Ladies and gentlemen, thank you for standing by. I am Katie, your Global Meet call operator. Welcome, and thank you for joining QIAGEN'S Q2 2025 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, Head of Corporate Communications at QIAGEN. Please go ahead.

Thank you, operator, and welcome to all of you to our call today for the second quarter of 2025. We appreciate your time and interest in QIAGEN. Joining me today are Thierry Bernard, our Chief Executive Officer; and Roland Sackers, our Chief Financial Officer. Also joining us is Dr. Domenica Martorana, from our IR team. Today's call is being webcast live and will be archived in the IR section of our website at www.qiagen.com. A copy of the results press release and the presentation are also available on our website. Before we begin, please note that this call will include forward-looking statements. Actual results may differ materially from those projected due to a number of factors outlined in our most recent Form 20-F and other filings with the U.S. Securities and Exchange Commission. We will also refer to certain financial measures not prepared in accordance with U.S. GAAP that provide additional insights into our performance. Reconciliations to the most directly comparable GAAP figures are in the release and presentation. All references to earnings per share refer to diluted EPS. And with that, let me turn over the call to Thierry.

Thank you, John, and hello, good morning, good afternoon or good evening to everyone around the world. Thanks again for joining us. QIAGEN delivered another clean and solid quarter in Q2 of 2025. Indeed, our sales growth is among the highest in the industry. And on top of that, we are increasing our outlook for the year. This performance reflects focused execution and gives us confidence to deliver on our upgraded 2025 targets. We are building a solid foundation to deliver more growth in 2026 on our path for solid and profitable growth against our 2028 targets. So let me walk you through our 4 key messages for today. First, we exceeded our outlook for Q2 with solid growth and improved profitability. Net sales rose 7% to $534 million with 6% growth at constant exchange rates. Core sales are a more important metric for QIAGEN since they exclude discontinued products like NeuMoDx and DIALUNOX. Those sales also grew 6% CER over the same period in 2024. Adjusted diluted EPS was $0.60 and $0.62 at CER, ahead of our target and driven by the strong improvements in operational profitability. Second key message, our growth pillars performed strongly. QIAstat grew 41% at CER. This was driven by strong instrument placements that once again exceeded our quarterly goal of at least 150 systems. We continue to see solid demand across all regions and benefits from our menu expansion initiatives for syndromic testing. QuantiFERON grew 11% CER supported by solid gains in the Americas but also in EMEA as we maintain momentum in driving conversion of latent TB testing for the traditional skin test. Let us remember that around 60% of the global market still relies on the skin test, and this underscores the significant remaining potential for conversion. QIAcuity, our digital PCR platform delivered double-digit CER growth supported by healthy demand for consumables and companion diagnostic deals, while instrument placements were slightly below the prior year, reflecting cautious capital spending trends among customers. QIAGEN Digital Insights, our bioinformatics business maintained momentum in a challenging environment. Here, we expect new growth in pulses from the acquisition of Genoox and the Franklin cloud platform for AI-driven interpretation of next-generation sequencing data for clinical labs. And in sample technologies, although total sales were flat against the second quarter of 2024, we saw solid mid-single-digit growth in automated consumables. Our teams are moving ahead to launch 3 new platforms with first stage in late 2025. Third key message, we have upgraded our full year '25 sales outlook based on the solid start to the year in a complex and volatile macro environment. We now expect 4% to 5% net sales growth at constant exchange rates, up from the previous target for about 4% growth. More importantly, we are now expecting 5% to 6% CER growth in our core portfolio, up from the prior outlook for about 5% growth. We are also confirming the adjusted earnings per share outlook of about $2.35 at CER, which, as you remember, we upgraded in April and represent an increase of $0.07 compared to our initial guidance for the year. So amid this external volatility we remain focused on execution and agility to deliver on our targets and capture the right growth opportunities. And as a fourth point, we have an expanded range of ways to create value for shareholders, customers, and all stakeholders. Following our Annual General Meeting in June, we paid our first-ever annual dividend and now have authorization for another synthetic share repurchase of up to $500 million over the coming 18 months. With about $650 million already returned to shareholders since 2024, we are well on track to reach our goal of returning at least $1 billion to shareholders by the end of '28, absent once again of significant M&A. At the same time, we are continuing to invest organically in the business. Our teams are also actively reviewing value-creating M&A opportunities. Our differentiated portfolio across diagnostics and life sciences is indeed strong and performing well. This is reflected in a strong record of execution and a clear commitment to implementing and executing on our strategy and creating value. With that, I will hand it over to Roland for more on the financials.

