ILMN - Earnings call transcript Q2 2021

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Operator

Thank you all for standing by, and welcome to the Illumina Q2 2021 Earnings Conference Call. Please note that all participants will be in listen-only mode until the question-and-answer session of today’s conference. [Operator Instructions] Please also note that today's call is being recorded. I’d now turn the call over to your host, Brian Blanchett. Sir, you may now begin.

Brian Blanchett

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

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

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

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

Francis deSouza

delivered Thank across exceeding you, XX% segments. and growth, geographic year-over-year afternoon, billion, significantly representing all regions expectations Illumina market QX revenues and $X.XXX everyone. of good

research the reproductive grows genetic clinic. are more sequencing health markets, disease patient enter awareness expanding applications the Our sequencing contributing robust programs and coverage are reimbursement and in increases, oncology, to testing business. Ramping our clinical population including as growth

surveillance fight against the COVID-XX a platforms has tool using Additionally, XX in Illumina emerged critical for genomic as pandemic, over now countries surveillance. with the global

Looking forward, future instrument backbone was the of capability be with anti-microbial including QX there record zoonotic to backlog a quarter surveillance the with epidemiology XXX% of global we genomic resistance, for since to ended and infrastructure sales, durable, global consecutive momentum and year-over-year the outbreaks, the is this combat NovaSeq. instrument highest revenue up transmissions, second quarter launching bioterrorism.

performance our by Now platform. looking at

run, over customers from highest orders sequencing portfolio high to of launch with spectacular who its to continues expand, its new Demand are since NovaSeq half order XXXX. Our high-throughput. achieving throughput QX in the high-throughput continued volume QX with in capacity for coming

high in at these our a to are systems oncology Additionally, population continuing use genetic to customers demand disease testing, programs. testing, and meet rate sequencing

single placements. Our of for times drive to applications continue Cold The customers NextSeq in exciting enabling cell Harbor Spring placements output XXXX, with growth the record QX. of XXX, analysis. mid-throughput new like new almost X the is Clinical drove customers platforms NextSeq NextSeq Labs XXX with in strength

has shipped quarter, Dx for also record toward the trend in like revenue with the instruments and outside preimplantation by any emerging record more We years. driven well U.S. as this see our surveillance. had core MiSeq NextSeq last again than genetic of clinical over been COVID business decentralization demand Benchtop set shipments five quarter This up areas screening as an a we year-over-year. XX% as prior sequencing a quarter platforms excellent instrument

access business, patients CGP selection, XX% comprehensive for world. $XXX billion third opportunity and lives year-over-year, for shift from expanding profiling segment, year-over-year outstanding for is MRD genomic was U.S. our large With demand therapy the providers, announced and XX% fueling covered market RUGD, globally In to offerings NIPT, quarter reimbursement of consecutive our customers of small additional now powering segments. recorded Clinical tests. selection new are lives with our segments; for growth demonstrating expanding testing in consumables RUO and and access indications up sequencing and as collaborations the covered Clinical its our million existing the therapy focus are of to are Oncology Clinical across the XXX,XXXth additional its and Starting drive WGS and are Research market like the on Illumina’s CGP in market and achieved added our QX, assay, in our of TruSight and Caris, additional and year across our XXX, this milestone XX customers Applied their Turning by Research countries. comprehensive coverage, approved, also sample existing entering team XX Oncology customers genomic and reimbursement, and driven panels. and revenue over field both over around the to in clinical X enormous new oncology expanding so profiling customers, now Illumina’s footprint. expertise far segment. There impact largest benefiting in oncology, our testing, testing

pharma outcomes. bring customers, trials year, addition, health covered expected and be improve to a the clinical has market. oncology MRD and also emerged multiple as X we that U.S. NIPT shipments January, in the million guidelines. Reproductive early-stage ACOG benefit to In patient for approximately of In the exciting drugs end disease would continued last the by in MRD in from key with the based proven pregnancies reimbursement segment, revised consumables to future growth invest to positive testing decisions, It’s approaches the driver see over of more entering XXXX.

to we already coverage expand. and continue surpassed milestone that to expect We have

expecting making access for the ensure in progress In NIPT. also Germany example, families U.S. to outside implemented have We’re all coverage be national will to XXXX.

In growth Genomic expectant and Solution guidelines recognizing In Southeast parents reimbursement are Solution NIPT our enabling the Thailand Generation Europe accelerated whole access across seeing significant June, Hospital by healthcare saw for Additionally, Rady State whole of infants. This partners sequencing both In published from Next other as Asia. genetic and these prices groundbreaking is sequencing broadening and growing of the Europe diagnosis to decreasing an and Project disease. hospital critically-ill to and across outstanding of Children’s due Genetic research NIPT for expanded care the in in also the version testing of we that whole adopted coverage a Asia. our lower of and XX in of spending to VeriSeq time VeriSeq More we increasing for continued well marked diagnostic genome XX% QX, quarter exomes to yield by country. diagnosis CE-IVD of the genome California genome had now over protocol in rapid networks patients Bear, Baby quarter, hospital showcases results promising the than program shift as from enabled change cost through Rady’s NIPT X, WGS. effectiveness sequencing network rapid sequencing genomes. delivered a the another available disease driven benefits

