ILMN - Earnings call transcript Q1 2021

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Operator

Good day, ladies and gentlemen, and welcome to the Illumina First Quarter 2021 Earnings Conference Call.

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference call, Ms. Juliet Cunningham, VP, Illumina, Investor Relations. Please go ahead, Ms. Cunningham.

Juliet Cunningham

welcome XXXX. earnings and first for everyone, of quarter afternoon, to call our the Good

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

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

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

Francis deSouza

everyone. and you, Thank good afternoon,

very quarter to growing compared up prior and customers driven Illumina's of pre announcement, by billion, shared strong revenue $X.XXX revenue billion research quarter. core with We the XX% XXXX, accelerating was in a we exceeding primarily especially our the levels. year the growth compared history. in clinical XX% achieved As quarter from Sequencing first activity last $X the both start first XX% had Illumina to our in prior pre-COVID and strong, year, with business, to

seeing addition, future the infrastructure creation which drove platform. the since share NovaSeq to outbreaks. enters exceptional year COVID-XX, share our first I'd as throughput epidemiology achieving monitor as fifth it highest platforms, combat a to its record, a investment Beginning as of of genomic with is high we're well its In performance, pathogen quarter by first quarter placements significant some in global for like highlights additional remarkable launch. on

to continue our of continued our We see throughput customers HiSeq as as customer from the enabling positive version high new existing base. well impact reagents, X.X both conversions

Biosan in quarter NMPA drove as to work year. seeing Clinical Illumina continued placements, platforms to In NextSeq we XXX. revenue for upgrading XXXX, with we where development Dx solutions. in recording received Burning date. NextSeq clinical instrument drive with highest shipment setting IVD customers continue hospital QX, provide like NextSeq adoption China, XXX the MatriDx, approval new partners the its strong to comprehensive Rock, customers we're XXXX mid-throughput and saw increase existing additional sequencers well and as benchtop in XX% XXXX in NextSeq growth, We NextSeq to Notably, increase saw consumables from with Our last to strong compared a their as and success XXXX. performance from an

Russia Dx the registration across partner, medical received March, Additionally, more sequencing next-generation in in use clinical device our working Russia. for R-Pharm, NextSeq with strategic patients enabling of

growth and as placements. year-over-year quarter, year-over-year, instrument revenue another portfolio in shipments and HiSeq generated QX. well had in consumables in with robust instrument strong throughput sequential Our growing sequencing consumables low MiniSeq both growth XX% and MiSeq, all as

interesting support One is seafood an and with compelling platforms cultured the to for be use in cell to startup ever-increasing of technology low-throughput entry point customers cases. Blue new-to-NGS [ph], Blue development sustainability example continue number customer diversity. our using oceanic & a a Our of

Additionally, across these instruments programs play a critical role localized COVID in globe. catalyzing the surveillance

and segment. Clinical COVID XX% and up were of with year-over-year, and do surveillance, demonstrating XXXX our is testing in include which $XXX profiling and our growth to consumables Oncology Oncology clinical announced comprehensive first and assay, for in particularly growth Belgian our Total TruSight exceeded new segments. Research is growth up rate to of to for first pilot testing customers in selection our not to by our These of for and will both consumables fastest shipments CGP, or XXX overall testing, results XX% Research Research reimbursement more customers. for a for driven metastatic growing showed the of was revenue than and Applied from TSO million sequencing strong across Academic consumable year-over-year. was continued our its comprehensive segment. reported sequencing-based RUO genomic clinical sequencing use success of significant February, Society largest Clinical Medical this sequencing XX% they CGP NGS-based quarter segments, of some that Turning with access advanced Clinical demand the the over evaluate benefiting tests. cancer. therapy quarter, clinical our Oncology customers. This the profiling, reimbursement adding use XX for patients monitoring XXX, genomic expanded national In

for XXX week to companion Therapeutics, TSO XX assay, a blood the CGP a develop pharmaceutical cancers. our new into continues TruSight with announced exciting offer distributable an choice Kartos diagnostic, expanding compelling to TP We offering leading partners. Oncology partnership a last As

by Anthem Harvard a quarter of pregnancies NIPT karyotyping. risk-sharing, In March, this St. Louis, techniques Illumina pregnancies sequential health, for results less in groundbreaking, criteria And last Blue and MDS New or of large notably, Blue reported of and Minnesota, to just month. twin similar two of and coverage Cross sequencing the payers, coverage technology broader kit. out expanded fish U.S., demonstrating include Journal to we genome study also drove sequencing real-world cascading of in their for Pilgrim, at results on our the the at using both Shield CGP, Beyond grow, year-over-year reproductive treatment cost to of coverage growth. produced the of in consecutive accurate England AML guidance compared International the cost with ACON Medicine the our whole in on add support University, studied, These all effectiveness NIPT to Washington in the our increasing offering developments that pregnant showed standard CE-IVD rapid effect of seen we've women. the time for like whole In published marked all NIPT. to adoption NIPT building continues and the partners fueling continued studies momentum more NIPT to promising Most the for a third access paper patients of use quarter. genome cancer

was XXXX. from For and new Sweden, where the example, positive there quarter Italy of approved coverage requirements news were first during

genetic scalable choosing accurate QX. in and highly are exceeded growth and segment rate this to testing. Customers growth in Illumina's our Moving sequencers, rate disease the company's

see coverage We also issued. continue being to decisions favorable new

first-tier epilepsy two million Germany for whole quarter, Geisinger and they XX U announced major S to expanded include in exome disease health for coverage over cover their of This that insurers members. cerebral will And sequencing suspected and having rare in year palsy. will whole the for genome these the care. Research and test. cost diagnoses genetic sequencing increasing provide a faster XX% children more disease, demonstrate tests a of to diagnostic continues The of to as with patients whole-genome is and XX% coverage better a used

