Qiagen exceeds Q3 targets with 6% sales growth, boosts 2025 EPS outlook to $2.38 amid strategic PARS acquisition

Katie (Operator) - (00:01:24)

Ladies and gentlemen, thank you for standing by. I am Katie, your global meet Call operator. Welcome and thank you for joining Qiagen's third quarter 2025 earnings conference call webcast. At this time, all participants are in listen only mode. Please be advised that this call is being recorded at Qiagen'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 zero for operator assistance. @ this time, I'd like to introduce your host, John Galardi, Vice President Head of Corporate Communications at Qiagen. Please go ahead.

John Galardi - Vice President Head of Corporate Communications - (00:02:08)

Thank you operator and welcome to all of you who are joining us for this call for the third quarter 2025. We appreciate your time and your interest in Qiagen. So joining the call today are Terry Barnard, our Chief Executive Officer and and Roland Sackers, our Chief Financial Officer. Also joining us today is Daniel Wendorf, our new head of IR, and Dr. Dominica Martiromo from our Investor Relations team. Before we begin, I'd like to share that our next deep dive on Sample Technologies is planned for Friday, November 21st. The invitation was just sent out to you, so please register for the event. Dominica has done an outstanding job leading the creation of this series and we look forward to another engaging session. As always, today's call is being webcast live and will be archived in the IR section of our website at www.qiagen.com here 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 and all references to earnings per share refer to diluted eps. With that, let me hand the call over to Terry.

Terry Barnard - Chief Executive Officer - (00:03:37)

Thank you John, and hello everyone. Good morning, good afternoon or good evening to all of you joining us from around the world. I'd like to start by thanking the Qiagen teams across our company and across the world for their ongoing dedication and strong execution in this challenging macro environment. Their focus and collaboration enabled us to deliver another solid quarter. In fact, the 24th consecutive quarter in which we met or exceeded our target we continue to see the clear merits of our strategy to prioritize high growth areas of molecular research and testing while maximizing the reach of our portfolio to customers across both the life sciences and diagnostics. This approach continues to provide balance and stability even in those very volatile and uncertain conditions. This performance in 2025 also enables us to advance key capital allocation initiatives that are strengthening our business and creating value. Two important developments were announced yesterday. First, the acquisition of PARS Biosciences that expands our sample technologies portfolio into the very fast growing AI driven single cell market. Second, a 500 million synthetic share repurchase to be completed in January20 that will bring total shareholders return since 2024 to above our 2028 goal for at least 1 billion return to shareholders. We remain strongly committed to our 2028ambitions even again in this challenging environment. We have significantly strengthened key pillars in our portfolio in and continue to position qiagen towards our 7% sales CAGR target from 24 to 28. We are also on track to move well above our 31 adjusted operating income targets by the end of 2028 despite currency and integration headwinds. So we are combining top execution with decisive actions to deliver solid, profitable growth. So let me walk you through our key messages for today. First, we once again exceeded our targets for the third quarter and delivered one of the fastest growth rates in our industry. Net sales rose 6% to $533 million. While results are constant, exchange rates were up 5% and ahead of our 4% CER target. More importantly, core sales, excluding recently discontinued products increased 6% CER over the prior year period. Adjusted diluted EPS was $0.61 at both actual and constant exchange rates and therefore above our outlook for at least 58 cents. Those results again underscore the strength of our differentiated portfolio and the success of our efficiency initiatives in delivering a consistent performance quarter after quarter over the past six years. Second key message our growth pillars continue to perform strongly. In 2025, QIAstat Diagnostic grew 11% driven by strong instrument placements and double digit consumable growth on demand across our clinical syndromic testing panels. QuantiFERON also grew 11% CER supported by continued latent TB conversion from the skin test and broader adoption. Worldwide. Sample technologies returned to growth with sales rising 3% CER on demand for automated consumables. Despite cautious capital spending. QIAcuity, our digital PCR platform, maintained double digit CER growth with robust consumable demand more than offsetting slower instrument sales among life science customers and Qiagen Digital Insight Our bioinformatic portfolio delivered solid double digit growth driven by growing demand for clinical bioinformatics and also the integration of Genox, which has further enhanced our growing range of AI driven solution for interpretation of clinical next generation sequencing data. Third key message our strong performance so far in 2025 is allowing us to again raise our earnings target while confirming our sales outlook. This reflects the success of our efficiency initiatives and disciplined execution. Despite currency headwinds and the adverse impact of tariffs and the current US Government shutdown, we continue to improve profitability and maintain solid growth. This is fully aligned with our 2028ambitions for solid, profitable growth. Therefore, we now expect adjusted eps of about $2.38 CER, an increase of $0.10 from our initial guidance for 2025. At the same time, we continue to expect net sales growth of about 4 to 5% at constant exchange rate and more importantly 5 to 6 CER growth for our core portfolio. This is definitely another solid and strong quarter demonstrating consistent execution, operational discipline and clear strategic direction. And lastly, let me briefly address the announcement about our leadership transition. After more than 10 years with this remarkable company, including six years as CEO, I and our supervisory Board have agreed that this is the time to prepare for Qiagen next phase of growth. This decision comes after deep reflection and with full confidence in the strength of our company, the strength of our strategy and above all the quality of our people. I will obviously continue to lead Qiagen until a successor is appointed to ensure a smooth and orderly handover. Our focus My focus remains unchanged, executing on our strategy, delivering on our 2025 goals, and advancing on our 2028ambitions for solid and profitable growth. It is a real privilege to serve Qiagen and to work alongside such talented and dedicated colleagues and I'm really confident that our company is well positioned for its next phase of growth. With that, I'll hand it over to Roland for more on the financials. Thank you Teriet and hello everyone.

