ILMN - Earnings call transcript Q1 2020

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Operator

Good day, ladies and gentlemen and welcome to the First Quarter 2020 Illumina Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Ms. Jacquie Ross, Illumina Investor Relations.

Jacquie Ross

Good afternoon, everyone and thank you for joining us for our 2020 first quarter results. you well that this hope sincerely are during keeping time. I

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

can of have it our illumina.com. had website earnings not the in you chance to at found If the Investor review a release, be Relations section

deSouza, Francis President Samad, Participating share and Executive for be Illumina our Sam Officer. today Officer will financial on Chief update Francis Financial Sam review will will an and and results. Chief business our

Of course, any we with of call challenges are please if today, us from technical a different bear hosting so number or our are there pauses. locations

be is the website. call under financial during call Securities of our will intent section our results archived made protected in XXXX. statements This recorded and portion being is regarding It Investors today’s be all and Litigation of that forward-looking the activity our Reform Act Private commercial will the audio

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

the I will turn With over call Francis. to that,

Francis deSouza

way collectively these and your and are us. and challenging you joining you times. sincerely Good through safe work I hope healthy everyone Jackie. that ones afternoon, our thank you, as we Thank loved for

of pandemic, genome with was response Fan the Since and Illumina to outbreak, technology explore earlier a to economic world as the population teams patients sequence by of can Dr. support then, global Center was help the been recovery. mutations accelerate Illumina’s technology screening leader work the everything Public COVID-XX working In and Wu host efforts to in As at to all we sequence-based identify named to therapeutic and diagnostic combat health citizen Shanghai and monitor Health SARS-CoV-X. public is understand what surveillance used the efforts, later and Illumina’s committed efforts, programs. genomics, to of viral and testing support stages as doing complete first team a the over strains and support in published to have back well to

disease Hutchinson among surveillance, CDC and Cancer of at Dr. virus the bringing to Seattle And Senegal, the UCSF cases terms first and time. tracking Mali, transmission donated Chiu mutations. expand In NGS-based products Africa Dr. the Democratic to Ghana, Republic we for to Research in Bedford country South the Fred surveillance their Ethiopia, have Africa Center Nigeria, Egypt, capability at Charles sequencing in Kenya, are capabilities Congo, some in Uganda the Trevor of those infectious monitoring and for

identify part Susceptibility to interactions and those of viral the genetics development individuals And between host important COVID-XX certainly potentially the at understand almost support and in to is to and most risk genetic. vaccines. it’s therapies

week, of an We immune Center, COVID-XX potential it announced protective Genome and better that Earlier York Genomics Biotechnology positive factors including will Genomics with are collaborations Ireland and identify Adaptive the and understand COVID-XX. factors determining England the supporting sequence Medicine genetic multiple for Stanford, to partners, evolution to viral samples New response. risk-bearing the this genome

testing the to will while majority testing PCR serology-based there of testing, terms occur tests, using and multiplex looking are NGS. numerous In of groups using

NGS-based testing. offers IDbyDNA, partners, our of one example, validated, For clinically

the describing clinical assays plans validation. groups publishing of with are NGS papers multiple Additionally, performance for

work. on customers working tests screening are ultra-high for to NGS-based return some throughput Finally,

the testing recover have without risk. meet our early, are to been our efforts to as critical highlighted these at While challenges are individuals enable sustainably help that customers placing teams to economies working

response; its efforts, and always viruses to our rarely virus we that As with enrichment data help number Public To information support SARS-CoV-X metagenomics workflow to of unbiased of to to I supports for by and have different their to findings surprised am characterize of team. software and to may highly transmission, customers’ the COVID-XX impressed, and released we co-infections enable workflows containment by Labs academics pathogens epidemiology detection to a and response and the viral it higher Labs detect at researchers but easier co-morbidities new SARS-CoV-X researchers a study support and work, Health viral support to the contribute immune workflow identify and the co-infections sequences track of and and volumes; genes analytics Public databases. including innovations and Illumina host the application shotgun a strategies treatments; require that detect SARS-CoV-X identify delivered toolkit co-infections for studying of also SARS-CoV-X and human epidemiology; identify makes sample novel optimize accurate profiling sequence other an Health the to application respiratory enable for other an amplicon public detection

made have is sequencer. toolkit anyone available We an this who freely using to Illumina

work, we this the fight are many contribute related are pandemic. not everything like of keeping also would and has whether dedication relevant. customers to team Illumina recognize to can more the thank Illumina mission ensuring like improve COVID-XX health to I those to who directly supply global unlocking and who Illumina’s safe, doing never performing critical human to combating to genome COVID-XX. or employees by to the for would their partners I customers working – power our for the been

by of your we the whatever your to commitment drive, and will do can inspired maximize creativity impact are and We efforts.

customer, update. that by we million. three $XXX that, product. are share will can of With by we our $XXX so pieces so I to to the to million our guidance ways, range lot region, quarter there $XXX of this compared of revenue business quarter, first moving quarterly will insights our about move million Illumina Clearly, talk a reported I many and by in have, of

COVID-XX to impacted regions, Starting was the was the in with and therefore by the China the most impacted quarter. be first

grew, As priority customers included region January MiSeq This to was country. hospitals installation in one supporting and work. they the for CDCs and iSeq capabilities systems the the related starting of COVID-XX support the other hit at and their our of as in the locations scaled CDC hardest in outbreak

