Dear ladies and gentlemen, welcome to the SYNLAB Q1 2022 Financial Results Call. At our customer's request, this conference will be recorded. If any participant has difficulties hearing the conference, please press the star key followed by zero on your telephone for operator assistance. Today's call will be hosted by Mathieu Floreani, CEO of SYNLAB, and Sami Badarani, CFO of SYNLAB. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Mathieu Floreani, who will lead you through this conference. Please go ahead, sir. Thank you. Good morning, good afternoon to all, and welcome to our call. We'll present today our Q1 2022 results, and together with Sammy. I'm very pleased to report today another quarter of growth and another increase in our 2022 guidance. Let's start with our Q1 financials, the highlights on page five. Our revenue is up by 13%, adjusted EBITDA by 10%, and this is against the challenging comparison base we had in Q1 2021. Just as a reminder, at that time, we had reported 96% growth in Q1 2021 against the prior year. In this year's Q1, we have a strong impact of Omicron wave. Our unlevered free cash flow is strong at EUR 155 million, but below last year, and that's due to temporary COVID-19 impact on working capital. Net net, our financial position is very strong, and the leverage is down again at 1.2 times. Moving to page six and our operational quadrant. Summary here is good execution again on all four pillars. If I start with organic growth, the first pillar of our strategy, we progressed there on many fronts. Number one, new BCPs, keeping up with the pace of last year with about 40 BCPs open in the quarter. Number two, specialty tests. We have been reinforcing our leadership through new partnerships like OncoDNA, for example, in Germany, and continuous M&A. Number three, the SEL contract, where we are successfully delivering on one of the largest ever hospital outsourcing contract in Europe. Now, focusing on the underlying growth, which excludes any COVID-19 testing. We saw some softness in the months of January and February, and that is correlated with Omicron wave. COVID-19 reached levels that we have never seen before in terms of infections, and that has impacted the lives of many of us, including people operating in the labs. We stopped measuring attrition end of 2021, but there was definitely also an attrition impact in Q1 2022, and that is evidenced by the strong rebound we saw in organic growth in March when the wave was receding. We have also good progress on our second pillar of operational excellence with SADics delivering another EUR 5 million of savings. Our Lean and SGS program is now rolled out in five new countries. The renewal of our core lab equipment is more than 90% completed. Third pillar is M&A. 8 acquisitions completed in 6 countries for EUR 63 million EV. That represent around EUR 32 million in revenue and there we're also progressing continuously and well on our integration of 2021 acquisitions. Finally, on the fourth pillar of employee engagement, well, it's not really a Q1 highlight as such, but we have published our second ESG report in April, and that defines our high impact areas and tangible targets for each of those. You can also read that our ESG team has gathered many short stories, and we'll show the efforts that are made across the network to make SYNLAB a more sustainable company. Now moving to page seven. That's our usual update on COVID-19 testing. Our summary is tremendous efforts again by our teams to meet the demand, especially in the first weeks of the year. You can also see that testing levels gradually are decreasing since then and are now back to levels that we have seen about 20 months ago, which is very good news for society of course, and also for our teams, which can now go back to more normal working conditions. On the right of the chart, we also show the decrease in PCR testing prices. That is a trend that we have observed for a while of course, but that we have also accompanied with many initiatives and, if I just name one, I would name the lollipop test initiative in Germany. The average price per test is lower by almost a third compared to one year ago. I can now hand over to Sammy for the financial section of the presentation. Thank you, Mathieu. Good afternoon, everyone. I'm very pleased to walk you through the Q1 2022 financial performance of the SYNLAB group. These are non-audited SYNLAB AG consolidated financials. Let's start with the revenue on page nine, where we have another quarter of revenue expansion. The Q1 2022 reported revenue stands at EUR 1,061 million, 13% revenue growth. We have roughly the same revenue on a pro forma basis. Again, pro forma basis mean adding the additional revenue as if the 2022 acquisition had been consolidated on January 1, 2022. Two out of the 5 acquisition completed in Q1 were completed very early in the year, and the remaining three are very small bolt-ons. Overall, EUR 7 million revenue from the 5 acquisitions completed in Q1. We have positive effects in the quarter with weakening of the euro versus Swiss franc and GBP currencies. The rest, EUR 74 million of organic growth, 7.6% organic growth with strong volume growth, more than offsetting 17% revenue drop from PCR price decline year-over-year, as Mathieu mentioned. Let's understand more the strong organic growth on page 10. COVID-19 testing, still primarily PCR testing. 