Earnings conference call (announced in 6-K)

Ladies and gentlemen, thank you for standing by. I am Katie, your call operator. Welcome and thank you for joining KIAGEN's preliminary Q1 2026 Earnings Conference Call webcast. At this time, all participants are in a listening-only mode. Please be advised that this call is being recorded at KIAGEN's request and will be made available on their internet site. The prepared remarks will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. At this time, I'd like to introduce your host, Daniel Vendorf, Vice President, Head of Investor Relations at Kayagen. Please go ahead.

Thank you, Katie, and welcome to our call on our preliminary results for the first quarter of 2026. In light of the update to our 2026 outlook, the pre-announcement was issued in line with German disclosure requirements yesterday evening. We are planning to publish full Q1 2026 results on May 6, 2026. We appreciate your time and interest in KIAGEN. Joining the call today are Thierry Bernard, our chief executive officer, and Roland Sackers, our chief financial officer. Also joining us This is Dr. Domenica Maturana from our Investor Relations team. As always, today's call is being webcast live and will be archived in the Investor Relations section of our website at www.kaiagen.com, where you can find the press release and presentation accompanying this call. Please also 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 20F 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. Generally Accepted Accounting Principles or 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 adjusted diluted EPS. With that, Let me hand the call over to Thierry.

Thanks a lot, Daniel, and good morning, good afternoon, or good evening, depending on when you are in the world. Thank you for joining us, and thank you also for your interest into Kayagen. As you saw in our announcement for our preliminary results for the first quarter of 2.26, we delivered strong profitability as adjusted diluted EPS achieved the outlook despite mixed sales results. Sales were below our target due mainly to significantly lower quantifier immigration testing demand and continued caution among U.S. life sciences customers. The important point, however, is that four of the five pillars achieved or exceeded our expectation, and we do continue to believe in the long-term opportunities for quantifier. While we are taking a prudent approach to the updated outlook, we see tangible drivers for stronger growth trends in the second half of the year. Let me now highlight some key messages. First, we delivered adjusted EPS of 54 cents at constant exchange rates in line with our outlook despite mixed sales trends and a tougher macro environment. Net sales were $492 million, up 2% on a reported basis but down 1% at CER and below our outlook for at least one percent growth CER. This reflects a mixed performance with solid momentum across many areas of the portfolio offset by the weaker than expected quantiferal sales. Despite the lower sales, discipline's execution supported earnings and enabled us to deliver on our adjusted EPS outlook. Second, our growth pillars delivered a solid performance with 4% increase of sales CER. Sample technologies grew 9% at CER and also rose 3% CER, excluding the PATH acquisition. KayaQuiti delivered double-digit CER sales growth on games in both consumables and instruments. Our bioinformatic business, KayaGen Digital Insights, delivered solid single-digit CER sales growth laid by growth in clinical applications. And KIA-STAT diagnostic cells declined 1% CER, facing a tough comparison to a stronger pre-year quarter. At the same time, for KIA-STAT, consumables were up on double-digit growth for GI and meningitis panels, where instrument placement continued at a growth at a good pace. As I mentioned at the start, quantiferon cells declined, and those were down 5% CER. This was mainly due to significantly lower immigration testing demand in the US and in the Middle East. This impact is exclusively isolated to immigration-related volumes. We did not see changes in pricing, competition, or underlying demand in the key patient testing markets. We continue, indeed, to see stable ordering patterns and solid growth in the remaining 90% of the quantifier on business. As we have said before, the undialying market for latent TB testing is growing at about 4 to 5% annually, and we now see the U.S. market growing about one percentage point lower at this time due to the immigration situation. Overall, we expect sequential improvement over the course of the years for quantifier testing. Third key message, we maintain a high level of profitability in the first quarter with our disciplined approach to managing the business and making value-creating investment. The adjusted operating income margin is expected to be at about 27.4%. This reflects continued efficiency gains while absorbing headwinds from tariff and currency, as well as the impact from the past acquisitions. Fourth, we have updated our outlook for 2026 to reflect those developments and the more cautious macro environments. Net sales 2026 are now expected to grow about 1% to 2% CER, with adjusted bi-duty DPS expected to be at least at $2.43 CER again. The updated outlook reflects lower expectations for Quantiferon, continued caution among the U.S. life sciences customers, volatile OEM customer ordering trends, and ongoing geopolitical uncertainty for 2026. At the same time, we see very tangible reasons for factor sales growth of about 4% CER in the second half of 2026. This includes the end of headwinds from the discontinuation of Pneumodix and Dialinux, benefits from new product launches, a sequential improvement in Quantiferon, and better than expected contribution from BARS, and last, a modest improvement in life sciences demand. With that, I'll hand it over to Roland for more details on the financials.