COVID-XX clinical it measures China for maintain difficult to for to testing. As patients the implemented outbreak, and appointments oncology NIPT contain became

first both was result, lower were and total a than in in consumables systems $XX revenue sequencing As China sequencing the quarter China and expected million.

and It’s China up normal, as and seeing labs customers run to April. and volumes we business their in scaling clinical March returning not in back We have started in see to but are operations. their research increase to China both

wave EMEA AMR in Momentum orders but through much the were impacted weeks. mid-March to as first still in slowed AMR our flooded closure these resilient by COVID-XX. of closing and quarter in the for February. tracking beat shelter-in-place expectations our quickly and clearly across were Both and EMEA COVID-XX were and expectations of above quarter, the the regions first

were in first the tend AMR than expected quarter were to system not priority system the at purchases given considered back-end end customers and Systems EMEA. both many any shipments high for total of lower quarter. be and loaded in First,

revenue Total some revenue EMEA we was and total saw AMR million. Second, sequencing was preemptively $XXX on $XXX customers consumables. stocking million up

million, growth, sequencing with record revenue despite APJ of solid Finally, delivered related consumable COVID-XX shipments Japan, headwinds. $XX including in

In for record reported overall, fact, the quarter ever with a total this for was region. APJ revenue highest that

have each and sequentially an QX a far and have extremely in region, declining to albeit overcome in customers up quarter, stayed globally, We revenue we challenging challenges Illumina’s running to to in our products China. operations and On been note, a able deliver related timely consistent with COVID-XX and manner. expect more modestly be any so positive

have in customer Moving is our and it sequencing of to from some systems. impacting network ways, volume with customers the different that runs clear insights associated a drawn COVID-XX connected of different view, we is

sequencing a While are activity output believe our not of is shows general directly we base. of reference volume to are the and revenue. reported systems Runs that across are trend our installed correlated useful regardless not all this connected,

Overall, for working then in in but the and institutions. number First, COVID-XX. was requirements, not of both were clinical rapid stabilized the quite response is decline especially to throughout April. to been to during reflects slow XX% XXth, what peaking at volume roughly Not those on ramping and back ending research labs surprisingly, shelter-in-place was running research has quarter research of research started directly March half This during week quarter, of academic XXXX. the fourth among The it of runs the the beginning the March, XXth. and beginning the flat of in applied week runs since well close quickly, second March scaling

high to of slowly we are XXth. by the research. impacted impacted volume clinical was sample essential runs resilient considered healthcare facilities. saw remained volume many beginning in quarter research open, research. decline, for and point some Clinical somewhat during run the week is albeit In reached services the run customers also clinical our but clinical, Unlike as to although March ending more Moving volumes XXth, started than more of their March healthcare COVID-XX, than was our week customers, being patients have avoid

of basis but was currently clinical modest, and in to Both over longer quickly, kind although started for two the run clinical it While running any on April what XXth. the in weeks, weeks. see flat four XX, research declines clearly The four clinical beginning last week sequential more just more is beginning extended volume is volume and to stabilization XX% modestly for weeks. before we Clinical the summary, different roughly has of trend. too the the also increased run it the curve dropped duration quarter in little shape gentle was early but stabilized April a faster, research the run week stabilizing volume has last In volume of the clinical drop year. been the for and was fourth and been customers. more Research in call last of at a

moving below million the disruption. same XX% last revenue sequencing COVID-XX the revenue down was our driven expectations substantially total year, quarter system of Finally, by to $XX of from view, and

COVID-XX we the comfortably impact sequencing sequencing quarter. have Excluding system would exceeded for systems, expectation the our revenue on

were the quarter system NextSeq in first of across down with shipments However, launch. all its exception XXXX families, of

forecast shipments XXXX with shipments the NextSeq on because of our internal delivered for disruption for expected were the were Orders system than the the quarter, X. the in-line of COVID-XX our were first on end customer but quarter. right lower March of First at time

applications new not the academic research. food HiSeq Early HiSeq XXXX with did modest We and ahead. customers XXXX cancer, in existing customers so far for adopters funnel included XXXXs and sales research NextSeq all quarter. NextSeq four to ship in COVID-XX safety, included consistent cannibalization customers and of across both Initial regions. Illumina any disease, genetic remaining new very conversions conversion of is NovaSeq The expectation the quarters first the NextSeq among in institutions our

Illumina almost new expectations. new our of of ahead half NextSeq the shipped XXXXs too system Finally, customers, to were

XX% $XXX related was previous Sequencing stocking our from to guidance sequencing meaningfully year quarter pull year. other system to pull-through stronger its last Less consumable quarter. per and year million than MiniSeq same Sequencing pull-through NovaSeq customers. the and below of quarter, up compared targeted with expect per consumable revenue was and the of XXXs than associated XXX beat COVID-XX last million do quarter revenue and and with and Pull-through our year. through quarter to was licensing than service MiSeq for was comfortably the NextSeq higher $XXX revenue range. in $X.X NovaSeq XX% both the was grew last due half the NovaSeq higher down same per same the step to was of expected. million, second million We $X.X flat among clinical last within

$XXX XX% Overall, sequencing ahead revenue and revenue. of expectation, million of our of total slightly was represented

same and Moving revenue the year, was million, with for expectations in-line the $XX XX% arrays, our to from array first down quarter. total last quarter

service with primarily million year- our a services by seasonality contribution business offset given $XX grew DTC, DTC instruments, and over was of with In and was array the strength other. consumables and over-year, driven expectations business partially first declined by declined sequencing summary, consumables in overall but normal sequentially Our this as across broader the negatively our related we Array COVID-XX impacted by sequencing quarter, sequencing but the expected, and consistent stocking, from modest sequentially both associated market. year-over-year.

