ILMN - Earnings call transcript Q3 2024

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2024 Illumina Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Salli Schwartz, Vice President of Investor Relations.

Sallilyn Schwartz

Hello, everyone, and welcome to our earnings call for the third quarter of 2024.

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

be at the illumina.com. can of Relations release website our earnings found Investor in section Our

Chief will Providing be state our Executive Dhingra, financial Jacob remarks of Thaysen, Officer. prepared for Ankur Core Chief Officer; Illumina Illumina's business, results and will on for an update provide today and will Financial the Jacob review Ankur Illumina.

GRAIL year. As this a of reminder, in June we divested

SEC earnings filings. GRAIL review and results consolidated release of and see please a our For for our historical Illumina, financial

be of will which be stock-based measures, We our and non-GAAP discussing includes on review can available release website. compensation. results, to you in the We data the found which these encourage in today's GAAP supplementary reconciliation non-GAAP

is while against fiscal of we quarter of is third sequential fiscal as compared the the go XXXX. that As through second XXXX, the compared results, as against please quarter year-over-year note

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

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

over now will Jacob. I to that, turn the call With

Jacob Thaysen

today. afternoon, another joining our Salli. Illumina of financial and for strong everyone, thank you, Good performance. delivered you, quarter Thank call

sequencing growing of next of the We margins significant NovaSeq driving and platform the in expanding the phase to utilization bringing our innovation X progress earnings, and are making customers.

NovaSeq revenue was regions, Greater was revenue revenue Europe China down revenue expectations. was $X.X down Across with EMEA the highlighting X% our up to an quarter, customers, and Americas in has this to billion, In XX user shipped base. diversity clinical our of line our XXX. we X%, was been XX%. of installed year-over-year, XX%. additional Plus installed placed the QX, In total our base instruments, up was Approximately base X XX% bringing

a The X revenue, Series cumulative $X major surpassed in billion milestone.

operating update. we allocation began and non-GAAP we capital diluted of per exceeding the executing at XX.X% margin of earnings laid share strategy $X.XX, expectations, our on strategy August out Our our and

funds than persistently range. revenue macroeconomic Looking be prior healthy, through now year-end, to slightly expect has near-term our the remain environment the been guidance XXXX while ahead constrained. lower We growth our

XXXX journey, However, made culture transformative of this performance. we we raising Ankur far margin will and significant earnings for excellence operating strengthening so our are the have reflecting additional operational his driving progress remarks. guidance details share, during our in year and per both provide our

To innovation continuous next expansion. achieving single-digit annual XXX in strategy August double growth customer deeper excellence and and strategy, commitment of operating set while key operational guide expansions the by basis drive margin a our margin points out EPS achieve revenue high against digits years. to update, our to During over laid teens to priorities and XXXX plan X we collaboration, this, growth to execution I've the

range the solutions base. serve deeper on providing a to increasingly customer our targeted is priority, of diverse customer needs of first collaboration Our centered

of grateful included partnership their and Most users. past are legacy of recently, Core several support. ongoing our for most lab of with to that a this customers experienced Illumina collaboration the worldwide. months, our connecting directors I'm our long Over and have some group academic continued a them with

initiatives: key with do itself better customers engage we to seeing the on way. a and to from And Their was customers that X to we the interact needed And shifting a Illumina to of in to impactful we the one, we most sight giving support customers early is I'm line hear in As we two, way invaluable, present area. observation ambitions. clear collaborate new the significant that in their evolve we My how in the have industry. input develop solutions allowing this customers, they with and focused now are us are pipeline. innovations products beginning

forward. see culture. will become mindset increasingly this a our our into serve partner It going embedded to pleased company's I'm of success as cornerstone

is from follows our Our naturally it is shaped need. they innovation, priority by are telling as first and us priority continuous driven second which customers what

example, recently announced For MiSeq of the groundbreaking iXXX. we the launch

solutions for Early faster addressing process. flexible fold are demand approach turnaround smaller customers for with into throughout scale bringing our feedback the advisers of projects is We validating the development as product time.

our Customers to thaw room demand agents, with end-to-end workflows shorter paired have portfolio. leverage XX we customers times about releases to are excited Over these across the sequencing without have need asking what for. temperature The they agents. intend storage that are game technologies is new this and And changer. time, allowing our a on shipping been run future of proven expressed for in

begin that update, including will we our will NDS instruments easier. following number months. the demand strategy a early making shared innovation, IXXX comprehensive whole the in we MiSeq in for days XX by to launch saw access late shipping next while additional genome the sequencing reinvent strong driven the At and announcement. these Collectively, XX workflow our of will customers over genome technologies X-based genome, QX,

a Comprehensive multiple just technology extent as SBS few hours prep eliminated of minutes. whole cell, layers the chemistry. to Standard Library constellation performed additional is going flow on redefining on is data, novel information directly created of of from to add genomic solution a the by time it the map read hands leverages genome

which single understand diseases, library information prep. Customers is based a everyone, Another variant from obesity the fight and methylation customer-driven to to and cancer, access innovation is which will important provide will infectious including diseases. have information in genome, epigenetic

product providing Both that will and feedback Constellation solutions influence genome are with X-based development currently read advancements. our customers the technology map in