Thank you, Thierry, and good morning, good afternoon. Let me now take you through the financial details behind this announcement and later through our updated outlook. As we said, Q1 was a mixed quarter. The heat or outlook for adjusted EPS through distributed execution, while sales were slightly below target. For Q1, the preliminary net sales of $492 million US dollars were up 2% on a reported basis and down 1% on constant exchange rate. The positive impact of about three percentage points on sales at actual rates was in line with our planning. Same was the case for adjusted diluted EPS of 54 cents on a reported basis and 54 cents at constant exchange rates in line with our outlook. Let me now review the sales results. Sample Technologies delivered 170 million US dollars of sales, up 9% CER, compared to the first quarter of 25. Excluding the past acquisition, which is performing very well, the sales rose 3% CER. Growth was supported by demand for automated consumables and instrument placements, as we saw good trends worldwide. In diagnostic solutions, it's worth 185 million US dollars, and down 4% CER. The main driver here was a 5% CER decline in Quantiferon sales, which overshadowed solid trends in many patient testicles. Peristotix sales were down 1% CER, which was expected, given the tough prior year comparison to a period with a very strong respiratory season. Diagnostic solutions also included a year-over-year headwind, as expected from the mid-25 discontinuation of the Neumodix system. PCR Nucleid Essay sales declined 13% CER to $69 million. With his product group, Guy Acuity delivered double-digit CER sales growth. However, he also saw significantly lower sales in other areas, including PCR consumers and the O&M business, as he felt the impact of life science funding constraints. And in the genomics NGS product group, tiers were up 4% CER to 57 million US dollars. This was supported by Kyogen Digital Insights, which grew at a solid single-digit CER pace driven by growth in clinical bioinformatics. Let me now turn to profitability. We are expecting an adjusted operating income margin of about 27.4% in the first quarter of 26, supported by ongoing efficiency gains as we absorb the impact of tariffs and currency movement while also investing into the future of the past single-cell analysis business. With that, let me head back to the call to Trier.

Thanks a lot, Roland. Let us step back a bit for the quarterly numbers and share a few reasons why at KayaGen we continue to feel confident about the portfolio and the path to stronger growth. The message here is that our pillars continue to move ahead and only the 2026 sales target for Quantiferon has been adjusted. As we mentioned earlier, the issue with Quantiferon is isolated to immigration demand. Importantly, this does not change our view of the long-term opportunity. Trends in other patient testing groups remain solid, and the underlying market for latent TB testing continues to grow. As you have probably seen, new data published around World Tuberculosis Day further reinforced the role of quantifero in detecting latent TB infection, in particularly in high-risk and immunocompromised population. We are also advancing scalable laboratory workflows for quantiferon. A new generation of chemistry for quantiferon detection on liaison system with our partner diacirin is now being rolled out in the U.S., in addition to the earlier launch in Europe and other areas of the world. We are also seeing targeted screening initiatives ramp up in various fashion groups, diabetes or dialysis, particularly as well those being prescribed biologic therapies and immunocompromised individuals. Looking ahead, we will host a virtual Quantiferon Spotlight session on May 7th, where we will provide you with more details on our strategic priorities workflow automation plan and the additional enhancement that underscore the long-term opportunity of this product turning to sample technology this remains one of the clearest example of the portfolio moving ahead as forecasted we continue to advance our automation strategy with our free new system launches for 2026 moving ahead and receiving positive customer feedback as an example kaya spring connect was launched in february and we are very encouraged by the first wave of orders with the first sales contribution expected in the second quarter we also have the first orders for Kaya Symfony Connect after the launch in late 2025. Full IVD commercialization remains on track to begin in the middle of this year. Kaya Mini is also on track for launch later in 2026. We continue to see good traction in strategic high-value areas such as liquid biopsy where KIAGEN systems are being integrated into the workflows of major players. The PARS business is also performing better than expected, and we are on track to exceed the 26 sales target of about $40 million. As you remember, PARS gives us an entry into single-cell analysis, a highly attractive area where researchers need scalable workflows, and high-quality data generation. This was also reflected at the recent AACR cancer research meetings, where we showcased applications across our oncology workflow. This includes our expanding capabilities in sample preparation, single-cell analysis, and digital insights. For KayaQuity, we continue to see strong momentum in digital PCR. Our focus, as you know, this year includes expanding applications such as gene expression while continuing to develop a portfolio of companion diagnostics with our pharma partners. Turning to KayaStat Diagnostic, we continue to broaden the panel menu and strengthen the platform for syndromic testing while also advancing our pharma partnership in companion diagnostic in the first quarter for example we received u.s clearance for the gi panels on the kaya stat wise which is as you remember the high throughput version of this modular system we now have the respiratory and gi panels clear for the rise version kaya stat is also being expanded into bloodstream infection testing in europe we launched the first of the new blood culture panels in january we also submitted the first panel to the fda and we are awaiting a decision this marks a very important expansion beyond respiratory gi and meningitis to support better, faster clinical decision support. Finally, KIAGEN Digital Insights, our bioinformatics solution, continues to strengthen our sample-to-inside strategy with its status as a leader in bioinformatics. Within QDI, clinical bioinformatics remains the key growth area, double digit in this first quarter, as we are building capabilities through the integration of the Franklin platform from the recent acquisition of gnotes so across those areas the message is very consistent we are addressing the quantifier on immigration testing demand issue while the rest of the portfolio moves ahead as planned and now back to roland to discuss our outlook thank you to you let me now provide some additional perspectives