Research running now Applied year-over-year full and Momentum to Turning growth. operating programs saw genomes we sequential from Us continued All In genomics to scale and at strong a thousands week. grow of of is population segments, the QX. our U.S., in

PopGen multiple saw internationally, pipeline opportunities. ramp providing We new initiatives of on-going also an

our COVIDSeq the as to the and We workflows, Multi-omic, half and success expect sequencing. in and awareness against Nanostring, in challenge. the such research are fight meet on enable driving and XXXX of emergence to revenue of companies will future the of the Illumina’s single bioinformatics focus for and PopGen second assay The instruments, XXx spatial, and EUA genomic intensity over expanded from segments, renewed NextSeq surveillance launch RUO to on year. demonstrate different initiatives expanded with The in partnerships our novel gaining commitment approaches XX-sample cell applications the for heightened this has high XX discoveries pathogens. clinic. quarter the The Olink, delta many continued the traction variant enter COVID-XX provide COVIDSeq of this and

wave. for a enable We XXXXs, philanthropic second to ensure with QX COVID the NextSeq the resources to this XX remain in consumables. consumable have have that Earlier first we we Diagnostic also in our to on and This governments including India’s testing access needs steady to working in Molecular epicenter COVID labs to These donation our efforts, time COVID we half. in this limited of devasting QX will announced efforts revenue Mumbai, $X and driven at countries. consumable countries Laboratory are two surveillance Through capabilities, revenue Hospital. to with high the million surveillance second week relative sequencers are now half increased with COVID an the Reference over of expect sequencing in working Kasturba initiatives at relatively surveillance and

screening by our multi-cancer come GRAIL. to on the feedback positive all genomics I’ll launched Before encouraged its to is test exciting fruition a GRAIL screening, I kind call of are to this Galleri. update this hand oncology Sam, we’ve the available It provide the and we space. In QX We in of companies made in to are first over supporting brief committed the to innovating employees received. test, promise and see

thousands July, we help shared the tens to committed over positioned Sam. Illumina of closing we believe pro-competitive I’ll and deal to remain uniquely of with turn And call acquisition, As in late save to be will this lives. now, this

Sam Samad

in year-over-year and our billion, As $X.XXX Francis sequencing driven in revenue exceeded by outlined, second expectations, to XX% growth growing growth quarter XX% XX% microarrays.

growing in of X% time XX% first to quarter sequencing company total revenue. billion, sequentially the $X.XXX billion exceeded total representing $X revenue For and history,

service received than driven and NextSeq a COVID-XX NextSeqDx testing and approximately also to revenue one-time from XX% record new-to-Illumina Revenue a to our and $XX NIPT $XX XXXX by were instrument Our royalties in NextSeq adoption and driven of Sequencing XXXX. of other quarter million, and demand NovaSeq shipments, recognized growing continued was year-over-year revenue. contributions grew all shipments incremental revenue in their from instrument customers from consumables more by who to second as all clinical, significant expand Sequencing growth cells. doubled strong another XXXX, by and grew the NovaSeq the our sequencing. of to particularly record million, driven quarter the new $XXX flow Mid-throughput expectations, higher million patent strength second million surveillance due resume consumables settlement. accelerate from pandemic system expected, Since XX% reflecting in XXXX core by led shipped robust XXX% to by across exceeded revenue XX% sequencing customers. the primarily and to by shipments for to driven of continuing have new $XXX categories. VX.X revenue year-over-year to high-throughput business $XXX impacted million, demand XXXX with by contributing demand quarter continued instruments launch, quarter well Sequencing million are revenue consumables been than regions across of customers. related year-over-year research approximately reached in in XXXX $XX shipments as high, litigation to

Moving hospitals, genomic related strength by population the region record XX% XX% to in quarter both from sequencing by Americas to disease strength a testing clinical superior strong more EMEA’s revenue delivered year-over-year was and disease year-over-year. representing performance region. prior performance the results, $XXX momentum also Greater the million, in region as was surveillance year in ease was was outputs disease the year period. recovery growth market in due $XXX Revenue XX% to of record in in genetic of product initiatives, including revenue representing region. due for quality $XXX also Illumina genetic sequencers. revenue regional of driven COVID testing, given growing the accuracy, testing demand regional shipments surveillance from genetic research instrument a acceleration growing the as to year-over was access to revenue compared well led driven and clinical by continued the growth research for performance and EMEA business, for to driven reimbursement. growth million, than and doubled by expanded demand The contributed clinical in NextSeqDx by oncology testing. from of China contributions of testing. million, from the sequencing an use, COVID for driven Sequencing growth

