ILMN - Earnings call transcript Q4 2018

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Operator

Welcome to Illumina Fourth Quarter and Full Year 2018 Conference Call. My name is Atrian and I will be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and answer session. [Operator Instructions] Please note this conference is being recorded. the to turn Ross. now will call Jacquie over I begin. Jacquie may Ross, you

Jacquie Ross

XXXX. afternoon, Thank fourth for year call you, quarter everyone, full welcome Atrian. Good and to our earnings and the

the During financial of the market commentary which activity, offer our and we a we call will will the results after host the today, released close commercial after on review question-and-answer session.

in being Participating Sam our the a will chance results made be intent President release, Officer. our under Litigation recorded Illumina be Samad, brief our Reform call found the archived a earnings will and website will Act to it section audio Investors of update that Chief provide section Private regarding illumina.com. will the had state activity of Securities be review It the in be review portion not XXXX. all and Francis our the financial Relations is you've is business and financial our of commercial for call and Officer; website. of statements If today Chief Financial our at Investor and the on today's will can forward-looking results. deSouza, Francis during Executive protected Sam This

XX-Q With Francis. refer I to with better Securities including Illumina the to the and uncertainties subject turn assumes recent Illumina's Commission Forward-looking that actual statements files current statements no the forward-looking to and results Illumina projected over to that, and documents events understand Actual or All and that differ; risks XX-K. information differ or obligation and cause now to Forms these are you risks materially uncertainties. may could discussed. those will upon To statements. call results Exchange from we are available update based most

Francis deSouza

the XXXX ended note. you, up from record XX% $XXX a Illumina high Good everyone. afternoon, quarter With fourth of revenue Thank of on million, Jacquie. XXXX.

of systems, consumables demand of reflecting increasing enable quarter clinical our represented to Normalizing an and In growth of XXth through array of the number quarter sequencing reported XX% consumable billion, pull XXXX. sequencing record growth of services. of up with for X% range to fourth consecutive stocking third and for reported research, the quarter. and fourth XXXX, Illumina XXXX, continues XX% and $XXX broad customers. year consumable oversea XXXX compared a we of orders, grew flat of timing $X.X strong For genomics as million across applications was the sequencing translational revenue level in the was roughly consumable

consumable low the support to Illumina our more For mid categories. grew full Growth broadest customer year, throughput, throughput and was of range $XXX or throughput throughput sequencing revenue requirements. than XX% application million continues to And across XXXX the $X.X and billion. high visible uniquely

customers' consumables family, to expected throughput NovaSeq. continue the HiSeq Within decline high transition as their

For the NovaSeq five. revenue by year of increased than full consumable more a factor

as and customers. the low multiyear XXXX, to part HiSeq, wave of our next support For of among throughput our are catalyzing transition a HiSeq upgrades we from strategy

doing two this We are ways. in

$XXX,XXX And flow waiting February. SX pricing to believe no S important the launching to newest by it's to been the And power SX enable these customers flexibility the ranges, And for sequence and our to larger consumable NextSeq to modest system unlock customers lower the our of year allowing on another greater revenue. pull growing are cell. oncology sizes NovaSeq respective the applications. NIPT delivered throughput was in our throughput again demand revenue. within genome. due adoption MiSeq batch year-over-year sequencing have on mid throughput both record at we've XX% There cell quarter family part SX low price which through second, the represent the MiniSeq changes large We will flow of range. help consumable continues and of respectively. than cell Once per the even of majority the In to to and strong with of and rather all and of from changes was NovaSeq we approximately First, XX% for $XXX,XXX contribution the throughput high Prime, the growth It cells consumables. of reduced end flow list flow IC

of Moving up Illumina. to new was for representing sequencing million record systems. quarterly a $XXX XX% year-over-year, Revenue

up with As from XXXX, we we including the anticipated launch, strongest shipments. by quarter than more XXX see XXX of XXXX. both yet existing portfolio, robust performance About continue the the has HiSeq the XX% based to installed NovaSeq. year a take and of customers. new NovaSeq end across from its of if Since at had fourth the the XXX was And to the we NovaSeq approximately first shipped even end installed strong demand of

the So of early span in cycle we believe will very stages are that years. multiple we a that conversion

purchasing continue desktop throughput support In new we who are higher is hematology on prepare and bringing adoption to efforts. purchase NovaSeq to to build see Illumina initially high in that launch, sequencing the full XX% NextSeq, from customers. translation users. had to hospitals. future. about to represents orders addition This conversion lab, fourth NovaSeq trials In using customers quarter, of for desktop now And to decided our new lab of new strong multi-omic clinical the research drive to bringing to one pathology upgrade of medicine footprint Other in community a using cycle, out customers group the since is a service but HiSeq one to expanding our house output precision NovaSeq plan customers included

highest And any new NIPT, were Once and of oncology the we in shipment since customers. revenue launch. acquisition. sequencing again, of existing the second system NextSeq With good saw drivers was mix fact NextSeq quarter to primary strong. in and placements