these We will ASHG access like details providing customers this from events X be at innovations, early week. including further upcoming later results industry on

cycling X as for QX, will upgradable the In We the year. applications, NovaSeq Illumina cells, to XXX single X for continues to this innovations will the proteomics. designed deliver we In be XXX high flow on near cell and shipping by X output Series. to flow NovaSeq such NovaSeq cycle accounting track remain end and term, single of begin introduce This XXB instrument cell Plus. the the

priority excellence. Our is operational third

to culture we here only enhancing foundation progress our have top not driving a powers and in a benefit we productivity, positioning building Indeed, is that to to made directly the every long-term customers our excellence. investment regardless driving capital allocation, they our of and focus serve, build our patients great is operational contribute the smart Illumina are efficiencies shareholders. and Our optimizing spend success line, employee also But our where employees to by

our to Now Ankur I'll on ask more outlook. quarter results and third share detail

Ankur Dhingra

only our about this information, call, is going financial an everyone. I'll earnings and results, and developments balance then guidance you, Illumina financial outlook excludes on for expenses, that sheet more forward. Core our overview our of you about GRAIL. revenue, afternoon, and speak good shared All Jacob, on including provide and color give Thank we

put was expansion strategy. $X.XX also Cash Illumina's our delivered strong, with the we allocation strong team earnings remains and and margin use all revenue of During And of a capital excellence. quarter, line ongoing cost the third across billion generation cash dimensions discipline in our very expectations. and through operational to

Now I color to each will of these items. add

Third instruments our business, compares. business X% year-over-year with declining quarter by revenue the both was constant a basis, reported against launch down currency growth strong offset on in consumables and year

Sequencing progressed Consumables. was uptake continued X% $XXX driven year-over-year than faster X forecasted. consumables million, revenue The we X by transition NovaSeq strong in up

of more giga and XX% Series. was consumables the than NovaSeq XX% more bases than As X of on high-throughput QX, are revenue sequenced of of end high-throughput

X some clinical are giga NovaSeq on Xk clinical, of of the were bases transition as saw sequenced XX% high-throughput X from quarter, including acceleration We approximately in to Series. this the

FA's customers. legacy cell clinical flow of XXB As have to volumes and transition clinical increased we X-Series, seen the the from adoption increasing

While half there of make, the throughput transition pace Series by X we in middle high almost quarterly transition some our based of customers still choices XXXX. believe of the on variations will consumables to be revenue put

from Moving both customers. to a And XXXX. more clinical Total globally. $XXX sequencing our growth to as instruments our cash placements research high significantly a year-over-year, was million activity. behind driven slightly at mid-throughput two, and X sequencing by QX, GB connected mid-throughput placements and grow continue continue NovaSeq revenue in purchasing output year-over-year third robust for XX% X decline decline with shipments decline, expectations. and constraints XX% factors: behavior quarter was instruments year-over-year Sequencing than one, on rate capital in to launch-related instrument of moderate the ordered compared The impact a and flow shipments lower as to

an service instrument a was from strategic on high driven base. service in Sequencing million, by well X% revenue increase revenue up as year-over-year, and as revenue other growing partnerships $XXX contract installed

increased margin to operational for primarily Moving the by was margin gross our P&L. points of year-over-year. Non-GAAP of the XX.X% XXX excellence gross performance the strong execution quarter consumables, improvement This of rest in a the driven also and revenue more savings. was to continue of Year-over-year sequencing half productivity favorable by improvement. that making up of roughly that initiatives mix improve deliver cost gross supported margin basis

productivity business count were of mix roughly going and head Biosciences. $XXX the will expenses last achieved quarter-to-quarter of on from are margin This additional will support flat the a improvements to our acquisition change basis, operating expansion resulting sustainable While quarter. million includes our forward. expenses Fluent Non-GAAP have and the we

effectively. expenses manage to continues team Illumina The

we As I in reprioritize reduce to mentioned expenses. strategy during our several play our update, and actions have

non-GAAP period. across XX%, came the the our in in compared XX.X% above result, prior guidance approximately for of was by operating strong a gross well performance year margin operational to expenses. As in quarter driven XX.X% the discipline margin and This

expense income operating Below the other million was in $XX QX. non-GAAP line,

along we quarter, XX% hand the the was [ delevering loan, tax was info to a debt effectively ] also in the reducing rate $XXX redeem issued for cash drawed During rate. on $XXX quarter. Non-GAAP coupon term at high-cost million that million X.XX% used interest our delayed with and

year. income credits per Putting return non-GAAP per share. we'll all last our In benefit share QX it earnings together, a as or diluted million net diluted filed onetime see was for for for QX, $XXX we few the $X.XX of

approximately Our non-GAAP the count for XXX diluted share was million shares. average quarter weighted

flow flow Moving expenditures and and was free were million. million, for quarter. at $XXX cash $XX $XXX to balance operations cash Cash by healthy the flow provided items was million. sheet Capital

about excited During in instrument-free very acquired We're capital single-cell adding allocation strategy. cell can the we line this to large for stated the technology quarter, our potential innovative with put experiments single Biosciences, to work Illumina's technology We cash enable. Fluent portfolio.