XX% grew Disease Genetic as and revenue million clinical by Reproductive driven customers. Finally, Health growth sequencing APJ consumables applications research in revenue as strong $XX by year-over-year, of across utilization well Testing,

purchases year-end first As APJ in fiscal Japan in of normal the revenue due of seasonality expected, decreased sequentially timing to quarter XXXX. and

a of supplementary gross On of by utilization data in review patent will as include can to available results of these operating due offset well Moving due to and compensation. non-GAAP margin improved higher sequentially basis compensation positive year-over-year found volumes, mainly related the XX.X% $XX encourage non-GAAP the strong today’s sequentially XXX expenses, increased stock-based on investments settlement. a due litigation and to due basis revenue non-GAAP reconciliation expected the measures of increased increased product you impact partially cost lower I demand fixed highlight gross on patent from mix. of a to $XXX margin I leverage project which the points expenses release than second margin million from XXX as GAAP certain our half spend website. gross which but shifting one-time expenses to operating related million the points, litigation as by be to increased higher and Non-GAAP basis, as settlement, XXXX. well on were favorable to timing Non-GAAP

higher to margins business. as than compared settlement. operating to million higher the in one-time to on as decreased compensation decline million $XX were XXXX. due year-over-year additional $XXX As to of expected of expected, first XX.X% in earnings due foreign well due the and Non-GAAP of that support sequentially from was the and our gross The mix tax due increased non-GAAP were expenses year-over-year, lower quarter revenues no as tax flat non-GAAP margin, on the $X due to of our a XX.X% other expense rate was lower in repositioned quarter earnings a subsidiary first year-over-year longer in by operating non-GAAP investment margin short-term for primarily of higher GRAIL headcount patent XXXX up litigation investments last recognized year-over-year, investments XX.X%, as Operating performance-based growth, the we better The expense jurisdictions driven expenses and favorable lower was growth volumes quarter of and Non-GAAP million interest portfolio of reinvested. certain The tax to tax rate to with indefinitely income the expected. anticipated a decrease acquisition. was funding rate. the are

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

made Moving items, to quarter $XXX sheet million driven revenue to compared from payments included flow which Grail by days to balance pursuant agreement. linearity. to of operations days $XXX was cash cash flow and XX merger DSO continuation million, the XX last in

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

$XXX our outstanding matured used of which XXXX in we million convertible quarter, second the June. the notes, During to repay principal

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

XX% grow Moving now to XXXX. the XXXX XX% guidance, we now expect represents full year $X.XX to range the XXXX revenue to approximately in increase compared of At $X.XX billion to billion an this to $X.XX or billion. of mid-point,

strength to operating year-over-year expect, expectations ongoing midpoint margin innovation core commitment now continued revenue from accelerating higher higher For of COVID our XXXX, grow XXXX at than year the approximately our R&D. non-GAAP by driven reflecting XX.X% expect revenue total contributions our We expected to surveillance range, and revenue testing. now sequencing be in the full we approximately XX% guidance and in to business our

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

to expect to of earnings rate basis points $X.XX. in of our in range higher XXX previous prior non-GAAP than GAAP the expectations. from the XXX and approximately We We $X.XX now $X.XX, non-GAAP which year, our range per expect increase tax earnings to to $X.XX the share share per is

year-over-year. Moving revenue we to the approximately expect third quarter to of increase XXXX, XX%

per $X.XX, non-GAAP earnings the share $X.XX $X.XX of of earnings expect $X.XX. We share range the to in range GAAP per and to in

for back his over hand to remarks. Now, the final call Francis I’ll

Francis deSouza

It cylinders. firing results is on all customers, from our Illumina, half clear our Thank Sam. that you, are first strong and

laying of proud world. am of existing clinic. deployment patients globe. take significant time clinical for and spatial genomic emerging The and initiatives access early into these treatment the incredible fantastic the at and access the to have In larger cancer further sequencing speed Illumina’s drive diagnosis I’ve Research more CGP governments in company. will is generation long-term And our genomics genetic to and new a for in driving detection capital execution of research MRD sequencing. testing, opportunity. disease infrastructure. cases technology growth investor benefit to and very expanded as programs clinical are growing growth health. genome. applications more evidence cancer the COVID permanent, incredibly expanded the Our are new alongside tests, human of an initiatives am honored national have unlocking oncology, and brings that benefits the across use exciting therapy our development for problems there while the the selection. road the tests offers for will representing seen in to reimbursement I significant central by we solutions. robust, teams In gives to for genomic which fulfill all genomic human WGS and more In come. continues role these multi-omic approaches work around map health global surveillance awareness markets to and most internationally to playing and the for is tremendous and time funding adoption. need the colleagues coverage life foundation improving scale, overall innovation in catalyzing has health complex in novel advancements still epidemiology is to reach NIPT, field, Single-cell, rapid drive in sciences decades be dramatically up broadening systems population This that a is I to my a is power U.S., patients are the genomics my Illumina of role in sequencing a in driving instrumental

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

Operator

of Evercore our Instructions] ISI. Speakers, Kumar the of first from [Operator question line Vijay is

now is line Your open.

Vijay Kumar

I with my solid one for guidance question could if and here. start thanks on Hey taking results guys, question. Francis, the on maybe the congrats

implied half be XX%. about and of trajectory opportunities growth why cetera, second perhaps stronger. revenue about Your instruments, In on shouldn't of Comps speaking the maybe growth, record you about second only points side, revenue basis the get half it harder. backlog the ended et surveillance XXX revenue talk context about the

Francis deSouza

Yes.