on our outlook for 26th and for the second quarter. As we have said, we are taking a prudent approach to reflect the development in the first quarter and the current macro environment while remaining focused on delivering solid, profitable growth. For the full year 26th, we now expect net sales growth of about 1 to 2% at constant exchange rates compared to our previous outlook for at least 5% CER growth. Adjusted diluted earnings per share are now expected to be at least $2.43 at CER, compared with our previous outlook for at least $2.50 at CER. The updated outlook reflects two main factors. First, quantiferon sales in 2016 are now expected to be a steady at a CER basis at around $500 million. This compares with our previous target for about 6% CR group for about 535 million US dollars. We have reduced these expectations in light of the immigration testing demand. This customer group represents about 10% of total quantiferon sales for about 15 million US dollars. We reduced this by about 35 million US dollars for 26, and we have not seen changes in demand for the remaining 15 million US dollars, which is largely European immigration testing. This impact from Quantiferon reflects about 1.5 percentage points of headwinds to full year 26 growth compared to our prior year outlook. Second, we have taken a more cautious view on mainly US life science customer spending for a total of about 40 million US dollars or about two percentage points of headwinds. This involves three components. About 15 to 20 million dollars of headwinds comes from research customers in the US. Another 20 million dollars comes from volatility in customer ordering in our OM business, which also includes government agencies in the US. And lastly, a few million dollars of pressure comes from the Middle East conflict and the broader geopolitical uncertainty that has developed since the start of the year. Turning to the second quarter, net sales are expected to decline approximately 2 percentage points CER compared to $534 million in Q2-25. These sales trends take into consideration that quantiferon sales continue at a largely unchanged level from the second quarter of 2025. While we believe in the full-year target for Kaya Start BX sales, we have purposely taken a more conservative view on these product sales for the second quarter in light of the strong year group comparison. The pillars as a group are expected to go about 4% to 5% CER in the second quarter compared to the 4% CER group in the first quarter of the year. And as a reminder, the second quarter will be the last period with headwinds from the discontinuation of NeumodX and Dyna Lunox. For adjusted diluted EPS, these are expected to be at least $0.60 at CER in the second quarter compared to $0.60 in the prior year period. Operational efficiency and disciplined cost control remain a key priority for Kiagen and continue to support profitability despite lower expected sales. At the same time, Eronix and Q2 will absorb a diluted impact of around $0.01 from the past acquisition. Let me now address four drivers for faster sales growth in the second half of about 4 percent cer first about two percentage points of incremental growth come from the roll-off of headwinds from the discontinuation of neumodics and dynalunox and unchanged from our prior expectations second about two percentage points are expected to come from new launches including the sample prep instruments and additional offerings for kaya STAT, EX, and chi-acuity. This is also unchanged from prior expectations. Third, about one percentage point is expected to come from improving year-over-year growth from quantiferon as we anticipate growth in the second half of 26 compared with the first half. Finally, about half a percentage point of improvement is expected from a combination of the past acquisitions, performing better than our target for about $40 million of sales in 2016, and modestly better trends in U.S. life science funding as the year progresses. Taken together, these factors explain the expected bridge from sales declining about 1-2% in the first half to a growth rate of about 4% in the second half to reach our target for about 1% to 2% CR growth in the year overall. And looking ahead, in terms of midterm growth, we see very positive trends for collagen as we work through a period of rebasing quantiferon demand. The pillars of the group are expected to grow about 7% for 26, and we see this continuing at a healthy pace in the future and supported by quantiferon returning to a more normalized growth rate in 2017. With a series of new product launches on the way, in particular the new instrument in sample technologies, this provides even more confidence in delivering faster sales growth. The pillars are also increasing as a share of total sales. They are now at about 75% of total sales and rising, and we are taking actions to stabilize the base business. Let me also briefly address currency trends. For the full year, we currently expect a tailwind of about 1 percentage point on sales and a neutral impact on adjusted EPS. This is unchanged from our previous assumption. For Q2, we expect a tailwind of about 1 percentage point on sales and a neutral impact on adjusted EPS. Overall, we have taken a prudent approach been updating our outlook, reflecting current market conditions and known headlines. At the same time, we remain focused on disciplined execution, protecting profitability, and returning to growth in the second half of 2016. Last but not least, we also confirm our adjusted EBIT target of 29.5% CER for the full year.