authorization In and put addition, share. at in million quarter, following we from repurchased earlier And for $XXX.XX stock shares a share Illumina this XXX,XXX place our $XX we per delevered. noted, average of of price as an program Board repurchase

quarter. these with capital show execution cash the in million actions $XXX short-term cash, and our operational of strength in Taken investments. the approximately ended together, quarter the equivalents We

was we to revenue is capital sequencing throughput flow expectations. line and strong throughput. earnings We announced in products margin summary, in In with The well. stated X the revenue shareholder-friendly goal expansion progress significant towards growth, and been high our of made going actions. improved towards breakthrough cash We our deploying new quite NovaSeq low have of transition

guidance. XXXX to now Moving

overall our and now results expectations are met down expect to year-end business approximately for tempering expectations, be year revenue revenue revenue Although full our X%. we our QX

expect QX, $X.XX to revenue be For approximately billion. we

near-term utilization of macroeconomic to pull-through constrained levels year. strong any in We but and behavior support environment see uptick the on the our end and purchasing does continue remains through not the instruments

decline instruments instrument an perspective, relative we're mix versus range percentage and projected forecasting to is in the still consumables unchanged, to mid-XXs XXXX. From the revenue

we are access, very is excited will we in QX. minimal early Although MiSeq XXX, contribution receive in it about and revenue

in instrument customers QX for, decline waiting for instrument. our low-throughput with the As we will business likely had new planned

shipments we X throughput, delivered we of high XXXX. above in second still NovaSeq the half expect be to first what half For

and sequencing the with forecast still in also uptake to year-over-year stage consumables setting strong upper the usage for grow growth. versus quarter, the GB We low single-digit the We exiting percentage third end solid consumables revenue towards year the range of XXXX. saw

outperformance in we While guidance operating diluted reflecting carrying into guidance, revenue for our forward operational margin we are our in EPS, increasing QX. excellence are the and initiatives lower of impact and our both disappointed QX the

for our XX% We non-GAAP to are operating raising range guidance margin a to of XXXX. XX.X%

raising we're for the projected We And guidance diluted our earnings $X.XX XX%. are XXXX. to approximately range share tax full year $X.XX year rate reducing to for per range our lastly, non-GAAP for to

With that, Jacob you. remarks. for over to will closing it back his now I Thank turn

Jacob Thaysen

Ankur. Thanks,

has As I reset our our the structural momentum first orientation. support our refocused forward. and reflect industry on and the created the for early I'm excited to first We launched company on Illumina team drive and the year, made have made progress changes leadership my strong business new to the we strategy. necessary We core the customer

embedding operational multiyear results are increasingly start to show in culture, This in transformation excellence been our our is and the journey. good beginning financials. We've to our a

stated back during forward Ultimately, returning finish would update. I'm single-digit and encouraged I although high to QX by bringing looking strategy confident growth, are specific we to guidance. like to growth XXXX, providing our to revenue in feel as Illumina For XXXX, before

now line to invite Q&A. operator I Thank the for will you joining the for open today.

Operator

We Instructions] with first will to Research. go Doug Schenkel [Operator Wolfe

Douglas Schenkel

On keeping clinical good And a really do down customers. Sequencing this you are you sequentially. guidance, off in in of standpoint, revenue building a And placements from progress do of you're drop? making slight expect terms Consumable grow mind to with What of sequentially? specifically, kind revenue clinical guiding expect bit specifically, just you to

as When that some are looking assays a moved 'XX. have to box, X? the you a do to on existing just for about clinical going from consumable much how a to be I'm visibility concerns ahead know addressing look you for plan? do cliff Specifically, place you help instrument legacy when we revenue customer's

Jacob Thaysen

And that. clip think I look clinical we now. at don't the the few this for business Yes. a way heard and I've times, right Thanks that's

and the continues first think towards to momentum I course, there foremost, moving we're, excited that of be see X. to strong

earlier here mentioning momentum, the lot was we moving strong towards are of Ankur a seeing we're As volume that the X. seeing

direction the presenting is were the into Strategy pointing at everything we So also Day. that

also very in for of we healthy uptake guidance mentioned here activity year we are for funnel, we mentioning actually -- for And though saw strong are very QX you the normal normally of as take as that out that nice even we But -- not our -- we end see did mentioned, -- not We is -- moving coming seeing a indicator towards that's down we -- into as did we tweaking the were see instrument the QX we're for what Consumables. we before also that see. we trajectory seeing I the revenue a also you're X. think our is of the

customers. we our of understand actually and clinical our I how into larger lot what our we we go as to customers, them on our work into specifics to the deeper actually and funnel with a we on before, actually to going With have transparency quite spending do spend they're closely of with mentioned pipeline. We lot are are a with especially time where to have R&D in time, where

new technologies. quite we come transitioning to customers, also certainly get they're have with on looking And good different our out but they're the they clinical That what projects also for we our academic and to So over goes a into when the customers. prepared when X. can understanding transition both

the takes months XX% by to over assay. a Ankur than months. I saying, And the to the It say X. look a But This few a seen don't level XX more at for year, is takes from over a assay clinical to if X transition we've that Now also XK just normally completely of perspective, time. was from usually would I customers and volume going it if now lot in accounts. we what that of not it high see is

