Conference Transcript - QGEN 2026-03-10

Daniel Wendorff, Analyst — Other

Good morning, everybody.

Luke Sergat, Analyst — Barclays

I'm Luke Sergat. I cover life science tools and diagnostics for Barclays. Kicking off the conference here, first meeting with Kaigen, long-time listener, long-time caller, I guess, for me. I have Roland Sackers, CFO, and Daniel Vinkoff, IR. I guess just to start off, we talked about this a little bit outside, But kind of go through updates on strategic direction, you know, CEO search, some of the M&A news that's been out there. So just kind of wrap all that up into, you know, some early comments.

Roland Sackers, CFO

First of all, Luke, thanks for having us. And I appreciate that you're now a research analyst and not a researcher anymore. We still miss you as a customer. But I think it's an important question. And I think probably you're referring to also the comments that he made more or less last week, where he was, from my perspective, reinforcing what we said before. On the one hand side, car engine feels quite strong about, I think, our overall perspective in the market. I think we delivered also a very strong 25 footprint. And with our focus around our five pillars of growth, we feel very comfortable going forward. Nevertheless, we're also going to CEO transition. As you know, Trier and the company announced that they go a different path, and we're in the middle of the CEO search. We are now down from a long list to a short list. I think we said publicly last week that we probably believe that sometimes in the second quarter that may result in an announcement. It depends a bit when a new person can start, if it is a U.S.-based person, an European-based person because, as you know, in Europe you have a couple of competitive clothes and other things which might take some time. Nevertheless, I think the board is very straightforward that they are looking for somebody in the U.S. you would probably say who has seen the movie, somebody who has experience in the footprint in more or less in all of our industries we are serving on the clinical and the life science side, clearly somebody who worked in Europe and all the U.S. So I do think that is the expectation, and we are moving along here quite well with, I would say, a strong group of candidates. Nevertheless, during that time period, and again, we went to a similar situation in 2019, as you know, while we are a much stronger company today, the board, of course, has to review all alternatives it has for it. And that goes from just arriving to organic growth, also doing, of course, as we did in the past by ourselves, bolt on acquisitions, but of course, if there's any opportunity to create additional shareholder value or shareholder value even much faster by being part of an acquisition or any kind of transaction, we are very much open to that. There's also a reason why we hired advisors to help us facilitating that. And again, as you know, we will see what the outcome is. the old rule is nothing changed until the day we announced it, and that's where we are. Yeah, until you get another

Luke Sergat, Analyst — Barclays

press release, yeah. Alright, that's fair, and then I guess from a CEO perspective, and you guys are recruiting in light of the strategic rationale, and maybe you know, I don't want to say shopping ourselves, but just open for more discussions around that, you know, how does that impact the search there? Is that, like, walk us through you know, who would be coming on? Would they have protections? Because like you said, in 2019 you went through a similar dynamic.

Roland Sackers, CFO

I think you can take your two perspectives right? And I'm not telling you if I'm leaning to one or no, but just more or less. I think that it's probably the range of objectives you can have. On the right hand side, you can of course argue, okay, is this a limitation to your CEO search because what does it mean for a CEO if there is a company which is reviewing its strategic position? But on the other hand, you can also take a position in the view and say, okay, it might be helpful for any incoming CEO if that review was properly conducted and reviewed and the board came to the conclusion the best way forward right now is more or less staying standalone and moving it forward as the organic client is quite strong. that doesn't mean that the board doesn't know about its fiduciary responsibility going forward it's quite obvious that if a day later somebody else would come forward and say hey we have a different view on that company and that they don't know about their fiduciary responsibility so I would argue you can take different views and nevertheless the list of candidates is quite strong

Luke Sergat, Analyst — Barclays

all right great all right let's go to the fundamentals I think the feedback on OneQ across the board from tools was that it took investors kind of by surprise with how conservative or appearing conservative the guides were. And it felt more of the same of the last few years. Walk us through what you guys, like what walked into, what was baked into your OneQ guide and coming in a little bit softer there. and why it's different than what we had seen the last few years in this space.