So Vijay thank you for question. that

I'll momentum point the you we out. So saying, in business tremendous start by are seeing as

businesses look market our If segments of part – the we're business, you expand. seeing every at those

QX and more we are. second for; number pandemic. expect we but so in don't a continue happened the are repeat into things and things but are that there what that's will of of a one-time that Sam to add And there year, midst are the is, we one, they of of the the sort this, going that second number of then out to in expect thing still that half color on QX playing in look, we're list we'll the And watching

And are out how world. here eye a see in variant and both to keeping so plays around the Delta U.S. the watchful we the

some put momentum And we of say so of the that for that two see should are as those definitely to means the counterbalance half. the second And that allows we in terms that the see in factors in. moderation pandemic. middle incredible – We're would what we're we in I'd expect the still markets

Sam Samad

I maybe Vijay, way. on specificity by Yes. the more the one-time And in you for the first some thank question half. add just could factors the

the out when the second really that strong to call factors is think They're really half. accelerating markets. business in you the Our are first important half do core want one-time about I that and all across

So would bucket the follows. one-time as factors I

half. we of million of the instruments roughly characterize but million second stocking $XX quarter. about stocking. in million $XX million I surveillance $XX in did see would the not QX, placements, COVID in in first did We quarter, have $XX that's had You have we the so first any

another There's in terminates Now second that's we’re item. the expecting Biobank, up in wrapped to half, the and quarter. the third so UK basically not which repeat

$XX about we second to $XX will revenues finally, the that's And half. that million half the not So the first settlement a not that in million referred half. remarks the second extra I second in quarter my in repeat prepared there's will have of use in that NIPT in then

of first million put So half it's would that call if factors repeat. I $XXX one-time these together, don't in the about what you all

half from we're versus looking those exclude the flattish first basically it's you If half second first at half. annualize, and

Vijay Kumar

comment That's helpful, picking I is in utilization the could up on, one Sam. if And interesting. the Francis, on maybe box

uptick how record consumable a should does comps utilization perhaps we placements in markets, the like correlation Given on here? should what outlooks, draw and XXXX, in MRD we matter and comments, these fiscal outflow think could healthy budget-free about look or this

Francis deSouza

Yes.

ready saying, XXXX, to on So seeing. I'll about start but make are color give the I'll as by you trends we're not statements we more you know,

portfolio. what point that out, employ. you that instrument business really we what's the I lead since the to of backlog And overall seeing for indicator model especially instruments have about a exciting on that the about you And the is because we across launched strong we're instruments side tend if look As said be NovaSeq. highest instruments, at we

highest we side, the product high-throughput have for order XXXX. the On launched QX volume in we the NovaSeq since

the mid-throughput double on you average last the for at few track side, to ship we're ship years. the almost we that the we of On look number if NextSeq

strong mid-throughput the the low-end, out really MiSeq then And even last. the shipment remarks, quarter the of highest got portfolio. the I at any in we've in as So in pointed momentum

momentum that we the high-throughput, big year. So, are in all going low-throughput, of second businesses backlog showing into those have mid-throughput, resulting half real the of the

Operator

of from line Next and the Schenkel Company. Cowen Doug question is of

is line Your open. now

Doug Schenkel

appreciate it. I guys. Thanks,

First I'm is talk going thing to GRAIL. about

in So recognizing remarks you to talked prepared your you what that about GRAIL. remain committed

process is not it going clearly and fair unfortunately you this course way in it's with different to you And but say PacBio recently happened know. not way, the this of think expected controversial a I to.

to any if this out doesn't a into if a dependent? go over not try most you doing effectively way be know is three-parter to, happen can’t does, sequencing to this kind one- if company conclusion One, regulators, that I acquire the XXXX? a really third, that's So Illumina EU hope what and your could it through, that the willing And to evaluation service could in is in stick well forward? really to Illumina with the but approach? regulatory expect two-year process run here. or tactically are you you do moving period. happen, think like want changing process then with out they the your And seems to of how drag best clock you then And what secondly, that you are this better

Francis deSouza

Great.

think I I all those have questions.

So Doug, those questions. thank you, for

So, first process question we is willing run and with if to does are look stick going the – out clock. it like the is this, to

way the work timing So the is is going XX. to the deal contract lasts December till