10.2 million PCR tests in Q1, highest quarterly volume, with an average price around EUR 41 per test, compared to EUR 43 per test in Q4 and EUR 58 per test in Q1 2021. Down EUR 17 million, EUR 170 million rounded number revenue loss. 1.5 million non-PCR tests only, mostly antibody testing. The total COVID-19 testing revenue stands at EUR 450 million versus EUR 434 million last year in Q1, still up EUR 16 million despite the price drop that I mentioned. Excluding the COVID-19 testing, the organic growth is at 10.8%. The underlying growth split into two pieces to isolate the impact of the South East London contract that has started on April 1, 2021, from the rest of the business. The underlying growth, excluding SEL, is at 2.1%, slightly lower than in prior quarters. We have stopped, obviously, reporting the attrition as its measurement was difficult to assess precisely. Mathieu will provide more color in the business review of the growth by segments, but January and February were soft. The growth in January, February was soft, impacted by the Omicron wave, and we experienced a strong rebound in March with 4% growth. Moving now to EBITDA, the Q1 on page 11. The Q1 2022 reported adjusted EBITDA stands at EUR 357 million. This is the highest level achieved in a quarter for SYNLAB. EUR 22 million EBITDA growth, of which EUR 2 million from FX, EUR 3 million from 2022 acquisition, and EUR 17 million from organic. Excluding COVID-19, we had around EUR 5 million price drop, mostly from negative price in France. We have EUR 9 million inflation in one quarter. It was EUR 19 million for the full year 2021. The somehow we are doubling the rate of inflation versus the running rate we had last year. It's mostly coming so far from OpEx. Excellence program, again, procurement savings from core lab project and productivity savings from initiatives executed across the network. EUR 5 million in Q1. We're in a good shape to deliver the EUR 20 million for the full year 2022. The Q1 EBITDA margin stands at 33.6%, down 0.9 points versus 2021, with a drop of 9 points from the PCR price alone. Meaning that excluding PCR price drop, the margin is up around 8 points year over year. The Q1 performance helps us demonstrate that the key profitability driver in our industry is volume leverage. As our cost structure is mostly fixed on the short term, any incremental revenue drop to the bottom line with a high volume flow through. Page 12, net profit expansion. The bridge from EBITDA to net profit and from reported to adjusted financials. EBITDA first, we have a nominal adjustment now of EUR 0.5 million, and it's all acquisition-related costs, including PMI costs. The adjusted operating profit is at EUR 300 million. It's up EUR 20 million from Q1 2021. The net finance results are positive, rounded EUR 5 million, thanks to financial instruments revaluation and FX gain. Interest expense are also down at EUR 14 million only, representing 1.9% average interest rate on our financial debt. Tax line is increasing based on increased volume, with an effective tax rate roughly stable at 25%. The Q1 adjusted net profit stands at EUR 227 million, up EUR 38 million year-over-year, +20%. Let's move to cash flow after the P&L, page 13. The strong EBITDA translating to strong cash flow generation despite the impact of Omicron wave on working capital, mostly receivables. DSO is at 69 days, up 7 points compared to year-end. One quick message here is we have EUR 35 million of COVID-19 receivables from one large contract that has been collected here in May. Okay, sorry for the short break here. We had an electricity shortage in the room, and we're now online on the mobile. I stopped the presentation on page 13, cash flow. I just wanted to highlight again here that we have a strong cash flow for the quarter, EUR 155 million and level three cash flow, around 44% of conversion rate to EBITDA. There is nothing significant to highlight below the operating cash flow, except the CapEx is increasing EUR 16 million per year as planned, including EUR 9 million of leases. Moving on page 14, strong balance sheet. The balance sheet of the group expressed with the capital employed and capital resources view. The change versus December is mainly driven by the addition from the five acquisition, as well as the impact of Omicron again, on their net working capital. The net debt of the group, including rounded 600 million of lease, is now at EUR 1.5 billion, down EUR 113 million versus December. The group has a strong cash, strong balance sheet here with 540 million cash on hand and around 500 million of undrawn RCF. More than EUR 1 billion available cash for M&A. The ROTC is at 19% at the end of Q1 2022. Page 14—15, sorry. Further reduction in debt and leverage. The adjusted net debt is rounded at EUR 156 million. At the EUR 1.56 billion at the end of March. The LTM pro forma EBITDA is at EUR 1.264 billion, up EUR 27 million. The leverage ratio, debt to EBITDA, stands at 1.23, down nearly 12 basis points compared to year end 2021. This concludes now the financial section of the presentation, and I will hand it back to Mathieu for the business review. Thank you, Sammy. Yeah, let's cover our main geographies, starting on page 17, with France. Seven percent decrease in revenue, 23% decrease in AOP compared to Q1 last year. That is mostly due to a reduction in the COVID-19 contribution, which was price driven. Minus 1.1% on the underlying revenue evolution, and that is hiding actually a very robust volume growth of 4.1%, which is offset by a sharp price decrease. The two components here are that the normal price decrease as per the three years agreement, which is 2.5%, since January 2022. On top of that, an unfavorable comparison base in Q1 only, for this year as the 2021 price decrease started later, in April. It's a slow start into the year, but very good reasons and not to be worried about for the full year performance. Page 18, Germany. Plus 32% increase in revenue and 75% increase in AOP with a new high for margins there. 