I would like now to hand back to you.

Thank you Roland. Before we go to the Q&A session, let me go over a brief summary of this call today. Q1 was a mixed start to the year, but we delivered adjusted EPS in line with our outlook through discipline execution. The sales shortfall was driven mainly by the quantifier immigration testing demand reset and we are addressing this directly and proactively we continue to view this as a rebasing of demand in this testing group but absolutely not a chance in the long-term opportunity for latent TB testing trends in all the patient testing rooms remains solid and we expect sequential improvements during 2026. The rest of the portfolio continues to execute on target. Sample technologies, Kaya Quiti and Kaya Gen Digital Insights delivered solid growth in this first quarter of 2026. New product launches and portfolio additions support our confidence in stronger growth trends in the second half. We have updated our 2026 outlook to reflect what we are seeing in quantifiable immigration testing trends, as well as ongoing caution among U.S. life sciences customers and the broader macro environment. But at the same time, we see tangible reasons for faster sales growth in the second half of the year. So in closing, we are updating expectations prudently and we are staying really focused on delivering solid, profitable growth. With that, I now would like to hand back to the operator for the Q&A session. Thanks a lot.

Thank you. Ladies and gentlemen, At this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to withdraw your question, you may press star followed by two. To ensure we can accommodate as many people as possible, please limit yourself to one question and, if necessary, one follow-up. Your microphone will be muted after you finish asking the questions. Anyone who has a question may press star followed by one at this time. One moment for the first question, please.

The first question comes from Michael Ryskin with Bank of America.

Thanks for taking the question. Appreciate the color you provided on the slide deck and on the call. I want to dive into a little bit more of the difference between what you saw in the first quarter versus how you're updating the guide. If we look at your reported results for the quarter, you missed consensus by about $9 million, $10 million. And if we look at Quantiferon at, you know, down 5% CER, it seems like the majority of the MIS was specific to Quantiferon. Maybe 8 of the 10 million was Quantiferon. But then for the full-year guide update, you know, 35 million is Quantiferon, but 40 million is at U.S. Life Sciences. So I want to really focus on that. It just didn't seem like it was that much worse in the quarter itself. So is it something that deteriorated in March later in the quarter? Is this order trends you're seeing? You commented $15 million, $20 million from research customers, $20 million OEM. It just didn't really seem like that played out in the quarter itself. So why is it just a steeper vision for the full-year guide there if you didn't see it in one queue?

So thanks a lot, Michael. And I think that you are nailing it indeed for the first quarter. Out of the 10 million shortfall, Quantiferon indeed represents at least 8 million of that. Now for the full year, we take a realistic but also cautious view based on many factors. We believe indeed, as you said, that the total impact, we based on an annual basis for Quantiferon immigration testing, is around $35 million. dollars in addition to that we take the cautious approach to the current u.s life sciences customer environment and kind of wait and see attitude that we have seen in the quarter one this represents roughly 20 million of cautious expectations and then we also take and this is not new, if you remember our previous call, a prudent approach for our OEM activities. By definition, OEM activities are more volatile because they are based on deliveries of big bolts of product one time. And so, year on year, you have that volatility, and for the year 2026, we believe it's another impact of around 15 to 20 million. So, overall, between In Compriferon immigration testing and those two events, cautious life science, kind of wet-and-see attitude, especially in the U.S., and OEM, you get the difference to the re-forecast for the year.

And then for my quick follow-up on Quantiferon itself, you know, you kind of alluded a couple times in the call to this is a rebasing year, and you expect it to improve in the second half, and you expect it to improve going forward. Just sort of what gives you confidence in that? And you saw Quantiferon already slow a little bit in 4Q25 to about 5% CER. Why do we think Quantiferon is going to re-accelerate? Why isn't this a low-to-mid single-digit grower going forward, given the robust growth you've had over many years and the fact that some of these immigration pressures are very likely to persist?

It's a fair question. You can imagine, Michael, that we have done a lot of analysis in the most recent weeks. And this is why we came to the conclusion that it's an immigration isolated event. And we don't imagine and we don't expect this event to happen again with the same magnitude in 2027, for example. The reason is very clear. Once you have reset the basis, because you have lost a market of immigration that you are not going to test anymore, the impact on the following year obviously is not happening with the same magnitude, first. Second, because when we look at other applications for quantiferon, immunocompromised patients, diabetes patients, dialysis patients, for example, we still see very good growth. And so, to give you precise numbers, internally but also with external experts, we have analyzed again our growth expectation for this market. and the conclusion is the following in most of the world the testing demand for latent tb continues to grow at around five percent in the us you indeed lose that immigration testing base but the rest of the market continues to grow at around four percent so it's still a healthy market to be the second reason why we are confident and this is why i confirm our invitation for the spotlight session on May 7, is that we continue to invest on this range of products. We have a new, more efficient workflow together with diasorine, is what we call the CLIA-2. And on May 7, we are going to show you enhanced automation investment and also progresses into patient scoring to show that we have still a potential to target probably around 5% growth for this range of products.