Roland Sackers - Chief Financial Officer - (00:12:41)

Let me start with a few key financial highlights. First, Qiagen remains one of the fastest growing companies in our industry as core sales rose 6% at constant exchange rates. Second, profitability remained strong. Our adjusted operating income margin for 3Q25 was steady at 29.6% of sales, 30% at constant exchange rates, absorbing more than one hundred and fifty basis points of headwinds from currency movements and the impact of US tariffs and earnings per share at CER were $0.61 and well ahead of the outlook for at least $0.58. Third, cash generation was also strong with underlying operating cash flow of $466 million for the nine months of 25, including about $45 million cash restructuring payments. And fourth, our balance sheet remains strong giving us the flexibility to invest in innovation, pursue targeted bolt on acquisitions like pars, and to increase returns to shareholders as we are doing with our $500 million synthetic repurchase set for completion in January 26th. We have a long standing capital allocation strategy that has created value by directing resources to the highest opportunities. Based on this new repurchase program, we are well ahead of our target to return at least 1 billion to our shareholders by end of 28. We also anticipate that our leverage rate, our net debt to adjusted EBITDA ratio will move towards the industry average of approximately two times during 26 as we consider additional capital allocation in the new year. Now let me take you through the details in terms of sales Results among the four product groups, sample technologies rose 3% CER and driven by consumers growth, especially automated kits that showed double digit expansion compared to the year ago period. Instrument sales were slightly lower but included good placement of the QIA Symphony, QIAcube Connect and Easy to Connect systems. In diagnostic Solutions, sales rose 4% at CER but at a faster 8% excluding the discontinued NeuMoDx system. The top performers were QIA, Stat and Quantiferon, both growing 11% CER and supported by further expansion of our companion diagnostic pharma partnerships in PCR and Nucleic Acid amplification. Sales were stable compared to 3Q24 at constant exchange rates. Our digital PCR platform QIAkuity continued to grow as strong demand for consumables more than offset lower instrument sales amid cautious life science spending. In the genomics and NGS product groups, sales rose 9% CR and led by the Qiagen Digital Insight bioinformatics business Qiagen Digital Insight sales grew at a double digit weight through a combination of silicro from the current business and first time contributions from the Genox acquisition. Consumables for universal NGS panels also grew over the year ago quarter. Turning to the regions, sales in the Americas rose 7% CER supported by strong growth in the US and against lower sales in Brazil and Mexico. In the EMEA region sales grew 4% CER led by Germany, France and Italy along with the Nordic region. The Asia Pacific region declined 2% CER and reflecting a mid teens car decline in China over the same period in 24 against higher sales in India, South Korea and Australia moving down the income statement Adjusted operating income grew in line with sales and reached $158 million as the adjusted operating income margin remained at 29.6% of sales compared to 3Q24. R&D investments were 9.2% in 3Q25 compared to 8.9% in the year ago period. The vast majority of our R and D spending continues to focus on our pillars. These include the upcoming launches of three new sample prep instruments, new panels for QIA StatX, the expansion of QIAQT applications in research and the clinic, and also the development of the fifth generation for Quantiferon. Sales and marketing expenses showed the benefits of efficiency gains declining about 1 percentage point to 21.2% of sales from 22.2% in the third quarter quarter 24 while our teams maintained an ongoing high level of customer engagement. General administrative expenses declined slightly to 5.7% in 3Q25 compared to 5.9%, showing continued cost discipline while investing in IT upgrades such as the SAP system migration. Adjusted diluted EPS was 61 cents at constant exchange rates, exceeding the outlook for at least $0.58. The adjusted tax rate was 18% and this was consistent with our target Moving to the cash flow we saw an ongoing high level of cash generation for the first nine months of the year over the same period in 24. Operating cash flow was $466 million for the 25 period compared to 482 million in the same period of 24, but the 25 results included about $45 million of cash restructuring payments related to the efficiency and portfolio initiatives. Free cash flow was US$336 million, which was slightly below the same period of 24 due to the higher levels of planned capitalized IT investments. Account receivables declined to about 53 days compared to about 56 days at the end of 24 as our teams continue to improve in this area. At the same time, days of inventories were 151 days at the end of 3Q25 compared to 193 days at the end of 24 and again reflected benefits from our efficiency initiatives. The improving level of profitability and strong cash flows is further strengthening our healthy balance sheet. This gives us opportunity to make disciplined decisions to invest in innovation, pursue targeted bought on acquisitions and increase returns to shareholders as you saw with the development. This is complemented by our decisions to increase returns to shareholders with a new repurchase set for completion on or about January 7, 2026. This $500 million return program comes after we completed a $300 million synthetic share repurchase in January and also paid our first annual dividend of $54 million in July. So based on this capital allocation decisions announced and also our and also our considerations for further deployment in 26 to attractive return opportunities, we expect Kaijin's leverage ratio to move towards the industry average of about 2 times net debt to adjusted EBITDA. In closing, our strong financial position supports our commitment to solid profitable growth. We are deploying resources in areas offering the highest returns, all designated to improve our position to deliver on our 28ambitions and create long term value. With that, let me hand the call back to Treilly.