financials With the that, Sam over in it I’ll discuss detail. more hand to to

Sam Samad

and your And Francis. us you safe thanks to and healthy. you I for joining all today. are Thanks, hope really families

As X% sequencing million, revenue year-over-year system $XXX other, to discussed, softer grew consumables than first with services slightly quarter revenue. and expected and sequencing offsetting sequencing

compensation. expenses, I these found can that be I include non-GAAP operating GAAP gross to you and stock-based measures of the encourage will reconciliation margin results Moving to highlight non-GAAP which review available data that the shareholders. refer in to and references attributable today’s release the net to to all on and Illumina subsequent Please earnings share income website. note results per our supplementary

million down the XXXX, of quarter Non-GAAP operating sequencing delayed was first increased lower a revenue favorable more our and less related consumable fixed due $XXX expectations, down and XX.X% the labor- than million was revenue in other lower travel. fourth of of gross sequencing and leverage stock were than expected expenses with mix XXXX. system increased cost and from margin Non-GAAP million $XX as in we expenses to volumes. quarter reduced to $XX of This addition we project higher resulting spend, safety higher from

due The expected. last reserves. tax benefits adjustments expected margin non-GAAP rate Non-GAAP quarter, prior from XX.X% year quarter discrete XX.X%, better down and related the from tax of than release last tax than operating up was to to of return lower and was XX.X% and

For million, diluted diluted and XXXX, was $X.XX the non-GAAP $X.XX first share, share. GAAP or net quarter $XXX or income million, per of income $XXX was per net

the for quarter cash capital revenue quarter million. was equivalents, and favorable compared with days were First DSO expenditures linearity. in the million to $X.X repurchases XX cash payments reverse $X.X is termination The was of from to due more expenses the flow and XXXX, to quarter, billion and XX ended and approximately in the at non-GAAP free first days short-term $XXX $XXX We of Biosciences. quarter, $XXX in investments. flow cash, to Additionally million $XXX quarter from last million; cash operations $XX This first PacBio million excluded continuation related paid billion share the fee advances due reported down end the to Pacific from our in are results.

share million. average the count weighted was for quarter approximately Our diluted XXX

available for current $XXX under have plan. million repurchases We our share

clear, guidance to revenue forward, outbreak. have we our guidance, be the and in uncertainties have EPS year. impact month or be for second and the any the will To quarter the other and experienced we NovaSeq this Looking quarter greater in, that and we shipments on previous our other accordingly. in we withdrawn can around system PopGen comments severity very the are the NextSeq made duration COVID-XX due the all and first One XXXX see of portal, impact we expectations to addition includes XXXX planning substantially than forward-looking

decline As every in the sequentially mentioned the smallest China quarter before, region with we dollar expect in revenue in to the expected in decline second and largest AMR.

today, produce in these to we While to delays we have are so our look our minimal far delays and been able in risk with first business flights. quarter, risks air closures Again, capacity deliver border drop fewer with higher note a and forward. transportation associated linked are not freight the to a impacting we but as customers of passenger

we quarter possible quarter on share guidance, second can Given at the in second factors second we outcomes, are revenue qualitative guidance comments our P&L not about not that wide the time. impact of range offering quarter. this will Even though are providing we some

clear in so is expect lower year-over-year you that lower our revenue a gross second both quarter a should margin, the it basis. substantially and on example, sequential will For margin lower gross

In terms protect strength remain to disruption. other we the the our COVID-XX we strategically side that of expense, investing to on operating business emerge committed of of we when ensure the

are be quarter basis do a to to engine expenses is of have result, work we we dollar operating roughly events expenses consulting development and near-term, we innovation our including will hiring everything In As Illumina managing to timelines. associated and carefully. compared an we and some the cycle. hiring there discretionary lengthening said very can expect with a with marketing expenses, we de-prioritized while second a associated savings product travel, flat restricted slower year. on the last most That retain important are

on spend certain We reducing are also temporary in functions. and labor contract

quarter been Finally, $XX the year, we projects. have projects capital Compared for delayed and reduced or expenses by than have certain budget million. certain delayed original second non-R&D more canceled our to expenditure operating

into cost preparing shelter-in-place if quarter. are orders opportunities additional We also the remain for savings third prevalent

the a near planned all have While loosening we of can needed. we that for activate in we future, restrictions of hoping if are scenarios range for

some monitor the need other more In pandemic carefully the investments we includes gating a the and hire programs assess will of members rest to throughout to or of reassessment hiring investment quickly. This the whether we in situation cases. plans the slow take actions more continue We prolonged. quarter meantime, to is pause our aggressive second virtually, careful the and team but limit new retain on-board to if or flexibility capital

the will hand back over to call With that, I Francis.