Ankur Dhingra

Doug. Ankur, is This

specifically assumes to our other right part, QX the Consumables, the guidance from question typical your for now seasonal decline on Consumables. a in about QX guide QX So to

perspective. seasonally, purchases relative As I pattern to there are transition clinical other and in I'm well. Nothing looked at few lots seasonality. what trends a as know, simple right QX, you the of kind underlying last They're assuming for that And perspective the a et of looked the QX seasonal guide Consumables now. cetera, during holidays down follow or transition, quarters. years the do that's and from back the in

Operator

Puneet We'll to move Partners. Souda next with Leerink

Puneet Souda

a walk just understand competitor? a the mid-throughput that considerations number can through wanted asking mostly there U.S.-based from on quarter the was China? hard to you just for side, then that clarify briefly was I U.S. the Ankur, And came -- from in provide seeing but in I XXXX? just that mid-throughput -- for you the mid-throughput you about decline us to and Europe Jacob, from XXXX. Or decline competition was more there, have it's

biggest clinical taking customers over, reduce the the for as purchase to they'll be they here which the will time, at of But cost, they revenue. the also transition will that's the you. lower One obviously, a instruments, is same obviously switch new revenue

So as just XXXX? considerations the through can you walk about you us think

Jacob Thaysen

that. Okay, competition continue are And that Puneet, of I a first to with China. think the quite start across I let thanks with we actually encouraged I'm is see for one -- we world. me think, the lot

type recall, to relationship of As a leader have with reconfigure And our a in we the of reset you the organization, looking new in and many our Jenny organization, including has also almost might and months also China, coming pricing partners X job reset fantastic done strategy. at ago. different

that flat I to actually revenue starting And are working that seeing starting we there. we're see we're sequentially, that now, think to meaning are see

the in China. take see at we the that absolutely Competition the I that mid And starting to But a something early that of agile. it's world, out. the that is But So have change of front will I truly call competition in toes on are customers. It are rest before. us believe important us right here. more think you're better as something in our to seriously. seeing pattern in to it keeps It least, say too that I actually said we a company that very us competition. makes most we it's I've throughput. in it's makes

enjoy that. So I

lot and performance And getting I lab into the conversations, -- they're where will more mentioned, the academic those And you other we if a of look more itself, also of as small a from. with see had see also do right we they we business. were day, those more many instrument themselves. buy of say financial had directors. that the companies, still Core to -- outsourcing. the the would business I mid-throughput lab will see conversation constraints looking a to directors now, mid-throughput and their during likely I sequencing that And all previously see biotech companies customers, are small of that Due thereby we -- of the and them their

And macroeconomic is we us, mid-throughput. the of majority we before, pressure mentioned the see the for still as in the

would we that deeper So look growth are like as that go 'XX, think Strategy very if in committed -- into of XXXX. see into -- our will into we expecting to still this you at the still we Day, single-digit year mentioned, said, to I considerations we're we high by before But we end I 'XX. end

a stepping we've we then As were here we and from expect where seen we 'XX. had to positive ourselves go into And we in growth negative step mentioning, 'XX also that. growth into

Operator

to move with Kumar We'll ISI. next Vijay Evercore

Vijay Kumar

price on commentary. at about were XX% a Was but didn't Jacob for here. -- that minus expected minus hear line Analyst you GB chime activity you both can the The details of in in that with the of XX%, Day? XX%, or lot levels Ankur, a maybe I

the the margin on XX.X%? readjust you of to of XXX the off here the fiscal think margins, increase given XX% 'XX? Day, at Analyst mix the Or the Is -- given And updated margin we expansion for said guide expansion. that should base of I points basis impact

Jacob Thaysen

-- Well, very to I delivering also guidance us give first, in but on EPS. I'm for gross to a that, operating about thanks But that encouraged would specific Vijay. have here. and the little margin see talk margin, And I'll our GM, Ankur say bit the

to want our to margin Illumina times, the deliver I and significant company that volume in also we able speaks it in think progress expansion. be to tough the team we're

So the the a strong basis deliver where should I'm it excited highly points on -- out Ankur, at proof think are? I about to we very do we are Day. Strategy committed XXX that. to do to set remind you And points But give that we certain want that

Ankur Dhingra

absolutely. Yes,

Vijay, between around question So first in think Yes, that was I that it the answered I XX%-ish pricing. in range.

quarter, said it if the range. that of still X Xk see from price than within to XX towards end this that impact was model the You've we XX, range, rather that transition since towards did closer higher accelerated, but the it

results. around the margins, Now I'm very with tell the I you, can pleased

as the -- basis basis to work on what giving that right? team points, high expansion And it's model driving As of the start be get ability what be gross has I of XX% been it able our XXs base and and premised to crank as up I'm and us could about XX% XXX -- range. higher. off expand is think in here thinking keep model Our us XXX the that to a margins to do we X was things, the that point view

lots to have of within that still to out XX%. cost get COGS to structurally take closer We opportunity

the levers land of progress quarter, we're -- quarter still, the XXXX feel beneficial. but and that then higher I For or mix several looking The where that OpEx on about certainly -- and we at again, end, very how making. good XX% this working Q and side, I off this now, we're was think to