Terry Barnard - Chief Executive Officer - (00:21:01)

Thank you Roland and as usual, let's have a look at the progresses across our product portfolio and particularly focusing on our pillars of growth. You probably remember that we are targeting around $1,490,000,000 in combined sales from our five pillars for 2025 representing a growth of around 8% CER. So based on the results to date in 25 we remain well on track to achieve the goal for this group. Let's start with Sample Technologies. We continue to advance our next wave of automation and and have taken an important step with the acquisition of PARS to extend its leadership by moving into new technologies. Regarding the upcoming instrument launches, those are perfectly on track. QIA Symphony Connect has now been installed at the first customers and the initial feedback has been very positive about the performance and enhanced connectivity. QIAmini and QIAsprint Connect also both remain on schedules for launch in 2026 and early field tests for Kaya Spring Connect are confirming very strong demand for an advanced high throughput solution. It is indeed extremely interesting to note that we have already received purchase orders for Kaya Spring Connect. We have also recently marked the fourth placement of QIAcube Connect, reaffirming our leadership in automated sample processing beyond automation. We are expanding the reach of our Sample Technologies portfolio with the acquisition of parse, a pioneering scalable instrument free single cell analysis. PARSE has developed a breakthrough instrument 3 combinatorial barcoding technology that removes the need for droplet based system and enables analysis of millions or even billions of cells instead of thousands. This enables delivering more insight at a fraction of the cost. PARSE solutions are already used by more than 3,000 laboratories worldwide, including every top pharmaceutical companies and leading research institution. So this acquisition is really opening up new dimensions for Qiagen in this fast growing single cell market and fits perfectly with our sample to Insight strategy. PARS also creates synergies with our QDI Bioinformatics business, connecting large scale single cell DN data generation with powerful AI driven interpretation. Together we can accelerate discovery, build virtual cell models and help researchers unlock new frontiers in AI based drug discovery and next generation biology. So tune in for our Sample Technologies Deep dive session on November 21st and you will learn more about the exciting area of our portfolio Turning now to Kia Stat, we continue to expand our syndromic testing portfolio worldwide with the launch of a new instrument version in the US and we are preparing for more panel submissions in 2025. In September we received the US FDA clearance for Kia Stat Diagnostic Rise, the higher throughput version of our syndromics testing platform. QIAstat Diagnostic Rise automates up to 18 tests simultaneously processing as many as 160 samples per day with very minimal hands on time, so this high volume version is particularly attractive to our largest customers. Also in this third quarter we were well above 150 kiastat placement, which is once again a testament to the continued growth and stronger customer adoption of KayaStat system. When it comes to menu expansion, we remain perfectly on track to submit the blood Culture panel in the US and in Europe by the end of 2020 25. On QIAcuity, our digital PCR platform, we continue to expand the assay menu and where we are on track to sell at least 1,000 new assays in 2025. So now back to Roland with the details on our outlook for the year.

Roland Sackers - Chief Financial Officer - (00:26:12)

Thank you. Let me now turn to the outlook for the rest of 25. We continue to expect another year of solid profitable growth as our teams drive operational efficiency and disciplined execution across the portfolio for the full year. We are reaffirming our outlook for total net sales growth of about 4 to 5% at CER. The expansion remains broad based across the business. More important, our core portfolio is expected to grow about 5 to 6% CER since this excludes sales from discontinued products. You saw that impact on Our results for Q3 25 with core sales rising a percentage point faster than total sales. Additionally, we raised our target for adjusted earnings per share to about 2.38 cents CER, reflecting our ability to improve profitability faster than sales while absorbing the headwinds of currency movements and US tariffs. This marks an increase of $0.10 in our adjusted EPS target from the start of 2025 for full year 25. We continue to anticipate tariffs to create a relative headwinds of about 90 basis points on the adjusted gross margin as we work on implementing various mitigation actions. Now on to the fourth quarter where we have decided to take a view that the impact of the US Government shutdown continues until the end of the year. In light of that factor and also the current macro trends, we are targeting for total net sales to be steady at constant exchange rates compared to 4Q24 and for core sales and the core sales to rise about 2%. CER adjusted EPS is expected to be about $0.60 at constant exchange rates. As we look at the currency impact market trends for the full year, we continue to expect a positive impact of about 1 percentage point on net sales, but an adverse impact of about $0.02 on adjusted EPS for the first quarter. Currency movements are expected to have a positive impact on net sales of about 1 percentage point, but an adverse impact of about $0.01 on adjusted diluted EPS. On a separate note, I am pleased to introduce Daniel Wendorf, who joined kyogen as of November 1st as our new Vice President and Head of Investor Relations, reporting directly to me. Some of you may know Daniel from his prior role at the investor relations team at Merck in Germany and earlier as a research analyst covering Qiagen and the life science sector. He joins a strong IR team. Gian Ghilardi will continue in his role as Vice President, Corporate communication With that, I would like to now hand the call back to Treilly.