FTC in And review, that there's by because work, another so case the Commission this the European processes approval we're both one At working Luxembourg there's all get those of the by way European of X to land it there's we XX. point, point, to jurisdiction. dismiss doing that in are the work December possible European Phase is and the or At the doing Commission timeframe. there's we're we're and work in work doing this with those with the FTC, the

the And so this out. to clock are where get we're at to through run period this committed working conclusion. not has point, And we a this the to at yet stage stage, this at

deal We continue is to believe pro-competitive. that this

of because business. can to continue that of will in of We be result we saved this we just the if accelerate GRAIL didn't lives tens simply that not believe savings the deal would thousands buy

else would buy anything So services or to other working mean not read we this the provider that that deal, the year. to committed answer I we any through want we end through can't the this to timeframe, are to buy. question, of through

number of We other acquisitions XX have months. the done in last a

going have we look it means for So shareholder need to those through. time. if long-term from to believe those to for gone think add we value. we continue to them, to continue things I acquire are And time that look will And we

need can it's learned of don't clearly And we are to telling other the the that on employees a terms over folks clear we And thing hill. and to D.C. I the is, the things presence on to the spent the fantastic more – of what our hill and we that become couple – story In personally do to presence have really one us hill the Illumina on there resonates. in starting we we time of so months, better, a don't hill bigger there. agencies have story various and the lot have we're we’ve presence build the and a is, the last the

mean support we get and to people want it. really And it behind so I when story, tell the

so going of one to hill, and and have have the on often going going we the be And differently more a story and is presence we're the learned more we things do clearly. more to of Illumina telling to we're

Doug Schenkel

be and threats and XX one, go, more space going some this way you that's and a me bit seen already. come maybe now, focused lot to from at maybe that And humblest that, conclude over terms read of the intensify lot in in the feels thank Francis. sequencing planned sequencing. of then seeing There's look of this acquisitions for We're that one. say let sequencing. somebody a to landscape a short me something. for few It kind seems in going to it on means in entrance And platforms. There's public the advancement years recent long what fair And last new little of to technological that we've to that, appreciate over next going in to the ask of the years, read seen tools. it's kind different and competitive I you be I longer-term a say Recognizing possible hey, are dynamics the coming in and think a bit has try

market? soon New and about to think same? or think cell is from the top really past, curve More of few of next years as instruments essentially the playbook that bit play the the way few little So the as next a about same next the kind the density as is you you year maybe and we Thank bottom different? have elasticity the in think flow you. years, as same

Francis deSouza

right. All

question. great Another

coming competition the terms couple through the so you each say, talk this few this, always behind and And of competition, markets. I’d we've and of part. So two, intensifying does like And therefore at the we and before? a right? is is ago here? of the One feel go will it playbook in is given Thermo same so look, Qiagen some we'd years let's a in appreciate waves let's years in a you've competing that had way is And One, the be were question. about talking been about parts right XX now wasn't it looking of from

and is there are have decade. And after very this companies are there market there told dozens investment. it'll conversation big we at and anticipate of the this dozens we and last companies we're so to anytime so giant beginning – I'd the the venture attract lot that a still go because that mean, are have of to fully I you, funded have been being of the And in continue market, had sequencing could of space.

time. that in So I liked are years the PowerPoint, competitors bodies look what said you, but get difference in every one different, people The don't of being I the actual Doug, up launching. never from the from a especially sequencers whose obviously, see of of is of away started. than you And great I number a said launch you dead the couple could companies closer of where showing literally on trail read terms notes to

we've that. So seen

Those set gold The parts follow. that. continue point sequencer to have a forward, be more us continue the sequencing that to etiquette, more playbook value the do be be we of Now to to now part playbook the see faster to the the the in that And space that just will relentless get. expect to into same. price acceleration, market sequencer. continue for the the part as though same, will continue our built terms with And same has follow, in competitors another with accuracy, of innovation else customers seen our competition of the we standard add that's a you've that hardware the more and set is everybody competitive better, so going again, to will

a into pipeline the sequencer. that by bioinformatics do You've built seen now us expanding that's

so we of And the our what means from continue expand that's market, you we'll and output sequencers can unique react force now you call. that. variants made and in from now we sequencer. to the to became to create everybody to get else sequencer it it our images, remember And move then our the through And and base a

it add genomics So But some sequencer variants. playbook is that to Illumina's you've changed. got was to a than used The the single of secondary diversified your instrument, business HiSeq, catch to been, industry before it's GA market, few part more and we years A has Illumina up ago be our really and way ever that. the now and the you targeting research to right. pipeline giving to

throughput sequencers our the segment market. that's the were sort REO, So right. into business, of of you research highest selling one only Today

of we cleared is applied. of business have diversified, a our the from our market. XX%, really half outside lot workflows comes and research than the and Our XX% market, almost is business end-to-end the And More the U.S. clinical comes into rest from business

And landscape, out at single matches so the segments there look the business. those as all of no I competitor

have different if workflows, of it a cases, better, of some deliver In sort in end-to-end cheaper. their And own playbook. cleared so faster, is you have cases some each them to

different a is that after so no that's at, I and there's I of business. look competitor our Doug, And can – single mean, coming competitor say most

Operator

you, speakers. Thank

from JPMorgan. question of of Peterson the Tycho line Next is

now Your line is open.

