school campaign. So it's fundamental for us to accelerate. We have the pipeline and the portfolio to do so, and this positions QIAGEN to deliver on the expected three-year plan guidance that we gave in our Capital Market Day in New York.

All right, great. Thank you. And then great to see consumables returning to growth as well. What are your expectations for instruments versus consumables in the back half of the year?

We have always signaled to the market that for many factors, first of all, an influx of capital sales during the COVID pandemic era. Second, let's never forget that this year is very specific in the world. It's one of the few years where half of the world is going into elections, especially key markets such as the US. So anytime you have elections, you have a bit of a wait-and-see attitude. There is clearly some caution in capital expenditure in many labs, especially in life science. We expect this situation to be short-lived. We have always said that laboratories are traditionally and regularly investing in upgrading their capital sales. We expect this movement to normalize progressively moving into 2025.

We'll go next to Michael Ryskin with Bank of America.

Great. Thanks for taking the question. I want to dig in on some of the portfolio developments you talked about, particularly the Digital Insights. It sounds like you're making a lot of progress there and seeing some strengths in the software business. Just wondering if you could talk about the underlying state of that end market, customer purchasing decisions, and broadly just what you're seeing in genomics. Thanks.

Thank you, Michael. You know that we have basically two main classes of customers, as we have highlighted during our Capital Market Day in June for QDI. What we call the discovery customers include research and academia, while the clinical customers are also essential. There is a significant need for bioinformatics, especially driven by the demand for genomics data. The market is also impacted by the fact that when you have an explosion of available genomics data, you still need to have very smart software to allow clinicians and laboratories to make sense of that data. In other words, to transform those trillions of data into actionable research or clinical insights. This demand is pushing the dynamics of that market. The specificity of QIAGEN here is that not only we have invested for many years in artificial intelligence, but we have built an incomparable knowledge base thanks to years of manual data curation. This combination of automation and AI with manual curation makes QIAGEN so distinct. Additionally, especially when you compare with all our competitors in that segment, this activity is highly accretive for QIAGEN at every level: gross margin, EBIT margin, and EPS. While our competitors often operate at a loss in this space, we see it as a market where it's interesting to invest in marketing and research and development.

Okay, thanks. And if I could squeeze in a follow-up. On QuantiFERON, strong quarter with double-digit growth at constant exchange rates, continuing strength there. Obviously, there's been a lot of discussions about potential competition in that market. It's been another quarter since there have been some updates from potential competitors down the road. Just wondering if you've had any change in conversations with your customers or what you're seeing in the market in terms of expectations moving forward. Thanks.

Michael, QIAGEN is like you. We hear and we listen to comments from competitors, even when they are extremely contradictory. But this is not our focus. Our first priority is to deliver on the $450 million guidance in 2024 for QuantiFERON. We are on good track, marking the fifth consecutive quarter exceeding $100 million in sales, once again double-digit growth. Second, we must capture the skin test market because it remains the main competition in that area. There are still probably around 60 million skin tests in the world, with 16 million in the US alone. So you understand that we have a lot of room to grow. Third, we are committed to reaching the $600 million target for that franchise by 2028, demonstrating a 7% CAGR. Those are our focuses and that's what matters, in my view.

We'll go next to Jack Meehan with Nephron Research.

Thank you. Good morning, good afternoon. Wanted to start with your latest thinking on end-market trends in the life science side for academic customers and pharma customers. In terms of spend trends, how are you feeling about funding conditions and the pace of recovery here into the second half?

I believe, Jack, thanks for the question, that the situation should normalize due to one main reason: People will have more visibility on the funding situation. Remember that for a significant part of H1, at least until April, many labs, especially in the US, did not know their budget, for instance, for NIH 2024. Now they know it's flat this year. Will it be flat forever? I don't believe so. We have never seen that in the history of NIH, for example. We've highlighted this cautious approach in capital spending, but I am confident the market will continue to grow. Admittedly, this year is a bit softer on capital sales, but I don't expect this to last forever.

Great, okay. And then on QIAcuity, how are you tracking relative to that over $90 million target? I think it implies a bit of a step-up in terms of growth rate in the second half of the year. Just would love to hear more about your confidence in that. Thanks.