Roland Sackers, CFO

We clearly, I would say, gave a guidance which we feel still quite comfortable with for the full year of a goal of 5% growth rate. Nevertheless, I do think it's fair to say that there is clearly quite significant ongoing macro challenges worldwide. I think the good news is that finally the U.S. has an approved NIH budget, which is also quite helpful on the consumable side nevertheless, particularly on the automation side it's also quite obvious that it will take some time before our customers rebuild the confidence to do mid- or long-term investments which is buying a new machine because we all recall six months ago there was a lot of rumors around NIH budget might be down 20%, 30% that is not helpful building the confidence in, again, if you want to buy a new instrument. At the same time, other things have changed, right? You're now seeing what's going on in the Middle East. We all hope that it's over quite soon, but we all know that every company has business in this area. It is clearly a significant part of a lot of logistic change. I'm quite sure that the freight company is already reviewing fuel surcharges and other stuff. A lot of things going on. So I would say starting on a realistic, more balanced base is a good starting point. If it goes better, I'm quite sure that we, as many other companies, still take orders. But, again, I wouldn't underestimate the impact of this lack of confidence. We're still seeing, particularly on the academic side. The clinical side overall feels quite strong. We don't have the strongest respiratory season in the world right now, so there's no incremental tailwind now Kaizen specific have in mind of course we are fighting in the first half also some headwinds from the discontinuation of Neumoto X and Dynalonics that will fade away just that by itself will give us 200 basis points more growth in the second half compared to the first half we also made important launches this year as you know we are launching three new machines on sample prep two already on the market so there's no launch risk on that quite obvious that they will generate more revenue in the second half than in the first half, so also that will overall give us a step up of 150 basis points from new products on the sample prep side, 50 basis points from other launches. So I think there are good reasons to believe that we've seen acceleration. Nevertheless, we're not in an easy environment right now.

Luke Sergat, Analyst — Barclays

Yeah, and on the academic government environment, you touched a little bit on that. You know, we talked about how last year you had this second half waiting. I mean, last year was like a total freak out, I guess, from everybody when they saw that budget cut 40%. So we don't have that this year. But what we've seen is that the budgets are still slow to release. And we were at AGBT, and I think that the sentiment there was that at least researchers felt that, okay, at least I'm going to have my job. I'll figure out when I get my money later. That's like the incremental positive that we got. Are you getting that same type of feeling from your customers?

Roland Sackers, CFO

Yes and no. I would say the good news for us is we have seen it last year. We were also not really much affected on the consumable side from all the shutdowns and budget things because our products are typically products which are very resilient. As long as you go to the lab, you need our products because otherwise you can't do anything. So we have felt it mostly or the significant part actually on the instrumentation part. But, yeah, of course, there is this level of uncertainty, which, as I said before, will take some time before it moves away. It's actually also different in the U.S., and I think that in Europe, European research budget is actually moving quite well along, which, as you know, is important for us as well. Yeah, it could be more stable, but we're still moving in the right direction.

Luke Sergat, Analyst — Barclays

And on the U.S. side, are you seeing, is this kind of just a continuation of existing projects? or are you starting to get bids for new project starts or new ideas?

Roland Sackers, CFO

The good news is what we're really seeing is picking up for us is requests for quotes for the new instruments. So you see that people are at least expecting money. They do diligence work. They want to have demos. So that helps us also to get, I would say, more optimistic for the second half of the year because you wouldn't do that if you wouldn't be somewhat optimistic because there's other things you could focus on.

Luke Sergat, Analyst — Barclays

Yeah, and on those launches, I mean, you have the Sprint, or the Kaya Sprint, the Kaya Mini, and the first update to Kaya Symphony in a long time. So kind of walk through the genesis and where these new boxes are going to fit within the workflow.

Roland Sackers, CFO

Clearly three important launches for us. And as I said, Symphony is on the market, Sprint is on the market, Mini will be end of the year. Probably not much contributing revenue for this year, but probably more important for 27. Impact of the financials will be different. As you said correctly, Symfony, of course, is a well-known instrument for Kaizen, but now we had a major new release which has a lot of features which all machines doesn't have from continuous loading, random access, 30% more capacity on a lower footprint. As you know, we have a lot of significant customers who go in 20%, 30%, and they are clearly in desperate need of new sample prep machines. And so if we can more or less offer them now new machines, which a higher throughput on the lower footprint is exactly what they're looking for. So we have, I would say, a good order income on that. This will generate particular instrumentation revenues. It will take some time before this generates incremental consumable revenues because these machines, which we are probably replacing other symphonies, are very much utilized. Over time, it will generate more throughput. Very different than the KIA Sprint. KIA Sprint is a high throughput machine. Here, KIA Sprint doesn't have any footprint at all because we have never been in that sub-segment. While we are, I would say, the leading market player, if it comes to sample prep, there's more than 60% footprint in the kit market, we have never been in that sub-segment. I would think here we see both, significant income of revenues from the new instruments, and, of course, every kit is also an incremental kit, what we're selling. So I think that is something what, for sure, will have the largest financial impact on the sample prep side, not only for this year, but probably also midterm. Last but not least, the Mini, again, a very different instrument, rather an instrument where we are expecting to replace manual work. And the way it should work is, again, we haven't set a price point yet, but let's assume you can now buy a walk-away instrument for $3,000 to $5,000. And as I said before, most analysts think you have a similar number, Luke, expect that we have a 60% market share in sample prep. Typical setup in a lab is that you have 10, 15 different applications. So let's assume you have 10, 6 coming from Kaigen. Now, instead of using them manually, you can use an automated walk-away solution break-even in less than 12 months. over time we expect these customers ask themselves why I'm still doing for others manually if I can have a walk away solution, particularly in days where everybody feels a bit squeezed money is a bit limited, so I do think there's a nice addition to our full menu. That's also a reason why we expect that our mid or long term growth rate for sample prep should be significantly up. This year, as you know, it's probably somewhere between 9 and 10% growth rate, but Of course, that includes the $40 million from the past acquisition. If you take that out, there's still probably somewhere between 4% and 5%, which is a significant step forward from the underlying, let's say, 2% plus we had in the past for a single largest product. In addition, being the CFO, it's clearly also important and not a surprise that Soundproof Web is probably one of our most profitable products as well. So that also will have, I would say, a good impact on our overall margin, probably 27% and forward.