We're have concern academic research segment. majority customers as months. in period, million strains of in in a of awareness the $XX Turning Consortia, manage of to saw CDC within €XXX COVID XXX essential the our $X.X lab. to In genomes the improve compared Genomic funding world the surveillance four pandemic the of in growth outbreaks and the the pathogen the viral quarter next American viruses. approximately raised sequencing role Indian commitment emerging strong that and over to have Plan identify revenue XXX, In instrument in to the in research investment outcomes, the combat of million improve In for drove first determine with sequencing resistance. the This governments the sequence seeing announced and globally $XX government million investment surveillance Europe, The to of a and incremental the and capacity quarter, SARS-CoV-X, plan million variants. capabilities returned the plays $XX includes sequencing infrastructure about creation mutation genomic consumables. emergence variants the of EC India, academic variant drug spread vaccine We Act in for around circulation against sequencing pathogens, activities launched in and or US, surveillance of billion the prior emerging infectious and year to the to the genomic national comprising Rescue health pathogen to including fight disease. to placements

countries expand national continued the capabilities. pandemic, to we investment genomic genomic battle surveillance world epidemiology around As the expect pathogen in

While risk the infectious pathogens, there this severity infections, including drug determining how and initial durable emerging infrastructure terrorism, of is COVID genetics and and natural host impact focus longer-term bio resistance are disease. hospital-acquired future tracking needs, antimicrobial can surveillance, the of

a While the of infrastructure we pandemic has activity. sustained awareness new sequencing, build that our and has certainly also out baseline support fueled believe will it demand established for

our report, Large commitments annual QX us world. goal to population sequencing As map expanded the is expanding assurance on all multigenerational the around population and world seeing their example evolution our study project. and feedback In a February, website, serve on In climate in continued our ramped forward This health our We In to the highlights world. report second the diversity one of planning, programs, social we're resilience continue Egyptian patients, also several and the investor first we the through in a place the initiatives level we our sample Tohoku notable of Africa, US, include: outlining focus human programs. on launch specific national environmental, this the that group is volumes look month, improving available this population U.S. establishing chose genomics our expect This on to Egypt work good the governance throughout help to into the of of published genomics project up a of XXXX the with precision presence data disclosure membership Japan, for health medicine. COVID-XX of emissions. Illumina Medical with on demographics, Egyptian XXXX. planet. announced ushering and on in health pandemic, acceleration Earlier program systems in energy Organization CSR focused we genome, year. improve transparency our trade XX,XXX-sample take Megabank of communities of as country to our genome and the on

Our is GRAIL. which brings me the an tenet, commitment to core Illumina advancement human health to of

acquisition. test GRAIL breakthrough We recently remain committed study GRAIL early the is CCGA and pursue are pleased Meeting, American Gallery, its Cancer making data completion with the the the X multi-cancer in to launch Annual detection is progress at screening Association GRAIL and presented affirmative its QX. for to Research of expecting from

One many tens save multi-cancer of acquire of we of the to tests, blood accelerate GRAIL was patient could to reasons early detection to breakthrough which thousands lives. access decided

We are strongly that acquisition committed customers competitive. pro our is believe and our all supporting GRAIL to of

the Illumina's decreased, accelerate We Sam. much and women. We making the entry, of it detection accessible prenatal population larger tests similar market, important whole. prices a a where, to to now acquisition out the And I'll grew over noninvasive in play market to saw turn after as pregnant testing expect dynamic early of a these market the cancer

Sam Samad

with by grew total first in the revenue from purchases growth also sequencing reflecting consumables the period, first As driven customer in quarter the billion Francis revenue Francis high, growing running and for contributed all XX% first consumables revenue XX% pre-COVID billion, demand representing quarter million categories. surveillance version first clinical grew of quarter. XX% of in strong to XX% by company's Total highlighted. compared quarter, instruments contributed Sequencing all revenue $XX million the across million, Sequencing by prior flow across the grew growth XXX% X.X timing initiatives driven levels, regions Record activity $X sequentially year-over-year, quarter in are in year-over-year $XXX the instrument outlined, by a quarter. customers revenue microarrays. XX% revenue during research sequencing to history. growth consumables as the revenue of and performance reached first XX% to new in $XX year testing clinical revenue. above Sequencing first revenue and with of strong approximately COVID-XX and NovaSeq million sequencing approximately cells. benefited Most during $XXX $X.XXX

surveillance adoption incremental mid due The marked building resulted instrument some additional initiatives XXXX and first by quarter for of NextSeq capacity shipments, consecutive XXXX. strong driven of million genomic COVID of epidemiology. quarter in customers another to revenue record $XX throughput approximately

year-over-year IVD service words, revenue partnership and the down service in sequentially. revenue due XX% other sequencing recognized and Sequencing year was expected, flat other As period. prior to roughly