Tycho Peterson

specifically, think about some weren't said And Francis, COVID takes expecting you are last as you back any the wondering we to you PopSeq half of some instruments. ongoing? question, guidance of in Hey, about just think quarter, those thinking the programs, surveillance the gives side, risks on of how thanks. on that to the then I'm about the and back the year

some have this quarter. instruments did actually You

could are what actually underestimating that odds the the surveillance? side around instrument tail So on you be kind of the there

Francis deSouza

Okay.

two So let me the of parts – question. it’s

with me to PopSeq COVID instruments. Let then and go let's start

with PopSeq We is with to full force. Biobank, where talked are very I continuing we're now. – COVID right the happy the go programs UK about

towards end sequence this it's production but the of year, scale. of sort end to it full continuing at to expect We

production much unexpected thousands seems massively samples week, I don't about scale. doing the what's expect of at All really barring happening and all We the now something of of disruption us. course year, that robust. sequencing for us over of is with full a talked And pipeline

Getting well. XX running up running now really really we programs around that, about are the often So and that into exciting they're have it's PopSeq world. is

other, from they is around of, that world terms to more protecting. there's starting any contribution means as more bit the other us impacted of gives that’s the programs And part so still than revenue wrap if resilience start parts the we're And that diversify to the PopSeq the a world. I in think little

healthy us of the I terms the for think really rest it's PopSeq setup a year. for of in

right; COVID buy We I in few happen told year. for behold, you we going the during here QX. to weren't in And QX. instruments this of when you're terms I call we a surveillance months more the was expecting then thought ago, in instruments instruments, any was In some that told COVID

predict. candidly Now business is that part hard the of Tycho to

the we've the $XX buy possible. it's predict. And, but yes, instruments, what that's more terms more to of and of so absolutely, We And year the model million instruments is no again, buy into million built – for in hard rest $XX people to consumables.

Operator

you, Thank speakers.

Next of question Savant Stanley. the from line is of Tejas Morgan

line is now open. Your

Tejas Savant

China. Good just have a PopSeq, I and Francis. to then I question want evening. on on quickly follow-up Hey,

into mean, So on with government by could that by MVP then of news here PopSeq, been heading targets issued of Chinese terms it the over some pocket – a of some And there Obviously, renewal. the risk around XXXX? second an for of be bit mean, was for What's delay in little generator the some possibility I you a an bit on here recently that's your a China, new of revenue of there's the hospital larger years. a important as air customers I purchases. your

impacting following thoughts growth the geography. important growth? Dx, that any So driver been that in NextSeq there Obviously, on your you for regulatory approval, has

Francis deSouza

Yes.

Tejas. So thank you,

go through questions. the two Let's

we that ones reasons running confident the number at already year. the the about and have of that of bigger pipe that I a of revenue really the we number just rest PopSeq the the pipeline the have fact now a programs For PopSeq talked for feel in scale. We

of at pipeline. the the looked the And the sources of them diversity really in associated and looked we revenue feel but so we've timing, at that the any confident PopGen risks

we've China, been were In China. the out terms about seeing in growth seeing we happy talked We of we're of the China. really performance with

our We you position are it And on paying is things touches off. maintaining asked leading in about. China, that our strategy the really

we always very So in was centric. strategy partner a that China have followed

customers. customers on and instruments them that have those – products building And we those are our Chinese into selling partners partners so are And their partners.

And so maiden of and position that under China. are the a them puts a in qualify lot good in even us China regulations really

is model, in things, a sort – then that other touched positive the of LDTs means partner of NovaSeqDx, thing other it on, China which that when positive in forward – step terms really and that's a again, very couple The the also what of is but is you regulations a in for the around China for a us future.

momentum of happy So to positive some pointing where the encouraged with we're we're forward. things it's terms going of by, the in seeing growth

Francis deSouza

now ongoing half thing second that on which XX forward population add year would on the in genomics genomics driving population exciting I or we thing initiatives what about to but one maybe talked so really going half, regards the an about earlier, is basis XXXX, are also in the of initiatives contribution is And the with genomics, beyond. population and

very – that in say diversified are we respect. I So would

of of actually but are contribution. the talked half. spread that second ones do the the UK we across which is that And that contribution we and them they large wrapping ongoing. number the are ones drive Biobank, of happen, starting to not have one up ongoing waiting terms we've In is about, are which Those a to are in

Operator

speakers. you, Thank

Bank De America. Next Bruin is question from Derik the of of line of

now is line open. Your

Derik De Bruin

of a couple questions. Hey

that, quite be new of been, backlog one instrument lot NovaSeq in mean, has commentary the product introductions? your still the know for we've should or it. earlier sounds out say and earlier like what's the of philosophy and think I philosophy and the last I numbers or something know next or remember we it I it are the impressive in talking what's product potential I the would I year runway strength coming I And Francis, about on this that likewise. like on generation existing a first – now we given year, were portfolio? introductions, were like new your be was will NovaSeq

Francis deSouza

It's great question. a

will the products about we tell has ready, market to I'll the point, market of when Some additional whole. grow hasn't our The meaning not one into the ready unlock actually Derik that is, changed, but part is market part the as you philosophy elasticity both. a absorb we launch part has, that think changed will price and we