Japan. approval, our Building am including National Cancer to low Japan, up Within both NextSeqDx ended approved and iSeq targeted first control, utilizing Sysmex as throughput half of of and and new customers. based And shipments in launch. re-sequencing clinical establishing quality be XXX I system units broad the quarters year About the this NGS panel were metagenomics, bring in HiSeq are to gene into and commercialize MiSeq our on were instrument system registered will the run by Corporation library approximately in with on developed first range a country XXX the outbreak to announce Center, the infield across sequentially. was we IVD This be of approved Illumina's of Sysmex with family MinSeq applications shipments NextSeqDx in two PMDA panel these and test PMDA based HiSeq Japan. these Collectively, shipped his customers the the pleased work NGS applications, Illumina care. disease a to partnership monitoring. oncology IVD first

For example, plasmid for one now synthesis the is characterization and in conformation using sequencing. customer place CE iSeq of

genomes, vectors using sequence Another as bacterial and viral mosquitoes. the as disease well iSeq to from customer is

of of XX% the year quarter Moving up ago, down in XXXX. quarter driven sequencing in services other. to and XX% largely repeat sequentially our was to that Revenue sequencing In primarily same in by $XXX the due was quarter did Revenue million grew GeL. oncology fourth. a the revenue fourth third total, not payment from the collaborations

a and research growth these the enable across believe of the continue translational from myriad For time developments applications. genomic revenue progression over Across to clinical with XXXX, will and encouraged we full care. XX% of we to solid to year continue to research, areas, by that sequencing standard to grew be clinic

broad We continue see leveraging efforts a to research NGS. range of

doing biggest international the to research challenges programs collectively For last The three tackle tissues some some cancer. others. example, announced were of cancer inflammation not million. new just is UK These initiatives awarded week, £XX microbiome, but chronic Cancer why Research, in research and

team Dana-Farber between Institute Medical One the School that Harvard exploring the the cancer. in of microbiome of is is by program led relationship colon and Cancer the a

efforts Moving dozens intended failed initiative from multiplied improve health. on, to population genomics a lasers handful of to human has of

XX of and program sequencing. will year. transition ramping population a around several its million France expect whole-genome to revenue to contribute Illumina clinical its and we exome of just initiatives practice, examples, for one into and gradual begin journey genotype all to participants. us tracking launch completion will give GeL's this pilot are We sequence XXX,XXX XXXX. to and growth technology global few To genomics in genomes Despite its expect begin using

And which is project, as X sequence sequence ultimately genomes well to its XX-K million XXX,XXX to three genotype XXX,XXX initiative RNA-Seq continue will - the year. phase Singapore XXXX. samples a As a wave of first and by whole-genomes the

NIPT excellent also evolution continue markets. of oncology, We in and rugged see to our progress the

way generation sequencing the oncology. continues to clinicians are redefine Next approaching

market. to We in for joined diagnostics the has assay bringing or this our will to gene of assay data pan-cancer the distributable been proud MSI, emerging evolving targeted ensure forward and and with XXX fusions gene clinically to the short optimal and is breakthrough leading tumor prestigious assay environment panel device that and rapidly for matched patients innovative biopsy. deliver in have to designation trial. The The detect granted actionable and therapies. to designed been to oncology biomarker is approaches comprehensive With reimbursement and variation site that TMB to clinical tumor including hope development. extremely Illumina innovators therapeutic known profiling profiling in regulatory are is two tumor liquid support look list a like

RUO. which with on continue is the TSOXXX we of development IVD as available to assay an based partners content While drive the now is

access of million the ChosenMed the sites grant ChosenMed atlas XX,XXX the We early to which the tumor pleased include is the of lab part initial are cancer response support Other around to as China. offering. to of world $XX vast early of samples. their and working in the the build genetic from majority expect will TSOXXX bank use our add with RUO assay we customer adopters China's

pregnancy in average births coverage increased Ohio risk than the eligible in families and US, in US to XX% of and addition NIPT, for of January, of NIPT Medicaid around states the continues for in risk while five. with covering is is coverage all increase XX% higher the to to pregnancy number are Moving at risk Pennsylvania to XX%. the average not More

XX risk offered EURXXX will X will X between France that X,XXX and nearly and with be abroad, recently NIPT. announces Looking XX representing women they for contingent to of at Screen and pregnancies. reimburse approximately X% trisomy

be ship detected. which adds carrier diseases genome, that type Additionally, XXXX, of version genetic will X NIPT of can number across we resolution the the increases and in VeriSeq half the first

total policy health to patients. more expanded in first And sequencing end positive brings Michigan $X,XXX WGS the a plan final rugged just access pricing patients one coverage enables insurance old which issued over CPT for helping XXX ago, weeks coverage NGS was Health, the with For This Priority the for to million. few rugged diagnostic specifically genome covered to million per to coupled for oddities. of --, patients CMS' lives quote lives whole-exome acutely

testing genomic is adoption. poised to the While become working utilization help standard is to believe today remains rugged for care Illumina the patients. nascent, we of accelerate