COVID growth instrument from for Moving to testing, demand to surveillance. that surveillance with sequencing in was genomic resulted health strength contributions in XX% research items XX% to driven and in the million, was revenue in hospitals, region genomic revenue and higher-than-expected the sequencing to epidemiology. growing Americas the as growth, including of sequentially revenue, performance and successful by China first partially period. revenue and driven year including million, EMEA results, the Greater XX% in the of revenue and customers, prior oncology, expansion testing $XXX and by delivered $XXX genetic year-over-year the clinical offset strong COVID driven IVD was customers initiatives $XXX disease product These quarter were by XXXDx. lower in initiatives regional revenue continued representing epidemiology consumables by million from EMEA's due sequencing demand delivered representing launch partnership revenue sequencing expected. demand of clinical of applications XX% clinical region strength by reproductive growth for growth in year-over-year. related Revenue NextSeq in compared

of clinical year as sequentially, million health oncology, such as and $XX growth fiscal Finally, purchases. genetic XX%, APJ and revenue revenue sequencing both well consumables as driven of grew testing, year-over-year reproductive disease end by applications, in

were due to data operating our highlight leverage non-GAAP cost basis website. encourage compensation. improved GAAP will the reconciliation expenses, to the I was anticipated of which and fixed XXX gains which better in I expected $XX increased the absorption measures, on today's million release million Non-GAAP as of other our these the fixed results, Moving margin supplementary review margin acquisition. sold margin higher due non-GAAP for the expense down gross million available stock-based additional sequentially was headcount resulting XX.X% found due offset in by higher expected. quarter. partially week to variable include spend XXXX. to COVID-XX GRAIL compensation investments write-down to gross in be up This you increased by the short-term were in points operating pandemic to Non-GAAP offset on revenue was expenses million $X in leverage of repositioned year-over-year, and Non-GAAP can operating and quarter due sequentially increased XX.X%, The XX.X% performance-based the fixed inventory year than of XXXX, driven partnership $XXX Non-GAAP QX basis cost we ago fourth decreased one-time due the quarter on gross funding improvement freight and sequential volumes. in with expenses, fourth of a sequentially, quarter attributable project quarter. line in Non-GAAP compensation to a during operating margin the an the and of QX. growth expenses expenses that costs XXX basis, higher volumes margin by expectations, points increased higher slightly was revenues, product gross fourth as of by year-over-year on to On portfolio partially and investment we XXXX. non-GAAP higher from cost mix, in quarter, $XX up IVD lower

associated rate tax up on of income are expense requirements the that last In subsidiary reinvested, due acquisition. the The due in anticipated foreign indefinitely from funding GRAIL to quarter tax quarter. to no XX.X% interest first addition, with non-GAAP longer partly lower we earnings the had was capital certain

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

million, compared Moving Cash flow by sheet and flow XX of revenue was driven balance items. XX quarter, from $XXX operations to DSO last cash days to days linearity.

approximately the $XX cash, First short-term quarter year in in equivalents was $X.X ended and million, XXXX We $XXX We were with expenditures did repurchase flow common not investments. free the billion and quarter. cash million. first any capital cash stock

fund $X quarter, from proceeds first GRAIL in bond received the acquisition. we approximately the issuances During billion anticipated to

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

XXXX to now Moving guidance.

full this earlier $X.XX At to $XXX year $X.XX We in range year. billion to the million of of XX% significant our grow from and increase an increase represents a billion. this revenue expect or XXXX our approximately of guidance, XX% to midpoint the expectations

year placements. growth at consumable sequencing in This For guidance compared the approximately Reagent version sequencing and XX% X.X orders of full clinical and XXXX, the instrument our by of midpoint revenue growth NovaSeq driven revenue approximately range, expect to markets. strong now grow we XXXX, driven year-over-year, to includes by XX%

by approximately our to HiSeq NovaSeq $X.X high We to continued initial our to NextSeq in throughput placements range mid expect and towards high driven system conversion, grow the customers of new to end addition demand XX% pull-through $X.X platforms. NovaSeq year-over-year, to of revenue be guidance throughput sequencing to across million million.

X% to approximately is to view grow Our XXXX. compared

gross to IVD in product levels, development. volumes, in of We full leverage quarter investment operating to expect our be offset XXXX expect We margin XX.X%, revenue our non-GAAP improve partially to reflecting ongoing non-GAAP higher and expectations now research and revenue increased higher partnership on year commitment mix approximately by XXXX and XXXX. the first from reflecting margin

continue time. over maintain on our margin improving business operating our We leverage to core focus

realized bond about non-GAAP than expect be GRAIL of in close anticipation million investments due from duration acquisition recent our the XXXX, on issuances. of fourth to expense shorter interest other income We the interest in quarter and $XX the gains XXXX, lower income of the to lower

diluted expect shares XXXX We range $X.XX the GAAP in million. And approximately $X.XX to of expect be be in non-GAAP and earnings XXX outstanding of to share range per we to to share per the $X.XX. earnings $X.XX in

to up economic XXXX, recovery to business. expect our in revenue we be core the due and XX% year-over-year Moving broader the strength quarter approximately to of second

increase gross expect margin did sequential expenses due on investments Non-GAAP due modestly basis. supporting to to We increase to Non-GAAP significantly a and non-GAAP due basis, slightly to to basis be as sequential a basis, to a Non-GAAP volumes compared the support volume down the be first on modestly growth. and resulting the as margins other leverage. operating year-over-year the additional sequential expenses. are year-over-year well in on Non-GAAP of quarter. growth unfavorable a rate higher gross development, expense be investments and compensation-related tax year-over-year to expected business and to the research and higher-than-expected mix on lower a

result, non-GAAP in quarter and the $X.XX per remarks. As to of the expect earnings of I'll we $X.XX. share a share Francis range for for his final earnings to back call $X.XX the in the per $X.XX range GAAP over to hand

