Qiagen N.V. (QGEN) Q3 2025 Earnings Report, Transcript and Summary

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. [Operator Instructions] Please be advised that this call is being recorded at QIAGEN's request and will be made available on their Internet site. [Operator Instructions] At this time, I'd like to introduce your host, John Gilardi, Vice President, Head of Corporate Communications at QIAGEN. Please go ahead.

Thank you, operator, and welcome to all of you who are joining us for this call for the third quarter of 2025. We appreciate your time and your interest in QIAGEN. So joining the call today are Thierry Bernard, our Chief Executive Officer; and Roland Sackers, our Chief Financial Officer. Also joining us today is Daniel Wendorff, our new Head of IR; and Dr. Domenica Martorana, 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 21. The invitation was just sent out to you. So please register for the event. Domenica has done an outstanding job leading the creation of the 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 20-F and other filings with the U.S. Securities and Exchange Commission. We will also refer to certain financial measures not prepared in accordance with U.S. 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 Thierry.

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 targets. 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 Parse Biosciences that expands our Sample technologies portfolio into the very fast growing AI-driven single-cell market. Second, a $500 million synthetic share repurchases to be completed in January 2026 that will bring total shareholder return since 2024 to above our 2028 goal for at least $1 billion return to shareholders. We remain strongly committed to our 2028 ambitions even again, in this challenging environment. We have significantly strengthened key pillars in our portfolio 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 target 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, where -- 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 $0.58. 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 6 years. Second key message our growth pillars continue to perform strongly in 2025. QIAstat diagnostics 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 Genoox, which has further enhanced our growing edge 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 U.S. government shutdown, we continue to improve profitability and maintain solid growth. This is fully aligned with our 2028 ambitions 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 rates. 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 6 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 2028 ambitions 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, Thierry, and hello, everyone. 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 remains strong. Our adjusted operating income margin for the third quarter of '25 was steady at 29.6% of sales, 30% at constant exchange rates absorbing more than 150 basis points of headwinds from currency movements and the impact of U.S. tariff. 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 9 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 Parse and to increase returns to shareholders as we are doing with our $500 million synthetic repurchase set for completion in January '26. We have a long-standing capital allocation strategy that has created value by directing resources to the highest return 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 2x 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 4 product groups, Sample technologies rose 3% CER and driven by consumables growth, especially automated kits that showed double-digit expansion compared to the year ago period. Instrument sales were slightly lower, but included good placements of the QIAsymphony, QIAcube Connect and EZ2 Connect systems. In Diagnostic Solutions, sales rose 4% at CER, but at a faster 8% excluding the discontinued [ NeuMoDx ] system. The top performers were QIAstat and QuantiFERON, both growing 11% CER and supported by further expansion of our companion diagnostic pharma partnerships. In PCR and nuclear acid amplification, sales were stable compared to the third quarter of '24 at constant exchange rates. Our digital PCR platform QIAcuity continue to grow as strong demand for consumers more than offset lower instrument sales amid cautious life science spending. In the genomics and NGS product group sales was 9% CER and led by the QIAGEN Digital Insights bioinformatics business. QDI sales grew at a double-digit rate through a combination of sales growth from the current business and first-time contributions from the Genoox 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 U.S. 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-teen CER 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 the third quarter of '24. R&D investments were 9.2% in the third quarter, 25% compared to 8.9% in the year ago period. The vast majority of our R&D spending continues to focus on our pillars. This includes the upcoming launches of 3 new sample prep instruments, new panels for QIAstat-Dx, the expansion of QIAcuity applications in research and the clinic and also the development of the fifth generation for QuantiFERON. Sales and marketing expenses showed the benefit of efficiency gains declining about 1 percentage point to 21.2% of sales from 22.2% in the third quarter '24, while our teams maintained an ongoing high level of customer engagement. General and administrative expenses declined slightly to 5.7% in the third quarter, 25% compared to 5.9% showing continued cost discipline while investing in IT upgrades, such as the SAP system migration. Adjusted diluted EPS was $0.61 at constant exchange rates exceeding the outlook for at least $0.58 CER. 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 9 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 USD 336 million, which was slightly below the same period of 24% due to the higher levels of planned capitalized IT investments. Accounts 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 the third quarter of '25 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 bolt-on acquisitions and increased 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 considerations for further deployment in '26 through attractive return opportunities, we expect QIAGEN's leverage ratio to move towards the industry average of about 2x 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 '28 ambitions and create long-term value. With that, let me hand the call back to Thierry.