Thank you.

We will take our next question from Tycho Peterson with Jeff Rees.

Hey, thanks. A couple here. So you got at 6% to 7% growth in Quantiferon in February. That was after the immigration policies were in place. So I'm curious, were you expecting a reversal of the policies, or did something get worse in the quarter? It'd just be helpful to hear about the guidance philosophy, because we knew about the immigration policies then. Second, you know, to Mike's question on life sciences, you know, sluggish academic spending is not a new dynamic. NIH grants were flattened January, down 9% in February, actually got better in March. So did something deteriorate in your order book? Is the environment getting worse relative to what you were, you know, thinking before, or were you just previously too optimistic on the recovery? And then lastly, just get us comfortable with the margin ramp. You know, you're maintaining full year on margins. Get us comfortable that you can actually hit 29.5 for the year. Thanks.

Thanks, Tycho. Those are good questions. Let me address first the question on Quantiferon. Tycho, as usual, in full transparency, this is probably where I blame myself the most. And what do I mean by this? As you can imagine, Tyco, we follow sales in our customer base on a daily basis. Sales of Quantiferon to address the migrant testing market are done in different kinds of labs, what we call our key accounts, LabCorp, Quest, or normal labs in the U.S. We didn't see any inflection in growth until December, which means that probably our customers didn't see that immigration impact either. And if you remember when we reported the Q4 result, we highlighted that softer December months. Should we have seen earlier that that trend on immigration softer demand would amplify in January and February? That remains a good question and that remains a question where I blame myself. But nothing until early January was showing us that this would amplify. Second, Taiko, if you remember, this current administration in January announced an expansion of forbidden countries, up to 49 countries if I remember now. This created a second impact. So, yes, I blame myself because I wish I would have been more proactive with the first signals that we saw end of December of early January, and this is why I said that we are taking very proactive actions, and this is why we decided to reset the market potential for Quantifera, because we know now that it's a solid trend. Second, life science and academia. We are not more impacted than most of our competitors. And indeed, Tycho, I would agree with you, and I said that for many quarters now, that we have more visibility now in Q1 on funding, especially in the U.S., compared than, for example, six months ago this is a fact at the same time it is also a fact that money is not flowing back as quickly as expected and this is not just impacting kayagen when i look at our competitors research in life science for example you clearly see that it's negative to flattish so it's nothing new but what is new is that everybody i believe was expecting the money to flow back quicker. And this is why I mentioned that kind of wait-and-see attitude. I don't think in addition to that that the increased geopolitical tensions in the Middle East did help positively that kind of wait-and-see attitude. So basically, we are a bit more cautious. We still expect a rebound. It's half of a point of growth in the second half of 2026, but it's taking a bit more time. And now on the margin forecast, I'm going to ask Roland to chime in here.

Hello, Tycho. Great question on margin development. First and foremost, Well, you will see already that within the second quarter, we will deliver an adjusted EBIT margin of 29%. So we go very quickly into the direction of also our four-year target. And then the second half, we will even adjust it. Again, compared also to last year, you see some developments here. And I think there's a couple of drivers so that you know from our discussions we had. But we clearly continue with our around about 40-car efficiency projects, and therefore I would say they were clearly supposed to help us to over-achieve our margins. Right now, I would say for this year, at least, they will help us to achieve the 29.5%. Gross margin, in addition, is going to be helpful. You have seen that also in Q1. Time to prep was being very helpful for us in general, and we do believe that trend continues in particular, with some of the new launches, there's even acceleration dollar rise expected. I think it's no surprise that sample preparation is one of our highest cost margin products. So I think there's also clearly a certain factor coming from the gross margin side, in addition to operational leverage. Big step, just to finish it up, is a bit of this year, actually another significant step in terms of launching our next rate of our implementation of the ERP system, which again really takes a lot of incremental cost policy system. So overall, I would say the 29.5% is well on its way. And again, you will see that number already Thank you.

We'll take our next question. Thank you. Thank you.

Thank you. We'll take our next question from Casey Woodrig with JP Morgan.