Thank you, Thierry, and hello, everyone. We delivered strong financial results in the second quarter of 2025. Our profitability continued to improve, supported by disciplined execution and a clear focus on operational efficiencies. Let me take you through the key financial highlights now. First, we achieved another increase in our adjusted operating income margin. It rose to 29.9% of sales, up 1.5 percentage points from the same quarter last year. This improvement was driven by several factors. First and foremost, the efficiency initiative launched in 2024. This included the decision to discontinue NeuMoDx, which more than offset the adverse impact from currency movements against the U.S. dollar and the new tariffs. Cost discipline across the organization played an important role. We have also maintained our focus on investing in growth and innovation. Based on the solid results for the first half of '25, we are tracking toward an adjusted operating income margin of about 30% for '25. Compared to '23, this would represent about 300 basis points of margin improvement, which underscores the scalability and strength of our operating model. Second, we delivered strong cash flow in the first half of '25 while absorbing cash payments for the efficiency program and portfolio decisions. Net cash from operating activities was USD 301 million, unchanged from the first half of '24. This reflected the solid business expansion and benefits from tighter working capital management. Our balance sheet remains very strong, giving us flexibility to invest in innovation, pursue targeted M&A and continue returning capital to shareholders. This year, we have already returned over $350 million to shareholders through the $300 million share repurchase program in January and the $54 million dividend paid in July. Let me now walk you through some additional details on our sales performance in the quarter. Starting with sample technologies. Sales were broadly unchanged from the second quarter of '24. We saw good trends in our focus on automated consumables across several regions. Instrument sales held steady over the year ago period, supported by continued placements of our core platforms. Diagnostic solutions sales rose 11% at constant exchange rates with strong contributions across our regulated products and led by QIAstat-DX sales up 41% CER and QuantiFERON sales rising 11% CER. We also saw another quarter of double-digit revenue growth in companion diagnostic revenues. In PCR and nuclear acid amplification, sales grew 3% CER over the year ago period. QIAcuity saw a positive growth rate in consumables, but instrument sales were soft due to cautious customer spending. Turning to the genomics and NGS product group, these sales were also stable in the year-over-year period. Hoping the QIAGEN Digital Insights bioinformatics business reflected double-digit gains among clinical customers, which absorbed softer trends among research customers that are facing continued funding pressure. We are also working through the shift from the multi-year licenses to SaaS-based subscriptions. Turning to the regions. Sales in the Americas rose 7% CER supported by strong growth in the U.S. and Mexico. In the EMEA region, sales grew 8% CER, led by France and Italy growing at double-digit rates, along with contributions from Germany, Switzerland, and the Middle East. The Asia Pacific region declined 4% CER with sales down at the low teens CER rate in China over the same period in '24. Moving down the income statement. Adjusted operating income rose a strong 13% to $160 million, leading to the adjusted operating income margin improving to 29.9% of sales in Q2 '25 from 28.4% in Q2 '24. On a constant exchange rate basis, the margin rose even more sharply to 30.8% in the '25 quarter. This improvement was driven by a combination of higher sales and ongoing efficiency initiatives. The adjusted gross margin benefited from the quarter with a solid product mix but had to absorb the impact of new tariffs and currency movements and declined to 66.7% from 67.2% in Q2 '24. R&D investments were 8.9% in Q2 '25 compared to 9.9% in the year ago period and aligned with a target for about 9% to 10% on an annual basis. Sales and marketing expenses were 22.1% compared to 23.1% in Q2 '24, reflecting efficiency gains while maintaining targeted customer engagement. General and administrative expenses were slightly lower at 5.7% in Q2 '25 compared to 5.8% a year ago. We have good cost discipline while continuing to support strategic IT upgrades. In terms of adjusted EPS at constant exchange rates, these results were above the outlook and that was even with an adjusted tax rate at 20% against our target for about 19%, which continues to be our '25 goal. Turning to cash flow. We generated $301 million in operating cash flow during the first half of '25 compared to $300 million in the '24 period. This performance is even more noteworthy given that the '25 results included about $36 million of cash restructuring payments related to our efficiency initiatives and portfolio streamlining actions. Free cash flow was $270 million, slightly below the $225 million in the first half of '24. This reflects higher planned investments into digital initiatives, particularly the SAP system upgrade that is now in the implementation phase. We continue to improve our working capital management, thanks to operational discipline. Accounts receivable were unchanged at about 56 days compared to the end of '24 as our teams continue to improve in this area. At the same time, days of inventory decreased to 159 at the end of the second quarter of '25 compared to 193 days at the end of '24 in light of our efficiency initiatives. As for the cash flow consideration in the second half of '25, keep in mind that the dividend payment was made in July. We also anticipate that about $500 million will be paid out in H2 '25 for the 2024 convertible notes due to a likely early redemption. In light of this topic, we are reviewing attractive non-dilutive refinancing opportunities during the second half of '25. One option under consideration is to issue cash shell convertible notes at favorable terms. As always, any refinancing will be aligned with our disciplined capital allocation strategy. In closing, our strong financial position supports our prudent capital allocation approach. This combines investing in strategic growth initiatives with increasing returns to shareholders. With that, let me hand the call back to Thierry.