Terry Barnard - Chief Executive Officer - (00:29:19)

Thank you Roland. And so we are coming to the end of our call. So to give you a quick summary, Qiagen definitely delivered another strong and solid quarter, once again exceeding our outlook. And just as important, we took decisive action to strengthen our portfolio and increase returns to shareholders. All aligned with our 2028ambitions. Our differentiated pillars, many serving the continuum from basic research to clinical diagnostics, continue to perform very well. New product launches and additions to our portfolio are on the way to create new relays of growth. We definitely remain focused on creating value through profitable growth, operational excellence and disciplined capital deployment while maintaining flexibility to pursue attractive acquisition opportunities like PARS. With the increase to our adjusted EPS target for 2025 and a new $500 million shares repurchase, we are definitely delivering on our commitments to value Creations by positioning Qiagen for continued momentum as a top performer in 2026 and way beyond. With that, I would now like to hand back to John and the operator for the Q and A session. Thanks a lot for your time.

Katie (Operator) - (00:31:03)

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 also 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 our first question, we'll take our first question from Jack Meehan with Nephron Research.

Jack Meehan - Analyst at Nephron Research - (00:31:43)

Hi everyone and congrats. Terry. John enjoyed working together, but I doubt this will be the end. For my question, I wanted to focus on the Parse acquisition. Just had a few questions on that. Just first, if you could talk about how the deal came together and what brought them to the top of the list of targets, you know, as you consider Tuck and M and A. And then if you look at the competitive landscape for single cell, it is very competitive, kind of have an entrenched leader with 10x and then you know, Illumina's talk about instrument free approach with fluent. So if you could just talk about the differentiation of the technology and you know, kind of why it's better in Qiagen's hands and what you can do with it, that would be great. Thank you.

Terry Barnard - Chief Executive Officer - (00:32:31)

Thank you Jack and thanks for your nice comments. So first of all, for me and for the company, the acquisition of PARSE is the typical very good examples of very good use of our cash for a strategic bolt on acquisition. First, it is strategic. Second, it is extremely synergistic with our existing portfolio. Third, it is accretive to our top line growth. And fourth, it will be accretive to our financials in a very reasonable time frame in less than three years. But because there are different knowledges around PARSE, let me come back first on what does PARSE offer and what could be the everyday applications? This is a company that we are following since 2017. We have always believed at Qiagen that single cell was a natural extension to our sample prep technology. And since we know them, what has amazed us at Qiagen is that they constantly executed on what they told us they would deliver either growth or product development. So let us remember first that single cell analysis is literally turning biology from a blurry group photo into a real sharp portrait of every individual cell. As a result, scientists all over the world, they can now study millions to billions of cells at once, for example, to try to see which ones are driving cancers. Other technologies groups all the cells together, so researchers cannot really see which specific cells are actually causing the disease. PARSE makes this level of insights completely possible and we will Combine this with AI driven tools from our Qiagen Digital Insight portfolio. So why did we select PARSEe? There was no way for Qiagen obviously to invest into a me too product or portfolio of solution. First of all, PARSEe is the fastest growing company in single cell analysis and is a very natural extension of our sample prep portfolio examples. PARSEe is already present in more than 3,000 labs in the world. Second, PARSE offers an instrument free kit allowing any lab to use it without costly hardware. Third, and perhaps more importantly, PARSEe differentiates because it can process million to billions of cells. Far more than any other system and far more than the competitors that you mentioned. As a result, we consider that it is a very natural fit for sample tech but also with synergies with our Qiagen Digital Insight and also next generation sequencing chemistry.

Operator - (00:36:21)

Operator.

Terry Barnard - Chief Executive Officer - (00:36:21)

Does it answer your question?

Jack Meehan - Analyst at Nephron Research - (00:36:23)

Yes.

Terry Barnard - Chief Executive Officer - (00:36:24)

Yeah. Thank you. Jack. Does it answer your question? Jack? Sorry. Does it answer your question?