Operator

to We'll move Dan TD next Cowen. Brennan with

Daniel Brennan

data you late, progress -- the growth did how first revenue could expectations? on I kind you the that joined in And versus how color But some out QX? research break clinical bit believe. I the little perspective about Maybe customer could from we versus consumable base think gave I sorry, -- customer a out you base know break growth, one, a but of little NGS of maybe

Ankur Dhingra

Yes.

the for up if nicely. know then research clinical the both consumables clearly. I you're a There and I can that think was dramatic shift our -- grew wasn't X% quarter. very breaking between growth But don't X. overall, I And out

Daniel Brennan

Okay. you placements in Maybe gave discussed. you year what's on the kind any stepping were, were now in mid-throughput kind back instruments mid-throughput outlook contemplated I of the but I Could don't of think kind know of that they basis? color light. some just guide the quarter guys what for you from a give full breakdown the

any So kind the math and you about provide or year. of can color number of mid-throughput kind assumed for any the us full what's now for

Jacob Thaysen

Yes.

actual So at not this we're point, placement for providing mid-throughput.

an you And year update give the think, -- will the I little at to for back full do you We JPMorgan, Ankur, want as do. go we usually a you're on... maybe

Ankur Dhingra

Yes, Yes. for clinical Margins? the nicely. consumables not both misspoke research growth X%, the are and I grew X%. -- quarter, yes, the And

Daniel Brennan

Or other just know you're one Maybe can 'XX I is mean, to CapEx on one we're think we're But a in early environment. sneak versus not 'XX? it it environment it while is this Is like just difficult likely commenting is at down -- X the I it start X.? fair contemplate on I year-over-year kind to too to point, in say in? 'XX? fair of to the placements in given

Jacob Thaysen

like would I of the ready as that we to mentioned, Yes. year. when beginning the We by guide would do we the -- like

Operator

to with Peterson Jefferies. next We'll Tycho move

Tycho Peterson

per you Just gig is that here. pricing bit X headwind picking lower. we seems as Obviously, little momentum cost about transition about to happening, are thinking How to a think maybe the about going clinical up some the forward? thinking be

into have I think able GRAIL to dynamic were those those customers contracts to of And those X? transition the of they that oncology locked around you do dynamics? some break, multiyear sign. with the guess, about we How then Do

Jacob Thaysen

we our customers that providing that We customers X. compute we from with power the Overall, a but towards point, the is from our have DRAGEN that to we we X pleased are, and of interpretation also platform have. benefit is the the see combined that that course, power believe continue price move able substantial lower workflows with

a are to there's -- X. there's to why lot a wants the So on move reasons -- our of lot and customers

a are clinical considerations know, you and in of the other assay space, that what cost assets But working you is want current move reduction on new do or as to the the of if might work because all the not moving that also it sure over need see to you ready it move the to upfront, validation over costs you you the you're other. of type lot your -- so be And get your make might to to by you a over. on, assay, cost validation also, outpacing

So that's moving either seeing expectations seeing. deeper the a still because many And customers do the that our encouraging are us elasticity thereby, working the of And we that. expecting to that we're bigger are sequencing. is we I actually that's for assays panels, over customers are that out. now mean, are our

of time. to We over grow the are period -- XX% say, you continue continue as than more of we expect that next our placements with clinical, to and

I that will see a cliff. certainly not we concern out how there that's it, to not That's we is speak our customers. we a know there So see how

staged that quarters this of over the a is and follow We be and be we seen past thereby the trajectory happening, are transition to seeing it over will transition. have time

Ankur Dhingra

X the the -- the The I've out. Tycho, the every of the so I've customers Strategy impact. higher and is Day, during time quarters. But month here elasticity a we given going instrumentation still granted, far X transaction, higher higher throughput a during through just GP out shipped price of little the that see given growth. did We quarter. of And during transition, solid very playing I saw so kind been we that's the And acceleration thesis and are saw laid seen transitioning, the bit

portion quarter than we able now single-digit rate high this were that, I'm despite grow all, into our at in transitioned to all XX%. X, has a the more But of a talking business right? Consumables because larger

of volumes So half transitioned. the over already

us that the a GB growth of gives into good revenue. position, translating starts So good in part larger a puts a -- us that

Jacob Thaysen

not by your to what on think this open referring multiyear the you call the letter. you And is we way, Tycho, also instrument the I our specific. what offer contracts, -- are question about call And

the So or in those will with also contracts continue place are X.

Operator

Westenberg move to over next with to David Piper Sandler. I'll

David Westenberg

of to to build was getting both is that I'm a question, I'm from topic sorry So demand. I Tycho's is here question, this Doug's big of going guess, that the just elasticity on and belabor on we're Doug investors. cliff but it -- point,

positive sort you will to or us actually but can revenue -- GB playing whole actually of out there? us like know of terms little the a market some are cells it conceptualization of a whole is lot color, this assays a still I give net make that. anything on maybe is getting of build flavor to that bit flow fact to these in that new want that, So given already help a I you've

quarter know talk that not And you have then throughput about that of X that to just are the dynamics maybe QX on year been been a was seasonality some of the not QX. budget on one. obviously I the there's -- just happening quarter? question, Can flush in on low that the weight than only lower fourth where I part there's build think here,

fairly percent capital overall However, low the on tiny I is a throughput sales, as of mean, P&L.