Francis deSouza

you, Sam. Thank

duration balance or of that our the do meet between ensuring the the pandemic pipeline customers. we navigating to that of slows ability mindful this otherwise don’t innovation uncertain our anything are of needs our We and of inhibits

impact prepared We but into felt are of the biggest the second will if be the we that extends that ensuring hopeful quarter, in well year. the are second half it

demand. As current value the times, importance change challenging quite even see has we of to long-term sequencing don’t resilient environment trajectory and genomic Clinical as these the of testing adoption the and is, highlighting any proved medical testing. challenging in

It’s While are to prepare reassuring paused way related it’s pandemic a of projects. work. important some clear of true Clearly, to find this work that for the out resources this and that to see labs are of operations, committing our the research to we also number research governments COVID-XX around do it’s lot next to then that one. world a have labs switching their have

we there heart the the last next it’s And solution. building clear limitation the believe to to that getting technological hope the time. and We be For the at of surveillance other over sequencing is for with CDC, United that prepared the capabilities allocated of done. relief billion will a from in the better specific $X be that goal out can two example, this not packages has the States do government

including running It our to suppliers, more convinced partners united business. our customers of challenging our a importance the work. our shared time employees, is and But to Illumina community, cause more our a or be of been a the never has

stone we We actively we more more the to are unturned as no effort. can leaving that, the look for contribute start Q&A. With and to ways

Jacquie Ross

this our have question first at you Do time?

Operator

[Operator the with Dan comes question Brennan from first UBS. Instructions] line of Your

Dan Brennan

this for Thanks the managing and thanks. good luck through time. Great, of taking question period

is think kind market researchers It can academic will instrument back through related consumable to when So for to end on be I part lab, back academic give you. just to difficult see a lost first start sense – orders us of just Can Help you think be ramp relates and we’ve of a their the up usage two-parter. had up we to come us that you labs? still to they that heard like the make how for fulfilled. time can in that, it but could vis-a-vis quickly

you lot kind real out a helpful? turn testing on testing. can then NGS of related the you. you if just opportunity for to Could provide there would is COVID is And So be can on second discussed from Thank of comment be or opportunity and some color testing? impact to that in that? interest the that nascent interest PCR of Obviously, NGS the Illumina, part a you any

Francis deSouza

Thank you, Dan.

of So your through let me go questions. each

me to is was around on quickly the people them start that question there for one. first possibility to ramp-up Let or market. get the capital catch work up purchase? and will with back consumables that academic The How a when

some the Professor months that start bit by doing talked challenging very a work academic Seattle, to over customers we’ve vectors transmission jump out Charles terrific our work little the been pandemic in have Fred our really at of the mutations response. Bedford that acknowledging really virus, understand about me of the us Chiu researchers I research under doing and was some some few really last seen in help the UCSF, the circumstances. all Let in combat host the at Hutch and the the

could how ramp up. back of that business quickly terms In

the What’s business of business isn’t we get is ramp happening long to as remain those that mandates to impacted that shelter-in-place that doing to Now some But they’re once to away. start effect. is expect be going the lifted, as in going that quickly. fairly continue work mandates

Biobank the it a attempt And get catch certainly One, – we on customers up in some to UK the to we are when so to number the see into we granted extensions an into to they is work, they current expect [indiscernible] where office back them there is other work be the time example at projects pick window. true see expect expect And up the their labs. that cases there of doing. with happen. be will academic funding to the for be things able In but cases to will you on urgency some an and

finish of we goes working So through think been projects they’re the that where away. hard customers, research they as our And think can work to it’s the examples we’ve on. doing frankly

understand there enters becoming things very quarters is that our there Another certainly there with for risk, well. factors genome, factors provide of academic and dynamic coming understand work pandemic – the in is going of commercial protective to as involved the understand also is clear virus a additional individuals, we single cell need that to a through blood COVID-XX expect that that’s how be be and done itself this for really that research to research so that count origins create and to are an the the cell to research virus on when is and genetic customers the emerging like cell and customers understand on the the the be evolves done need for quarter the research viral our in evolution

prepared there will is to research funding NIH, the research. COVID-XX that been up And the And that the the consortium I that’s allocated mentioned work remarks, to UK is so there to CDC the we well. to see in expect genomics that ramp as fund as in UK,

are ours number using One adding based around as NGS is in question second your of is opportunity remarks They’re diagnostic are COVID-XX – there testing. mentioned being the in to the testing. NGS based are market I assays testing, do places COVID the to then capacity for And used the to assays. NGS NGS there where in using that of the customers in

So seeing. thing that’s one we’re

Secondly, the we’re and in as in true that’s CDC China, a And true starting NGS used countries number in the around need Africa, technologies CDCs recently be in but world we just CDC, shipped it’s well. the surveillance CDCs in for seeing to capabilities. with now to of

there is for need So capabilities. used another be surveillance to NGS in

capability to NGS Another bring there area that back to that’s around the keep ultra screening cases high using concepts screening back move to work are throughput back people using ultra of regular testing healthy emerging ours deliver people is being work. idea throughput customers to so of testing in work and to people high by to and do healthy to at some developed

a or we’re emerge tests for as additional then to testing. whole And area diagnostic NGS research develop emerge NGS finally, understand that’s seeing around well. whether we’re as so that is we for need and possibility or the there as responses, another seeing therapies NGS well to a to And for that based using host do as

Sam Samad

point, is instrument seen shipments month, In than quarter of to I’ll stronger academic QX, should first offer the one data Sam. up we’ve also actually Dan, – I say expected first institutions. this

still fact in to a despite that’s part market, more we’re the testament disruption. that resiliency the So that the shelter-in-place than of of

instruments of terms So consumable well. are get we confident utilization past this terms once and this of pandemic in in both we will as that that rebound,