3.9% underlying growth, and that is again a strong volume growth at 4.5% against the soft comparison base last year and with very limited price pressure. Page 19, our South region. There are 13% increase in revenue and slight reduction in AOP. The quarter in South was marked by a reduction in the COVID-19 contribution and strong contribution from M&A. We have a -1% underlying revenue evolution with 2.3% volume growth, stable prices, and that is more than offset by headwinds in Italy. Two components here also. Half of the underperformance is coming from a high comparison base and half from a change in the reimbursement schedule of the Campania region of Naples. This phasing impact should revert in the rest of the year. This has happened before already. We have a strong network expansion also in the South, with 25% new BCPs in Q1 2022, and six acquisitions closed since the beginning of the year. Page 20, our North and East region. There we have 18% growth in revenues, 3% growth in AOP, with lower COVID-19 contribution, but very strong organic development. The underlying growth is 9.1%, excluding SEL. That is with a volume that is up 7.6% and prices that are also up by 1.5%. That is the price effect here is the result of price indexation in both Eastern Europe and in the UK. We also have a further network expansion with about 10 new BCPs that we opened. Now onto Ukraine. Our operations in Ukraine closed temporarily when Kiev was threatened because that's where we are located. But we have reopened since on the request of our Ukrainian colleagues. Also to be noted that since the start of the war, we saw increased activity in neighboring countries, and that is driven by the influx of refugees, which once again is a testimony of how critical of an infrastructure we are in healthcare systems. Now let's move to the concluding section of the presentation today, the outlook on page 22. Our COVID-19 business scenario, as presented since November of 2021. Same slide. We have done 450 million of COVID-19 testing in Q1 alone, so we are now in the upside scenario for 2022, higher than the five million described. Sorry, the 500 million described at the upper end of the range from November of 2021 when we communicated. Consequently, on the next page twenty-three, we present the revised outlook. We now expect group revenue in the year 2022 to be around EUR 3.1 billion, and that is based on sustained strong organic and M&A growth. Our adjusted EBITDA margin is expected to be within a 24%-25% range. This is the high end of the 23%-25% range that we communicated back in November 2021. We narrow it upwards to reflect the expected increase in revenue, but it also factors in number one, the view that we should maintain a certain COVID-19 capacity also when the prevalence goes down, which then can have a diluted impact on the margins in the short term. Number two, the ramp-up cost effect from growth initiatives, investments, and that is notably in direct to consumer. Number three, inflation and costs. On the bottom part of the page, our key priorities for 2022 in terms of capital allocation, which are CapEx, M&A, while paying out the 20% of adjusted EPS in dividend. This concludes our presentation for today. Thank you for listening, and we'll now open the floor for questions. I'm just looking here in the room. We're going to switch onto our usual device, which is probably higher quality for the sound. We might have, while you think about your questions, a few seconds of line. Thank you. We will now begin our question and answer session. If you have a question for our speakers, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial zero two to cancel your question. If you're using speaker equipment today, please lift the handset before making your selection. Just as a reminder, if you would like to ask a question, please press zero one on your telephone. I see I have you back online, so the first question comes. Yes, we are. Perfect. Sorry. The first question comes from Oliver Wynberg, Chelsey Group. Please go ahead. Your line is now open. Oh, yeah, thanks so much for taking my question. I wanted to talk about inflation pricing. When we start with wage inflation, I think in the last call you talked about that, in March, you haven't seen much so far. Can you just provide an update where you stand? Also when we think about wage inflation, probably more for next year, at what point in time do you expect to have better visibility? Can you talk to how the kind of process really works in the kind of biggest countries, Germany and France? Is it simply you setting the price or is any kind of external party being involved? Secondly, on pricing, I think you provided some color in the last call, that around 15% of sales is where you can pass on pricing, while with 40% it's rather fixed, while 44% is still subject to the regulator. Can you just talk to is there any kind of action you're taking to push the regulator for potentially more, better recognition of inflation trends? Or is it too early? Or is there kind of pushback in terms of that you have been earning in the past? Any color on that side. With regard to the sales that are fixed in terms of price, can you just clarify what exactly, what kind of business is that? I would assume probably that the hospital tenders are part of it. What is the average duration of the contracts, when they come forward in negotiation, which allows you to also pass on price there? Thanks very much. All right. Thank you, Olivier. A long list of questions. Sammy, do you want to kick it off on the- Inflation. Inflation first. Yes. I