For example, Genetic Australia. recently partnering in profit for service and with Services rugged Victorian not Clinical providing

million in Moving up to the was from arrays. XXXX. X% same Revenue quarter $XXX up

we sequentially to in revenue in down slow As revenue expected, with was This array revenue. recent with third That QX. is line in following the trend quarter step system record said, from array revenue and into services in array services a growth the expected sequential decrease down XXXX. QX lower is

tests factored markets this based and in as expect into new growth health other to US. and the have outside more reaccelerate are widely our are adopted. apps We revenue And as guidance genealogy introduced

robust moderated adjusting EMEA of strong When system results. performance XX% included it China growth and year from stocking in region shipments period, with a notably the grew NovaSeq and for period impact, straight year XX% grew record tariff sequencing year versus prior XXX,XXX announced across for the Genomics the prior eight regional whole which drivers by that sequenced and X% last the with business. sequentially to of month genome. revenue Americas the grew England sequencing sequencing revenue tariff QX including grew Greater quarter the contribution the the strong the XX% QX growth growth effects placements from with consumables. from Other related quarter period. prior year-over-year XXXX. delivered Moving

Sam look up was Sam? call review headway make the to further of X% to up up NIPT Finally, XXXX. first expand to the continues XXXX. fourth Korea. in APJ quarter XX% our partner I'll sequentially. revenue over in financials. the hand as we from With million $XX and our quarterly of And Biogenome that for signed region in

Sam Samad

Francis. Thanks

X% ago. growth a fourth discussed year-over-year year same in XX% slightly arrays. to Sequencing $XXX XX% revenue And million sequential $XXX from As driven growth was on by and micro million, down a revenue quarter of up quarter sequencing grew X% in basis. the consumable

the up consumable China of on was $XX Array timing experienced XXXX. As revenue that quarter, XXXX, after consumables first order the customer in some the sequencing of fourth million discussed million this sequentially the and order in for in consumables stocking. XXXX. approximately the XXXX, China million stocking previously sequencing quarter, grew $X also related sequencing consumable we with revenue expected related adjusting for included previous in $XX tariff of revenue shifts associated sizable Normalizing in And or quarter of QX was QX. fourth of grew up QX stocking in million versus were XX% $XX year-over-year. XX% quarter sequentially In

the million and noted, sequentially down down Francis and year-over-year. service down was $X for As total the million for million year-over-year. of $XXX up in sequentially fourth Array year. XX% and full revenue service the services sequencing revenue total $X of represented XXXX. Combined consumable XX% the XX% were and XX% compares revenue XX% quarter year fourth quarter XX% in and XXXX to full This XXXX of of

Moving XX% QX of million total to $XX $X Array were XXXX. sequentially the represented in Instrument XX% same million of therefore $X last grew versus quarter for Sequencing revenue XXXX. revenue up systems. systems year. down and million the sequentially versus and XX% systems and period

gross gross stock and were excluding our basis Year-over-year operating quarter, margin spend which $XX reconciliation in GAAP last to be margin XX.X% the the due million mix year points expenses. supplementary you operating of services marketing and up of XX% and the to refer to quarter, XX.X% was this non-GAAP mix. the that by XX.X% tax primarily operating higher to quarter. was last expenses measures I Non-GAAP decreased note basis can highlight compensation. lower timing R&D product Helix, business. from The due OpEx of down spend. rate quarter, tax prior to shareholders. Non-GAAP website. earnings largely weighted was Illumina quarter subsequent Non-GAAP driven operating in share compared product non-GAAP data the return non-GAAP last specifically year, therefore of all to down third margins encourage quarter towards net compared Please almost include decreased non-GAAP I margin million that primarily margin our will last attributable XXX the on to today's margin Moving results from XX.X% XX.X% found and available release the from and references results review points XXX of per income to to gross fourth based $XXX end reflecting adjustments.

by $X.XX quarter to XX net fourth or net $XXX diluted XX quarter, GAAP XXXX, $X.XX non-GAAP flow For was the $XXX of higher driven income Cash revenue $XXX was compared DSO diluted days geography. operations share. was from and million, or million. favorable at days per income share per less linearity last and million, was

flow capital free In million cash expenditures addition QX $XXX seasonality. to collection quarter million. Fourth were and was $XX

our cash the year share term current short approximately in billion million under repurchases cash, $X.X we quarter equivalent of We XX investments. and for with plan. stock This XX leaving repurchased million available ended

Xst, the XXXX no longer notes As and January were of XXXX convertible.

million share remain the approximately has QX diluted shares However, share count price our in exceeded our conversion price. one because

such average maturity later. As was again will XXXX for count March million. our ahead share the XX, XXXX The months XXX of become diluted weighted convertible quarter three on notes

premium on the principal to expect for stock which million million stock issue in repay and $XXX We to approximate cash the around $XXX depending expected is price.

to guidance that million favorable billion increase reduced we year billion, range our in allows expect the midpoint. approximately Moving XX% for us less to approximately of X%. representing year previously growth to the $X.X an expectations full guidance, XXXX of at FX to This by environment $X.XX we XX% $XXX as or full shared, revenue grow

linearity, XXXX XXXX. we in Regarding to end back revenue than be expect more loaded it was

first a was half in split in the XX% XXXX the revenue As second reference, XX% half. and in

expect the to of half exceed in of proportion We revenue the second XXXX XX%.

to mid-teen digit the the in sequencing we the low grow revenue range cautious and grow in expect revenue We to opportunity. to the on consumables XX%. And a grow reflecting above consumer array view sequencing single expect

systems our grow XXXX, steady, the expectation single upgrade cycle. multiyear slightly expect we In addition to to in XXXX, NovaSeq compared be for up mid expected digit with in to flat to with shipments sequencing consistent

to genomic XXXX revenue We slightly slightly revenue margin down year population gross a lower initiatives we expect of a and contribution basis. be from non-GAAP Compared expect higher percentage oncology to be operating expenses full margin collaborations. with on from our down to XXXX,