Francis deSouza

of are pandemic, others. national proud role making in battling machine a fighting couple key Sam. a diagnosis, the among AI off it genomics you, our clear and learning first integrating and customers From partners Francis to Thank our multiomic and accelerating, Illumina last to the of across and over playing will the standard world's The pandemic, hear X,XXX and foundational including About happen. Jennifer in have genomic healthcare genomics of to and to leading it's power days. community topics a annual on of diversity are readouts the harnessing our and critical oncology, start of human is We globally. Collins, James Illumina, of care, conference in included is defining Suhail. the is disease Gates, strong our impact cancer momentum in registered customer at that the XXXX, we, genetic witnessed from strength health the building Bill very growing role that of element transformative Frances employees making Arnold pioneers, the people genomics the and customers, Doudna,

open operator Q&A. the to invite I'll Now for

Operator

reminder, comes only question so we as [Operator Instructions] a And can from with SVB your possible. that Puneet ask accommodate one Souda analysts As please as many question Leerink. first

Puneet Souda

questions. Yes. Hi, for the Francis. Thanks

appreciate really first XX% that are infrastructure, year? for in parts is and surveillance and cadence I the to the guide surveillance different U.S. question epidemiological as what's the how XX% out in baking you the you that is COVID is, for what vaccinations sequencing. raging here world, -- COVID opportunity The billion-plus that? $X still And one the think is COVID is cadence in ramping, investing of the of really, mean, the the build I in are of administration

the So see -- sort steps? European just What next just close the baked does What what one year? on my term is here. for implying half second a Commission and should the of look of Directorate is into General? wondering there? we a obviously, process how And that how like in GRAIL. you're And much tail both longer are this second then, FTC And

you. the just -- of the So wondering what's next steps? are some Thank what

Francis deSouza

world saying been Well, last surveillance thanks Puneet. sort It's this in how something, start for know, is Great. of we a you pathogens. as we've and that year what talking it's is for moving putting out forward about talking I'll to questions, about of infrastructure really need by is from genomic your with Puneet, exciting addition that, epidemiology -- the testing, it to infrastructure. beginning the the see fact

So it's to commitments out around the and in that made play to the the world U.S. see see here big encouraging

coming what growth to from get Now is of XX% to majority terms our vast XX% question, of to year, business. in the core building into this that we're the your in

this over course surveillance expect the of contributions investment small we've is whole We way infrastructure the modeled So saw look, year from we we QX. year. in said, some the the

got million in so we to QX that And we we lay infrastructure, instrument consumables out purchases that of some saw of $XX saw and bolus some infrastructure. in a

terms of over of of to model, in our we continue the course of consumable investment. the rest the not additional year, but terms model a So infrastructure some lot in purchases

a and it'll very year. are of end commitment what's be be that we next around rolling to is nations out. that it terrorism plan infrastructure, this the the even and about in helpful are towards in antimicrobial are thinking the outbreak Plan, by Rescue of it's a as a -- infrastructure is fighting And for genomics-based this American U.S. durable really they fight prepare the help is or And the emerging a out creation investment surveillance to this what outbreak, we some made resistance more or that year bio and whether play tail next next the acquired out pathogen to it while or is seeing expect we way hospital the natural interesting Now the of released long-term bid to start expect pandemic play pandemic infections.

And this a out, so do It's tail year. on of point we expect, you story as some this. not

In very story fact, we've little this going in modeled year, out a but forward. plays it really year that next and is into

that's so details terms out, And it make come them sure model. as of to thinking how with Obviously, about you. more in we'll share

acquisition court. said, into of acquisition. working we the Commission their as district review And GRAIL, to that we are U.S. the of our European GRAIL. terms In we're of case the pursuing on means are committed taking the also In I with GRAIL

close that And law continue our second to the will deal on half are side. this the we and We the expect year. will to on continue our feel side, facts is the in close that of

Operator

your question Doug with And comes from next Cowen. Schenkel

Doug Schenkel

taking questions. strategy want about guidance Hey philosophy. then ask you good to and for I afternoon, antitrust thank and also and my

your for to and making you challenging these in on your process? years, Illumina of question what said So You you as developments? one, of and your opportunities GRAIL, in how as light deals, adequate remarks how is acquire And on to proved of criteria in a into GRAIL. Puneet's know, to PacBio And be plan you evolving in wondering, response terms you're the strategic felt challenges last obviously changes recognizing approaching expected. than the regulators everything with well on over in more the run of abandoned lot now I strategy, couple acquisition antitrust has you're these am as but both two, prepared

are presumably, making changes So accordingly. you

sense think though it guidance lot at enter a did make for XXXX. those. billion point? relative big. world And talk targets in for targets your of about even helpful philosophy, to you your think to I we as I $X.X me, the would year targets. of this back the out you describe hear And it know, then really growth about And all Illumina if this numbers was a is that tough Yes, how then backlog confidence said, in -- would self-imposed be mean, uncertain, to I it to are was still XXXX, year in on coming we go QX.

So would helpful hear I'm -- if things? year. this you're I you in towards applying just side things Thank mind, about more to philosophy with you. still think those it the think guidance And of the conservative be you're to skewing

Francis deSouza

too. year. And about parts it talk about Doug, strategy, power forward. FTC so Hey, let philosophy contribute of from the And take impact both your me touching experience I'll with may Great. question. our acquisition the first our how specifically I'll Sam going any then then, on of for changes and talk guidance the rest

terms were building our positive customers, and the technology of saying, momentum obviously a that in the the acquisition, years, and attempted DRAGEN by PacBio didn't we over that, been into at by you success the if have acquisition, informatics initiated our years has in in I the Edico -- closing couple look which three last we really super and on get sequencers ago, through received so acquisitions huge so we first, was we So our create successful But the a of FTC. that well side. think,

completed, for our into acquisition data also We technologies well. capabilities and compression Enancio our sequencers lossless example, as -- into brought and the

to are that into our and of sequencers innovative work is some our do seeing market bigger acquisitions. of market. what buying how in success we we've that terms take have had in we're build can these And our core to given we popular that But sequencers so technologies in we're of terms seeing also