So in addition to executing on sales and profitability, we also execute on research and development. So, let's now take a quick look at progresses across our product portfolio, starting with sample technologies where we continue to advance our next wave of automation. We are making indeed steady progress on 3 new instruments. And I'm very pleased to report that we are perfectly on track, on budget, specification, and timing for QIAsymphony Connect, QIAmini, and QIAsprint Connect. Those systems are designed to deliver flexible throughput, improve automation, and enhance digital connectivity across both clinical and research applications. The first of them, QIAsymphony Connect, is on track for a controlled launch towards the end of 2025. This platform strengthens our position in high-value applications such as liquid biopsy offering expanded capabilities and improved connectivity. QIAmini and QIAsprint Connect are planned for H1 2026. Together, those platforms will expand our installed base and address a broader range of customer needs with scalable, innovative sample preparation solutions. Early field tests for QIAsprint Connect and early feedback from pharma companies have been extremely successful, and we are seeing strong interest in this high-throughput system, reflecting broader customer demand for next-generation automation. Second, QIAstat-Dx, our syndromic testing platform has a growing footprint worldwide. As you know, we are now offering a broad menu of FDA-cleared syndromic panels across respiratory, gastrointestinal, and meningitis targets. This includes 3 mini panels tailored for outpatient settings, helping to address reimbursement challenges, specifically in North America. The strength of our assay portfolio has driven strong instrument placement. In the first half of 2025, for example, we placed more QIAstat systems in North America than in the whole of 2024. With those developments, QIAstat continues to build momentum as a flexible and fast-growing solution in the syndromic testing market. Turning to QuantiFERON now, we continue to drive successful conversions for the traditional skin test. I cannot emphasize enough that customers continue to choose the superior solution built on QuantiFERON and the trusted DiaSorin liaison automation system. But we are not being complacent. We continue to strengthen this foundation with seamless lab integration through truly universal automation. We continue to invest and innovate our QuantiFERON test to improve both automation and ease of use. So stay tuned; soon, we will be able to share some exciting news on this front. Now to QIAcuity. Our digital PCR platform continues to expand its presence in oncology resources, especially. As you might have seen, we recently announced new partnerships to develop and deliver multiplex assays optimized for QIAcuity and digital PCR. ID solutions, for example, is supporting assay development for cancer mutation detection in circulating free DNA and FFPE tissue samples. Another partnership, Tracer Biotechnologies, is working with us on minimal residual disease tests for solid tumors to support decentralized clinical trials and future companion diagnostics. Third, in addition to that, GENCURIX is developing third-party IVD oncology assays for our QIAcuity diagnostic, including application in both tissue and liquid biopsies. Those partnerships will reinforce QIAcuity's role as a differentiated platform in oncology and will open further opportunities in areas such as transplant medicine, infectious disease, and metabolic disorders. If we turn now to precision medicine, QIAGEN continues to strengthen its position as a trusted pharma partner. In June, we announced a global partnership with Incyte to develop a next-generation sequencing base for detecting CALR gene mutations in patients with a rare type of bone marrow cancer. This test will support Phase III clinical studies. We also began a collaboration with Foresight Diagnostic to transition their next-generation sequencing-based CLARITY ctDNA assay for lymphoma. This collaboration will transition this test from a central lab service into a kit for use in clinical trials. And finally, turning to our bioinformatics activities and QIAGEN Digital Insights. We acquired Genoox in May, adding the Franklin cloud platform to our clinical genomics offering. Used in over 4,000 labs worldwide, Franklin expands our capability in scalable AI-based NGS interpretation and fully complements our QCI suites of solutions. Overall, with those developments across our portfolio, we are now targeting about $1.49 billion in aggregated sales from our five pillars of growth in 2025, which represent about 8% growth over the prior year. Based on the results from the first half, we are well on track to achieve this goal. And now back to Roland with the details on our outlook for 2025.