XX%, in up XXXX we $X.XX a the in of share expect $X.XX rate and of share in includes to Helix the XXXX to due dilution. per to range GAAP to This approximately $X.XX We approximately be onetime tax Therefore, range investment to benefit earnings expect tax earnings $X.XX XXXX. from of related per Helix non-GAAP the $X.XX.

a expect system quarter consistent first to past we've with of the to revenue be four revenue total seen sequential down is due sequencing XXXX, years. we the For over basis on lower the trend which

$XX million Following expect quarter revenue single consumables by to flat be performance, of sequencing to system $XXX in sequencing the flat expect decline XXXX. the and quarter growth from grow arrays GeL our Sequencing million digits. we approximately sequentially to of part others we to fourth to And XXXX. in therefore the micro we this quarter the revenue. be to up expected mid the fourth expect slightly Offsetting in compared offset record with to sequentially decline high services in reported fourth

partially XXXX. quarter our rate expected of rate quarter benefit. expenses we in expected quarter be meaningfully up revenue. XX.X% year And be XX.X% basis first percentage to due slightly onetime of to full fourth to fourth flat a the compared than revenue operating We favorable service due expect in to to tax on Non-GAAP non-GAAP mix compared the expected higher offset be to lower are reported array gross the margin the to by expect

compared we expect meaningful this last Finally, Francis? change don't any count share in to quarter quarter.

Francis deSouza

and Illumina. closer XXXX was in an saw precision invigorate research reimbursement and invests around evolving academics, promise only to Thank for in work NIPT, developments genomic are broad you, nations oncology. spectacular translation inch regulatory in in the undiagnosed world even genomics Sam. We medicine. These adoption further rare disease the and with of and environment can in and as institutions a clinical incremental

is exciting continue remains unlocking linear. oncology population And human our cancer and Illumina by many health human clear A pregnant will will above more unnecessary the the ever scientific is ramp of end this in access and that the us, test. to patients to the gain most diagnostic access test have of sequencing. with that of innovate genomic What genomic start screened of than earliest could mothers non-invasive will will Illumina and improve is the discovery be As growing innings power to will path testing prenatal diagnostics, number journey before limits push the perfectly of wave genome. in and genomic A to initiatives oddities. to year. more with to before all, And costly children the

to and customers to with today's impossible will continue listen will With open for turn Operator? partner questions. We we our into that, call the possible.

Operator

our And Morgan. Tycho Peterson Instructions] [Operator comes first from JP from question

Your line is open.

Tycho Peterson

how seeing XX% are there? any all impressing. you little as am HiSeq about for to guidance. are installed, driven just want Is a and few that ramp sequencing NovaSeq think you than slower up hit contributions expanded you And can getting with wondering, I upside for a I confirm but very POPSEQ Francis, factoring hit NovaSeq bit from you for you of greater you the you there, talked around start down Thanks. some can whether color or utilization the growth, initiatives? follow I about asking XXXX? on XXX by XXX, you had are wondering really people if actually in guidance these what XXX am then is we certainly in placement consumable I actually guidance a just from provide XXX,

Francis deSouza

Sure.

the sequencing in We range NovaSeq the from portfolio the XXXX. across with driven MiSeq of rest of the over population record a start about the drive the the happened of and that number across this talked we last talked me the be year. into initiatives quarter these are up the we year. genomic to applications. of seeing, look about customers will consumable Let We around saw growth course fact that the entire year, the last of consumable through growth ramp systems all question in way said by we stock we placements what If the

growth see placed. we And NextSeq so to from step expect the

We Europe. growth the growth expect growth that QX. from see are we to then to we from we the that done And expect record uptick of primarily seeing number NIPT NovaSeq placed in continued see in in around that

across the in is broad consumable So applications. across very growth based, sequencing our the portfolio,

we XXXX remarks XXXX placements, In NovaSeq that XXX we XXXX terms in in placements XXX of I said with exited prepared the with NovaSeq and NovaSeq. exited approximately about

of take the the we So number to when And frankly that's XXX. and placed in terms they short choose were timing just customers systems. of driven by

of X, lab evolving, adjustments smaller on with As it's expected. see NovaSeq started cycle customers we large begin step had is at X take update prime momentum just then and and S year of pricing some journey. out as HiSeq of generally building our the their year NovaSeq. X and last throughput with S begin some the the we from to S NovaSeq a And upgrade We into we high to S see how start start playing look the transition this really back the launch the expect

we play it's multiyear for as HiSeq way. out and this upgrade So that to was a customers planned, cycle going

Operator

And from Bank from America. our of comes de the next Bruin question Derik

open. Your line is

Derik de Bruin

afternoon. good A couple Hello, questions. of

testing of a that. in of back, basically done or DTC of ancestry all market? in with getting sort And with new just we really So Are Can just there. of not sort are And also of on you like basically the question that through genomics on - you do now Is what PacBio the it's for people in us seeing the the you are them people buying am one And the sort first on comment expansion process. regulatory kits, can any guide. update the you on sort you heritage walk got that information. update can interested that array request you Thanks. and you turning incremental testing transaction? where I market. looking curious,