Jacob Thaysen

into Yes, that. Dave, let me go

assays. to there's if think think X those things see I you about

bigger assays. I've think decided spoken that definitely have to to I make customers

markers have oncology So substantial they deeper or if more things require they decided add assay, on, to methylation maybe the but markers also have all a sequencing. that

really for Customer saying, we So and we for are volume And is strong top segment. now. that, was Ankur that -- also what uptake as to Academic clinical on both encouraging continue the that we see be right of should happening see

the while the is volume So it of X. -- really that and X most that coming is speaks obviously from offering to

and the the actually works market. of see the offering that X Research both even though for is lower price, we Clinical So elasticity

We same volume. seeing customers and to right over stay now just to... that Ankur, of a volume. you shifting and are the the lot are transitioning with X creating is not of do Most more them want also

Ankur Dhingra

that's great. No,

our working more -- if days, of cetera. And for driving sequentially, seasonality I comment the lesser at a think holding terms with the to instruments, potentially to would still et inventory, sequentially, mid decline there, instruments testing -- of lower seasonality that thinking minus relative QX. and QX up In your you're be questions what, Consumables mine we're my number in decline, our around given QX guide, was XX% --

our the everyone, still we've I remind to was would said life other of what this relative Consumables have a Xk. for shorter before, One think things X shelf I relatively

those of manage of the for days, of might year. tests working of accordingly. play choose there's out to be performed are the If number their customers may inventory inventory end lesser some or there So dynamics lesser our number to

Operator

RBC next We'll with Capital Conor to Markets. go McNamara

Conor Noel McNamara

million, on just for overall year, Is I out assume QX. I'm most that's that's I'm following guidance the safe think, to $XX to million the and it of change, revenue $XX assuming up else just where works seeing? all throughput to where that in can mid or give if of that are of revenue Is so, and all Instruments? you breakdown a kind you're the of And taking in out pockets the low guidance? you're in

Ankur Dhingra

question. good Yes,

to -- bubble it from midpoint it -- if panned closed, you're effectively is right, the me which with a pace about we we looked at out. in our very the back And in perspective. how and business overall, relative you're of pleased to Let Consumables very, the you that QX think when at up, it and just range talking

and same pin And put can fundamental environment is year-end the the that same is the reason if to much variability the behind if at we and us going the kind at the when were business of we be. at how gives been team it's pace look late, funnel, to we that closures, has going sales side pace on the our right? look closing, -- back and which which a Instrumentation saying And hard inputs. variable comes back continues, at at pace more of the But us look deals the the saying,

to we behind would, landed probably the end the a thinking -- them area a from that midpoint. roughly But of purpose, think the in from our approximately. weakness businesses. fundamental certain Services how closure was pointing way kind than our process kind Consumables it, to different work through and velocity as closer [ we of components, lending closer it do mark I pervious way change. a because there's -- about this guidance to take guidance That's XX perspective look the for deep that The good now we thought lower to figured And to we're better we at out our rather as Instrument, modeling equally a we of overall. And ]-ish that's XX rather than pointed

could X/X So take out I'm CDx services have of reason X. it you is we do And certain the out saying of all deals. also specifically because out

comp assay approved recently As you by was know, FDA. TSO our

are next those pushed tied a are agreements few into agreements CDx that. related that getting to to have CDx Milestones year. We

would probably lines. equally So the feather I X/X across X about

Operator

Stifel. Dan with to move We'll next Arias

Daniel Arias

Jacob, Yes. called we're a to and year. big consistently guys throughout It when XXXX. out pretty the in headwind calendar a coming change you like as doesn't environment there's macro now the flips feel placements the have

for are you What comfortable actually abating? should look how headwind can getting with rate impact as the the placement shift we positively? that So a

Jacob Thaysen

Yes.

very X, Strategy beyond at the to quarter-by-quarter Day, these mean, I point years wait we can't can transition have think we as Consumables mentioned if before, perspective, we that because Illumina right, difficult point. -- this is are starting think still look day the from a it's to things around. to in that us business headwinds indicator to mentioned growth do I as point, none do this models of macro definitely see for the calls the least to talk or said, over You're Dan. our I at that out I in about That easier quarter look, that at that we few this -- it's the but call here. early that a we the at at And turn -- while

different are that parts. in -- shoots improvements But we actually said, we seeing green

tomorrow say, are us we But with is believe change better. the iXXX We the Consumables is MiSeq up. with some momentum. As that looking coming again election giving the going everything to

right see, let's taking we're and now. quarter-by-quarter So

Ankur Dhingra

saying, us. one So is, I Consumables then right Jacob add the the thing was is for indicator as would leading only

then returning of consumables forward as the have it going play the half to around growth yes, providing out our some said, out. in year. The Instrumentation, see and kind foundation back we And to thesis of is playing Jacob kind of