Thank you, Jack. First of all, let’s not forget that QIAcuity is possibly the fastest growing install base in life sciences. Since the very first day we launched QIAcuity, we have achieved a remarkable number of placements, converting qPCR customers or shifting them from competitors. Second, even though we see good demand for our instrument, QIAcuity has been slightly impacted by the caution on capital expenses in labs, which is typical. The good news is that we are extending QIAcuity's reach in two dimensions: first in the clinical business with the launch of the FDA-approved platform in the second half, and second in the pharma sector, making QIAcuity a valid solution for companion diagnostics. This is why we believe that we have the guidance for 2024 of $90 million within reach.

We'll go next to Dan Arias with Stifel.

Hey, good morning, guys. Thanks for the questions. Thierry, obviously, QuantiFERON is an important product for you guys here and at the Capital Market Day, part of the discussion on maintaining your competitive position was just related to workflow. So I'm just curious about the timeline associated with some of the automation improvements that you highlighted there. I don't think we covered that, if we did, I apologize, but I think automation was one of those critical elements of the offering. So I’d love to understand when the workflow is expected to change and how the workflow is expected to improve over time.

With all due respect, Dan, what we insisted during the Capital Market Day is first on the strength of our partnership with DiaSorin, which is one of the major install bases in immunoassays worldwide. Therefore, we have a competitive back-end workflow. Secondly, the market sometimes forgets that we also have agreements with two leading front-end automation companies. When combining both, this results in an unparalleled automated workflow. What we indicated in New York is that our agreement with DiaSorin permits us to look for an automation partner. We haven’t finalized any formal decision yet, but we are reviewing options and will inform the market in due time.

We'll take our next question from Odysseas Manesiotis with Berenberg Bank.

Hi. Thanks for taking my questions. One on Roland regarding margin first. You're at 28.4% this quarter, up a decent bit from Q1. I just want to get a feeling of how much of that is NeuMoDx, which I'm assuming is two-thirds of the month. And just to think about the latter quarters regarding where you can get to and respectively the exit rate in 2025, it does seem like crossing 29% here is a logical way to think about it. Do you agree?

Yes, thank you for the question. In the second quarter of ’24, I believe there is no material impact at all from NeuMoDx on the operational expense side outside the restructuring charge. The decision came quite late in the month; therefore, there may have been some extra costs which we had to take. It is important that this will change in the second half of the year and also continue into next year. I think we laid out to you and the market ahead of the Capital Market Day, noting that the transition out of NeuMoDx will go somewhat into mid-2025. This means the ramp-up in contribution to profitability will phase in over time. What you’re seeing now in the second quarter is clearly a contribution from the core business, which I want to mention will continue. We feel comfortable that we will be north or at least at the 28.5% for the full year. If you do the math forward, you can clearly see that we have to be north of 29% within that timeframe, and I do have good confidence that we will achieve our 2028 goal of 31%. This will come from a larger contribution from operational expenses side. Over time, we will see contributions even outside NeuMoDx from the gross margin side.

All very clear. Thank you. And a follow-up on the instrument front. Looking at the instrument sales being down 10%, you mentioned this overshadows trends you're seeing on the reagent front. I wanted to know which franchises did better on instrument placements in H1 '24 compared to '23. Thanks.

I apologize; I was on mute. We mentioned minus 10%, but the real comparison is rather minus six because we stopped promoting NeuMoDx. Therefore, we need to account for this basic effect. The first message is that we continue to place or sell instruments. It would be a wrong impression to say we are losing market share. We continue to increase the market penetration of QIAcuity, QIAstat, and our sample tech instruments. We simply highlighted that customers, especially in life science, are a bit slower to take decisions or sometimes postponing because they are waiting for more visibility. This is a short-term movement, and it's very challenging to sell instruments in life sciences if we cannot finalize placement. However, we can do placements in clinical settings. This balance between life science and clinical helps us to mitigate that situation. We are monitoring it very carefully, but QIAcuity, QIAstat, and sample tech instruments are increasing quarter after quarter in placement.

We'll go next to Douglas Schenkel with Wolfe Research.

Hey, good morning, good afternoon. Thank you for taking the questions. Thierry, I want to start on the topic of portfolio optimization. Just a quick question on NeuMoDx. Is there any chance you will still find a buyer for that asset? I want to level set on that. The second, which is more important, recognizing that the focus of your Capital Market Day was understandably on the growth pillars of your portfolio, around $600 million of your revenue, or about 30% of total revenue, falls outside the growth drivers. How active are you in evaluating options for components of that part of your business? Are there further opportunities to optimize and reallocate resources while improving the overall growth and margin profile of the business beyond what you described impressively back at New York a month or so ago?