Francis deSouza

Sure.

side, had know growth where where we genotype we in about XX in million XXXX about XXXX then you very as million On spectacular genotype consumers X we and array the consumers. again

right So our and about think couple in of size with working was that the felt years. customers XXXX, answer direct-to-consumer they the at last of numbers to over looking growth the moderating given the seen they've

And up with working What we see start so based our believe this on reaccelerate a to we forecast show we as is closely see them. them growth jointly as that market will health the market of well And customers start growth another outside up. we market. genealogy vector as we as the US for kick-in us, then will see ramp see to the as

lots had Asia. we especially of in customers So interest DTC from

up customers those with we start going expect to year we so And ramp into then customers. starting out those future. started to engage to playing and the And this

we the So the the expect FTC And request the so we to are second that year model as into down market. reacceleration of this on expected. is we But where single for digit. we PacBio got it from side, we see

the are gathering information And so we in phase.

to and still process be And we we going so expected expected a in close. as the midyear general is

Operator

question next Evercore ISI. from from our comes Ross Muken And

Your is now line open.

Ross Muken

Good afternoon, congrats. guys and

of all bit some orders, growth. NovaSeq of stocking kind out tease with point both So the talking to of to back hard of the cadence of sort Obviously, just maybe underlying. it of and of just sort consumable little going the Tycho's about

for I sort seem stops. we the starts mean that project clearly sort this of versus really in guess are If that kind is project just starting the year I some in growth. strong. then How it all of where is year you and on maybe that the back naturally coming of off projects utilization little are the the where so sequencing am on pieces necessarily cycling you as terms year of balance am get look can doesn't of drive bit had to at up and saw the I trying of half? to sense instruments gone sort that half guides get what's and over the the color half see just then of I you cadence? dynamic consumables that of weighting. up trying But back much back the pull like through sort and picked the

Francis deSouza

Sure.

if at business in loaded. half So tends our our look cadence in year, you the any back business to

So in we have of Last that And business about the we done half our because ends year driven about primarily saw is year the seasonality fact. two back talked of the year. effects you out. XX% of playing

calendar You QX. of to then have fiscal obviously year have government end you have year US the federal; of you that in the the the that is And closer the end the year.

that the orders. than a usual not This things more to of us so hit up orders but to really then like some little the back stride to see but the expected year efforts pronounce only you start usual of pointed as consumables out year. strong because we always for start we over year. also the of half will all system driven the that's And strong we course over will see effects, be sequencing And ramping their the population bit

As just driven And really to they in an And if moving an example, into time. they some will look you genome phase XXX,XXX wrapped their transition in service. the GeL, sequencing that are take at QX. NHS

US back than the in will half out. really And year. half to in the you the see of you the play the in France, to play will or that so year if that Similarly, first us dynamic out of of look more start same start at all

then effect this year and seasonality normal is back loaded the our than take usual. you so and And you see layer this will more end you in

Operator

Schenkel And Doug from question Cowen our next & comes from Company.

is line open. Your

Doug Schenkel

And couple relates for wondering redeemable in in ones. balance going then sheet this Helix to am dropped million QX $XX number not that? guess not I non-control to QX. or balance I Hey, $XXX if but NovaSeq. a for the the I what sure million placement good quick from to the year just afternoon. am drove back interest on your

end missed said You placements Yet the year. that quarter. XXX in now your you target you low XXX of the shipped over acknowledge you for the in

just good? on what is off the XXX am exactly quarter thinking wondering going I So do to than the surface pretty A more first aggressive. team in you were pretty you because lot were

of am I your just there aggressive wondering Thank disconnect if you. revenue is some were just timing that when between you was on wracked, expectation. and So if quarterly really shipments

Sam Samad

that's related with annual to regarding to valuation Helix. usually So on redeemable, the regard the basis perform we that

result a that we of if add that's And that the annual Francis do. So valuation - you

Francis deSouza

Yes.

the So number, if did the drove and expecting as at working, thinking short the the to come are over the what course then of I over quarter And working is year. our of pipeline. what a are always of And the look close said earlier. within are XXX we NovaSeq we we course you customers

I their we still purchase said, first of NovaSeq. three have to As HiSeq yet our customers quarters

their than them fewer but anticipating, So played we when just the working out they terms lot with of time, And timing are you are pipeline. issue. estimate their can timing, is And any imagine took the working we NovaSeq. with will NovaSeq we in to were in customers QX of that's in take the a it in given way

those in with come to are expect coming to those continuing work We we And customers. quarters. customers the

Operator

next from Souda comes question our from Leerink. Puneet And

Your line is open.