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 billion in combined sales from our 5 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 have taken an important step with the acquisition of Parse to extend this leadership by moving into new technologies. Regarding the upcoming instrument launches, those are perfectly on track. QIAsymphony 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 schedule for launch in 2026 and early field test for QIAsprint 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 QIAsprint Connect. We have also recently marked the 4,000 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-free combinatorial barcoding technology that removes the need from -- for droplet-based system and enables analysis of millions or even billions of sales 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 institutions. 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. Parse also creates synergies with our QDI bioinformatics business connecting large-scale single-cell data generation with powerful AI-driven interpretation. Together, we can accelerate discovery, built virtual cell models and help researchers unlock new frontiers in AI-based drug discovery and next-generation biology. So tuning for our Sample technologies deep dive session on November 21, and you will learn more about the exciting area of our portfolio. Turning now to QIAstat. We continue to expand our syndromic testing portfolio worldwide with the launch of a new instrument version in the U.S. and we are preparing for more panel submissions in 2025. In September, we received the U.S. FDA clearance for QIAstat Diagnostic Rise, the higher throughput version of our syndromic testing platform. QIAstat Diagnostic Rise automates up to 18 test 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 the third quarter, we were well above 150 QIAstat placement, which is once again a testament to the continued growth and stronger customer adoption of QIAstat system. When it comes to menu expansion, we remain perfectly on track to submit the blood culture panel in the U.S. and in Europe by the end of 2025. 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 assay in 2025. So now back to Roland with the details on our outlook for the year.

Thank you, Thierry. 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 gross sales rising 1 percentage point faster than total sales. Additionally, we raised our target for adjusted earnings per share to about $2.38 CER, reflecting our ability to improve profitability faster than sales while absorbing the headwinds of currency movements and U.S. 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 headwind 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 U.S. 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 the fourth quarter of '24. And for our core sales and the core sales drives 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 of 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'm pleased to introduce Daniel Wendorff, who joined QIAGEN as of November 1 as our new Vice President and Head of Investor Relations, reporting direct 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. John Gilardi will continue in his role as Vice President, Corporate Communications. With that, I would like to now hand the call back to Thierry.

Thank you, Roland. 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 2028 ambitions. Our differentiated pillars, mainly 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 Parse. With the increase to our adjusted EPS target for 2025 and the new $500 million share repurchase, we are definitely delivering on our commitments to value creation 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&A session. Thanks a lot for your time.

[Operator Instructions] We'll take our first question from Jack Meehan with Nephron Research.

And congrats, Thierry, 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 as you consider tuck-in M&A? And then if you look at the competitive landscape for single-cell is very competitive kind of have an entrenched leader with 10x. And then Illumina talks about instrument-free approach with Fluent. So if you could just talk about the differentiation of the technology and kind of why it's better in QIAGEN's hands and what you can do with it, that would be great.

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 a 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 3 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 application. 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 at QIAGEN is that this constantly executed on what they told us they would deliver, either growth or product development. 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 the level -- this level of insights completely possible. And we will combine this with AI-driven tools from our QDI portfolio. So why did we select Parse? There was no way for QIAGEN, obviously, to invest into a me-too product or portfolio of solutions. First of all, Parse is the fastest-growing company in single-cell analysis and is a very natural extension of our sample prep portfolio. Examples, Parse 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, Parse differentiates because it can process millions to billions of sales far more than any other system and far more than the competitor that you mentioned. As a result, we consider that it is a very natural fit for Sample tech, but also with synergies with our QDI and also next-generation sequencing chemistry. Does this answer your question? Jack, does it answer your questions?

It does.

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

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, 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 QIAstat. 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 QIAGEN, 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 digits. This is very encouraging and especially in the U.S. I remind you all that the U.S. 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 QIAstat 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 syndromic testing, Hugo, we will definitely beat our mid-term 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, QIAGEN will be a very solid and competitive #2 on the market.

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

A couple of quick questions on the diagnostic side. First, on QIAstat-Dx. You now have the 3 key panels, respiratory, 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.

So I think the main example that I can give for the impact of those 3 panels on our U.S. performance for QIAstat is, as we already disclosed at the end of Q2, Doug, we placed more instruments in 6 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 3 panels now are really helping. In addition to that, we have reshuffled the team. We have dedicated sales rep for QIAstat in every territory in the U.S. So that helps. So in '25, we are going to exceed our target for instruments for the U.S., and the growth is very solid. So I'm very confident. On QuantiFERON, 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 DiaSorin, 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 U.S., it's around probably 15 -- a bit more than 15 millions of skin tests that we need to cover. And then we are prepared -- we are prepared. And 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 digits, 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 #1, but we know that we need to defend this disposition, and we are ready. We are ready commercially, we are ready also from a product standpoint.

Thierry, I don't know if you could 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. We look forward to seeing you in a few weeks.

This is very humbling. Thank you.

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

Great. Maybe just to start on academic and government. Maybe just walk through if you can quantify what the shutdown impact is on the quarter. I know that you're assuming those shutdowns for the entirety of the quarter in 4Q. And then some of your peers have talked about European academic and government spend improving in 3Q and 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?

Yes. Thanks for the question, Casey. I mean, obviously, the new events since we had a quarterly release is that we are in a shutdown in the U.S. 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 U.S., and nobody knows when he's going to stop. So we took a conservative assumption, which is, okay, we are going to be in the 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 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 some time on consumables. I believe that QIAGEN is able to mitigate that impact for some reason. First of all, because while we are not immune, obviously, to it, but I believe that we sell product of very high value for this 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.

Understood. And would just reiterate what Doug said, Thierry.

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

We will take our next question from Aisyah Noor with Morgan Stanley.