Thank you, Thierry. Let me now provide some more perspectives on our outlook for '25 and the third quarter. Our ambition remains clear to deliver another year of solid profitable growth and continued improvement in operational efficiencies. We have upgraded our full year '25 outlook for total net sales to grow about 4% to 5% at constant exchange rates, up from the prior target of 4% growth. More importantly, we have also increased our target for growth in our core portfolio that excludes revenues from discontinued products. These core sales are now expected to grow about 5% to 6% CER, up from the prior target of 5%. Let me point out that you will see a stronger difference between total and core sales in the second half of '25, given the discontinuation of NeuMoDx and DIALUNOX in June. This represents about $20 million of headwind from the sales of these products in the second half of '24 that have been discontinued during the first half of '25. On adjusted earnings per share, we continue to expect results of about $2.35 at CER. We are increasing profitability ahead of sales as we see benefits from continuous contributions and efficiencies with a more stable favorable tax rate while also absorbing the impact of new tariffs. For full year '25, we anticipate tariffs to create a relative headwind of about 90 basis points on the adjusted gross margin as we continue to increase our mitigation strategy. We have taken a realistic view on growth for the second half of '25, just as we did in the first half, reflecting the current macroeconomic environment. At the same time, we continue to see opportunities to deliver results above our targets. For the third quarter of '25, we are targeting at least 4% CER growth in total net sales and a faster rate of at least 5% CER growth in the core portfolio. Adjusted EPS is expected to be at least $0.58 at constant exchange rates. As we look at the currency market trends, we expect a positive impact of about 1 percentage point on full year net sales but an adverse impact of about $0.02 on adjusted EPS given the headwinds in the first half of this year. For Q3, currency is expected to have a positive impact of up to 1 percentage point on net sales, but be neutral on adjusted EPS. So in closing, we have now upgraded our initial sales and adjusted EPS targets for '25 and are committed to delivering on these goals as a foundation for further solid profitable growth in 2016 and the coming years. With that, I'll now hand it back to Thierry.

Thank you, Roland. So we are coming to the end of our presentation. And before your questions, let me briefly summarize the key messages for the second quarter. First, we delivered another solid clean quarter of results that were again above our outlook for both net sales and adjusted earnings. In fact, our sales growth is among the highest in the industry. Second, our growth pillars are driving momentum across our portfolio from diagnostics to life sciences and across the world, addressing critical customer demand in highly attractive and growing markets. Third, based on the solid trends in the first half, we have upgraded our full year '25 net sales outlook based on the strong start of the year and we have also confirmed our adjusted EPS target following our increase in April. Fourth, we are advancing our capital allocation that balances investments in QIAGEN with increasing shareholder returns. At the same time, we continue to invest organically into the business in terms of innovation, digital infrastructure, and targeted M&A deals. So in closing, we are moving into the second half of the year from a position of strength. Quarter by quarter, year after year, we are building long-term value for our shareholders, and we still are determined to achieve our ambitions for solid profitable growth. And before ending the call, I want to let you know that we will be having another virtual deep dive session this year, highlighting this time our growth pillar sample technology. We continue to receive excellent feedback on our 2 previous deep dives on QDI, if you remember last year in December, and QuantiFERON, and we want to keep that very accurate short and winning format going. With that, thanks a lot for your attention. And I'd now like to hand back to John and the operator for the Q&A session.

The first question comes from Luke Sergott with Barclays.

This is Salem Salem on for Luke Sergott. Just one on the quarterly dynamics. In Q3, you're lapping a tougher comp compared to the first half, so what's really driving the confidence in the guide from a visibility perspective? And then the Q4 guide seems to step down just a little bit to the 2-ish percent range on a CER growth basis. Anything that is worth calling out there on the perceived deceleration? Or is that sort of a risk-adjusted based on visibility two quarters ahead?

So thanks, Luke. And that's a fair question. First of all, we are coming already from quite high growth. So obviously, increasing based on that high growth, again, the guidance for the year is quite a performance. Second, we continue to operate in a very volatile environment. I strongly believe that the question of tariffs is not completely settled. So it's still volatile. So we remain realistic but also ambitious. Lastly, do not forget, as Roland started to allude to, that what is interesting to look at, especially in Q4, will be the core growth rate. Because in Q4, especially, you will see that the impact of the discontinuation last year of NeuMoDx and DIALUNOX onto this year is going to become important. Roland, would you have to add something to that?