Jack Meehan - Analyst at Nephron Research - (00:36:32)

Yes. Hello. It does. Thank you.

Operator - (00:36:35)

Thank you. Thank you. I'm sorry. We will take our next question from Hugo Solvet with BNP Perrybal.

Hugo Solvet - Analyst at BNP Paribas - (00:36:46)

Hi guys, thanks for taking my question. I'd like to focus on QIAstat please. Can you talk to the traction for the new panels, gastro and meningitis and how do you see them driving an acceleration going forward? And as some of the instruments placed during COVID will likely arrive at the end of their life cycle soon, can you maybe talk to the opportunity for potential market share gains here? Thank you.

Terry Barnard - Chief Executive Officer - (00:37:12)

Thank you, Hugo. So QIAstat continues to deliver. I mean it's very interesting to see again a double diGIt growth in Q3 and we all know that Q3 is always normally a kind of softer quarter for Calistat. Why? Because the syndromic testing market is still driven by respiratory panels. And we all know that in most of the Western world Q3 is rather a low time for respiratory infections. So 11% growth in Q3, 150 more placements of system is a good performance. Respiratory panels are 70% of the syndromic market. But it's very interesting to see at kiagen the growth of our GI panels and meninGItis and especially where we can grow like for example in the north of Europe or in North America or in Middle east for GI and for meninGItis. Hugo, we are growing at more than double diGIt. This is very encouraGIng and especially in the us. I remind you all that the US is still the main market for syndromic testing. So yes, as you said, obviously some of the customers that we installed during COVID will come from renewal and basically renewing with Once again, the Kaya Stat is the perfect choice. Why? Because since COVID they have much more panels opportunities and they will get more in 2026 with the launch of the blood culture panel and the complicated UTI by the end of 26 for Europe and 27 for the rest of the world. So we are well on track to execute on our guidance for 2025 and for syndrome testing. You go. We will definitely beat our midterm guidance that we gave in our capital market day in New York, which was, as you remember, $200 million revenues by 2028. I continue to say with the rest of the company that in syndromic testing, kiagen will be a very solid and competitive number two on the market.

Hugo Solvet - Analyst at BNP Paribas - (00:39:27)

Very clear. Thank you very much.

Operator - (00:39:31)

Thank you. We'll take our next question from Doug Schenkel with Wolff Research.

Doug Schenkel - Analyst at Wolff Research - (00:39:37)

Good morning. Good afternoon, everybody. A couple quick questions on the diagnostic side first on QIAstat DX, you now have the three key panels, respiratory or GI and meninGItis, approved in the U.S. i'm just curious how you have seen these contribute to platform growth since then. I know it's relatively early, but I just want to see if placements and utilization are tracking in line with expectations. And then on Quantiferon, you guys have done a very good job this year with the investment community. Basically talking about the importance of some of the automation capabilities enabled via your partnership with DiaSorin. I'm just curious if, as we sit here today, GIven I feel like we've heard less about any competitive disruption to the franchise, but if there's anything new to talk about there, whether it's via the partnership or more broadly GIven, performance looks quite good there. Thank you.

Terry Barnard - Chief Executive Officer - (00:40:43)

Thank you, Doug. So I think the main example that I can give for the impact of those three panels on our US performance for QIAstat is, as we already disclosed at the end of Q2, Doug, we placed more instruments in six months in the U.S. in 2025 that we did in the full year of 24. I think this is the best estimate that those three panels now are really helping. In addition to that, we have reshuffled the team. We have dedicated sales rep for KIA Stat in every territory in the US so that helps. So in 25, we are going to exceed our target for instruments for the US and the growth is very solid. So I'm very confident on Cointiferon, I keep the same approach together with the team. We always believe that competition would come one day to this market. And this is why for the last 10 years Doug. We have prepared for that. Even when there was no names or no precise dates. We are prepared. This is why we built that automation partner with Diazerine, but not only with DiaSorin, with also Tecan and Hamilton. This is why we consistently improve the technology itself. We are now at the fourth generation of Quantiferon. And this is why also we continue to focus on what is still today the main competition, which is skin test. I remind everybody once again that we still have to convert more than 50 million skin tests in the world. And if you just take the US it's around probably 15, a bit more than 15, 1.5 millions of skin tests that we need to convert. And then we are prepared. We are prepared. And the last thing I would say that makes me very optimistic for Quantiferon, Doug, is that despite those good results, despite the fact that we continue to grow at double digit, we continue to prepare the future. I started to speak about this in our Q2 earnings expect in the coming weeks and months to see announcements improving the workflow of Quantiferon, the ease of use. And we are also working on further enhancements of the test so there is no complacency in our approach. We are number one, but we know that we need to defend that we are at this position and we are ready. We are ready commercially, we are ready also from a product standpoint.

Doug Schenkel - Analyst at Wolff Research - (00:43:30)

Terry, I don't know if you can still hear me, but if you can, I just want to thank you for those answers and more importantly, for all the great work you've done over the years. You've really done a great job through a tough period in the industry, bringing a new level of discipline to the company. So I really appreciate that and thanks for everything. Look forward to seeing you in a few weeks.