mean, again, we have assumed in our guidance here around EUR 25 million additional labor versus what we had in our budget, which was slightly higher than the, I would say the EUR 19 million that I showed today in comparison to the EUR 9 million in Q1. So let's assume EUR 23 million inflation in for the year plus 25. So we're assuming EUR 48 million inflation for the year. This was assuming 3% nominal inflation on PCE. As mentioned, there was nothing very significant in Q1 as an incremental inflation on PCE, but a portion of it is within the EUR 9 million. Here, we will see how things develop during the year, right, in terms of the pace. Usually, we have a yearly exercise for the personnel expense increases. We may have to adjust this during the year. We will see how it develops. We believe still that the biggest portion of the inflation on PCE will come for the next year. The process, it varies by country as you mentioned it, France and Germany, but it remains within the same area where usually there are yearly agreements. It can be done with local unions, or on a branch level. It's very specific country to country. There will be also in Germany the minimum wage increase starting Q4, somehow in Q4. This will probably have an impact or a ripple impact on the rest of the salaries and mostly on the lower salaries. All this, what I'm describing here is already somehow captured into the overall number of EUR 25 million incremental inflation getting to EUR 48 million for 2022. For 2023, it's probably a little bit premature to provide guidance or direction here. Historically, we were at 2%. This one, we're targeting the 3%. We'll see later in the year what would be the range for next year. Currently, we have no negotiation started of that kind. Yeah. We'll push it further into the year, if anything. This was for the inflation. On the pricing side, the breakdown again, 50%, where we can action prices and obviously we have this ongoing reviews with the countries with the directions that they have been given to increase prices where possible, based on the current environment, and this is ongoing. We are seeing this already in April and so some increases in prices. This is an ongoing. It cannot come overnight, obviously. It's a continuous effort within the 36 countries. On the question on how we influence the regulator or I think how we push the regulators you were mentioning to increase prices. This is at varied stages depending on the country. Some have understood and have already increased prices as we have shown. What you have to remember also is that the regulators are not only regulating us, they're regulating healthcare, and in healthcare, they usually have a lot of public hospitals. We'll see what will happen, but it's a bit difficult to on one side increase the salaries of public hospitals and not do anything on the rest of the healthcare sector. We have good hopes that at some point there will be a positive impact. It's too early to call. Then you asked the part of the business at fixed price, so that's the regulated ones, and then we have also some hospital contracts you were mentioning. Duration of these contracts, it's very variable, but let's say, it can be from 1 to 5 years, depending on the nature of the contract. That means that we renew, let's say, on average, 30%-30% approximately of the contract annually. That is a bit the same topic, right? Because at some point, if inflation would be durable, the healthcare systems will need to increase their DRGs. If that happens, then our hospital customers will also have a different, say, invoicing conditions, which will give us an opportunity to hold discussions. That's perfect. Very helpful. Just on energy, the EUR 15 million upgrade in terms of cost base, is that still a reasonable assumption? Yeah. No, no change to this assumption so far based on the trend we're seeing. Perfect. Thanks so much indeed. The next question comes from Miss Osena, HSBC. Your line is now open. Hi, congratulations on the results, and thanks for taking my questions. I have two, please. First of all, on the South East London project, based on my calculations, I think you are coming up to much higher revenue figures from the initially guided EUR 160 million per annum from that project. Also, is the margin still slightly dilutive? My second question is, we've noticed that you've completed 90% of the update of your core equipment. Could that indicate that we should calculate lower CapEx figures going forward? I guess that will also depend on the future opening of collection points. The third question is, I appreciate you stopped reporting efficiency numbers, which are hard to measure. Which areas of testing and which countries are the ones that where you experience a higher comeback to business now that COVID testing is gone down? Can you just repeat the thing, the last number three? That was not super acoustically clear. Oh, sure. You don't report sufficient numbers, but in terms of the comeback of the testing, which areas are the ones where you're seeing the most revival, let's say? You mean geographically or nature of test? Nature of test and geographic as well. I think both are interesting. Okay. Okay. On LCL revenues, you want to repeat that? Yeah. LCL revenue, you rightly pointed out the growth of LCL. LCL is delivering above the expectation in terms of revenue. We mentioned it that we have earned a number of additional activity while the trust was contracting with additional hospitals. This has gave us this incremental activities that we are seeing here on a running basis quarter after quarter. Now, in terms of profitability, it's still a dilutive contract, and it will remain dilutive