Yes, thank you, Thierry. I want to emphasize that both Thierry and I are not indicating any specific reason why Q4's growth rates should differ significantly from Q3. I believe that if we focus on the core growth rate, we can see that there isn't a substantial difference from today's perspective.

We'll go next to Aisyah Noor with Morgan Stanley.

Just on QIAstat. Could you unpack the 41% growth a little bit? How much was flu-related respiratory demand versus new pull-through on the GI and ME panels and versus new account wins in the U.S. And I'll ask my follow-up as well to this, which is, are you able to disclose the install base for QIAstat as of the latest quarter?

So thanks, Aisyah, for your question. So if you remember, the specificities of this market for syndromic testing, more than 70% of the market is made of respiratory. So respiratory remains the main test driving that growth and that performance. But from a purely percentage, even if the base is lower, we are extremely pleased with the growth of testing on GI and now also meningitis specifically in Europe, and starting in the U.S. We start also in that 41% to see the impact of the mini panels in the U.S. You remember that we are a unique company in the sense that we can offer both large panels and also mini panels. Fourth, there is also a good impact of capital sales and placement in those numbers. As we have said, first of all, we are way ahead of our quarterly objective of 150 systems. And as we said today, if you just take the example of the U.S. in H1 of 2025, we put more systems and more QIAstat on the market than in the full year of '24. So it's basically what is driving this performance. I'd like to finish by saying as well that even if QIAstat is the only syndromic system, which has been endorsed by pharma companies for companion diagnostics, there is no influence of companion diagnostics in the growth of H1 and the growth of Q2. It's purely testing and instrument placement performance.

We'll go next to Jan Koch with Deutsche Bank.

My first question is on your product group, other. Could you remind us of what is included here? And could you quantify the revenue from the discontinued system within that line in H1? And should we expect a return to a more normalized growth rate from Q3 onwards? And then secondly, a follow-up on QIAstat-Dx. Could you speak a bit about the regional breakdown of that growth we have seen in Q2?

I will let Roland answer for other and the discontinuation. But remember that in previous calls, we gave you the numbers for what was, for example, NeuMoDx in H1 of this year. By the way, NeuMoDx is fully discontinued as of June '25. We closed the termination of this instrument. Roland, for this first question on quantification and other, and then I will come back to you with QIAstat split geography.

Yes. I think overall, as we said, we're clearly going to stop it down. And we had also I think in the first half were both combined is probably around $20 million, also the delta compared to last year is also a $20 million number. So it is a sizable impact for us. That's the reason why we, again, focus on the overall impact in terms of core growth rates and focus on the core numbers because that is real apple-to-apple. On your second question on what is other? It is a mix of several factors. Therefore, it's other. It is starting from freight reimbursements. It has also to do, of course, with certain reallocations we get from the freight all the way down to certain one-time deals we do with certain customer groups. It's a bit more bumpy.

Thank you, Roland. And for the geography split of QIAstat, I'm pleased to report that all the regions are benefiting and contributing to this growth. Europe, despite the strong market share that we have, is growing double-digit. North America is accelerating. We have fully reorganized the leadership, the team with fully specialized people in the field now. And what we find interesting, Jan, to your question as well, is that we see countries that are becoming quite significant in terms of revenues in some emerging areas. I would give you a couple of examples: South Africa, for example, Saudi Arabia, or part of the Middle East, where we have significant market shares. So this is a bit the geographic contribution.

We'll go next to Tycho Peterson with Jefferies.

I want to probe on maybe just your views on QIAcuity for the back half of the year. Keeping in mind your target for 600 to 1,000 systems this year. Can you just talk about expectations for the back half of the year, how you're feeling about kind of pharma uptake? And then thoughts on competitive dynamics. Your main competitor did an acquisition of Stilla. They have some new launches and are targeting kind of the lower end of the market, with improved automation complexity. So just curious how you feel about competitive dynamics. And then before I jump off, just one clarification. Did you lower the target for QDI from $200 million to $240 million by '28? I think I heard that.