Luke Sergat, Analyst — Barclays

And on the Sprint with the high throughput, right, when you think about, and this is, I'm thinking more about diagnostic labs and liquid biopsy applications, how scalable is this to get into if there's like large-scale, you know, genomics population studies to single-cell, you know, again, because you're the first layer of that whole biology stack. You need to unlock that part of the market.

Daniel Wendorff, Analyst — Other

So the CHI Sprint is mainly targeting our research customers. So high throughput sample preparation for our research customers. But you're right, the CHI Symfony Connect we have in particular developed for our liquid biopsy customers. Full sample traceability, very important in clinical applications. It has a superior extraction performance due to a slight technology switch. So even in samples where you do not have a lot of material, you can purify that very easily with the CHI Symphony Connect. And we particularly follow the strong growth of our liquid biopsy customers with the CHI Symphony Connect development. But the CHI Sprint is really high throughput, mainly for research applications.

Luke Sergat, Analyst — Barclays

Okay, that's helpful. And then back to where you were talking about the profitability on the incremental. With new instruments, typically from a mix perspective, that was always a headwind, obviously, versus your much higher margin consumables, and that obviously hasn't changed. But it's more of a question of, you know, from the new instruments coming out versus what we had seen in the past, can we assume a better drop through from that higher instrument mix, or is this going to be something like we've seen in past launches?

Roland Sackers, CFO

As you know, we do have a midterm target out of 31% adjusted A-bit margin for 2028. And I think we've been quite vocal about that. We are going to increase that target going forward. In brackets, I only have to wait for a new CEO. He should review what he has to deliver. But, of course, we internally developed the number, signed it up. So we're happy to release. It's just fair that whoever comes in has a chance to review that. And not even others, I don't know. We will see that. But we feel comfortable that we have potential to increase that. A significant part of that, I would say, expansion of profitability, again, from more or less the 29.5% we had last year, is clearly also that we do expect gross margin improvement. And that is driven by a couple of factors. One factor is that we expect also the consumer number and sample prep to grow. As you said correctly, overall we have a healthy instrumentation, gross margin, better than most other companies. But, of course, it is not to the same level than our consumables. That's probably also the reason why this year it stays more or less a bit flattish. It goes up a bit, but not a large change. And that comes in next year. But there's, of course, other initiatives as well. In particular, also, KayaStat will drive cost margin improvement because right now we're here under utilization. But, of course, if that product continues what we strongly believe 10-plus percent, that should help us to grow into that and, therefore, reducing our standard costing. But on top of that, we have 40 what we call KIA efficiency initiatives where we tackle a lot of different areas in terms of margin improvement. It has to do with, on the one hand side, rolling out our new ERP system. As you know, historically, we had two separate SAP systems, one for Europe and Asia, one for the US. Now we bring it to the new SAP HANA system on a global basis. So there's a lot of end-to-end work integration, which, of course, makes a significant difference for any larger organization. But we also still have opportunities to shut down smaller sites and locations to integrate them into our larger hubs, which, again, will drive efficiencies quite significantly going forward.

Luke Sergat, Analyst — Barclays

Okay. And on that LRP, you talked a little bit on that. But on the growth perspective, you guys talk about some shared dynamics there on Quantifuron. This is one of your key pillars of growth. I think that your position in that market is well understood. But there's always the bogey of competitive dynamics coming from the bigger customers in diagnostics world. So give us an update on, like, how you guys are planning for that and anything you want to walk through about the different. It's a very niche market set, right? It's very fragmented. So where do you think that you'd be able to do it?