for the duration of the contract vis-à-vis the margin of the group. The quarterly profitability it needs to be looked at over time where we stand. Today it's still in the. I would say, in the 10%, around 10% margin. It will evolve positively once the transformation of the operations would have been achieved in a couple of years. That's the way to look at it. It would be difficult to navigate quarter after quarter on this. It's more a business plan to execute, and the improvement will come over time. At this point, we had a strong COVID testing with LCL because it's within Pillar Two testing for hospitals, and that has been a very good windfall for our margin since the beginning of the contract. This is in addition to the number you show- In addition, yeah. Because the COVID is reported in the COVID column. Yeah. You want to take a question on blue? Yeah. On the CapEx? Yeah, the CapEx is good news on the program execution on core lab. This is great. This is per our expectation. For the year, I've already mentioned that we are targeting around 9% to the revenue of CapEx. That for the future, there will be a reduction of this percentage of CapEx in percentage of revenue. This includes the lease, this level of CapEx in percentage of revenue. There will be a shift. I mean, we still have a number of initiative. BCP will increase our BCP, will necessitate some CapEx. Also the completion of our IT roadmap, whether on cybersecurity, whether on the lease conversion, whether on the SAP project or on the D2C initiative also, will require some of the CapEx that we need to have. Overall, CapEx should not be contained going forward. Yes. Now, on your question about which geographies and nature of tests come back faster. Well, on the geographies, it's still bouncing a bit around, right? We still see that it's not say on a cruising normal level all the time. We have seen strong volumes across the board, right? If you take out the pricing effect, you see in every region that it has been strong. I would not say huge differences between one country and the other. In terms of nature of tests, of course, routine is the biggest component of our activity. That makes it difficult to see the effect of specialties. The bet, if we, if you look at it in more details, is that the specialties will be a high contributor in the coming months because we see more serious pathologies as a result of not enough early detection in the past two years, which require the specialty tests. Although we are the biggest in Europe on specialty tests also, you don't necessarily see the showing, say, significantly into the a different pattern of growth in the total number. If that can make sense. Just a quick follow-up. The SEL revenues in the first quarter, I calculate them roughly at around EUR 80 million. That does include some COVID revenues or not? The EUR 47 million that you see on page 10 of the presentation exclude the COVID-19. The COVID-19 is included in the EUR 450. We have not communicated the split of SEL in total. Understood. Thank you. The next question comes from Craig McDowell, JP Morgan, please go ahead. Your line is now open. Hi, good afternoon. Thanks for taking my questions. The first one, just on the value of assets that you're acquiring, looking at the EV to annualized revenues, I know it's not a perfect measure, but it's all we have from the outside. It seems that the target multiples have stepped up this quarter versus the prior year from around 1.7x to 2.0x this quarter. Is this a level we should expect to continue, or was there something unique in Q1? I'll ask a follow-up after. This cannot be looked only at on five acquisitions. There is a range. It appears to be a little bit higher here, it's fair, but it depends on the type of the eight acquisitions, sorry, not the five. Year to date. It depends on the type of acquisitions and the profitability of acquisition at the time of the acquisition. It 1.27 times is within this range. In terms of EBITDA multiple, it's fairly stable. Slightly up, but fairly stable. Yeah. A quick answer to your question is, yeah, that will probably be more or less the range to continue with. The key criteria is the multiple of EBITDA at N+2, post synergies, and this is the one that doesn't fluctuate a lot around the 7x. Understood. Thank you. Just on, you mentioned a lot on inflation within your fixed cost base, but just in the variable cost per test, just to be sure that there's no kind of inflation there, either in terms of the reagent or testing chips or anything else, is that something we should be concerned about? This is partially captured in the EUR 15 million. There will be a portion of the material expense that will be exposed to some inflation, but it's still relatively limited because a big portion of our material expense is based on contracts, multi-year contracts, and those ones are fixed. Excellent. Just the final one, maybe a bit bigger picture, but maybe you could speak to what the inflation backdrop is doing in terms of the competitive environment. How you expect maybe smaller independent lab competitors to react? Whether you think there's opportunity to win business or either organically or potentially take them on if sort of they face financial distress? Thanks. I don't think it will have a material impact. I think it could more have an impact on the regulator to a degree, right? Because they don't want to kill all the smaller ones, which might struggle more because they are not protected with long-term contracts like we are on material expenses, as Sammy was mentioning, or others. I would rather see it there than in willingness to say sell or being differently aggressive. It might