well acquisitions larger And I as that for to time, to acquisitions and marketplace make from, make think technology scan so going look continue to that as tuck-ins, the sense. one, sensible we're time

our market, our continue up position believe in we and bounds, the before acquisitions GRAIL more and in the do to our to also terms And to that we we going the they that of court we vertical to given recognize within We regulators we're given the to speed sure go scale are business on acquisition. where well on and do that's about acquisition. work educating an making even will are have business are

say, capital, at another where years. still maximum for couple to that focus are Strategically, on deliver last internally though, and all. the we making that's takeaway changed places sure And externally, focus we allocate that I'd can looking shareholder hasn't continuing So over value. we're that both of

couple points. of the for philosophy we're In huge quarter recognizes terms the that the our of feel, view, business. the with in touched off on momentum coming It's on core of our we important into hand, guiding a a one I of we're year, think balanced and year coming a you point amount that

it's if real clinical you the business, research in at the up QX. that huge numbers, up in growth of the revenue we're we numbers year-on-year the obviously, side in look instrument seeing had of terms and up side the it's the we the showing instrument, saw the QX, that's in in strength, of in rate So business both QX, and but showing also orders showing

momentum core of amount huge business. a our so in And

signs positive You business. seeing to COVID the we're very surveillance add add-on from that,

out, going with momentum still point of dealing into pandemic. hand, of uncertainty on you the the huge rest so one year, And still we're as the but the with the amount there's because

countries wave, that and on plays into still go out a And the to their with see are and third fourth labs wave run as people's could to that they we're impact ability the need. have or that they how the so sequencing grappling watching clinical pandemic

balance. that out, numbers, those although think else have it so I big you And balancing confidence know, don't appropriate And add. and have to strikes if two. Sam, we the numbers we put in we're we are anything they

Sam Samad

Yes.

mean I to Doug, add couple the brief I maybe is just a It us our of Francis. we high the business. outlook of confidence hit think lot about guidance you very is have year. comments. range. a of confidence, of gives core a for degree the What it, a strength be balanced and is, One that

in the adds and business, tremendous the enjoying we have. strength are confidence core to that We that

is risk would that pandemic, the to uncertainty potential as Francis related I only the or think mentioned. I out headwind the call

Operator

question And your JPMorgan. comes with Peterson Tycho next from

Tycho Peterson

couple A ones quick of Thanks. Hey. here.

are Francis, strength, the Street what and as year. spending you're catch-up guiding Obviously, how running, I'm getting the much seeing instrument is from curious, for full year's you're the of kind back last up just On above labs of delays?

are as a So maybe, kind wondering going Thanks. I'm quarter. any curious, then you wave the you quarter, be competition. couple in isn't your of out just Sam, over of on you competitive landscape them. for dynamics didn't winning And of I just if you suitable sequencing pull applications? if of then the one then, on you I'm break hear which could last there? and of the instrument companies those on for I think on most the comment said that competitive And kind platforms of you the There's And ongoing third how sort XX% but forward, can think about fleet, Can one last it single surveillance were years, you the question And COVID contribution. out that. projects. look FX we common element you to about to the curious of next that, evolving? think think talk as maybe work, then

Francis deSouza

make the XX% on right. commentary instrument represent about us landscape. look, instruments we're playing what's bunch the seeing asked for surveillance sort that so best strength the the a numbers, you the of, competitive Had all. will then, I was -- Tycho. portfolio, how All we and talked about testing from that. Thanks, which Then last me so will Great. of there, COVID asked said, since comment sure is that about you driving about let in that. I And capture let's questions play we on first, them and we about, surveillance out done talked of a

Okay.

let And a we the amount strength broadly and clinical segment. the but That So as only enormous of largest lots talked businesses, of that revenue huge sequencing we side strength. drivers not instrument segment, than it's We And right? the we segment, about side segment. segment, that the talked clinical is our a our there's more start in so of core instruments, me instrument And in in driving strength the doubling oncology strength. had saw year-over-year the Yes. is the more We on terms got with fact what's QX that in from both the the research oncology the in in testing. side. the oncology now in behind about clinical actually that strength fastest-growing testing, clinical strength QX,

last One reimbursement Genetic significant very across a of clinical NIPT. year. forward the in big oncology, saw drivers a number disease testing, is, we segments step of

market, reimbursed have in addressable the the to that a year. is happening has terms people what's tests in who so access expanded last of way, And

the our clearance that's example, in dynamics customers an driving the for that's their received China, business so from and that's NextSeq, growth. around playing are for are the driving in purchases. strength clinical the Other we and of and And NMPA business the that out instrument increased driving clinic,

driving China. hospitals, because what's from the And the market it's into about spend expands. instrument So cleared right? market so, more addressable QX. talks in terms continues exciting, With And catch expands of the the in in obviously, not just instruments instruments And that's well up. to really to more consumable -- the placed strength. with example, ability hugely that that's we It's addressable place that future market build, all reimbursement, our for products,

what In terms can have on. track at talked of or run they about if been are terms number of platforms look GISAID COVID, you deposited, the in the is that and genomes you NCBI, of we

a days. came last helpful there of think the that was I so out And in couple blog

our which up And I share it's he gone it's blog. an analysis, did -- pretty to think Robinson what says did, that did about we a there is about Keith clinic close XX%. too, genomics and

have Now platforms. in Illumina done of all genomes the GISAID been on

I O&T is and highest that. tapers next with after that the think about off I XX%, believe,

bit about And last so than talked a better similar, we maybe what but little time.