Puneet Souda

on I about the S if could have market. plus XXX Prime Francis customers, you question. ask the broader the for Thanks

less are discounting hand hand expect NovaSeq lab to was number in from there? share but to a that and have the you bit customers. do the market you other little a uptake SX capital sense how of this flexibility they terms to on one you larger I budget compared mean I have on You hoping get of SX.

their given cycle and projects so. and have You grand

just genomes view wanted I of So your uptake there happen or Thank to on what to just overall needs and the X get X closer of then sequencing, order sequencer. million you. to to the plus bring in million sort population

Francis deSouza

Sure, Puneet.

on NovaSeq in jump the me let So cycle first. upgrade

capital. smaller it's around that out, less pointed has you as So to quick and flexibility access lab the typically

to And cycle, planning target were so NovaSeq was labs the larger as we size first. it multiyear ready our upgrade

while high customers. ago we a access larger capital SX lot larger they can engaged shorter have customers. time. around because The do payback a the and have of out of so come throughput the XXXX really is saw and lot ready the sequencing we you what of high of of volume more That with to when the that So

sell was XXXX, really sequencing so the too us of story you can And customers SX. did focus made new and was In see we the to budget upgrade. flow write for the majority had remarks And or to Yes, really taking our to the to being the board XXXX. access we I as that time we did NovaSeq think NovaSeq SX sell but across needed in they XXXX. get to. that for the smaller around NovaSeq to the they about revenue now to of the And that NovaSeq needed lab cell grant either

so And And that we that we want base. specific some user do this is to activate HiSeq that of the to year part the offerings. needed very

the use HiSeq customers some example, rapid lot. that X,XXX for really there are some So mode run a customers,

They part was a data what output. Prime catalyze therefore and And fewer able wanted they what right, the targeted coming them year revenue. X,XXX this pricing SX and $X.X with that fast HiSeq of and that and consumable the could in base, customer to them the run that that exactly run HiSeq run. now. a new very customer a small. It's those fit. are samples the X,XXX be need are at SX intended to X,XXX is rapid customers can time there to And wanted XX in quarter flow around not the is period. business And and really good that X,XXX S XX gave million And do at love it's and of that out lab other necessarily less a that's cost, costing for lower be months flow run that customers so cell cell us And

pricing. ago to is what arsenal is a And question that's created those catalyze with team a and it few GeL take opportunity? years we We it dedicated there things a at number to so was And Illumina so have. you their and was new second the this population SX the HiSeq smaller S catalyze we Prime, question your And SX the year had sequencing sequencing. takes. to was customers then And around that we at actually that the want around, did starting population of effort. The are

represents engagement that are talked point XX the about. the of there we I those depending coordinates Illumina opportunities initiative population that's but on across play. to the plus that So sequencing that team roles And different

population We sequencing experiences up a local you to community In to population are with they England scientific things put articulate Genomics around of example together can explain effort. cases, the or samples. population deeply to connected representatives citizens. architecture the the community around in set share the for from some collect countries how are from actually how nations learned sequencing like a how medical their for we share cases, effort, sequencing some and with the able the able groups where reference to what help in set the scientific are you we even another benefits value and and around In and convene they you cohorts world medical

and the are And what we set play roles catalysts. that that's around those world so we different And initiatives different need up. the

Operator

And Dan from Arias question comes Citigroup. our from next

open. Your line is

Dan Arias

which Good like stepped off? a the have. If several afternoon, about model, outlook, it guys, than add it is and the the thanks. any we to the anything just my But lower I quarters going coming are XQ. consumables lot looks way was other way can to you back you HiSeq Xs pace at decommission number there for thinking in in sequencing XXXX of Francis in look what

sort curious maybe just wondering on year can any big new of is An So with there? assumption projects into XXXX? really you the of the beginning help if then the the all that some stayed obviously I of Xs am if visibility in very the at brought

Francis deSouza

Yes.

nearly are up looking were for cases they they to their their what we were existing but XXXX NovaSeq flows think center. NovaSeq. in ramp starting the validating genome was we would talked keep what about So we did catalyze throughput high that and in all I fact And the about XXXX. they in work in either X going

maintaining their NovaSeq And were the so parallel that they fleet. them numbers. A you were and in see of lot utilization high while using

see So on is flow, things XXXX in off more to move we the to that Xs of HiSeq work flows for of those that are the one and NovaSeq. work looking the

dynamic in year. the very large throughput in you that's high And that so the play centers out genome the expect this to see

year SX the I said SX are to smaller The Prime, looking really this trying S dynamics genome word catalyze centers. that other like is that for and if you with we

be another customer and so this demand that on And comes generate year that should of part going line to driver that's base. activate HiSeq another additional the

Sam Samad

And are talked And the that XXXX add the one past necessarily decommission. some if the of I We've not tied to Decommission had been can as customers replacing NovaSeq. thing, course as cycle. HiSeq for always about in we've had choppiness well. regards how Dan, with to actually over replacement

was first thing still their yet QX right. was customers are terms a in of well quarter NovaSeq. of the You as - in to remind I XX% have decommission. is And you bit take higher higher that of a HiSeq terms other our would

we quarters. be So in over the stages. few we out will next do a this early quite to upgrade still And play expect cycle its

Francis deSouza

Yes. what through. color could add just of so pull means terms if would that consumable in on, And then

customers at both the of the consumable they is that And Illumina in or with Xs they mode HiSeq. mix so and dollars have that have seeing are where either the one NovaSeq, than that what HiSeq are Xs just more terms phase that we have that in spend

an the And is obviously into good entry news. activity catalyze which additional so seeing are sequencing of NovaSeq environment we