Great. Thank you for taking my questions. So you left the five pillars unchanged outside of quantifier on for the year, meaning that the life science capital spending headwind is seemingly not hitting sample tech or chi acuity so can you maybe just elaborate on where exactly in the portfolio you're taking a more cautious stance here outside of the oam business that you talked a little bit about but purely on that research side um and then i guess what gives you confidence that the life science capital exposure that you do have in sample tech and chi acuity won't be impacted this year from the weaker market that you're adjusting for elsewhere and then just as a quick follow-up would also be curious to hear your confidence level and the new product launches You maintain the guide of 200 basis points of contribution for the year from those despite calling out a weaker capital market. So just maybe walk through the order book for those visibility into that contribution guide for the year.

Thanks, Casey. And I'm going to start with the second half of your question, which is the confidence in our new product launches. The confidence is based, Casey, on the buildup of the pipeline as we see it. If you remember for Kaya Sprint, for example, we told you that we were receiving purchase orders even before the system was officially launched. Yes, we launched it earlier in the year. And when I see the building up of the pipeline, it's above our expectation. That's why we are feeling good about it. We continue to acknowledge the softer or the less quick or less quick stabilization of the capital expense trend in labs, especially in the U.S. But we continue to believe as well that if you bring a differentiated solution, value solution, you have opportunities. And it's the same for Kaya Symfony Connect. Our relation with our biggest customers, be them Natera, Guardant Health, NIO, for Kaya Symfony Connects are very strong, so confidence as well. Kaya Mini, it's a bit too early to say, but the timeline for Kaya Mini is fully on target, and we know that it's going to answer a need for automation in sample test. And it's not going to be an expensive instrument. Second, KayaStat, the new panel on blood culture and bloodstream infection. It's a need in many European countries. As you know, it's not going to impact the sales for the US because it's going to probably be approved around November or December, which is going to be mainly in Europe. So the combination of new solution, improvement, because indeed there is more visibility on funding, that doesn't mean that it flows back, as I just said before, but there is more visibility, allows us to confirm the number that we gave you earlier in the quarter. I think those answer both of your dimensions. We continue to acknowledge that money is not circling back as quickly as we expect, but we believe that this is going to sequentially improve.

Thank you.

We'll take our next question from Jack Meehan with Nefron Research.

Thank you. Good morning, afternoon, guys. I wanted to spend a little bit more time on Quantiferon. Could you remind me the breakdown across different test categories and the size of the immigration testing pool i didn't realize there was so much exposure to specific regions um maybe just talk about the magnitude of the weakness you're seeing there and i'll squeeze in one follow-up at the same time which is um you mentioned you don't think any of the weaknesses competitive related just any more color you can share on this topic you know in terms of your latest thoughts thank you i i do apologize jack because the second half of the question there was a lot of background noise and your voice was extremely muffled.

And so I couldn't get the second part of the question.

Could you repeat the second part, please?

Jack? Sure. Can you hear me okay now?

Yeah. No, the first part of the question, I could get it. I will answer it. But the second part of your question, I didn't get it. I'm sorry.

Yep. No worries. Sorry about that. It was just, you mentioned you didn't think any of the quantiferon issues were competitive related. I was curious what your latest thoughts were on that topic.

Okay, two good questions again. I mean, I'm a bit surprised because I really believe, Jack, that in the past we segregated the different components of the quantifier on applications, trying to make a balance between normal testing, immunocompromised patients, and new buckets of growth, such as, for example, diabetes patients and so on. So, our best estimation, based on obviously actual numbers, is showing that around 10% worldwide of our quantifier on testing is based on immigration testing. And it's not just in the U.S., it's in the U.S., it's in Europe, it's Middle East. Look, remember, if you have in mind the contract that we won in Oman on Quantiféron, where the state of Oman gave Quantiféron the testing, it was the testing of all their immigrants. And so, with the current policy in the U.S., with the fact that the geopolitical situation in the Middle East is not favoring movement of people, you have that impact. We believe that the Middle East situation is a bit more short-term, short-lived. In the U.S., believe this is going to be a remaining and a recurring number, and this is why we prefer, and I think it's a transparent decision, we prefer to reset the base. It goes across legal and illegal immigrants in a one-to-one. I can give you more details if you want, but that's the explanation. For the competitive pressure, look, we are like you. First of all, we've never be in the business of bad-mouthing our competitors. We are used to competition in Quantiferon. We had many on the market. The recent publication I saw recently from the potentially coming competition is just showing that it's an equivalent to our third generation Quantiferon. We are ahead of that already as far as we are concerned. So I'm not benefiting it.

I said we are prepared.

Thank you. We'll take our next question from Aisha Noor with Morgan Stanley.

Hi, everyone. Thanks for taking my question. My first one is on sample tech. Could you unpack the 3% organic growth a little bit, so instruments versus consumables, U.S. versus Europe, and could this accelerate further to a mid-single-digit type of organic growth in the second half? And then my follow-up, which I'll also ask in this question, is on the strategic review, given it's top of mind for investors at the moment, if you could give us some color on how that's going, and based on the headwinds you're seeing in the U.S. market right now, whether it's immigration or life science weakness or flu, does this change the direction of your strategic review and how you're thinking about the future of this business and how soon we could be to an outcome of this review? Thank you.