So Tycho, thanks a lot for the question. We did not review any target that we gave for 2028, not for QDI or not for any other portfolio priorities. Second, on the back end of H2 for QIAcuity. On one hand, we are confident that we can achieve our targets because when you look at the number of instruments we have to achieve in H2 compared to what we put on the market in H2 of 2024, it is very comparable. So we did it in '24. I see no reason not to do it in '25. Of course, as we always said, we operate in an environment where there is cautious capital expense spending especially in research and academia labs. But against that headwind, we believe that we can achieve our target. Now increased or renewed competition, we welcome that, Tycho. First of all, for us, it proves that this is a very attractive and dynamic market. We believe that this market is still growing at double digits. The fundamentals of our competitive positioning have not changed. Simpler systems to use, much more automated than any competition and greater cost of ownerships. This has not changed. We fully acknowledge that Bio-Rad has made an acquisition. We fully respect Bio-Rad. I don't think that the market shares of Stilla were basically disruptive of what's going to be basically a competition between our two companies. This being said, I have said many times that I believe that this system, the quality of QIAcuity deserves to become the #1 in digital PCR and I still hold to that statement that we will become #1 in that market.

We'll take our next question from Harry Gillis with Berenberg.

You talked about the very encouraging feedback for your new instruments in sample technologies. Could you provide some more color on how we should think about the trajectory of their contribution to revenue growth over the next few years? And then related to that, just wondering if you're still seeing any deferrals of orders in sample technologies ahead of these launches. I'm asking because the sort of flat instrument growth this quarter looks like a sequential improvement versus last quarter. So just trying to piece together the different moving parts here.

That's a fair question. And you are right. Why are we confident? Because our strategy that we have reaffirmed in our Capital Market Day last year is to invest in automation for sample tech. And if you look at Q2 results, we see automated consumables growing around mid-single digit. This is very encouraging. Of course, this happens once again, in an environment where capital expenses, especially in the area of academia and life science are depressed. Nonetheless, being able to grow positively in Q2 on automated sample tech is encouraging. Now in addition to that, we are coming with 3 new systems. No other company on the market active in sample tech has this kind of investment and innovation. So, impact on our numbers has been described in our Capital Market Day last year, we said that our ambitions by 2028, will be to grow to $650 million revenue for sample tech, which will give us 2% to 3% CAGR until then, and this will mainly come from those instruments.

We'll go next to Dan Leonard with UBS.

Thierry, you talked about continued automation efforts with QuantiFERON and said, stay tuned. What are you alluding to? Are you able to broaden your partnerships and automation beyond DiaSorin? Or is there any contractual exclusivity that would prevent you from doing so?

Well, we are very happy with our partnership with QuantiFERON. We repeated that a lot. The situation works very well. We see no need at the moment for adding necessarily other partners, but that doesn't prevent us from continuing to invest in the test. How do you invest in the test? One, you make it simpler to use. Second, you increase the potential throughput of the kit. This is two things we are working on. And by the way, together also with DiaSorin. It's a bit early to give you all the details. But in the coming, let's say, two quarters, you'll know more. Third, as you know, we are also developing a new QuantiFERON for emerging countries. We call it the QIAreach. This is due to be launched around 2027, we are still on track. So this is the way. It's not necessarily adding a new partner. The partnership with DiaSorin works very well. It’s making the test even better, quicker, able to spend more volumes and easier to use.

We'll go next to Jack Meehan with Nephron.

I wanted to talk about the operating margin forecast for the year. Just like a slightly lower at approximately 30% for the year. Can you just talk about tariff assumptions, FX versus kind of operational factors, how things are looking through the year?

Yes. Jack, as I said on the call, for the adjusted operating income margin, I do think we had a very good one also in the second quarter, and we do not expect it to be in any way different in the second half of the year. We improved 150 basis points in the second quarter, excluding currencies, and I do think, while absorbing headwinds from tariffs. As you know, we said that a couple of times for 2025, we feel very comfortable that it doesn't change our absolute numbers. There's a lot of mitigation underway, again, from changing our internal supply methods to the way we produce, discussions with suppliers, to the way we distribute transfer pricing, all the way to sharing with customers. Nevertheless, relatively, of course, it has an impact because, again, if you pay a certain tariff amount and of course, we do comply with the laws and are far from paying tariffs as well, and you only get reimbursed to a certain extent, it has a relative impact, not necessarily absolute down to EPS. So long story short, we do believe that probably for this year, it is around about a 90 basis point impact. We still continue to see even more mitigation coming in, so it might be a bit better, but of course, you see that has an impact. So I would say right now, we are aiming for the 30%. We might be there. We might be a tick lower than that. Nevertheless, there’s a significant improvement. Absolute dollar-wise, EPS-wise, is still very strong, very happy with the $2.35, which is out there. I think one more comment to one of the questions I heard before. One second because I don't think that I answered it before correctly. I think one thing what I do think is important to stress also as we present here now from today's number is that we are clearly tracking well ahead of that. Nevertheless, we are clearly also in an environment where the macroeconomics get more difficult to forecast.