In seeing well. NextSeqs for used being terms as and of But popular surveillance. shops. used instruments instrument of broad lot NovaSeqs the a high-volume instruments, range are very in the a Obviously, there's MiSeqs we're of are a that being

blend, that if like, the it's you so And are playing really well.

there's In competition always in terms of the market. competition, but

growing going continue can attract you this investment that's and is a early this imagine, to to As dollars. market quickly

investing now, you or that in you be year too, of some compete there players looking listed are and the like that year. some true with. in every them, two, to next at But So been going that are that's think clearly are emerging players the right I market we were

say up I'd it's every So competitors. of And to deliver value year, to we continue our face us customers. to and wave innovate a to more new venture-funded

Sam Samad

to Yes. FX, With regards Tycho.

terms year-over-year, XXXX, contributed benefit And year, X% say, I to so the benefit benefit overall as and of the to QX, those half. for we're the so in moderate that more driven forward, FX mostly of If of RMB, in that full look at in approximately the would of versus was euro So compared the of the from I year, X% expecting, approximately, QX first by currencies. appreciation look and full currencies the for benefit definitely, versus expecting second benefit terms half we would we're XXXX. we say,

Tycho Peterson

you. Okay. Thank

Francis deSouza

You're welcome.

Operator

your And Sung Nam BTIG. with from comes Ji next question

Sung Ji Nam

and reimbursement oncology a there, you of taking and Obviously, to lot for attributed thanks strength about the favorable testing? Hi, trends. question. could you that better talk other Francis,

kind what from out and seeing your kind, diagnosis hear into last visibility the guys screening the cancer given there, year, if you're and there would to of companies visibility about, of have across your all thoughts the catch-up delays any, love curious Just to -- all you diagnostic that.

Francis deSouza

Yes.

were pandemic you types a Gardens the perspective and so customers closely through obviously, So we testing. like test, our terrific very if you is oncology as so -- the if you work with that our liquid space, clinical of durable blood-based we in on are in biopsy other customers, offer you point actually out, many they testing. FMI than and have and And more

innovative very patients. terms or having blood a access so And of units test test. the possible to even in phlebotomy And home-based if for mobile you some ways some have of that's our customers found

And I be of of a oncology the of there so to that pandemic and stories think the I in durable the one think biopsy, acceleration trend. liquid acceptance going that's testing, was of is an

way pandemic, you people that a much to out get more think I patient-friendly the than biopsy, to results, not test continue you'll the the in we test. realize see only a do growth come it's high-quality because and but liquid can of tissue-based

see possible, to being way you'll I preferred So liquid biopsy think if a go.

Now whole saw really in there QX what the do catch-up to because that of biopsies. a lot of means, liquid you durability isn't

continued XXX. are that showing up that's also like away, new terms things of therapeutics think I oncology biggest expanded in the emergence genomic so far for And like: biomarkers. And driver One, and strength of of XXX that the reimbursement two, leverage in the And products companion easier things CGP; from the TSO it partners -- the that for diagnostic for up signing that our from TSO availability like of relationships we're labs up steps. to create those us, our products then stand from make

strength And but be all those opinion. wasn't if a it durable factors up, think I was, much, of there oncology are so and there may driving my in testing, the catch in little frankly,

Operator

question next comes Genuity. your Masucci with Max from And Canaccord

Max Masucci

for the the great Thanks Hi. year. and congrats start to taking a on questions

in multi-cancer within language the serve which is does several seek The a question. screening, broader challenge applications to one prior blood-based the seems a range of types. clinical just narrowly landscape, focused be on cancer liquid piggybacking a of wide So on FTC's which GRAIL of the emerging acquisition to biopsy

the biopsy And is expect of that while M&A cancer opportunity in mind, activity M&A the companies sort GRAIL just it front? any or for types to of developing versus is future to that cancer? reasonable in if run deal continue be multi target small review, it under you'll that the liquid would number applications clinical one home this blocked, targeted the a are of active to is with So reasonable FTC expect acquisition on is

Francis deSouza

Yes.

that in observation liquid used for types think testing biopsy terms that's oncology. fact tests of of are good in blood-based or a I the various

looking does So what well as one type, early market. do which are is you the to in as is GRAIL that multi-cancer as detection, point players that other out,

area Another used for that therapy liquid selection. is is biopsy

product, with patients already who diagnosed therapies cancer that a have We match already them. helping -- were So the for kit patients space. a serves that right

our different XXX market in things a completely for selection. So different different requires of the blood. product is A TSO technology, the for looks used therapy part

segments. a both for continue is, at going all many but different approach. used be are -- sequencing help be could of offerings. us as they're It the forward. offerings it be technology advance range to extend going priorities different can things. part them sort look biopsy M&A tuck-ins. going to things, liquid answer biopsy very of The as of of tuck-ins liquid mission be require and that we capabilities look to that for And technologies of so It and And that our technology our a different could are part and It's strategic look could our

going do continue to to that. And we're so

Operator

And Tejas question with Stanley. from our comes next Morgan Savant

Tejas Savant

on for thanks one and a Francis, on three-parter arrays COVID, you: evening time. one and one services. Good guys. sequencing the on for Hey,

surveillance efforts on in India, both pandemic you in remarks the So mentioned COVID, prepared the earlier during this your afternoon.

coming genomes think in you in contribution next you few and funding months Europe U.S. Why in well. near the XXX,XXX as the of viral that here. the So said question. through that first have to term kind about this little the more obviously, I is that's that, And you're of million work not in a my quarter? expecting contribute first consumables $XX the

both million more comp, services, we for think a actually standpoint, from milestone was Outside Are there offsets is grew sequencing thinking it year-over-year and finally here in on having of quarterly quarter? XQ of a mean, $XX and business, usual growth seasonality about Sam. beyond? be year-over-year Is the in the arrays, should then that quite you'll business any of see after this outside fair I and bottomed flattish. terms on the And Second, of essentially while. this services the that consumables the in finally, to