Operator

Citi. move I'll Donnelly with to next Patrick

Patrick Donnelly

for margin the you nice this side. gross cost on talk we impact X to the one have million the Can margins as above I But progressing? this talk just Obviously, incremental XX% million quarter. It the longer-term year, savings side? can that year back that's of guess, you then how or savings And next guidance about obviously, Ankur, you was programs? $XXX probably see just we the over the so it, about, look of cost the just pacing the on you op margin next years. the have XXX that bps forward, $XXX

just on should helpful. offsets think think of that aware framework we for be about then should And any would as we Any high-level that margins 'XX? be headwinds about we

Jacob Thaysen

Yes.

sure ahead a much both So to it right since result set the before whole I the make the operational be challenged effort a top here, for just will line. details is here right the -- there want where look, we're on today period focus seeing very still in the company. in But meantime, the again really way we Ankur priorities on the that the up make be into drive company, putting the drive specifics better run to the but in focus efficiencies Illumina, came I of to goes and culture excellence on really we is also want to we company. might that a the mention intentional saying, an are

into how everything change goes culture. substantially and improvements. believe companies the I And do. we truly operations, also believe, that the the this through I what we that do. I company truly R&D won't in goes drive look like is commercial see the a way beyond And from we line day top good the that before, good will way operations it future said this and organization as is And what all just looking

So to details? Ankur, the go want do you into

Ankur Dhingra

Jacob. savings playing productivity is Now message to gains from. where Thanks, come the we're perspective, X so seeing drive which come for laying the potential And up, now, But a initiatives, starting also out teams that No. could the come relaying in exactly is same want has up months come up where what are right? bottoms last organization, up be, culturally, the plans also around culture. starting that across with in the this ideas the the ones where from to is to we could with

very heading. So with this how pleased is

about question, $XXX the savings Now million feel we this to your good year.

X% even we're substantial operating expansion. year-over-year, decline and at guidance If XX the revenue in a overall, you simply XX that look our a at about margin, talking margin pretty

inflationary year, pressures margin been good this or inflationary gross towards our able during during offset focused part all to our heavily XXXX. substantially of and more a Now we've of

good $XXX I year. that this about So feel million during

take as or the Day, during the point margin forward XXX both going said $XXX for costs as COGS our Now out expansion, of I to focus million as will well the Strategy operating basis expenses. continue be

already specific cetera. et the of lines We we're moved strategies, we've sites. some execution, line in of early our up our in global setting shipping stages programs, have a R&D around series centers, parts We're consolidating into execution at manufacturing changes, capability some of some our and looking

of and reinvesting, sales than we're are where little So we terms in we our likely bit across are board looking a we'll And marketing in that the at. reinvest today. more

right? of and expenses. points anything headwinds pressure, part I back merit over see usual beyond year, in a next basis that of expanding in, find Every terms will inflation to as But don't forward, about and going X I all, will inflationary come all that there be In strategy taking going ways feel of years, the good offset other the that. to our we'll XXX

Operator

We'll go Guggenheim. next to with Subu Nambi

Subhalaxmi Nambi

robust levels? there consider $XXX does of this levers to from quarter? would enough a free levels? And these flow. cash off aggressive go FCF the Where almost that, drive And generated abnormal building Anything million in current You buyback more from are you at here? in

Jacob Thaysen

with I'm generation now allocation this could on that of our we repurchases, And in that. for have strategy. so. as of of especially the our model all, we course, that on think course, to you stock a cash we to good course, were here and back start -- I mentioned creating We're into pleased company And We start where also, business. -- both, are And in you do capital be core will quarter, And Subu, focus will our work. to we execute M&A. starting see is see we Strategy generation. cash to of our but can the Day focused first Yes, amount, on at thanks started also excellent very after

And with we Fluent, acquisition started course, this this did of of back also, shares. both the quarter but quarter in buy finalized in to here, which we

Ankur? So

Ankur Dhingra

material business. and question, the Nothing for thanks Jacob, of the profile happy Thanks, cash Very Yes. generation unusual. Subu. the with

even in conversion, XXX%, in about So but terms thinking that I above the remain is well kind to think, anticipate of is this net I FCF what in it territory to near XXX%, if quarter of here to closer you're that income term.

very healthy So from just perspective. -- generation cash a very, a from business

you our next conversion. think will FCF of stock-based and to FCF frame, the manage we down. capital et some And expenses, Over the come a higher cetera, components little are be our a as in X-year lead expense different about time, of the our some as also to X controls, conversion that of X I going expect depreciation the narrow we compensation, those bit period take it to do when is to part time of

expect Now remain XXX% I it to above well overall. still

that's back well our to generation started cash growing as intent. you shares. back we saw, revenue, to as that as saying, was cash buying strong we and intend in -- deploying We Jacob this business position. the putting core towards use, cash start So And do to started

the at the focus out the least our shares overall on strategy, Day anti-dilution what then heavily We extent revenue after. buy opportunistic was during count So back then the growth. and our of to least laid be the that do share keep share want buybacks to at and constant Strategy towards we to is

continue tuck-in a our balance then sheet focused M&A accretive the on tightly. those be things manage revenue quarter. type M&A, this delevered and of bring can to businesses On technologies. we our And to remain that bit We side, intend little for in

any have manage the term, bonds continue there on. short to don't coming sheet but from quite the we'll balance in we Now conservatively other due here