My one is on tariffs. So thank you for the guide of 90 bps 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, would you like to take this one?

Yes, sure. No, again, I think we were -- the 90 bps 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 the knowledge as of today, 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.

Okay. If I could 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 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're seeing? Or are you comfortable that these surcharges are passing through?

Well, I think we can take this question 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 price -- to pass the price increase, Aisyah, always a negotiation. Customers, when you are selling value, are understanding this because let's not forget that QIAGEN invest 10% of our sales in R&D, they see that. So the surcharge of -- coming from tariffs, it's not a price increase, it's a surcharge that we communicated to customers. It's not an easy discussion, but we explained, we explained the reason and we explained 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.

No, I think, you covered it very well, Thierry. Yes, at the end of the day, again, it depends. It is nothing what we do. Again, we clearly look on where we have pricing power, in which region, which product, what are the contracts? For us, more important is that, I would say, again, if you look at the financial results of this year, that we balance it out quite well. We were able to increase EPS 1 more time. Now we are $0.10 up. If you look on the overall margin expansion for QIAGEN, again, I just want to remind everybody, I know I'll show that you know it quite well. '23, we ended the fiscal year with an adjusted 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.

We'll take our next question from Patrick Donnelly with Citi.

Thierry, my congrats as well on a great run. Can you just talk about your high level, the moving pieces we should be thinking about for '26. Obviously, the 4Q exit rate has a little bit of the shutdown in it. So just trying to think about high level the approach into '26, both on revenue maybe for you, Thierry. And then Roland, I know you touched on the margin there. Anything high level we should be thinking about as we head into next year.

Yes. We'll ask Roland to start with the overall picture, and I will come back on the revenue as well. Roland?

Yes. I think, again, talking about the margins, let me kick it up also on Q4. As I just said, we are probably ending the year with a margin CER-wise of 30% for the fourth quarter also, while it's clearly a more challenging quarter in terms of the U.S. shutdown, we still expect also a constant exchange-wise, 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, Patrick, thanks for the comments. And the way we see it with the team is quite simple. Two years ago, Patrick, we took a commitment to the market, which was very simple. 7% sales growth CAGR, 31% EBIT margin, as Roland highlighted, of $2 billion 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 expanding the range of 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 Parse. If the situation doesn't improve -- if the situation improve, because also of our organic portfolio, but also the input from Parse, 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 is that if you look at what this management is going to do, and it's not just Thierry, it's 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 products, Genoox, Parse 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 expectation on the market from an EPS standpoint in 2026.

We will take our next question from Luke Sergott with Barclays.

Can you talk about just from the Parse acquisition plans that you guys or investments that you guys are -- 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. 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 QIAGEN can sell also Parse tomorrow. And I would say a lot of people from Parse 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 a global company than Parse. 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&D investment and the 2 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 Sample tech, 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.

Okay. That's helpful. And then I guess from a QIAcuity perspective, you 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 A&G 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?

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 application 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 is what we call QIAcuity Diagnostic. And we see a very good also -- performance from our companion diagnostic. So from direct customers, usage such as biopharma, QC controlled by pharma is boosting way over double digit and pharma customers are becoming a significant now a 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 PCR based is even surprising to us in full transparency. It's growing very fast. And I remind you this positions QIAGEN very well because we are the only company at this moment able to offer to biotech and pharma companies companion diagnostic solutions that are PCR-based, NGS-based or digital PCR based. So we are confident. Double digit, its a good performance. We are a bit impacted by this low capital expense environment. So we feel it in our number of placements. But once again, what are we talking about? We are still placing above 100 systems per quarter, and this is good for the future of digital PCR because those placements are going to generate, obviously, consumables.

We will take our final question from Jan Koch with Deutsche Bank.

My first question is on the announced acquisition of Parse. Could you elaborate on the gross and margin -- EBIT margin profile of the business? If I have done the math correctly, it looks like you don't assume any kind of EBIT contribution 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 you expect in Q4 in view of the government shutdown?

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

Yes. 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 really can see it has an EBIT dilution, of course, also for that year. And -- but nevertheless, we do expect it becomes accretive in '28. It is a significant growth opportunity again, the revenue growth rate is quite exciting. So yes, it is dilutive EBIT margin wise for next year, and it's something what we have to eat, and we were clearly trying this underlying to compensate and maybe even to overcompensate for that. But I would expect on the mid-term, there is a nice equation coming up as this business has healthy gross margins for QIAGEN and therefore, the revenue growth rate is going to help.

Thank you, Roland. And for Sample tech, 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 the strategy? For the last 4 years, we have really, really invested into further automation. QIAcube became QIAcube Connect. EZ1 became EZ2. QIAsymphony Connect is currently being installed. And in the first semester of '26, you will have 2 new instruments with QIAmini and QIAsprint Connect. So automation is the way to go. Second is investing into very high added value application. 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 QIAGEN 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 Parse. 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 '28 objective because those instruments are going to help. And they are perfectly factored in the ambitions that we gave you back in New York 2 years ago, which is roughly 3% growth rate and reaching $750 million revenues.

Okay. Thierry 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.

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