Francis deSouza

Okay.

a there. So you got few parts

for valuable value sequencing for about many, and it's now going start, a to very terms many, this why bit COVID little Because infrastructure in pathogen-based is, surveillance, come. to more, and is that not And right? for recognized there's question be many using a of as a both COVID. I'll clearly years genomic recognition we'll talk the So

question The have you out? arrays, why Okay. the not we more? So bottomed question second with is, is had

of going we from protect national public major -- to that but that's that important going believe an is sort part not national perspective. the absolutely be to one. infrastructure here this absolutely durable, health infrastructure just first systems We to that are an go it's a let's believe We national to all of health, the laying So forward. going be also defense valuable,

And out countries, is this decade over kind play going are have, expect right? going surveillance going to of a most pathogen-based some genomic to plus, we in we So forward.

and year, we that is In instrument the was it should see buying bought so that bolus about thought about fact we it how terms talked the see the last we of about we've bulk we some many you of way said, this -- QX year, with thought this year, in buying we And engaged of to them the they sequencing. this year. instrument countries expect some now, we expect

year the drive is continue is consumable obviously, what's Plan instrument more It big of for already And Rescue buying. our numbers. so, saw, the But year, that going what some about the for this to that the the talks this would and we expectation to American that very possible buying see expect are, happen things happened. to you rest of that happens, bulk

out. are worked expectations while the a it's for Our to details going that to be take

how much consumables the talking to it X do people year, how of where over really see won't Excellence, being hardware be about, end these already okay, infrastructure additional you'll while the that the course we so, much the And see Centers have, purchased they year, expect, need. start you'll towards we of are of sequencing

story an perspective. the going tail it's a year and from this going instruments beyond into of to year be of next end so And

how any course of thought about that keep of so it. the over if year. this you up-to-date We'll And accelerates that's we

little did some There's different Sam In parts there out. will play maybe that sort parts how bit -- and we part, talk and arrays, of are of to terms business. the year-over-year. see then growth those a there's And direct-to-consumer about

Sam Samad

Yes.

and not a the stay them actually So business grow a arrays. negative less definitely impact the saw sense revenues. overall correct that now part X% stabilizing, much [ph] in was revenue. very seeing Back small business. the I is to fact think It's in The a DTC X% of you XXXX, of the between matter in is of -- characterize we're the overall We bigger QX. our and is, of from our house contributor negative DTC way our somewhere a is

we to well contributor, have, DTC has mature and is -- grow the other though we're even to arrays continued agrigenomics over business, let you $XX Tejas. that Maybe negative we the arrays continuing year. specifically me of had had a to QX of time. of see see to to very less of that with or regards didn't have QX sequencing over last whether that so this to mature XXXX question dynamics to we still see in do QX, applications go year, services we IVD grow pleased licensing it's headwind and QX we fee a QX and a growing the million in So last related the that in as it's explain there, others,

So that down was you a and XX%. sequencing were the for negative. And by as saw, quarter other

should for As to or assumes regards partnerships, fees year. we what with IVD year, our licensing material I say, the the no guidance for fees any transactions or look is significant

other January. in So for be to had guidance back that's we're service we flattish quarter-over-quarter. the and with that And sequencing consistent our year, original mostly expecting

Operator

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

Derik de Bruin

Hi, good afternoon. Hey, a few questions.

guidance, just looking also questions of your the couple a results. first just So just guess is one at I revenue and

much to still that suite never strength to them. be your and basically were the And first HiSeq First upgrades in needs quarter much last saw was how question year how due the people of did planning is, of upgraded? you

on roughly think that also, the built in a in have $X probably instrument you a looks QX, And is strength. guide, it way, like I to sort roughly acknowledging -- one, trying some you're QX, Just of, of the QX at the -- the lot sense there's get looking conservatism each of questions billion there. just just

we So half, in a like given better XXXX? can look so question sense and wondering, into this why us flow at year how get numbers flow historical the of and just be other trends? it's sort Just one model? then like second like walk flattish would this to you of you how that can how I'm comp through as Thanks. just on And -- full stock those

Francis deSouza

Yes.

So, Derik. Thanks,

So about guide, a couple guess, second and stock-based about around one of the HiSeq, then -- I one our questions, the third three comp.

to talk about it then and turn I'll the start I'll HiSeq, talking Sam other with to two. So over

terms So we we know, there expect XXX the that majority path, started -- HiSeq talked when the majority time, the that, as you of we first customers HiSeqs, NovaSeq over -- were in them to fact we the upgrade about NovaSeq. would well, vast the move of

XXX from the So had numbers we of between upgrade, you refresh end XXX shared we the that with and XXXX we that upgrade. had left are year, to now then then last that with and and until went to

so a And in was there I QX. continued upgrade that or bolus a think catch-up. don't

over play this upgrade course years. expect it I a year as of quarters continue of and was think more to continued see, see going we've steady of future we to to that and into forward the

or a giant that a bolus really wasn't there but upgrading, continued happened. catch-up definitely was there So

now over So I'll turn Sam. to you,

Sam Samad

to linearity, referring other With the regards questions, the to I so Yes. what about let regards your you're approximately me is talk with first, which billion quarter. two Derik, think $X to

one of, we benefited in We regards would of the let's I that a terms guidance assumptions, COVID the keep in at don't our instrument with in all, expect for with building placements first in regards So have of items regards $XX QX, million did with purchases instrument mind, least. going our say, of couple assumptions. forward material That's was believe to QX, that COVID, to one-timer a to surveillance. was infrastructure. We

million little purchases, we of bit were one because a by would is we're material a called higher $XX elements approximately QX. amount, the that other than on And a lower in inventory which purchases consumable purchased running The some maybe that. roughly it of was do, the calling they and customers million catch-up fact but what usually out, $XX not

half. So half the QX and why a that's is not second first what QX. elevates is also step year the That's sequentially higher why than the That's down.