reduce a bit their capabilities to invest into their growth, but I don't think it's going to be anything significant. Excellent. Thanks very much. The next question comes from Alex Comas, DKO. Please go ahead, your line is now open. Hi, thanks for taking my question. My first question is, last quarter you showed an EBITDA, excluding COVID, of EUR 517 million. Do you have an update for this quarter, or should we still consider that the EBITDA margin is around 21%? Yeah, the 517 and the normalized EBITDA margin at 21% we presented it for the full year. It's a complex exercise, and so we will not repeat it on a quarterly basis. We'll do it again. We'll see whether we can do it half year, but I doubt. Otherwise, it will be done for the full year 2022. The trend, I mean, there are a number of factors that influence this 21%. It's the level of investment for future growth that we have, as well as the inflation. These, I would say, are the two key factors that have probably changed or can change versus what we have presented earlier this year. I mentioned already in March that the inflation, the incremental inflation was not factored in this number, so there is a high probability that the 21% with the higher inflation, as we're having now, will reduce. Do you have a guidance for that number? We have guided the EUR 25 million in additional inflation. Okay. My second question is more specific. I mentioned those two factors. At the same time, you need to look at another factor. Alex, we're back on. Sorry, we had another issue with our telecommunication system here, but now we're back on. No problem. To complete my answers in relation to the evolution of the 21%, there are different factors that can favor or disfavor the increase or decrease of this margin. The inflation will decrease the margin, no doubt. The pace of the transformation can go up or down depending on how much we invest, and it's discretionary on our side. The third item is the long-term COVID volume, which we put at EUR 150 million, but could be different, and I assume that probably we have been conservative here, so there could be some upside. The outcome of it is difficult to factor. My assessment today is that there will be a slight pressure on the inflation on this number. Okay, understood. My second question is more specific on energy and transport. When I look at the energy and transport cost, it looks like slightly higher than peers, and notably peers in France. Is there any obvious reason why this is the case? Notably on your transportation cost, is it higher in Germany than in France or not? Yeah, no. What is fair in what you are describing is we do see a geographic variance on inflation on OpEx, and we see more inflation in the south region than in France. While France, they have reported a relatively minor impact on transportation cost increase. The base is different also, right? I assume you have that in mind that in France the business model is that the patients come to the blood collection point, and then we have a limited number of lines connecting to our labs, whereas in Germany, we pick up the samples at each doctor, and it's thousands of them, of course. The infrastructure is a bit different. If you were to compare France and Germany in terms of transportation costs, what would be the difference as a percentage of sales? Is it like double or not? This is a very detailed question. We'll need to come back to it. I don't have the information for you now, Alex. Okay. That's it. Thank you. The next question comes from Hugo Solvet, BNP Paribas Exane. Please go ahead. Your line is now open. Hi. Thanks for taking my question. I have a couple. First on the 4% underlying organic growth rate that you had in March, and conscious about the comp base which will be a bit higher towards the remainder of the year, what should we think about in terms of underlying growth rates for Q2, Q3, Q4, and maybe against the 3% or above 3% that you highlighted in your long-term guidance? Second, on attrition, which you did not provide the number, but in Q1 this year, just wondering whether it was due to prioritization of COVID samples or also to absenteeism at testing sites because of COVID. Last on my end, I was keeping an eye on your long-term guidance assumes 28% tax rate, if I'm not mistaken, given the tax rate was 22% last year, 13 north of 23% in Q1. What should we assume going forward? Thank you. Yeah. In relation to the organic growth for the remainder of the year, we're very, I would say, Confident? Confident in our ability to deliver the 3%+ that we have guided for in our IPO guidance and continuously. We obviously this is supported by the opening of the BCPs. I mean, when you open 4 BCPs per quarter, 2 or 3 quarters in a row, it adds only, I mean, roughly 0.5 point of growth for the group on a yearly basis. So that would be good. So 3%+. Last year we delivered 3.3%, and so this should be similar. On the attrition, what caused it, I think we were fairly, say, agile to not have what you mentioned that we would have to have too much absenteeism and suffer, not to be able to serve our needs. We would rather sit on the other side that some hospitals in the first two months were not operating at full capacity and people were also sick at home and not necessarily going for their normal doctor's consultations or procedures, that would be the effect we have seen. Then on the tax rate. Yeah. The tax rate 24% last year, 25% in Q1, we are keeping our guidance at 28%. This is very, we have a mix of countries and the COVID-19 has, we had strong COVID-19 in some specific countries, so we and there have been some impact on the adjustment for the tax carry forward