Operator

And next Jaffray. question comes from Bill our from Quirk Piper

is open. line Your

Bill Quirk

be broadly should to everyone. which market XXXX? about some thanks, getting CMS approval in number Francis, close your I to afternoon, here specific, Great, of very some FDA trigger believe reimbursement. a guess are get good oncology you the how thinking little I customers should

So and there have filed panel. actually color release correctly I'd me, your for the Oncology then for the read secondly, approval you TruSight if I love excuse press array,

Francis deSouza

Yes.

engaged So, from TruSight that already we we've announced the assay. designation FDA device the recently gotten we've with FDA breakthrough the for and

they higher through is get they And give you priority get queue. FDA the so clearance. What process higher priority will the a the for get that are application to team in review assay sure if with a your that process what you as that that in the to they from that means dedicate to application; with They that work the clearance the means to to the that a in is we resources specifically IVD additional process design, data are comfortable they need through they requirement. add speedy through make going the advance get you to, application way. And will

a will require breakthrough always addition, PIA In designated one don't this it's because product. PMA inspection, while not

it's be positive for FDA to this the designation. so real And recognized by

process in are we with So FDA. the

be We with to designation. their get submitting will help

lot pointed in As is happening you out, oncology. there a

precision oncology that test. last step few a And now forward. so seeing the therapy NGS the of And And years just NGS the require big market larotrectinib as a approval lot by up, on over seeing of and genomic presence the are a driven story more of research of primarily showed translational is are first oncology a we was biomarker therapies the the that companion year partially by the more FDA because is really story and we story. clinical solely

genomic going expansion you solely by where we like whether biomarker have seeing genomic based indication biomarkers. So therapies it's of are Keytruda on driven more or to

So you've therapy more seen NGS required that testing.

environment about. as are the the You and coverage private decision more year. commercial testing. reimburse We national We've had seeing you earlier for more NGS players reimbursement talked favorable seen players in

And so lot clinic. of buildup of having a drive seeing testing momentum terms we are in NGS in the oncology

Operator

our Barclays. And Meehan from next comes Jack question from

open. line Your is

Jack Meehan

additional and could in array I some the difference context service Thanks, was into line the seeing the consumable hoping quarter. we are good afternoon. provide on you

consumer to exposure some lines. both have on obviously You

the So what underlying consumable XXXX? And acceleration you of the things? was for can between the expectation on two, side the breakout driving

Sam Samad

Yes.

about as growth with talked we customers, XXXX, maybe view cautious growth more starting in we've taken haven't general fact specific talked the in a specifically So said, we and well, XXXX. array the the we about on DTC obviously that

talked scan With process. their about to regards earlier, we've mentioned customer the within regarding timing we your result orders mean our about that's of to and customers to consumables I had some we and work services in we from - dynamics there had Francis specifically they QX really expected As the there conversation, instrument, regard regards that QX, for QX, the question regarding talked an With in regard samples and of space was and with array purchased with quarter the are forecast. ahead to that some drop some the back some of instance we just to and quarter. us that QX, up before. XXXX ramp And one holiday our looking with that in the DTC helped to and season going array our services related then at

past. seasonal future can we be can about we the as same these in choppy. And talked in be These maintain. So the do expect that seasonality

Operator

from And Bank. Dan our Deutsche Leonard from question next comes

is open. line Your

Dan Leonard

Thank you.

million add first something So outlook, revenue. check my up in for in your of Sam, $XXX off the with to just I the QX code pieces If of math. different coming I wanted am up zip

quarter? mentioned linearity you. in that difference Thank you the could more first, the So, And back end was is quarter in identify secondly, in linearity right? Is that drove you then the anything drove that there loaded? that the

Sam Samad

With mind start increasing. stocking were And regards slightly call. QX look that some then digit Essentially was was QX. to mention as from arrays I'll the that And slightly reiterate I that made that we $X at them we from high expect accelerated order QX, being And down to well XXXX So flat in let we as about QX range to in keep million million QX, did Dan. QX. consumable, in to talked roughly also increasing from where single well. on be comments should sequencing instruments the to with the you of me QX $XX

the that quarter. the well put being from So QX services said roughly light when with think the flat you as talked you can little pieces you about on obviously $XXX QX. And sequencing the I mentioned to what to in bit you QX to referring are up like. together regards you come prior looks QX to, linearity With but new were

quarters end we've is year. of was end that. towards in quarter we QX do the nothing that back that's as linearity there Usually, have the the the really of And in So more had. about approach specific typical tilted prior we

that was that. point wouldn't unusual I So anything that to

Operator

And Canaccord. from our question next Mark from Massaro comes

Your open. line is

Mark Massaro

for Francis, to ask the NIPT. thanks I want about question. Hey,

average the First, has utility able risk read secondly, for to change? ACOG finally, update it change XXXX will any give Harvard do you relates drive And then prove your and to then you be might on you NIPT? study when in as expect Pilgrim any And can from guidance an or included that us out setting? when

Francis deSouza

Sure.