Terry Barnard - Chief Executive Officer - (00:43:50)

This is very humbling. Thank you so much.

Operator - (00:43:54)

Thank you. We'll take our next question from Casey Woodring with JPMorgan. Great.

Casey Woodring - Analyst at JPMorgan - (00:44:00)

Thank you for taking my questions. You know, maybe just to start on academic and government, maybe just walk through, you know, if you can quantify what the shutdown impact is on the quarter. I know that you're assuming the shutdowns for the entirety of the quarter and 4Q and then some of your peers have talked about European academic and government spend improving in 3Q and you know, taking a bit more optimistic stance there on the forward outlook. So just elaborate on what you're seeing in academic and government, maybe between regions.

Terry Barnard - Chief Executive Officer - (00:44:31)

Yeah, thanks for the question, Casey. I mean, obviously the new event, since we had the quarterly release, is that we are in a shutdown in the US and it's fair to acknowledge as well that nobody, and believe me, I ask many other CEOs, you probably know that I'm still chairing our industry association in the US and nobody knows when it's going to stop. So we took a conservative assumption, which is, okay, we are going to be in a shutdown probably until the end of the year. If it stops before, we might see an improvement of our target so far. But let's take a cautious and realistic approach. So obviously the shutdown has an impact on our sales because it impacts obviously an already constrained environment in academia and research where we know that people were very cautious to spend on capital expenses, but sometimes on consumables. I believe that Qiagen is able to mitigate that impact for some reason, first of all, because, well, while we are not immune obviously to it, but I believe that we sell product of very high value for these academia and research labs. So it's very difficult to basically not use our product. Second, we do not sell huge price tag instruments, for example, so our solutions are first, very important. Second, it's not a big, big budget, but we see an impact. This is an impact on sales of consumables on a daily basis, and this is an impact also on sales of instruments. But overall, I think it's under control. It's fully factored in our current guidance. And I remind you, Casey, in that environment, unlike many competitors or peers, we have maintained our guidance for the year top line, and we have also improved our guidance from a profitability standpoint. I think this is a testament to the strength of the company.

Casey Woodring - Analyst at JPMorgan - (00:46:43)

Understood. Thank you. And we'll just reiterate what Doug said. Thierry, thanks.

Terry Barnard - Chief Executive Officer - (00:46:49)

This is very nice of you. I appreciate that. Thank you.

Aisha - (00:46:53)

Thank you. We will take our next question from a senior with Morgan Stanley. My question, my one is on tariffs. So thank you for the guide of 90bps impact on the margin. Are you able to be a bit more explicit about the dollar value of these tariffs, whether these are gross or net of mitigation efforts and whether we can annualize this impact for 2026? Thank you.

Roland Sackers - Chief Financial Officer - (00:47:21)

Roland, would you like to take this one? Yeah, sure. No, again, I think we were out the 90bps this year is of course the net impact. And I think what we said going forward is we have ongoing mitigation, so we do not necessarily expect an increase for next year's mitigations, more or less kicking in particular also early next year. So we do not with knowledge out of the day and unfortunately that is an area where one tweet can change a lot and but with all the information we're having right now, we do not expect that it becomes a larger impact for us.

Aisha - (00:47:59)

Thanks Roland. If I can follow up on that. On the pricing dynamics, these tariff surcharges that you're placing on your products, we're hearing from some of your peers that there could be some resistance to the surcharges that are being passed through and potentially resulting in some delay or push out of demand into the next quarter. Just curious, is this something you are seeing or are you comfortable that these surcharges that are passing through? Thank you.

Terry Barnard - Chief Executive Officer - (00:48:24)

Well, I think we can take this question, the both of us. I can tell you I've been for something like more than 20 years now. Unfortunately on the field it is always a negotiation when you want to pass a price increase, Aisha. Always a negotiation. Customers, when you are selling value are understanding this because let's not forget that Qiagen invests 10% of ourselves in R&D. They see that. So the surcharge of coming from tariff, it's not a price increase, it's a surcharge that we communicated to customers. It's not an easy discussion but we explain, we explain the reason and we explain that we need to share the burden as well. And it has generated results in our quarter as well. So never easy. We do not see customers postponing decision for this. It is a discussion. We are always pragmatic, obviously because we respect customers but we are also insisting that we need to pass them. I think Roland, you wanted to add something also to that.

Roland Sackers - Chief Financial Officer - (00:49:27)

No, I think you covered it very well. I think you covered it very well. At the end of the day, again, it depends, it is nothing but we do again we clearly look on where we have pricing power, which region, which product, what are the contract for us? More important is that I would say again if you look on the financial results of this year that we balance it out quite well. We were able to increase EPS one more time. Now we are 10 cents up. If you look on the overall margin expansion for Qiagen again I just want to remind everybody I know I sure that you know it quite well. 23 we ended the fiscal year with adjust ebit margin of 26.9%. 24 we ended the year with an adjusted ebit margin of 28.7 for this year again if you do the forecast CER we end with an EBIT margin of 30%. So we have now in less than 24 months, an EBIT margin improvement of 310 basis points. I think that speaks for itself, how we're able to manage it, including clearly, headwinds like U.S. tariffs.

