Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Qiagen NV (QGEN, Financial) exceeded its outlook for sales and adjusted earnings in Q2 2024, with net sales reaching $496 million, a 1% increase at constant exchange rates (CER) over Q2 2023.
- The company's Diagnostic Solutions product group saw an 8% CER increase, driven by strong performance in consumables, which rose 3% CER and made up nearly 90% of total sales.
- Qiagen NV (QGEN) launched new products, including a gastrointestinal panel and an upgraded respiratory panel, both receiving FDA clearance, which are expected to drive growth in the second half of the year.
- The QuantiFERON product line showed strong performance with sales up 11% CER, marking the fifth consecutive quarter above $100 million in revenues.
- Free cash flow rose 56% in Q2 2024 to $129 million, and 86% to $225 million for the first half of the year, indicating strong cash flow management and operational efficiency.
Negative Points
- Instrument sales were down 10% overall in Q2 2024, reflecting cautious customer spending on capital investments, particularly in larger-scale instruments.
- Sales in the Asia-Pacific Japan region declined 3% CER, with China showing a single-digit CER decline over Q2 2023, indicating ongoing macroeconomic challenges in the region.
- The decision to phase out the NeuMoDx system resulted in restructuring charges of $351 million in Q2 2024, with further charges expected through 2025.
- Despite strong performance in consumables, the company faced weaker sales trends for manual kits, highlighting a potential area of concern in its product portfolio.
- The adjusted gross margin saw only a modest increase of about 30 basis points to 67.2% of sales, indicating limited margin expansion despite higher sales.
Q & A Highlights
Q: As we think about the back half guide, third quarter looks like you're getting back to about mid-single-digit sort of growth and probably exiting the year in a solid mid-single-digit range. How should we think about that as a jumping off point for '25 and maybe compare that with your 7% long-term CAGR that you laid out at your CMD last month?
A: We are perfectly executing on what we said at the beginning of the year. We signaled clearly that we would have a slower H1 and then progressively accelerate. Q3 will be driven by the input of new products in our portfolio, the confirmation of investments in our bioinformatics QDI business, and traditionally stronger second-half performance for QuantiFERON.
Q: Great to see consumables returning to growth as well. What are your expectations for instruments versus consumables in the back half of the year?
A: We have always signaled to the market that there is caution in capital expense in many labs, especially in life science. We expect this situation to be short-lived. Laboratories are traditionally and on a regular basis investing into upgrading their capital sales, so we expect this movement to normalize progressively moving into 2025.
Q: Can you talk about the underlying state of the end market for Digital Insights, customer purchasing decisions, and broadly what you're seeing in genomics?
A: There is a significant need for bioinformatics, especially driven by the demand for genomics data. The market is driven by the need to transform those data into actionable research or clinical insights. Our combination of automation, AI, and manual curation makes QIAGEN specific. This activity is highly accretive for QIAGEN at every level.
Q: On QuantiFERON, solid quarter, double-digit CER growth, continued strength there. What are you seeing in the market in terms of people's expectations for the future?
A: Our focus is to deliver on $450 million guidance in 2024 for QuantiFERON. We are on good track. Fifth quarter in a row exceeding $100 million of sales, once again double-digit. We aim to capture the skin test market and deliver on the commitment to bring the franchise to $600 million by 2028.
Q: What is your latest thinking on end market trends on the life science side for academic customers and pharma customers?
A: The situation should normalize as people will have more visibility on the funding situation. The cautiousness in capital spending is expected to be short-lived. Given the power of innovation in life science, we are confident that this market will continue to grow.
Q: How do you feel like you're tracking relative to the over $90 million target for QIAcuity?
A: QIAcuity is probably the fastest growing installed base ever in life science. We are extending the reach of QIAcuity into clinical business and pharma. We believe that we have the guidance for 2024 of $90 million within reach.
Q: Can you give us some insight as to what extent the GI panel launch for QIAstat is already making a difference in your discussions with customers?
A: Highlighting the very healthy performance of H1 on QIAstat, 12% growth, is absolutely not impacted by GI. The fact that we have it now explains why QIAstat will be one of our main growth drivers in the second half of the year.
Q: Is there any chance you still will find a buyer for NeuMoDx? And how active are you in evaluating other options for components of your business?
A: We have started the process to discontinue NeuMoDx. Our priority is to ensure a smooth transition for our customers. We are actively looking at the rest of the portfolio to prune what is not making sense for QIAGEN anymore or what could be better in another company.
Q: Can you discuss your confidence level around potentially delivering above the guidance for QuantiFERON in the full year?
A: We are always trying to be ambitious and realistic. Our focus is to deliver on the $450 million guidance for 2024. If we can beat that, we will not hesitate to do so.
Q: Can you talk about the trends in the NGS business and what gives you confidence in improvement in the second half of this year?
A: We have a balanced view. The market remains significantly active, and we provide added value solutions. The demand is there, and we expect improving trends for our NGS portfolio in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