Operator

JPMorgan. comes of from Peterson with Your the Tycho line next question

Tycho Peterson

being the then be in the us about was UK anyway, growth the We’ve And restarting. for may year kick how think out you seen all the can back and Obviously drivers cancer as bring half those Thank wondering longer. that about latest of some the some think initiatives to off we I’m year. testing I’m There XX%. were but on of speed is numbers clinical you clinical, more general on the PopSeq the of you. NHS the the if drop beginning another. commentary of are down PopSeq on appreciate of on is would clinical them, curious I the obviously the let’s Francis, up that Biobank, XX%, duration is one of at some that most, laid those? just

Just about the curious dollars I’m then pandemic future curious think you you’re think in pandemics. about forward, Thank And anything if on how recovery clinical should R&D organizationally just you. or side. on differently the lastly about going terms surveillance, doing we of

Francis deSouza

Sure.

each go let’s through those questions. of So,

update clear let’s that with some of And the First, talk start major actually an about shelter-in-place PopGen And it’s requirements I’ll PopGen. have on the ones. programs. impacted the

might out ramp-up. They have dates new from yet. revised are they waiting haven’t when to As you NHS, hear the to we any put heard dates

Biobank So period. we’re evaluating was continuing UK a [indiscernible] they that year. them for announced planned sequencing ramp-up this three plans March and to month back and they stay of engaged the their around they’re The with and the in they’re over said half that were pausing

there genomes up to and to data, missed. invest with are was exclusivity Because also window and in in paused, quickly, again, and pretty perspective getting that up. expect would value that there around that speed expect there’s catch data customer the sequencing them effort they up of finite catching a to is that sequencing And from of work so and start that is back urgency so to will they XX,XXX they they of ramp a to terms be when a up about that they are kind an around the there getting at ramp and month were running they very that the is urgency quickly. Now able we before so we up therapy

have through cohort. their IDE which they And their In to we terms of all currently shortly U.S. submission, already of are us the they here expect the FDA. in XXX,XXX sample working

IDE And their people how But requirements shelter-in-place working the can back which really see on on. they making into they are – are to progress get so back submission, it’s what their labs. is come watching and

risk going QX. at And In terms are said as somewhat they the and it some for And operating is markets, get do that in because market, been we that’s are test is point US baseline that getting world shelter-in-place here they than to clinical testing here, get easing because of around cancer that average The the do their to they cases some to remarks, reimbursement the you holding in from NIPT I time have under a of patients are alternatives. recognize requirements. important saw the research in there tests. around back to to primarily be some clinic own reality covering the resilient hospitals, is from NIPT more prepared need test from in we in a back an that that then easier do below and have markets the around sort but at sort will the oncology the so for saw perspective and large the urgency again, into patients carriers than the them clinical of though

so And even we resilient clinical markets. to for more be expect the NIPT

pandemic focused research. for terms each workflows In the high so asking customers about, is throughput on of ultra for diagnostic of and creating and I that an for testing, we screening talked that organized effort are categories surveillance, internally surveillance, have the our for for

are share there then they folks that of more really point, terms our free it are data some – databases the they have public workflows, have some that’s put informatics ring-fencing can data asking so making workflow the amplicon the already also it helping been them around the and been have charge tools we who and for researchers easily. the metagenomics submit of in efforts put how we three on the them enrichment, thinking and to on the easier for have those At for on. efforts out getting to work workflow, out we COVID-XX this out shotgun We analyze around of

a it’s reallocation than bit different of So, sort expense. a little R&D rather of

Operator

the from Beuchaw comes question next Steve Wolfe Your Research. line of with

Steve Beuchaw

Hi. all, time. first Well, for of the thanks

also for so the And pathway terms trajectory there. question now a up, for as Second, Dan for So to think different operational couple think “essential.” labs in Does happens thank question from given a think you with one here? that necessarily micro-arrays question is deemed those labs? what Sam, are apologize good giving question just teams, for reopening. you the of as know I a about reopenings, the will Brennan do what relative for something discuss a that of your in of easy difficult second the what you Francis My I for environment more the guidelines feel It reopening so you you Francis, academic of are everything do policy popping timelines how progress policy asked you into gets speak to doesn’t one. are there any the of university could number delays is to year? the shipment balance for a the of Sam, coming quarter, positive points end what to COVID the to My Thanks There there then you the Sam, doing. you stocking? stocking questions is the equate there about around one. net first at for guys all Sam tied out you and or And is negative much. is the controversy is are at fine-tuning ramp so thought was versus whether some COVID

Francis deSouza

Steve. comments thank you well. Thank as for So you your

academic reopening talking about and about what our research labs when versus by around about opening those and up we come of asked start me to expectations sort are. how timelines labs capacity think universities back let So you

that this So very will lab start quarter. I in have of expectations for by saying modest we terms

taken. we that’s And so have what

are before a way universities we thinking And likely all to from in campus. which different on the students, bringing important You back especially an up. touched bar a than the are point, opening lot undergrad it. staged for that hearing do bar that’s It’s and customers from universities to open that’s of our is up

open see will universities open the universities full is even before the academic see our research you up and you belief up. labs that So

essential. is playing across number work that they research that’s dynamic is Hopkins academic other COVID-XX looking are involved in actively The And a the true are you of leading or means Yale That’s at or Johns board the very whether the research. are labs doing Stanford. that

of staging. going that’s ahead the Well, them opening be to lot of universities. broader a of are working academic the so labs And in the

slow. think in now COVID-XX funding starts academic are to see first, especially that scale labs as I will out begin you the focused to

then to you Next, probably. opening up labs will opening see see you up academic will students universities finally broader and