Operator - (00:50:37)

Thanks very much. Thank you. We'll take our next question from Patrick Donnelly with Citi.

Patrick Donnelly - Analyst at Citi - (00:50:48)

Hey, guys, thank you for taking the questions. And Pierre, my congrats as well on a great run. Can you just talk about high level, the moving pieces we should be thinking about for 26. Obviously the 4Q exit rate has a little bit of a shutdown in it. So just trying to think about high level, the approaches to 26, both on revenue. Maybe for you, Thierry, and then Roland, I know you touched on the margins there. And anything high level we should be thinking about as we head into next year. Thank you guys so much.

Terry Barnard - Chief Executive Officer - (00:51:17)

Yeah, we'll ask Roland to start with the overall pictures and then we'll come back on the revenue as well. Roland.

Roland Sackers - Chief Financial Officer - (00:51:24)

Yeah, I think again, talking about on the margins. Let me kick it off also on Q4, as I just said, we, we are probably ending the year with a margin TR of 30% for the fourth quarter. Also, while it's clearly a more challenging quarter in terms of the US Shutdown, we still expect also your constant exchange rise, an ebit margin of 29.5%. So still quite high. Yes, we have a bit more currency impact, negative impact in that quarter, but nevertheless, I would say still quite strong. And I think that also makes us confident for next year. So for me, it's very clear that we also expect an underlying margin improvement, not only for 26. And I know that you're all expecting us that we will update the margin for 28, and we're going to do so, and you will see a significant increase there. But of course, I don't do that today. The one thing of course, I want you to have in mind is why we will have an underlying margin improvement next year. It's quite obvious that, as we just talked about, tariffs is to a certain extent, still some headwind. And of course, the Argos acquisition is also, to a certain extent, a headwind. Nevertheless, we will more or less go into the year similar to what we did this year. And I do think we had a good one this year so far and to complete that.

Terry Barnard - Chief Executive Officer - (00:52:45)

Patrick, thanks for the comments. And the way we see it with the team is quite important two years ago, but we took a commitment to the market, which was very simple. 7% sales growth, CAGR 31% EBIT margin. As Roland highlighted 2 billions of revenues coming from our pillars of growth. The. Obsession of management, the priority and the focus is regardless of the market environment, we deliver on this. And what I mean by this is that it is clear that since our last capital market day sales are becoming more difficult. You see this with our competitors. You have seen most of our competitors or peers downgrading their outlook or extending their range potential growth. So what we believe is that if the situation doesn't improve in 2006 and 26, we are positioned to go probably around 5, slightly above everything, including with the acquisition of parts if the situation doesn't improve. If the situation improve because also of our organic portfolio but also the input from Pars, we could be between 5 and 7% of growth. This is not a guidance call. Let's make it clear. I'm giving you, we are giving you with Roland some flavors. Obviously we monitor the situation. But what is important that if you look at what this management is doing to do and it's not just theory, all the team is that regardless of the environment and complexity, we do smart move with our cash generation and balance sheet to improve our portfolio of product Genox PARCE and we take actions also to continue to improve our profitability. In other words, I would also say that we will position Qiagen again regardless of the environment to deliver on the expected on the market from an eps standpoint in 2026.

Operator - (00:55:30)

Thank you. We will take our next question from Luke Sergo with Barclays.

Luke Sergo - Analyst at Barclays - (00:55:36)

Great, thanks for the questions here. Can you talk about just from the PARSE acquisition plans that you guys or investments that you guys that you would need to take either on the automation side or anything that you can leverage on your existing portfolio here to add scale or make it more user friendly across a broader customer base. Thanks.

Terry Barnard - Chief Executive Officer - (00:56:06)

I mean it's already extremely user friendly and this is why imagine this is still a young company, more than 3,000 customers worldwide. It's a significant and humbling performance I think. Second, you know that one of the differentiation is that it's completely instrument free so it makes the ease of use extremely customer friendly. Third, there is something that we didn't go into details today that PARSE has built which I find also interesting is Giga Lab capacity to address especially higher throughput, higher volume customer demand. So I see a lot of interesting synergies, immediate portfolio synergies, someone selling sample tech at Kaijen can sell also and I would say a lot of people from Pars can immediately sell also and leverage our sample tech portfolio, our QDI solution as well. Second, there is another natural. By definition we are much more global company than Pars so we can immediately obviously expand the geographic footprint. And so it's in our business case to continue to support this portfolio with R and D investment. And the two teams are now going to work together as well to see what more synergy from a development standpoint can we put to make sure that we ensure the continuum of solutions from Sempertech but also QDI and also our sequencing chemistry and all this linked with AI. Let's not forget that a good driver also from that acquisition is that we take another dimension with AI in our portfolio.