Roland Sackers, CFO

I think first and foremost, everybody has to understand that still 60% of the market is still 120-year-old skin test, right? And even that 120-year-old skin test market is growing 4%, as global population is growing, as more mandatory testing getting required, back-to-school testing, healthcare worker testing. So the market is growing. Second is that market was always competitive. People, for good or bad reasons, always believe there's only Kaizen in the market. There's other companies in the market, very serious clinical companies as well. So I'm not sure why somebody might believe one is a better competitor than the others. And I would say we fight them all quite significantly over the last couple of years. Yes, we clearly have the leading market share, but what probably also has to do with that we never stand still.

Luke Sergat, Analyst — Barclays

We improved the product.

Roland Sackers, CFO

We have now launched the fourth generation. As we all know, the fifth generation is coming at some point. We made, particularly this year, significant steps forward in terms of automation. We just released weeks ago new automation steps, which increased 75% of throughput. That is hard to catch for anybody going out. And most important, we worked with our customers over the last two years to embed them into like three, four years contracts, which I think is a win-win situation. because at the end of the day we shouldn't forget also Quantiferon is not only for us but also for a lot of our customers if not for most of our customers a significant product with significant profitability so the question is why should you change it particularly, and you now look to know that have you ever heard in the last 15 years any issue with a Quantiferon kit with a Quantiferon automated system no, it doesn't work seamlessly So changing a product on a clinical side, which is working perfectly, is a risk. And the one learning we all have in our industry, that's true for a supplier, that's true for a lab as well, is once you can't deliver, you are in deep trouble, right? So putting that in a risk, we'll see how it works. We feel well prepared. There's also not a large update on that. As you know, some of the competitors pushed even launches out in the U.S. for time going forward. Let's see what happens. For us, I think it's even better if the launch happens soon because that's the only way that we can prove that we're still around once they're on the market.

Luke Sergat, Analyst — Barclays

Yeah. All right. And then I guess from here, the last couple of minutes, I want to talk about the recent PARSE acquisition. You guys talked about this coming in above the $40 million target that you're having. So how much of that is due to just benefiting from your commercial organization and overall just being able to scale the business versus anything that you guys have done internally from an ease of use or workflow simplification perspective?

Daniel Wendorff, Analyst — Other

So I think the key contribution really comes from the past technology itself, first of all. So we closed the deal in December last year. and one of the key reasons why we acquired PaaS is the ease and the rapid adoption of the technology. It does not require an instrument if you don't want to and it's virtually exponentially scalable. And the most attractive part of the single-cell research market is currently the part where you can generate large data sets of millions of cells. This is where the trend is going and where we believe PaaS has the best. This is really that part of the single-cell market we thought is most attractive. Of course, over time, you're right. We expect, with our commercial reach, to generate revenue synergies in that regard. And we're also doubling down on R&D, which is one of the reasons why we guide for a flat adjusted operating income margin in 2026, because we really double down on R&D for PaaS. This is currently the market segment, which is growing the strongest.

Luke Sergat, Analyst — Barclays

Yeah, okay. And that would be, as we think about where Sprint kind of fits in within that research market, would that be one of those applications where it's an easy fit for you or no?

Daniel Wendorff, Analyst — Other

I wouldn't see it this way. If you think of PaaS and where the money is coming from, so pharma companies are currently really exploring that field, which is driven by a few factors. You can generate large data sets. You can store and interpret the data, also with AI-enabled solutions. And you can gain biological insights. And if you think of a virtual cell modeling structure, this is currently where the money goes into it. If you think of the PATH technology itself, you basically use the cells, the incubation areas, and you do the transcription, the reverse transcription in the cells. So the CHI sprint is really for sample preparation.

Luke Sergat, Analyst — Barclays

That makes sense. And then I guess from here, when we're thinking about the, you're talking about guiding to the flat margins, but there's still a pretty healthy step up from your 1Q all the way up to 4Q. Can you just walk through quickly on the buckets there?

Roland Sackers, CFO

In terms of revenues or in terms of profitability?

Luke Sergat, Analyst — Barclays

The profitability side.

Roland Sackers, CFO

Again, profitability, as I said, of course, one thing comes with the scale of revenues, there's an underlying impact. second which is I think it's very clear that PaaS right now is diluted to our transaction just in Q1 is two cents dilution coming from cost margin for PaaS are actually quite healthy, we are doubling down on R&D because we do believe we do have the leading franchise and again we have probably this year at least $40 million, I think our probably only competitor in the market probably has around $4 million in that kind of a field So there's a nice opportunity for us to set the standard for the future, and this is exactly what we want to do. More important is that we are clearly driving forward some of our efficiency projects as well, so that is a significant driver for profitability as well. Not helpful right now in the first half of it is, of course, the whole tariff implementation. It's going to annualize mid of this year, so that should also be quite helpful. at the end of the day. We might all get a big check. I'm not sure how that ends. But again, that's probably a discussion for another day. Margin improvement, I'm quite sure that we have better margin this year than we have guided yet. Okay, great.