And we to we our curve sort and price the of so instrument capability, an a to with demand to that's when that the dialogue with we try an certain feel of market. continue to through the bring there be when is. certain customers product where a in market understand the or expand opportunity And launch is point

with It And really product wasn't dramatically actually. with XXXX, interesting. happened that mid-throughput engineering teams the constantly we do we're it's not of offering. what a a going to the an cycle. new result watching upgrade a has dramatic that changed with we time XXXX, to then in to actually, XXXX. ready has market's And our the continue the technology just part What what when the of X,XXX the and segment XXXX market. catalyze So the been into has is has NextSeq is are expanded philosophy right the the X,XXX pushing technical NextSeq when market bring seen And just [indiscernible] we it's or And replacement of feel those have changed. watch technologies quite it and to

instruments few who lots are people And open we put catalyzed the mid-throughput market This are out year, X,XXX If track steady. that over and are number almost for that we've last And markets of been points years, mid-throughput of on at the there the you to number. it's fairly the buying and up NextSeq been is shipped look still in happening double with that's new instrument the genomics price we've different XXXDx. What's the has before. with we X,XXX.

to of actually cycle, to up even offering but an an see just segment. other segment we a segment catalyze not now market upgrade in with open that so market an that And in opportunity parts

building And think future about into as different we we're a now that's our so products. philosophy that strategies

Derik De Bruin

ranges the base pull That's instruments. some was on NextSeq NovaSeq MiSeq? Could Specifically on sort any Great. pull us on share install what you like that? Thank through through pull and didn't really through Sam, give the helpful. and your of you color you.

Sam Samad

on Derik. high million to X.X Sure. we the were we for With that last regards going X.X happy guidance to end to range. instruments Yeah, NovaSeq, be was we the that million to. shared that said of

QX, is we're will I be range, expectation that now above for to million, exceeded that. we we for And So can the million going X.X X.X the to you year that our exceed full tell that. that

that. to to the MiSeq, cycle is haven't giving be XX,XXX of going we within XX,XXX with range high exact not to right With we an we of we're at for the instrument. instrument. the that XXXX With so are regards to for the through at pull XX,XXX X.X that. through that of we've whereas the number, end or that any to NextSeq NextSeq, So at high XX,XXX NextSeq range to of pull but to those within regards on pull-through now shared And that are the are that end instruments high-end we positionally NextSeq provide early XXX – range shared, pull-through MiniSeq to that XXXX XXX on life we're pull-through least, XXX, million too above that in top-end. of But XXX regards on

Derik De Bruin

very Great, much. thank you

Sam Samad

You're welcome.

Operator

Speakers, from of Dan Arias the question's next of line Stifel.

Your line open. now is

Dan Arias

and $XXX for point the can NovaSeq you readiness you taking just I you percentage maybe point? this seat is a advantage of genome have base more your do importantly, on read Francis, question. market do? just Afternoon your at guess on what guys, to it thanks of where the base is, capabilities customer if share your

Francis deSouza

have it? say the a and broadly $XXX summer, we're now reduction the you available put market give I customer. which would question. to into last don't how number genome pretty You a price know, elasticity is I they seeing, the percentage, the would but that, that's about specific with to that NovaSeq I think any catalyzed great say our

price would I of point. significant themselves a number expect them So are actually – at that availing

I'd you for necessarily XXX running genomes I them but price panels, a not to able point, them, of but some don't used know of NovaSeq TSO of now a NovaSeq the applications, a percentage course, for of large number are broad applications say exact they're of lot lot oncology in these or of have of range very use a give Now are an those at that usage that, significant that kind to you.

Dan Arias

it you maybe how that guessing, critical strong some franchise for response in there? going out we mindful forward, AmpliSeq be enough should to equipment, see that cancer guess, that be your Okay. side, of I'm a of then partnership or or I on the terms call might done, had oncology showed and pretty Illumina there that material work of are for I'm of we implications the margin wondering, the any usage

Francis deSouza

the about to revenue our think of of business thinking the they in the of in terms I have we the critical not a oncology what nice terms broadest it, do, to can want as reason that wouldn't not contributor big sure The want a revenue to us. it's of the in because I all. a that make we at way we have the of options do part a oncology make about in the customers did But portfolio, our that part but for meaningful portfolio. to is, revenue even it's part it's Yeah,

Operator

Patrick next question's the Citi. Speakers, Donnelly from of line of

Your line now open. is

Patrick Donnelly

questions. quarter, do trying the you actually, then the to and I'm per due to to seen today cadence for again, as se quarter customers weeks recent or handle of shutting of recently the we particularly a couple quarter the throughout wondering slowdown activity thanks I'm particularly here? just of have weeks kind on then lab in any up last Just and or here, picked down a things Delta? get be the Francis, how tried guys, taking might Hey in

Francis deSouza

Yeah.

you like quarter now, but we're it is the know and seeing with right saw fast start part, I'll the felt faster. see was the linearity not Patrick, we whole in started that fast slowdown – any DSO So are any internally I you The terms mean, not seeing we way easy quarter, in because shutdowns. of improved the Delta, of got could this you it

So there the was was slowdown was it surprising in it again, didn't, started middle. But no fast. what really

end hockey not starting So pronounced say the necessarily I'd fast a in we stick the at the because had was as quarter.