losses. So I today I will keep the 28% as a placeholder for planning purposes. Okay. Thank you very much. Just a quick follow-up on my end. Can you maybe shed some light on the D2C initiatives which you mentioned alongside the 2022 guidance, any initiatives here or how fast is it growing? Which countries are you growing this initiatives in? Thank you. Yeah. It's a bit early to give too many details, but we have picked two pilot countries to be in an accelerated mode, and then are supporting also countries that were already having D2C activity. They are usually growing between 15%-20% year-over-year. But we'll give more color in the coming months. We have an investor day on the twenty-first of June. Okay. Thank you very much. Yeah. Alex, I don't know if you're still online, but we have looked at the numbers you asked for. I mean, the transportation and percentage of revenue for France is 1.6% of revenue, and for Germany it's 4% of revenue. All right. The next question comes from J an Koch, Deutsche Bank. Your line is now open. Good afternoon. Thanks for taking my questions. I also have three, please. Starting with your new guidance. So how much of the EUR 100 million guidance raise on revenue is actually driven by high expected COVID revenue, and how much by other factors? Is it fair to assume that your new guidance implies COVID revenue of roughly EUR 640 million? Then, secondly, I was a bit surprised by your strong underlying performance in Germany. It would be great if you could provide some color on the monthly performance of your German-based business, just to get a feeling of the COVID impact in Germany and the current run rate. Then lastly, on your last earnings call, you shared with us that you generated about EUR 500 million revenue in specialty testing. Can you speak a bit about the growth and the margin profile of this business, especially compared to your routine testing business? Okay. Can you start then? Yeah. The COVID revenue, around EUR 600+ million. This is what is in our guidance today of EUR 3.1 billion. We were slightly above the EUR 400 million when we made the EUR 2.9 billion, so very rounded number. The numbers increase of the EUR 3.1 billion is two factor, is the incremental COVID on one side, and is our confidence in our underlying business. There's always pluses and minuses that we need to factor. This is the reasons why we're showing around EUR 3.1 billion. Germany, yeah, we have shown 4.1% growth in volume in Q1. 4.4% growth in Q1, 3.9%. Here you need to understand that there has been, there is no more attrition in the reporting system. The last year there were some attrition recorded and there has been some difficulties in reporting the attrition also last year. The evolution here on the growth could be also explained by some base comps in Germany. What we see is a strong volume, so that's at the end the key driver. We see that we have a higher growth than the market when we look at. We're gaining market share when we look at the various metrics that are published by the different institutes here in Germany. That was not specifically, to be precise, on Q1 because the numbers are published a few quarters back. We have had, I think, now 4-6 quarters of market share gains. Your question on the specialty test, the EUR 500 million. What is common to all countries is that this is a segment that grows faster than the others. Given the lack of early diagnostics during the pandemic, this should even accelerate a bit further. These tests would grow 5%-15% to give a wider bracket, because it really depends on the specialty and then a bit also on the country. The margin profile there, they are usually a bit less automated test than routine, so they're also more expensive. I would say that the margin would be in percentages on a rough bet, probably a bit lower than routine on average, but very variable by country. For sure, in terms of absolute EUR per test, significantly higher. If that answers your question. It does. Thank you. The next question comes from Gabriel Delay, Mediobanca. Please go ahead. Your line is open. Hi. Can you hear me? Yes. Yes. I can hear you. This is Kirill Palay from Mediobanca. Just two questions on my side. The first one is on gross margin. What I see in Q1 is that we got increase about 1.5%. Just you know wondering how should we think about it? Because the PCR testing volumes were a record high, I would assume that as they have usually low margin, so we should see gross margin deteriorating a little bit. But it was the opposite in Q1, so that if you could comment on that, please. The second one is on M&A. You didn't change your guidance. It's still more EUR 200 million is your target, more than EUR 200 million. You know, just looking at your cash balance, leverage level, then what is going on in the industry. 2021 and this year, some of your peers have been consolidating very aggressively. Should we see some sort of, let's say, well, higher target or revised guidance on that soon? Okay. Thanks. On the gross margin. Here, gross margin, this is a good catch. Here is 13% revenue growth, 15.9% gross profit margin. It's something that we have seen. It's a continuation of the automation of PCR and the reduction of material expense that we have seen there. Despite the price drop that we have a strong margin at the end on PCR. Mm-hmm ... in margin. Then we have also an improvement in our material expense on the rest of the portfolio in the first quarter, around 2 points also there. This combined explain the improvements here on the margin. 