Thanks, Doug. First, regarding NeuMoDx, while a company like QIAGEN is and will never be dogmatic, we need to be clear. We have started a process to discontinue and phase out the system. I confirm that the system will be phased out. Our priority is to accompany our customers to ensure a smooth transition. Since 2020, we have insisted on a balance and focus strategy for QIAGEN, focusing on growth drivers. However, this doesn’t mean that outside those growth drivers we do not have significant growth potential, sometimes above double digits. I’ve given some examples today, including forensics and HID, which have double-digit growth potential for QIAGEN. Precision medicine and companion diagnostics also present another double-digit growth opportunity. During our Capital Market Day presentation, we made a clear commitment of 250 basis points from our current EBIT margin to reach over 31% EBIT margin that Roland highlighted. Additionally, we also indicated our strategy to prune our portfolio actively when something does not make sense for QIAGEN anymore or could be better in another company. This will remain our approach.

Thank you for that. If it's okay to just sneak in a quick modeling question for Roland. We have about 52% of QuantiFERON sales in our model in the second half, with Q3 being seasonally stronger as we've seen in the past. QIAstat, even more in the back half but with more in Q4 than Q3, is that the right way to directionally think about things?

Yes, I think it's quite clear that we believe QIAstat has a strong environment, not only on other respiratory activities but with the launch of the GI panel in the U.S. we can address that market much better. This isn't just about GI, as we can manage tenders more efficiently now. Furthermore, QuantiFERON will stay strong for the year. I believe QIAstat will also grow sequentially in the third and fourth quarters because of GI and other considerations. Additionally, we should not underestimate what we anticipate regarding QDI and QIAcuity for the remainder of the year. As Thierry indicated, we made important investments earlier this year into QDI and QIAcuity that will contribute to that growth.

We'll go next to Patrick Donnelly with Citi.

Hey guys, thanks for taking the questions. Maybe just one for me, just on China. It sounds like it got a little bit better sequentially. It doesn't sound like you guys are expecting much improvement for the rest of the year. But can you just talk about what trends you saw there, maybe peel back the layers a little bit in terms of what looks better, what looks worse, and just the expectations for the rest of the year as we look into 2025 as well. Thank you, guys.

Thank you, Patrick. Roland was clear in his comments that first of all, our exposure to that market is rather limited, a bit less than 6% of our sales. The second comment is confirmation of what we have kept repeating for the last two years. It’s a specific market, but it’s too large a market to ignore. We are taking all actions to remain competitive despite the difficulties locally. This goes through further localization of our activities in research and development and manufacturing for products that make sense to become local in China. Secondly, I remind you that we have a second brand in China as well, consolidated with QIAGEN but managed differently and selling local products to Chinese companies. Lastly, we have confirmed that we do not see any structural improvement on the market at least before the second half of 2025. That said, it remains a significant market with significant size; it cannot be overlooked.

We'll go next to Matthew Sykes with Goldman Sachs.

Yes, thanks for taking my questions. Good morning. You mentioned some confidence in trends in the NGS business improving in the second half. Could you talk about what's driving that confidence and what you're seeing in terms of market specificity for improvements in the second half this year?

It's a balanced view. You remember, Matt, that back in 2019, we made a fundamental strategic decision at QIAGEN to focus on areas where we are strong and relevant, especially in genomics and sequencing. This includes providing a platform with kits and bioinformatics. We became completely platform-agnostic in those two dimensions. The market evolution confirmed that decision, as since 2019, we have seen growth from more relevant players in next-generation sequencing beyond Illumina, such as PacBio, Element, SingleX, and MGI for example. This means our offerings in bioinformatics and chemistry fit the needs of those players. We do recognize a base effect for Q2 '24; however, the market remains significantly active, and we provide valuable solutions. Therefore, demand is there.

And just one quick follow-up about QIAcuity on your comments about share gains. Can you elaborate on how much you're seeing in terms of displacing existing competition versus converting those qPCR customers?

That’s a very fair question, Matt. With a differentiated platform like QIAcuity, we go after every opportunity: competitive deals and new deals, i.e., conversions to customers utilizing digital PCR technology. It's a balanced set of wins. Given the features of the system and its specific technology—not droplet-based and fully integrated—we can address various workflows. Our small, medium, and higher throughput capacity addresses different needs. By doing that, we effectively win against competition and also attract new users to digital PCR.

We'll take our next question from Daniel Leonard with UBS.