Sam Samad

COVID to that your said, we with still just regards question, Francis Patrick and more still about, see point did think not you Delta no are raising. a year is one When as obviously we in Yeah. slowdown on

the think still it this we second quarter the still seeing half, shutdowns, the any exited So of point and that we But impact very you strong et as when not – at about obviously cetera. we're potential about started. think

Patrick Donnelly

And helpful. last there. clinical just versus we quarter quarter one and on side on expectations seeing it a NextSeq continues, just talk then and that Can That's are going up demand record maybe much there, how quarter forward? you're then the quarter record you picked seeing the after what this about

Francis deSouza

Yeah. a I story. mean, that has quite remarkable been

few shipping segment segment. minutes almost look we now instruments a into mentioned number we're it's I that think of shipped in if the ago at historically that you double I what that

things I'll to few we out; and XXX a XXXDx. one, So point continue ship

continuing So those there on are to buy. people they're who instruments, validated workflows

many are and driving. year about be our customers number And the new that to on of new It we sign continues and We to that's in. applications for us to are seeing future of of talked think workhorses segment we're NIPT, about you Illumina see portfolio. that a good purchases come all place instruments, growth continues things you of to so we're the The so in terms things last those that great all the we reimbursement when as to purchases really for you it's that be is oncology, a markets, and that see exciting are because for in true. clinical applications seeing. NIPT in lead And in kicked of some seeing oncology, about instrument for driving the and indicator that expansion us are a in talked instrument that clinical

Sam Samad

points by adoption terms add or we're not and in customer just type, customer from. to can but regards a maybe with of I the Maybe seeing data type placements where the split come

terms new into roughly We bank are stuffed customers. XXXX, in XXXX seeing to is We're in basically XX% new customers pie expanding NextSeq roughly and the which XX% coming our sales of encouraging, also coming seeing the really from Illumina from customers.

those are NextSeq strong upgrades, XXXX as But that really going the on well is XXXDx MiniSeq XXXX XXXX NextSeq customers capacity not now up to seeing also either and we NovaSeq. that continued HiSeq as as seeing customers and going we holding are very MiSeq NextSeq into with as NextSeq those instead and going and So XXXX, categories. XXX to said of or in we're XXXX. conversions well, What are the is really NextSeq placements XXX NextSeq

said expect, seeing we we So a are if we didn't handful customers that's of small that. only always done having very, seeing something and we're not really very

Operator

line the of from Mikson Questions of Genuity. Kyle Canaccord

open. now Your line is

Kyle Mikson

questions. the taking for Hi, thanks

for here ask and mute. on few time the just a of sake I go I'll So just will

So first I pathogen And tailwind the could CDC centers when August funding excellence, in for wondering to the XXXX? expect was that of the given question. the that's $XX million for just a be Illumina, for

forward this ask about one was is material be a second if that like to pretty that's I to guess, growth The wanted going moving just and I'm on just going spatial of also about the bit. a half you I see mean the readout. I driver, And on do that? can piece just just Thanks. COVID the that then second maybe guidance a surveillance on needle, for talk year. and Sam testing wondering the

Francis deSouza

Yeah.

to me it start me let over turn – let Sam. So I'll and

Act that to the In we CDC of money gets and and Plan out. where, see the how allocated that terms all money are American money Rescue watching

business because our gets some emerging. of that ago, built expect a definitely certainly We course our much terms are money but given growth benefit built was interest out. from into the cell it in really much of going years, maybe contributor expectations do business bigger interesting, cell this than of how are be a forward. spatial definitely to or be of in into some but the single year, single we colored where more. certainly amount for our done proteomics, we in and years still few We the much Spatial that those are haven't following they there's haven't expect of going They drivers work to both, that proteomics today allocated

Sam Samad

August funding million Rescue going been million billion So how centers of Plan there, out of maybe first XX has allocated, but American XXX that excellence the and will on some gets of allocated. of in which a it decided these the X.X be the with XXXX, that went in into really now

that's think expect more that I the a a of benefit we long-term for business.

So – as be durable years, genomic a expect built that that infrastructure we that's the what the this benefit, definitely future potential see we epidemiology will in not the upside gets year.

at split second guided higher had in first expectation terms XX with XX placements second out revenue half. we half is XX additional XX sequencing the this consumables to the the In million and our guide. between and QX, the off utilization we million just of and equally had on we million just consumables. is we're the million is QX. it with the kind in have that In That QX of QX, what instruments seeing of Kyle, approximately of consumables we million XX the We terms instruments, what that and call as XX half. to XX of million million XX through in year, driven look have In script million than progression in QX

Operator

participants. I'll the Illumina call now to Thank remarks. you, over back for hand final

Francis deSouza

for you questions. the Thank

investor a As of be the available will replay section in our of call a this reminder, website.

of you release. forward concludes and XXXX. our look third in next for of today's call earnings to we As Thank instructions update into today. contained us joining fiscal well our call the This quarter dial-in close

Operator

today's concludes all joining. Thank conference. for that And you

You may now disconnect.

Illumina (ILMN) 6 Aug 212021 Q2 Earnings call transcript