'Cause when we say we renew the equipment, it travels together with improved say conditions. Yes, sir. Yes, sorry. Just to follow up on that. Would it be fair to say that once the business normalizes or the COVID revenue normalizes, should we expect higher gross margin than it was in 2019, 2018? The gross margin of COVID was lower than the gross margin of the rest of the business. It's a fair point. Mm-hmm. There was more consumables for COVID testing and the material expense was historically higher. We have reduced it, but it was still, I would say, slightly higher than the rest of the group. On your question on M&A, we remain very disciplined, but at the same time, you're right to point that we have cash power to move on, say, maybe a medium or larger sized target. We have a very strong pipeline. I think when you look at also the diversification of our geographies where we originate them from, it gives good confidence that we can say do more. As said in earlier calls, we don't want to work on a target here. It's very important to keep the discipline of the alignment between strategy and what you're ready to pay for and what you see the quality of the targets you find. We are not worried that we can do more, but we just want to see it a bit the year progressing. Yeah. Thank you very much. The next question comes from Craig McDowell, JPMorgan. Your line is now open. Hi there. Thanks for squeezing me in for a follow-up. It was just a question on the guidance and what's implied for the final three quarters of 2022. Backing it out, given the very strong Q1, the implied EBITDA margin for the last three quarters is sub 20%. I think around 18%-20% by my maths. I'm just wondering what we attribute that to. Is that the continuing carry of this sort of COVID labor cost that you wanna be ready for? Or is this the run rate that we should expect in the base business? Thanks. I mean, obviously we have done the math. At 24% it gets you a 19% margin, and at 25%, a 20.5% margin. It varies between 19% and 25% for the remainder of the three quarters. 20.5%. All this, again, is driven by the factors that we have provided for the range of the overall guidance for the margin, which is, the level of COVID can vary, as we mentioned. We always say the round numbers. The level of investment can change also. Those are the two key factors that can influence. The mix of activity and the level of investment we do. Understood. Thank you. We haven't received further questions at this point. I will hand back to the speakers. Yeah, we can still wait for a few seconds to see if anyone is struggling to log the question. We have received one more question. The next question comes from Grace Lee, Jefferies. Please go ahead, your line is now open. Hi, thank you for taking my question. Could I ask two questions? First, on the margin impact. I think you mentioned preliminary about 2023 margin guidance, but we're just curious to hear your thoughts in terms of at least the phasing of those impacts to your margin for Q2 to Q4. We're just curious to hear that. The second part is about your strategy to keep the COVID capacity. How quickly, for example, in terms of time, can you change from the sort of COVID testing mode to sort of your underlying business? And what is that sort of in terms of margin impact that we should be sort of factoring in in our Q2 to Q4 sort of going forward? Thank you. For the margin, the 23%, for 23 is not. It has never been our guidance. I mean, the 23% is a midterm guidance provided at the IPO. On this one, I mean, it was on the basis of the 20.8% in 2019. This one at 23 also still assumed a certain level of COVID in it on the long term. This will be delivered over time. Today, despite the inflation, we still believe that this can be delivered. The timing of it could be slightly longer to get there, but that's our current view on it. The reasons for that is, again, once you deliver organic growth to a certain level, you offset price and inflation. You may have more inflation, which will reset a little bit the base. Then with a new starting base, you can gain margin over time based on our business equation, which is volume leverage. Then your question on COVID-19 capacity, it's not so much how fast we can do it, right? Because adapting our resources can be quite fast. Remember that we have a lot of temporary or fixed-term contracts in our COVID-19 resources in place. This goes with fast adaptations. The question for us is more on how much do we keep as a base level, and how much say very trained people do we keep in that mix. That is what can have an impact on the margin. If you look at the current levels, right, where everyone has declared COVID as finished, we're still in the range of 50,000 a day. If you run the math, you will see that if you would consider that as a stable post-COVID number, you would see that we are probably a bit conservative with our EUR 160 million that we consider will remain for the longer term. We're definitely prepared for that level, and have a bit more because we anticipate that you might have another variant with the fall, where we'll need to be able to react fast. Okay. Thank you. It looks like we haven't received further questions. I will hand back to the speakers then. All right. Thank you. We are monitoring the screen in case someone wants to jump in before we are completely finished. Thanks for your listening and the active questions. For next time. Our next, as I mentioned already, is an investor day, the 21st of June. That will take place in Barcelona. Please register if you're interested. Then we will present the full first half of the year, the 11th of August of this year. 11th of August. With that, I wish you a good continued rest of the day. Thank you. Bye-bye. Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.