We'll take our next question from Doug Schenkel with Wolfe Research.

Two topics. First, on M&A. Given the strength of the business, the strength of the balance sheet, your cash flow. How are you thinking about the M&A funnel as we sit here today? And what are the parameters that we should expect you're applying as you look at potential deals? So that's the first topic. The second is on margins. You're clearly trending ahead of the LRP targets for '28 that you laid out at the Investor Day. Where are you seeing the most upside to initiatives pursuant to margin improvement? And how should we think about the sustainability of those trends?

Thank you, Doug. We can address that question together with Roland. First, regarding mergers and acquisitions, our strategy remains unchanged. We have a proven track record of successful bolt-on acquisitions, with Genoox being our latest addition. Our pipeline for promising opportunities in the coming months is very robust. The primary criteria for these opportunities must align with our growth priorities and the key areas we have focused on over the last six years. We will not pursue M&A in a way that compromises our core strengths. Focusing on synergies with our current customer relationships to increase our share of their spending is essential. Additionally, any deals must be financially beneficial for the company and create value for our shareholders. We are willing to accept some dilution for a period, ideally up to two or three years, but it is crucial that we clearly see a path to increased profitability. Those are our two main criteria. Regarding gross margins, as you recall, we laid out a clear strategy to improve our target of 31% in the long-range plan, and Roland can provide further details on where we see potential for further upside.

Yes. And I think it's very clear also presenting here now from today's number that we are clearly tracking well ahead of that. Nevertheless, we are clearly also in an environment where the macroeconomics get more difficult to forecast. Therefore, as you know, we decided not only for this year, but also probably last year, it served us quite well to rather take a realistic view on the environment, giving us some flexibility so that we, I would say, can deliver on the numbers as we promise and hopefully come in, as we did a couple of times, even nicely better. So we haven't changed our policy around that now moving into the second half. Nevertheless, I do think what is going to drive us and help us also north of '26 into the more or less '28 environment is on the one hand side, our digital initiatives. We are rolling out quite a number of digital initiatives within QIAGEN, but also facing and customer-facing. Also, there's a good set of AI opportunities for us. So there is, I would say, quite a number of AI initiatives, which might make a difference for us as well. There’s clearly still certain smaller footprint optimizations possible within QIAGEN. You have seen some already coming through. So that's ongoing. Scale comes by itself. So I do think the margin inspection is for us rather the question is when to communicate not necessarily how to achieve that. And if you would ask me today, what is the most likely framework? I would probably say, okay, early next year, we have to give guidance for the year. That's probably the latest point. I would say if some of the macro environment challenges get addressed to a high degree, even earlier, that might be also a good point in the, I don't know, third or fourth quarter. It is within that period, very much driven by macro news and once we have that out of the way.

We'll take our next question from Hugo Solvet with BNP Paribas.

Congrats on the quarter given how tough it is out there for a lot of people. So just on NIH, could you discuss how NIH accounts evolved in Q2 and share maybe some early feedback on academia and life science customers following Congress vote last week and whether or not you believe that more significant budget flush in life science is something that could happen upon improving visibility?

Thank you, Hugo, for your question. As we've mentioned for the last couple of quarters, it's worth noting that our direct sales to agencies like the NIH and CDC are performing well. Currently, we are not affected by any budget cuts. This is likely because the items purchased from QIAGEN do not involve large capital expenses. Therefore, we seem to be flying under the radar regarding cuts. Additionally, the products they primarily use, such as enzymes, oligos, and sample prep, are not easily substitutable. Nonetheless, we are closely monitoring the situation. It is evident that while sales to the NIH and CDC remain stable, the broader context in research and academia, particularly for capital sales, is rather sluggish. This is a pattern we have acknowledged multiple times. Regarding the recent congressional actions, it is still too early to provide a definitive outlook. It's important to note that the primary decision-maker in the U.S. right now is the President, and we will need to see what unfolds in the upcoming negotiations. QIAGEN may reduce its budget for the NIH next year, but we anticipate that these cuts will likely be less severe than what was speculated a month or two ago. In summary, there may still be a decrease in 2026, but it is expected to be smaller than previously discussed, so we should remain cautious and observant.

We'll take our next question from Dan Brennan with TD Cowen.