the to not the expect than being contributor BioBank, complete half in which their UK second higher sequencing the half. we to other the first second half is The

QX, up actually, So project. they that will towards wrap

at why to would our year, flattish regards the compensation, this contributions, and stock-based beginning is of So roughly I that's I out the those say just are called year. linearity With the are accruals, expense over comp. from standpoint driven $XX million our by is performance, stock-based from actually impact also That stock-based compensation actually because our higher accruals stock-based higher. an year-over-year now

higher So comp we're overall. stock-based expecting

year-over-year that of standpoint, actually So from a it's north million. $XX

comp, moderates called haven't in about that impact, We to XXXX versus still negative that stock-based It's early XXXX but obviously for talk XXXX. impact, XXXX. out

Francis deSouza

I'll Derik, And give you color business. because the maybe, huge in Yes. the amount NovaSeq more reality NovaSeq a thanks, is of some Sam. we're on And seeing momentum

QX, again momentum right? NovaSeq, second then we of had in of the of momentum. in launched. about our had when impressive we talked So is year NovaSeq, launched quarter we're in orders, record QX, highest saw entering only we which XXXX, we fifth to because fact a for first that So we amount that again, QX, huge And amount since we QX of product in order the really huge

placement we've fact strongest NovaSeq. was any the order for since quarter about talked of launched our Just it that year first

We're momentum. So you're this huge of right. absolutely seeing amount

About called democratization the about in customers. huge the seeing from we're enabled a is from it to of that wasn't And of throughput upgrade. were strength we when X.X. And high I launched to Illumina, of something version fundamentally were it's catch-up represents, we and that's sequencing that amount fact we continues before, that Now NovaSeq what's by any to the kind that and talked come we NovaSeq. launch this labs didn't interesting, that half out -- what's new going that? expect of continued, driving of an new terms

drove what those large hearing and of accelerant really the that in the orders amount so elasticity of demand in we from And was saw placements we're QX. and of the catalyzed QX X.X that the is market NovaSeq

Operator

question from Citi. our Patrick with comes Donnelly And final

Patrick Donnelly

guys. the questions you, Great. one Sam. Maybe Thanks for for first taking

of can old right about you the of just mid be kind maybe give year headwind about well, that side, Illumina? going nice to on last year write-downs, what's side, Any normal normal Longer there? the this pull-through what the Just can through guidance adjustment, ago. two then get ago, just recent And would I think as that guess, to from a on kind the three instrument helpful. pretty path view, looks towards like the front inventory just recovery improvement or talk on the profitability way color talk price profitability old back you months forward? to throughput as the COVID, given you the could NextSeq,

Francis deSouza

Yes. Sure, Patrick. Thanks for the question.

for We're to that the year. to improve over the gross which gross some XX%. related aspects What our margins last some contributors get that? we're are maybe expecting we'll regards business -- profitability, in as pretty have margin. made in So along, improvements forward that to results guidance as saw we Obviously, and some saw operating volumes and also have of we of we're business. expecting seeing we terms in are in to the saw start Obviously, ramp, in the north mean, here the you since things margins, that -- all the with significant COVID, to profitability of contribution as mentioned that the core past improving higher expenses, we're improvement. to goes approximately the that business our obviously, time. of that in the to XX.X% improved profitability QX ramped, as the we with guidance, were and and from strength on We seeing as leverage And or QX, of of as COVID significant volumes that's And building we've and our ingredients continue improve instance. of in I terms freight look for strides both the terms

still back to to seeing, some is and -- of was sorry. also of of which question, And OpEx, to by still we're look on And up the of the capacity over that. it to investments. time I investments, with terms that we of are some we're terms making we're that throughput incredibly That expectations, are that we're terms both we the I path. we're and the manufacturing we're We in business have catch leverage throughput manufacturing We want demand I But catch mention seeing though, getting as path. why mid made improving both, and to our investments growth far in said, in making good we're historical terms in that mean, strides business, that. of levels. encouraged mid and OpEx in in as or the regards terms exceeds to -- forward, infrastructure in in just in committed quarter, to we one With on the throughput? low but was Mid throughput. committed up

level that mid we're more yet we you're the at stage the terms improve record continue but know going on NextSeq expecting not can XXXX regards every for We're for that levels of throughput to XXX, consumables, seeing expectations to can the throughput, quarter. forward. terms what pull-through Suffice as is level to going tell seeing at on forward we're DX to with XXXX. encouraging. So say, We're the NextSeq placements and you, I placements incredibly those and it I share in XXXX, asking where in XXXX of XXX well about and are as

when you're level so, pull-through growth, now really stage. when hard you're instrument at range having this it's put to of of stage -- consumable launch this of this you're early seeing And the and a still

can a we that. to quarters have we So it still do give few before

Operator

back over hand will to call Cunningham. I the Now Juliet

Juliet Cunningham

everyone, Thanks, We joining your for time. us. appreciate interest and All your right.

the Thank As a updating as of be soon available to forward you. concludes for of our second reminder, website replay this call. this And call possible. look XXXX. fiscal We on our quarter our will as you

Operator

conference today's concludes This call.

disconnect. now may You

Illumina (ILMN) 28 Apr 212021 Q1 Earnings call transcript