Thank you so much. On sample tech, I mean, this 3% organic is confirming the strategic decision that we took some years ago, is moving as quickly as possible manual customers to automated. So it is supported by all the upgrading automations that we have done in the past. If you remember, Isha, EZ1, EZ2, Kaya Cube to Kaya Cube Connect, for example, this is what is in our numbers in Q1. Why are we confident in Q2, Q3, Q4 is that as we have said this morning, you still do not see the impact on the new automation, the Kaya Spring, the Kaya Symphony Connect, and the Kaya Mini in the Q1. This is going to come starting Q2, Q3, and Q4. Can we push it to 5? That's a good question. I'd rather say step by step, we took a commitment to you in our Capital Markende in New or two years ago to bring sample tech back to three percent. We are there. If we can beat that, we will, obviously. And I think in this regard, the acquisition of parts is a very smart acquisition. Second, the strategic reviews, they are not impacted by our environment.

I think we have always said that management and board together are always open to work on options that could create more value for our shareholders and that remains the mindset thank you thank you we'll take our next question from doug shenkel with wolf research good morning good afternoon uh two topics and thank you for uh taking them uh the first is a follow-up to the last question uh terry any update on the ceo process and uh any you know obviously if there's something material we'd know it at this point, but I'm mostly just curious on how that's progressing and what the timelines are. So that's the first one. Second is on life science spending. Could you give us a little bit more detail on which segments, you know, really which product categories is what I'm trying to get at, where are the ones where you saw a notable weakening in demand? You know, so I'm trying to get it. Yeah, obviously there's the issue on quantifier on, but, but, you know, putting that aside within life sciences, what product categories weakened the most over the course of the quarter and was that weakness largely U.S. academic and government, or were there other dynamics that were surprising in areas like SMIDCAP biotech, pharma discovery, any, any other areas? Thank you.

Thank you, Doug. So very simply for the first question, this is probably one of the most important decisions of the board, and the process of CEO succession is still ongoing. We expect this to be solved in H2, but it's going very well, and we are paying extreme attention, obviously, to this process. And as you know, I will be serving the company as long as needed, but H2 is our timeline. For the life science, I think, first of all, to the different part of your question, we see softness mainly in pure research and academia, which is confirming what I said before. Yes, there is more visibility on funding, but money is not flowing back as quickly as expected. Where do we expect? And we see the main weaknesses, it's in traditional, what I would call a bit commoditized PCR and other components, for example, enzymes or oligos. Our sales, for example, to some major US institutions like the CDC or the NIH, they have decreased in Q1 around enzymes and oligos, for example. So components and traditional PCR. And third, we confirmed that it's mainly pure academia, pure research. We are satisfied with our pharma business, especially on the companion diagnostic. This is going very well, and we do not see specific increased weaknesses in the biotech environment.

Thank you. We'll take our next question from Odysseus Menesiotis with BMP Peribol.

Hi, thanks for taking my questions. On Quantiferon, I wanted to ask out of the rush launch, there's a few claims that have been made on our industry conference that there's big automation improvements here. I wanted to get a sense of how much of your Quantiferon sales are generated from your fully automated workflows using TICAN and Hamilton. And secondly, on your margin, considering you maintained your target for the full year despite the lower sales growth. Roland, you did touch on some efficiency programs doing better than expected, but is there any mix effect involved as well that we need to know regarding Quantiferon or the OAM sales? Thanks.

Very good. I will, since you asked Roland, I'm going to ask Roland to take the and then I'd come back on the quantifieron.

And I'm happy to go first. I do think, again, as I said, there's a very good level here on confident on the margin development. I don't think there's, at least from our perspective, any reasons that we are not able to achieve yet. And actually, some of the drivers are exactly the ones you're referring to. So mix will be helpful for us because, as I said before, sample prep is clearly a significant opportunity for us. It is clearly a high margin product for us. And some of the new launches will also clearly generate an increase on the consumable side. Because again, just think about Kiosprint being a high-scoop machine. That means, by definition, there's more consumers going to this kind of a machine than to any other kind of instrument. And so therefore, also not only the implementation part, but particularly also the consumable revenue stream should increase. Therefore, I think, again, a good driver. Second, some of the product areas, which right now are not developing as planned, are clearly coming with a lower margin contribution. I do think that is clearly, in brackets, somewhat helpful relatively as well. So I would think that is a component. I do think, nevertheless, the single largest component is actually the activities we started now it's more or less 18 months ago with the efficiency program. Again, I talked already about what we're doing on the ERP implementation. We still continue our activities around business shared service centers. We are moving here from 15 to 20 percent over time of employees being in business shared service center. We're talking about significant AI implementation programs within Kaija, not only to the customer side on the QDI side, but also for internal processes, for customer services in the finance area. Again, in coding, right? We have significant opportunities around software development internally.