Could you provide some clarification on the fourth quarter guidance? I'm wondering if you are currently observing any factors that might support the forecast of flat core growth, or if this is simply a conservative estimate. Additionally, could you break down the contribution of the discontinued product to core growth in the second half of the year? Lastly, Roland, you mentioned that you believe the guidance is conservative. From your five pillar guidance that you have upheld, which area do you consider to be the most conservative?

Well, Dan, I appreciate your stamina and push a lot, but I mean, I don't think that I heard Roland speaking about conservatism. Realism, I think, is the terminology used and we are already performing better than the market. In addition to that, we are increasing our sales guidance for the year. So it's very solid. Obviously, if we can beat that, you'll be the first to know. And again, in Q4, where I will focus is the core growth because in Q4, this is where also we might have a better base impact from NeuMoDx and DIALUNOX. And so this is where probably the divergence between the total growth and the core growth will be higher. And I don't think that we said that it would be flattish for core growth in Q4. Not at all. This is not in our new guidance.

Yes. On your question, Dan, on the details for the 5 pillars of growth, and I think you're absolutely right. We feel very comfortable that we're going to deliver as promised the 14%, 19% for an aggregate. I think it's also quite obvious to see that some of them are doing very well. We talked today at length on QIAstat and QuantiFERON, and it is not hard to predict that both probably do somewhat better than predicted. I think it's also very clear to say that QIAcuity on the one hand side has very good positive growth rate in terms of consumables. But I think Thierry also alluded to the call, the instrumentation environment in life science remains probably somewhat challenging. So that might come in probably close by—a bit lower. We will see that. But all in, we are above that. On the others, I think they are more or less on target. So I would say that is probably the—if you're looking for a trade-off, which is probably a positive trade-off, that it's a trade-off we are probably most likely going to face.

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

I've got 2. I'll just ask them both together. One, I think in the prepared remarks, you guys flagged China was down, I want to say mid-teens. If you could just segment or product line, sort of your expectations in China for the rest of the year? And then second would be the earnings season, I think it's obligatory for someone to ask if there was a pull forward or not, and I didn't hear that. So if you could just comment on any indications from any of your customers of stocking, any unusual timing on purchasing decisions, just given concerns on tariffs and other things down the road, just confidence that there's no weird ordering patterns.

Thanks, Michael. And we lost you for something like 5 or 6 seconds. So I believe I got your question on China, especially in which field we were believing that it was more depressed or not. So China for us, we haven't changed our mind. We don't see the market bouncing back at least before the second half of 2026. It is now less than 4% of our revenues. We know that the local government is trying to help the market by providing some incentives, for example, on capital expenses. At the same time, they continue also to push international companies to localize and it’s also the VBP program. So I would keep the same attitude for China. It's too big of a market to be ignored; it's too specific to make it an investment priority. We see China being negative until the end of the year in the same basically percentage as H1. We don't see it really bouncing back in 2026. And as we always said, even when China stabilizes and normalizes, we will not expect more than single—mid-single-digit growth from this country when it normalizes. That's our plan for China. For your question on QIAstat, no, there is absolutely no pull or inventory building from a customer ahead of the respiratory testing season. It's too early to say that it’s going to be or it might be a strong respiratory season this year. We are observing what is happening, for example, in geographies like New Zealand, Australia, and so on. But there is absolutely no—there’s no normal build on the numbers at 41% growth for Q2.

We will take our last question from Casey Woodring with JPMorgan.

So I have 2 as well. The first one is just from a regional perspective. I think you said Europe grew 8%, but sample tech in EMEA was down low singles. So just curious on the dynamics at play in Europe across the business? And then on QDI, how should we think about the back half and the cadence between Q3 and Q4 with the SaaS transition? And can you just remind us what the exposure is between clinical and research customers there? It seems like clinical is clearly doing well, while research is seeing some pressure in the market. So any color on those pieces?

For sample tech, EMEA is significantly contributing to the growth of automated solutions. I wanted to emphasize this in this call, as it aligns with our strategy. Regarding QDI, the division between life science, or what we refer to as discovery, and clinical still slightly favors discovery. However, we are making steady progress towards achieving an even split of sales between clinical and research, aiming for a balanced division. The transition to the DSIS varies from quarter to quarter because some deals are signed for longer durations. We saw an acceleration in this transition during Q1, a slowdown in Q2, and we anticipate a steady progression in Q3 and Q4.

So with that, we're going to end the call here. Thank you very much for your participation. If you have any questions or comments, please do not hesitate to reach out to Domenica and me. Thank you very much.

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