So let me start with ACOG.

question to place. you It's averages ACOG And favorable more NIPT. them pre-cursor which everybody practice that putting as utility hard So, XXX I mode know, withdrew a of the a in when industry think expect its as guideline happens. to in in an that predict

guideline revenue And to lag and into actually see your haven't around time when that in between an that you start expectation our plan. change flowing. We when built this changes

because any frankly based so ACOG in of built And that we changing. big on haven't expectation

Harvard we see of should data over coming year. to that this start of Pilgrim terms half the study, from back In

guidance that average come in And from so a our results timeframe you I then out. anticipates think question Mark see should whether around the was to And risk. there start some

wasn't doesn't, - it yes. that and So

Operator

And Daniel our from Brennan UBS. from next question comes

line Your is open.

Daniel Brennan

Great, taking for thanks the questions.

XXXX to marketing end. low or adopted your some So, order in but haven't stimulate to which kind the wondering or more there you high outlook? higher placement are and demand, NovaSeq of in I end, Francis, adjustments support customers the making with on the Whether XXXX? price kit, throughput of I know am on who X pricing obviously of the kind in HiSeq different is majority anything strategies be

Francis deSouza

over. In is any help prices the either really NovaSeq that so A doing cut have very largest being of high the changing bought work to we organization are of they of and by the lot entire lots validation end as it's with and our can you rollout, Obviously, plan not need. primarily they NovaSeq, working are customers with our Yes. done have about that's the there the fleet SX. customers work. them commercial them And imagine

do the at will spaces and you various they at are customers talking about. it any So

are you priors with to very all throughput engagement that out high commercial usual the as beyond can services the we imagine there. so And customers and close is those large

nothing Beyond that we doing exceptional. are

Operator

And question comes our from next from Ji Nam BTIG. Sung

Your line is open.

Sung Ji Nam

was what Sam, on to for our in what's And able or for you question. non-consumable taking micro raise, was comment thanks Hi, the XXXX? for in I rate business Francis then growth wondering be the outlook the XXXX. might if for embedded genomic

Francis deSouza

Yes.

predictable a mid usually last disclosed over single significant more grows Sung two is that business mature specifically And low digit. seen unlike years. business that haven't We where that's to DTC into but growth more we've that the Ji

proxy So as say that's would for I XXXX. good well a

disclosed specifically. we Although that haven't

Operator

Catherine And our Schulte next question comes from Baird. from

open. is line Your

Catherine Schulte

guys. Hey, for the question. Thanks

from you shift customer here lower being in this now to the bench of you the still XXXX. for as or or Is throughput mix users? to in a outlook sequencing that do about side customers? are talked NovaSeq think And away top of more from XX% get from NovaSeq much then HiSeq XX% flow For catalyze the you'll upgrade you orders story on cell new XXXX coming SX How the majority expecting of you mix much consumables.

Francis deSouza

the come been things the that new from about story and been what of incredibly have so has that orders upside had XX% it's What's resilient. us really customers. the far Sure. on throughput - NovaSeq high NovaSeq And surprised the to exciting

story for taking accessible more pricing fact, around NovaSeq number that over shipping throughput. you stayed you SX now orders to NovaSeq the look now can almost high results a and anything new and make to If continue our it Prime and having we are of to in even SX construct that two having customers years will so expect new and in like if NovaSeq, S who at

proven that to resilient forward. in believe has and strong a number I continue NovaSeq be it be going So orders terms remarkably contributor of to I expect to

the sequencing going our In terms some of customers. mix of represent forward, SX customers biggest

market SX is in to should continue But the the from SX we be from QX over and new and year. go into as S So expect beyond. grow then to its coming base to obviously to build I expect which contribution also revenue Prime you bigger out the to going see XXXX and SX a but

Operator

Donnelly Patrick question last Goldman And comes from our from Sachs.

is line Your open.

Patrick Donnelly

through reduction some feel of for online? Thanks. parts there impact for the going just to come Prime, NovaSeq. get building pull of to or price on Is that given I'm and HiSeq on with S potential focus SX volume down Great. over utilization Maybe SX question, convert on to smaller the better those users incentivizing further labs could trying utilization on the a moving to NovaSeq how lower just Nova? mix forward customers

Francis deSouza

Yes.

labs So we and first say labs. on have very to to I'll focus that our are dedicated the we're that look just those going keep teams large

now we're activate in have to XXXX, we're top adding the labs on focus the a very incremental looking lab. we that's smaller and focus an of on the focus deliberately So largest that

will come flow and likely rate will it's So - call build yet the market to NovaSeq early it's a be that the The you what too their NovaSeq. impact through there in we for change At these revenue partially pull base. that's point given pull an end. And overall the this as be. why new range on haven't up cells on through frankly,

for them call out. waiting the And we these want But see will certainly we we have impact sort before the normalize want flow we're of I overall blended the on that it's that, see onto NovaSeqs. are be early when and call sort to utilization a rate as we pull closeouts on market. to what able call will the in through to so cells on that market, And lot of bring of come those to you it too the know an

Operator

session. Ross And question-and-answer to turn this call concludes remarks. final over our back Jacquie for now I'll the

Jacquie Ross

Thank you.

through reminder release. available following close our Investor of section at fiscal quarter. as in the next of dial-in will to call earnings first well today's the website, us look today. for the a call webcast As this in our Thank of and the our as forward This you concludes be we replay contained the a joining update instructions

Operator

may Thank conference. And for concludes Thank you you, you This ladies participating. now and today's disconnect. gentlemen.

Illumina (ILMN) 29 Jan 192018 Q4 Earnings call transcript