Sam Samad

in significantly for DTC, for of of rest all, we like China a your the even that in the micro-array, for our on business, but as be QX around and saw continued were maybe first that’s around remarks though instance impacted, because has you of year, challenged Steve, will saliva obviously just all, definitely to of our Yes, essentially part going disproportionately first small are business, the tweaks significantly the shipments so in but mentioned, our questions banned. to smaller specifically become a QX, micro-arrays that business say, of be prepared even portion to the would I but DTC

usually some couldn’t around And you out. even then events, Olympics, have perform on that the And DTC. of those revolves now so testing all are etcetera, marketing pushed sporting you

our I very a be part business as well albeit So think impacted DTC disproportionately will small now. that’s of

negative that instruments. the of impact that represented we stocking, million terms the net $XX mentioned on In a million, $XX impact

we last So plus and negative weeks, capital in pausing that million a stocking a on impact represented was purchases in impact, customers consumables. and impact terms million on of $X saw the positive there two $XX definitely a

small a overall consumables. on impact So,

of this instruments So, can stocking. negative. million see modest $XX was very consumable the of by impact as you a And net offset was amount all

Operator

line next Your the Doug of from Schenkel with question Cowen. comes

Doug Schenkel

geographically describing thank at the in are last at And where situation on levels earlier like afternoon continue of China, remarks, you a end describing to albeit you we good it where described not my what recover you of prepared Hey, are year. questions. China, outside seems to it just that then you there off all other either that, any still right China? on end including noting of stabilization. want the April, areas are seeing and or notably I are kind outside make of that’s you. Thank side building markets sure end worth improving are of And areas are that, deteriorating? of you least and in there for sounds to that were were then markets like Based your taking by

Francis deSouza

you for Doug thank Well, it. your question. Got

You got exactly it have right.

research we has market back. the at couple start but did a for build. the clinical last rest you the the have weeks of size if started but towards gradual seem data to see – is look market, the point they trajectory changing and more last the in at seem of what can you to gradual business certainly if Similarly, see are we China and continuing in them least to and world, seeing impacted the of building was stabilized in sharper definitely it March, look the the points deterioration. first, starting week, It we to at So

In terms are a of then expect also the of the We segments the to and from have are to majority to are requirements testing below in are of research. shelter-in-place testing urgency that of academic most did average the to specifically lot we some the out talked slow of but now some the are slowly other quarter, of the clinical areas, that about markets up for resilient the reopening recovery inhibit more markets. down Those back a going back slowed repurposed well. labs although expect more we we build as average, this or markets areas above areas be that those them those higher the labs play are than given oncology down, we it where quickly research – in those covered the COVID-XX seen level terms but rest And seen. of ones have at we and stabilization that the that NIPT, is

And maybe Sam so be markets. in slower earlier. about market, directly business because from my expect to markets for research see direct-to-consumer that the of the things And the opinion, we those would one recover incremental to of talked that

Jacquie Ross

add. will I are on sitting you since Brandy, Hey, the next just question

see said the from for sequential that recent most something week. a was did clinical script week Just prior The a at we data we the run sequential show increase. and actually a we have volume the research reminder, both did in increase

that So there. sign is a positive

one data point. Just

will look of gives support but us data a to We trend, more for that that optimism. obviously points good something amount

Operator

comes question Derik of Bruin the next from with America. De Bank line Your of

Derik De Bruin

good Hi, everyone. afternoon,

Francis deSouza

Derik. Hi,

Derik De Bruin

to going multi-parter I am do a I if So can.

just a First one number of because that quantify bit agreements easy thought. higher is is services, the than little that size we benefited the licensing

be one hold. on consumables going lab have to since And don’t ordering can in? instrument And you’re have going seen right now. right this coming are Second things. sort is, down, down your other much general selling inventory there the I using the of obviously out you is patterns a now reason one things about you’re obviously pipeline people keep how up not slow and just – you some still little and order talk customers bit bring they normally your to shut Have trends you on because,

through they because sort pocket? on I to the before play an life we question Do of how the a I’m people come of of we just reordering. what’s things their before get start about we am sort the of and about when air back – going see So sort it’s ramp and bring So as do normal using do consumables curious dynamics just think shelf start what’s there? they inventories and that? trying Thank you. think

Sam Samad

Yes.

to were tell not sequencing can revenues, of was But is, all what amount disclosing I into exactly built regards had that we some the are Derik, for revenues, realized licensing the So our QX. with and guidance the other. we revenues licensing in licensing you

that As came expectations. you slightly in line, in saw, than better we had growth

And so dynamic the there. that’s

from terms relates are recognition some on and recognize certain necessarily revenues milestones different based In some had There them. all afterwards of at usually are revenue time deals year the you you that this too, principles. licensing design those to we the recognized that last and not that

effectively. regards What question. the life to that. consumables, With second that’s so the to months question? of to shelf So answer is I’ll six usually nine jump the first to shelf Essentially life was months the around

what is. third And in of terms that the customers So Derik question have life what that’s consumable was our usually shelf what had.