So there's a lot of areas where we see improvements coming up, and they come faster than most people believe right now again as i said ai is clearly changing the world to a certain degree clearly also in our environment and we are writing that as well and to your first question um look i i i would take it like this because i cannot speak on behalf of competitions what we have seen are slides that are showing a product which is by no mean differentiated to the quantity it has even less features than the current quantity but from an automation standpoint what I'm going to say is that there is at this moment only one full workflow and one fully flexible workflow on the market and this is what is provided by KayaJet when I say full is that when you start with a TICAN or a Hamilton, then the quantiferon and diatholene in the back end, or you can perfectly pick and choose and say, I'm only interested in the front load automation, TICAN or Hamilton, or I'm only interested in the back end automation with a diatholene. So we have a mixed up situation. What we want to show you on May the 7th is that beyond this we want to even enhance automation further make it even smoother more integrated and leveraging the full power of what we call the clia 2 from diasurine and we want also to improve the product from a medical and patient scoring standpoint So stay tuned, but I can guarantee you that you will see that once again, we are taking a step ahead on what we are going to present on May the 7th.

Thank you.

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

Thank you very much for taking the questions. Just following up on the previous questions relating to the step up in your margin through the rest of the year, I was just wondering if you could maybe discuss whether the Middle least conflict is having any impact on your raw material freight or energy costs and what's your exposure there should the conflict persist for maybe for a significant part of the year. And then just a second, a very quick one, I noticed your restructuring adjustments increased from 25 million to 45, what you got to for the full year. Could you touch on what that incremental 20 million is and where in the business you're taking some measures there?

Yeah, thank you. I would say more or less in the Middle East conflict. The good news is, of course, it doesn't affect us directly in terms of production or whatever. Again, thanks to the COVID environment, at that point, we had to change more or less our whole energy infrastructure a lot, so we are totally flexible there. Where it clearly impacts us as many other companies is on logistic costs, because it's quite clear that the big logistic providers and the forewaters are charged and surcharges to us. As you know, to a larger extent, we're able to share that with our customers, but probably not to the fullest extent because particularly on the company side. We still hope that there's a certain normalization come up to at some point in time, what we do not expect that short term. Nevertheless, I don't think that that is too much impact for our overall margin situation. I'm quite sure that we see, as I said before, rather improvement, something at the end of the day, given our cost of goods sold structure. That is not too meaningful from the outset in perspective, but just to give you the complete picture here. Under the restructuring effort, as I said, there's a couple of efforts which we are doing right now. I was referring to them. Some is around our current ERP systems. There's changes coming up. Some has to do with some of the other topics I was referring to building out on the knowledge we accumulated over time in our shared service centers. So that's clearly something that we want to strengthen over time.

Thank you.

Well, you will take our last question from Catherine Schulte with Baird.

Hey, guys. Thanks for the question. I was just Going back to the life science caution, thanks for giving some color on those product categories, but just given it's impacting only that more commoditized side and kind of the non-pillar side of the portfolio, is what gives you confidence that this is market-related versus, you know, share or product issue on that non-pillar side of your business? Thanks.

Well, I would say, Catherine, that over the last six to seven years, we clearly said that this company was focusing on where we are relevant and we can take definitive market shares on growing market. And therefore, from a strategic standpoint, it is no surprise to say that Kayagen becomes more and more a digital PCR company rather than a PCR company. It's perfectly in line with our strategy. We focus our sales force attention as well on products where we bring differentiated value and where we know that the margin over time are going to be the most interesting. So this is why also you see also that kind of results. The rest, I mean, as I said, enzyme, oligos, those are normally products that you sell in big bulk, so they are depending on order patterns, so it's not surprising. We have always said that OEM was volatile by nature. I think it's wise in any kind of model to model the OEM business at Kayagen between 70 and 80 million dollars per year of revenues give and take. And I think it's wise for a company of our size to continue to focus our people. We cannot be everywhere. And I prefer them fighting for sample take, pushing for digital PCR, pushing for Quantiferon, for KayaStat, and for QDI. We have enough with those products and it represents already 70 to 75 percent of our revenues. With this being said, I think we need to end this call. I would like to thank you for your attention and repeat again before closing that we have a virtual quick spotlight session on May the 7th on Quantifero, and I'm sure that you will find it quite interesting.

Thank you very much.

Thank you.

At this time, I'd like to turn the call back over to Daniel for any additional or closing remarks.

Yes. Thank you, Katie. Thanks, everyone, for joining our conference call today. If you have any further questions or comments, please do not hesitate to contact us. Thank you very much for your participation, and goodbye.

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