Operator

We'll with go Scotiabank. Ji Nam next Sung to

Sung Ji Nam

market if elaborate be wondering on might dynamics, to the specifically Just end more the Americas. a able Europe you bit relative to

sequentially. look kind curious macro you just if year any a from And growth seeing drivers in there both your this be the at perspective? from has If been pretty Europe, of the what year-over-year you're different and Americas might what they're steady,

Jacob Thaysen

It's certainly were performance. our pleased conditions We to even that right. see absolutely tough also European very some that consistent challenges, we results. with you're in Europe seen under great Yes, have

that, anticipate we will next the over period that continue and -- So of time.

into mid-throughput where tough have of last from we X more been the we where was If substantially little has you -- higher pressure also but the look in more to U.S., competitive Americas a instrument -- U.S. year. And that's it's it a than also thereby, place in situation, Europe. compare in the

will it easier the that that anticipate forward. little going will be U.S. continue Europe we and So -- will a bit compares going we look to for forward, strong in

Operator

next We Mason to with Carrico Stephens. move will

Unknown Analyst

opportunity the I served for in your cell. you was if some able hoping sort This Mason. how just on ] Fluent, either of ownership And space. [ or addressable could out Ben maybe share you taking just players of talk see through from you'd in the the single overall to other into market dive is growing be

you great. those be that could through balancing if would there, talk Just forces

Jacob Thaysen

know, customers, beginning, build experience. Yes. volume will as a many cell get Thanks for huge to acquisition single you help is be single experiments. our easy of also Fluent since really into we're a will don't certainly amount the for that you actually believe also per cost that. to in do And very experiment very, And to excited layout able aligned for very the and truly cell that with high very cell need we of a the have strong workflow capital can you

our the So make committed have them us. very own that of support to sample our Illumina for helping same though market the are we on expand acquisition current now I we all actually the -- for prep we single partners think very at to is opportunity to cell, platforms. our even successful has -- Fluent And time,

cornerstone, customers cell. single be of next focus and get the to going insight help Our research to through a I foremost, to single you tremendous truly cell. first time, a that period believe over our is fundamental is huge in cell successful be in single there's and

I'm So and customers of on bullish on or make very our I believe will actually Fluent make our and whether the opportunity, successful successful, we and make us can we they that by they're focusing choose truly sure sure will some partners, need them cell to the they going forward. all single what serve and of

Operator

We'll to go UBS. Dan next Leonard with

Daniel Leonard

MiSeq that better if help consumables the of a in might What's be launch that sales frame the as that what I helpful line And throughput the trying trajectory been What's would some be category? impact of about trend launch. impacted that mid-throughput low NextSeq. all? been on the think to then impact you could XXX sales And the on of follow-up growth that at I the Has the impact that XLEAP launch? on the changes.

Jacob Thaysen

Yes.

We're the excited So of market. low let me about start with new the MiSeq. I the to mean, end certainly we now solution instrument MiSeq bringing iXXX. very certainly throughput a

the XX know, MiSeq. you out that it ago be part going And the iXXX in market. now more absolutely solution to is the As MiSeq with than of years the is we best came since

to it easy on are it make operate really use, focusing to to easy make We from. to

can consumables for of don't wrap and up, directly, it ship that package that. you the You since having the And have consumables in reagents much the immediately use take anymore. easier or them makes actually or to reagents can to prepare store freeze open instead

mid-throughput this we customers MiSeq gone would potentially decide very have So such the iXXX them. our to might to expect go after because benefit that from of actually a And the think be creates well instrument some customers. received actually that we with from it a

our an you was As also, time the was update. could in portfolio it throughput imagine, low -- since for and

We pickup that we'll in that we do have space. And XX XX to months, a believe see over space. thereby, that performance seen in some weakening next the

impacting that said also meaningfully we're start to that to not be QX, before, we have As but in expect really seeing impact we to 'XX.

Ankur Dhingra

X% dollar revenue. for of or to it X% less than is low our the in throughput terms close you, dimensionalize then Instruments to Just business

kind about revenue moving help for that over years And of that entire is been overall box exciting now. around substantial. Illumina, But We're customers with portfolio as also an interest technology getting the ] it's talk of that. we're call XX-plus dimensionalize terms to the [ So our has getting to you just well. additional points number in for

Jacob Thaysen

Yes. that. in the on a seen And of have interest then we X chemistry, lot

have the XXXX, to that software We of users use download XXXX than NextSeq the starting have chemistry. XX% more and thereby also our

very been has well So received.

market We also. about the in will competitive continue market, to be I'm stay very and the committed very be to in mid-throughput future and excited that

Operator

will conclude our I that call will And the over Schwartz. to hand session. Salli back now Q&A

Sallilyn Schwartz

for today. you us Thank joining

reminder, other Investors a replay and this our and to in This concludes at of As seeing forward will of we look you the available call conferences be section upcoming website. events. a call, our

Operator

And call. again, thank ladies your and that conclude We will today's gentlemen, you for participation.

time, a this day. at disconnect have may You and great

Illumina (ILMN) 4 Nov 242024 Q3 Earnings call transcript