Francis deSouza

third is inventory. consumable question on The

and do long typically much reorder. how hold customers to So, how

just months. on take typically just I’ll around eight months and the lot reagents, so hand, of shelf our inventory hold for that say about life a is customers six as And of a reminder to

couple first for color the little we I of of the very add And ordering were more system strong the months on for so Certainly if seeing systems. ordering. quarter, just a

a quarter so the orders In even And were for we that in strong were terms with stronger-than-normal system of and seeing so fact we numbers. there linearity. heading

last setting to systems March quarter of of the a was a couple perspective. of So weeks it strong from orders

Jacquie Ross

that earlier, as the QX. sort actually of so far And actually shipped of Right? linearity. it normal orders seen mentioned into we’ve bit continue little ahead I think doesn’t quarter are Sam So this

and been customers, actually, but clinical research this been far by We’re seeing driven as from point so we’ve research. orders strength at seeing both the

Of we’re looking course, what that could data, it’s of change with at. month one but

Operator

Your comes SVB the Leerink. from of with line next Souda question Puneet

Puneet Souda

you Thanks doing Francis. for work the important are Hi, pandemic. the and that Yes. in thanks

are return back the you on some if first could you you go again, was I the seen What furlough getting instruments purchases instrument team think in I – where just customers for the had of lab, situations we’re expectation downturns shutdowns is when those past about hoping seen to So has and pent-up demand of they from appetite hearing are the in expecting and here? what could to or if elaborate and do things cases what the we academic in obviously And trial the normal back XX% to to new back return diagnostic second down. half when among customers, they when potentially then significant XX% there? anywhere and frame some the the time expectation sort in enrollment the current what’s to what’s is

the the how of should a provided, bar these if think think reflective and inclusive just Are the clarification, Thank sort we if purchases framework? runs in how numbers counts – to the volumes could run I of do that on second about that sequencer on instrument you. I wanted that? the to when understand think just should we revenue ask And getting briefly one have? duration of run runs about or already inclusive also So thus that you have the biopsy we I of what you sequencing versus could run these or arrow –

Francis deSouza

you, Thank Sure. Puneet.

So those way let my questions. me work to

of the run the instrument majority were a they’re starting of quarter QX. to in purchases, primarily instruments the for month able on track shelter-in-place In of be and terms requirements take again out, systems QX. strong QX were in and what strong the strong very the last they in of first through in Jacquie pointed frankly running The we labs just of appetite for had as saw disruption QX in And weeks because, was, we orders, happened of to number orders. to the there not shipments was two physically their QX, but in weren’t

if they recover. pregnancies on expect our So that to talk disruption seeing, demand is, much customers what the that by you the ordering right? to not the they it a our completely NIPT ordering the based was was they driven shipments And are they’re number from really us activity, talk customers customers, in driven testing demand oncology so that they are covered of for that more we telling to as or in and getting oncology are instruments activity.And by are appetite testing and is

we shouldn’t tick that’s what is is down, saw testing whether instruments change saying completely this drives central are or they not. they get so but and and So a this a

seeing the hesitation by capital the capital driven not or purchases is thing And demand. happening really we’re academic So side, right. spend. around on is It same is

of the need expectation that take instruments research revenue new have they well. is of majority shipments there in work going bonus the that around have. they that They when have with actually incremental they work spend happen that budgets, out will to by a be work back gating factor they’re shipments and will be QX. up will they beyond come to require our there have So as doing, the still to that, the labs it’s COVID they is into shows driven those so sheltered now and it, associated But and in that

Operator

Your from next question of… comes line the

Francis deSouza

In terms run of the count.

around run me Sorry, last up finish part just counts. which had Puneet the let question, of the was

per related certainly each So type the cost not or the to of are data truly run. numbers or run just you we’re of the run outset for the runs. They with sharing number are

you to for correlation does business. but our And no activity of so in direct it sense the there revenue, level is a give

Sam Samad

we our highest And is have is the Europe is we instruments, have it instrument The and Puneet, reflects the it and then in connectivity APJ is that a highest fact China. connectivity reflects the fact of very an that but that connected next AMR. in not portion the every little single

So of we’re terms seeing proxy, terms good the in in rebound the it’s a of indicator it’s business. but a the that direction of

Operator

comes line Dan Your of with from next Arias question the Stifel.

Dan Arias

you follow-up on kind maybe of wave health that pandemic you sort out Good an mean those those conversely. in about afternoon, guys. were were health projects for I the comment wondering Thanks. and are maybe complex active just planning mean is there of sitting expect Francis, data. as I a so PopSeq, pause, of next design you related it the large can stage, those aggregating and more less that networks, on to those? to advertisement have talking to just I genomic if initiatives? about the or kind just am serving of

Francis deSouza

Yes.

seeing Let can an work planning of happen while in of lot the planning me are playing in what’s a at then initiatives. principles Dan that is home. talk the we about those the what terms out are stage If for in initiative sheltered

that happen work can And the moving remotely forward. so is

around that submission in the seeing even IDE of for the us. We’re all US here

the if in and is over initiative work of happen then even to continue lot so And a period. planning that this the stage, really

the by could Some up of impacted be parts a PopSeq ramp pandemic.

started would be out of back that labs are be down, midst part for collecting you people getting example, a into if slowed the the the project that samples fields. into So of in until would or the

is, seeing COVID-XX importance of emergence are efforts. these playing sequencing that’s out dynamic the population to obviously of some Another element of the we

Fred of Trevor for out was are December, into capability really pandemics. combat the started terms project, to work helping the January, got did example, For that that COVID these the realize us right? And so pandemic existing starting of population repurposed we efforts surveillance in giving this ID future incidents, February importance and population in Seattle, flu in research Hutch look the to Bedford the then a timeframe at as

are for we playing efforts so of And that sequencing part thinking seeing population the emerge out. are as the that

Operator

Patrick Donnelly question Your comes Citi. next the of from with line

Patrick Donnelly

take capture positioned being I control, if one on certainly the nimble, Maybe of near in to what I as cost appreciate for for stay you here, the would guys want To side keep term, but that the of on that you to you things linger you about the further. scenarios do kind on front? controlled the point other that cost kind side. also a the that have Maybe timeframe expenses the push back little that expense pull Sam to would do initiatives of this. thanks. Thank harder guess to your you in things through a certain it do talk just Great, shutdown you. growth

Sam Samad

Thanks, Patrick. Yes.