Thank you. Just a clean-up on the QIAcuity. Did you share the growth rate for that platform in the quarter? And then Thierry, can you help me frame the importance of the BCR ABL product?

Regarding QIAcuity, we've indicated significant healthy growth in consumables for QIAcuity in Q2, and I can confirm that it’s above double-digit growth. On the BCR ABL front, when we decided to move QIAcuity from life science to clinical diagnostics, we made another decision to focus on oncology. We believe this is particularly relevant in what we call measurable residual disease oncology, where BCR-ABL is the primary marker. While I won't give specific market sizes, I can tell you it is the most relevant marker. We see significant potential here to prove the superiority of the digital PCR approach, demonstrating more precise quantitation of results versus other technologies, particularly qPCR. Additionally, this aligns with our product offerings in measurable residual disease oncology, which is somewhat mature in its lifecycle. Transitioning to digital PCR will be very beneficial.

We’ll take our next question from Falko Friedrichs with Deutsche Bank.

My question is about the GI panel launch for the QIAstat. Can you provide insights regarding how this is already making a difference in your discussions with customers and what financial contribution you expect from that panel launch in the second half of this year? Thank you.

You must view this in two ways: First, the healthy performance of H1 in QIAstat, with 12% growth, is not impacted by the GI panel. This indicates the strength of the solution. Secondly, we have disclosed that part of QIAstat's acceleration for H2 would indeed come from the GI panel. This is because we already had customers using QIAstat for respiratory testing who were waiting for this new panel to complete their solution for patients. Additionally, other customers expressed interest, but they required at least two panels to just justify the investment. Now that we have it available, their interest can translate to action. Hence, the fact that we have launched this quickly, from approval to market, explains why we expect QIAstat to drive significant growth in the second half of the year.

We'll take our next question from Curtis Moiles with BNP Paribas.

Hi, this is Curtis Moiles speaking for Hugo. Thank you for taking my question. I'm looking at the slide on page 8, where you're discussing the adjusted EPS outlook for the rest of the year. It appears we have included only $0.02 out of the $0.03 performance in H1. Can you provide a bit of insight? Have you left room for maneuver or are you planning to invest a bit more than you initially planned? Thank you.

Roland, would you like to take the EPS?

Sure, I'm happy to answer. No, that's a fair question. As you noted correctly, we had overperformance not only in revenues for Q1 and Q2 but also in EPS. We've already significantly increased our outlook, moving from $2.10 at the start of the year to $2.14 and now $2.16. We have also confirmed our EBIT margin improvement from 28% to 28.5%. As you mentioned, we will see significant improvement, and if you run the numbers, you'll see we're climbing close to 30%. We take pride in that, and having some room to do even better wouldn't be a bad thing. Let's see.

Okay, thanks. I’d like to have one follow-up regarding QuantiFERON. It's been strong in H1. Can you discuss your confidence level around potentially exceeding guidance for the full year? In addition, we've heard that Reviti plans to launch the new workflow in the U.S. and China soon. Will this impact competitive intensity in your market going forward?

To address your second question directly, we respect every competitor. However, keep in mind that the product announced by Reviti is nothing new; it has already been available. So far, it has not changed our growth paradigm for QuantiFERON or shifted our market shares. Best of luck to them, but it is not a new entrant. Regarding our guidance, we are always aiming to be ambitious and realistic, so let's first ensure we land at the guidance of $450 million. If we can surpass that, we won't hesitate to do so.

We'll take our final question from Daniel Brennan with TD Cowen.

Last but not least, guys, congratulations on the quarter. Maybe just one for Roland to start: regarding the back half of your margin ramp, I think you've got NuMoDx as being about a point benefit in the back half. Could you unpack how we should think about gross margins and the different operational expense lines, and how is leverage coming through there?

I appreciate the question, Dan. The restructuring charges associated with NeuMoDx have been clearly highlighted; we will see a slight decline in the contribution margin as NeuMoDx winds down. However, I believe that while this will affect some areas, the operational side of the core business is on track, having an incremental impact resulting step by step as we unwind NeuMoDx. I expect we will definitely improve the core margins and business profitability, which we will monitor closely. Our core business continues to gain traction and efficiency, and we firmly anticipate maintaining margins above 28.5% for the full year. The next obvious step would logically involve crossing the 29% line, taking us closer to our 2028 objective of 31%.

That concludes our call. Thank you for your participation. If you have any further questions, don't hesitate to reach out.