Luke Sergo - Analyst at Barclays - (00:58:01)

Okay, that's helpful. And then I guess from a KAI acuity perspective talked about the consumables up double digits. Can you just break out what you're seeing there for across the BioPharma side like how much of your QIAcuity piece is actually being sold into that market versus the academic and government market. And then a follow up on just what you're seeing from a competitive dynamic versus especially the new offerings from the droplet technologies.

Terry Barnard - Chief Executive Officer - (00:58:38)

So once again I mean as usual we deeply, I'm sorry respect our competition. What we see is that our direct competition is basically presenting numbers that are not really comparing to our performance. We are still double digit that we continue to invest. I said during the call that it's a significant number of new applications in academia and research every year that we are making available for our customers. You know that the solution is also now available for clinical customer. It's what we call the QIAcuity diagnostic and we see a very good also performance from our companion diagnostic. So from a direct customers usage such as BioPharma QC controlled by pharma is boosting way over double digit and pharma customers are becoming a significant narrow segment of customers and they are very interesting. Why? Because first of all their throughput, their volume of consumable is higher than any other segment and they are very demanding customers. Second, the portfolio of companion diagnostic digital PC are based is even surprising to us in full transparency. It's growing very fast and I remind you this positions Kayagens very well because we are the only company at this moment able to offer to biotechs and pharma companies companion diagnostic solutions that are PCR based, NGS based or digital PCR based. So we are confident double digit it's a good performance. We are a bit impacted by this low capital expense environment so we feel it in our number of placement. But once again what are we talking about? We are still placing above 100 system per quarter and this is good for the future of digital PCR because those placements are going to generate obviously consumables.

Luke Sergo - Analyst at Barclays - (01:01:00)

Great, thank you.

Operator - (01:01:03)

Thank you. We will take our final question from Jan Cook with Deutsche Bank.

Jan Cook - Analyst at Deutsche Bank - (01:01:10)

Yeah, good afternoon. Thanks for squeezing me in. My first question is on the announced acquisition of paas. Could you elaborate on the gross and margin EBIT margin profile of this business? If I have done the math correctly it looks like you don't assume any kind of EBIT contribution division from this asset in 2026. And could you also share the specific. Milestones that are required to trigger the additional 55 million payment? And then my second question is on the sample tech business. Obviously very encouraging to see that business returning to growth in Q3 but did you benefit from any one offs in the quarter and what kind of growth. Do we expect in Q4 in view. Of the government shutdown?

Terry Barnard - Chief Executive Officer - (01:01:53)

Very good, thanks for the question. I will ask Roland to take the financial on pars from a contribution to our financials and then I will address a sample tech question. Roland?

Roland Sackers - Chief Financial Officer - (01:02:04)

Yeah Hi, hello Jan. And I do think again what we announced is as you've seen that we expect a dilution of about $0.04 for 26 while we expect revenues of about 40 million. So if you do the math you clearly can see it has an EBIT dilution of course also for that year but nevertheless we do expect it becomes accretive in 2018. It is a significant growth opportunity. Again the revenue growth rate is quite exciting. So yeah it is dilutive EBIT margin wise for next year and is something what we have to eat and we clearly trying this underlying to compensate and maybe even to overcompensate for that. But I would expect on the midterm there is a nice accretion coming up as this business has healthy gross margins for qiagen and therefore the revenue growth rate is going to help.

Terry Barnard - Chief Executive Officer - (01:03:03)

Thank you Roland. And for sample tax there is no one off in Q3 and I think I hope that you will be able to attend our deep dive on the 21st because there we will go into details showing you I hope and demonstrating that we are perfectly executing on our strategy. And what is this strategy? For the last four years we have really really invested into further automation. Kayak Cube became Kayakube Connect EC1 became EC2. Kaya Symphony Connect is currently being installed and in the first semester of 26 you will have two new instruments with Kaya Mini and Kaya Spring Connect. So automation is the way to go. Second is investing in two very high added value applications. The first that comes to my mind obviously is Liquid Biopsy. This is not a number that we publish a lot, but do you know that sample tech Liquid Biopsy by kiagen is growing way over double digit. And when I say double digit, I'm not talking the 10 marks way over that. And this is where we need to invest. And third is investing into technologies of the future. The demonstration is passed, so there is no time off. I expect that for the full year 2025 and especially because of the shutdown, we will be basically overall flattish for the year. But I continue to confirm our ambition to grow in the 28th objective because those instruments are going to help and they are perfectly factored in the ambitions that we gave you back in New York two years ago, which is roughly 3% growth rate and reaching $750 million revenues. Great, thank you. Okay, Terry and Roland, thank you very much. And with that I'd like to close this conference call and again, thank you for your participation. If you have any questions or comments, please don't hesitate to reach out to us. Thank you.

Operator - (01:05:26)

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