We scenarios impact revenue what understand on for also at both the have might number be impact obviously year expenses. the a potentially looked the of to and

say, First, business. somewhere are we know to we me be of the expecting in the heard, our QX, mean and In $XX our in let of we below significant today, million even terms we are QX, $XX today where cost what I expectations of given million we as of amount roughly you In year half a are first taking terms the spend. were of around in spend. expectations out below

reflects definitely So, driven will plans by of in of are disruption I altogether. more, that involve put of and cutting this at beyond, hiring certain have a much for attendance, say, give cost and place or we – some if out months these don’t timeframe, actions more expenses, in contingency way we expenses reductions, lack around that of that discretionary be number if bit business If a a a pausing persist taking would very QX work-from-home and I of to but would have you it’s got want then believe to shelter-in-place quite specific like some travel etcetera. that conference, continue things this the that restrictions we much require and significant us we look

and looking non-R&D projects. sales temporary workers, hiring, contract expenses, reduction in significant stopping capital force contract at looking so, significant in And at reduction our our our and

are goes us involve in a terms would QX. cut would view on, prolonged have that that to the that of we to that’s now that more a broad-based things having going based we beyond fact again, definitely disruption So,

that’s are way it. the approaching So, we

Jacquie Ross

question? Brandy, the next

Operator

you. Thank

from of Ji BTIG. next line with the question comes Sung Your Nam

Sung Ji Nam

the think will for think mentioned the that of need was as testing in taking we Thanks testing. that or level the biggest or providing question. you you serology in a be most of Is I biggest through given two? sequencing PCR-based cost, diagnostics over is base, to accuracy, what unprecedented could talk COVID-XX year share the you curious next the hurdle Francis, I do probably What’s that? the the the it getting installed you. about testing? to take Thank hurdle bigger terms of diagnostic if

Francis deSouza

Yes, majority number forward, looking today, expect thank happen it you see you testing buckets. the more testing to happen think But in expect I for of that. in being on And can the certainly can And of done PCR. market. is see you to the NGS

of testing stand see clear of of should happen technology. forward. happen lots First, you diagnostic going so that and more you to a expect using will see on We individuals starting to see testing up more NGS diagnostic NGS number capability symptomatic

to individuals for back work. the is happen capabilities see will of will to believe ultra-high start that thing screening get throughput healthy to them emergence second The you we of

large confidence to the number employers bring back workforce, give their to their schools a back around exciting concepts being of screen to number into students very schools. healthy to very can bring are employees how you confidence on the customers numbers worked by of there so give And into individuals of

get per could Now, together what there sample make in done very you a very, NGS could and that arena, compelling. right put of now. you needs to NGS so that is could those work that from cost capacity work from workflows because and done being the that’s lot get is But happening the to be

testing CDCs together And other the are happening cases driven NGS world. in can by monitor this some organizations more so, around bucket is the now. that’s market you the outbreak Similarly, is And progressing. that happening too of that’s see next what’s the NGS to there But capability in putting right are surveillance. where area how it’s

need you And that so for NGS.

understand how is virus mutating. can So you the

You this need to NGS geographic starting so you’re you can and transmission the seeing capability of virus track come that online.

look I it of to surveillance, and forward testing screening testing, paradigm than a expect is part so bigger should to diagnostic today. you the see at if be NGS going And

Operator

we ISI. have question the Vijay one of do – for question And Kumar further question. next is comes with Your your last from line Evercore time

Vijay Kumar

my for Thanks taking guys. question. Hey,

Just quick one follow-up.

on there the mix what and – running your we clinical where and is at Francis up Thank asking are you the systems? between on revenue back am I is high-teens. the down think utilization mentioned in at clinical just The XXX% run-rate we side the half? in catch the reason I opening systems down am look capacity is is are XX, these perhaps when up, and utilization capacity a you. on there like economy research research and I was

Francis deSouza

Sure. Yes.

side, So it’s the breakdown at to how expect XX% business research catch-up our if we think right. market of some about if areas, the and you look some XX% the consumable clinical. about on sequencing And see there recovers, are

going we Similarly expect patients, lease going that we’re that side at model a moving initiative the well. example well. initiative. UK with into was we catch-up tested, patients front that March of full as So some for happen Biobank clinic maybe around on holding a as bit from to NIPT back little And the see get there catch-up expect into to the cancer

back And working definitely we and parts so, on. But to our are expect part many some there finish people were can to work that they the are go you see our of catch-up. of business, expect where business, there

So away. unlikely it’s goes the that work very

well. be as So pick in back the will cases business and up some majority some of our catch-up there’ll

Operator

for And back to closing remarks. like I over speakers turn now the the call would to

Jacquie Ross

you, Thank Brandy.

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

Operator

call. conference today’s concludes This

You may disconnect. your now you Thank participation. for

Illumina (ILMN) 30 Apr 202020 Q1 Earnings call transcript