ILLUMINA, INC. Q3 FY2024 earnings call

Deeper Customer Collaboration

• Focused on providing targeted solutions to diverse customer needs, connecting with customers worldwide, including academic core lab directors.

Continuous Innovation

• Launched MiSeq i100 for flexible smaller scale projects with faster turnaround, early access shipping in late Q4. Upcoming comprehensive whole genome sequencing leveraging novel tech and five-phase genome providing variant and epigenetic info from single library prep.

Operational Excellence

• Building foundation for long-term success, enhancing productivity, optimizing investment spend, with teams driving efficiencies and coming up with productivity gain ideas.

In Q3, revenue was $1.1 billion. America's revenue was down 6% YOY, Europe up 12%, EMEA up 7%, and Greater China down 23%. Sequencing consumables revenue was $741 million, up 7% YOY, driven by strong uptake in X consumables. Sequencing instruments revenue was $104 million, down 42% YOY due to lower NovaSeq X placements and mid-throughput shipments. Sequencing service and other revenue was $150 million, up 6% YOY. The NovaSeq X Series had 58 additional instruments placed, total installed base 527, with ~40% shipped to clinical customers, and the X-Series surpassed $1 billion in cumulative revenue. Revenue contribution: consumables made up a significant portion, instruments had a decline, and services showed growth.

2024 revenue growth is slightly lower than prior guidance range. Raising 2024 operating margin guidance to 21% - 21.5% and diluted EPS to $4.05 - $4.15. Q4 revenue expected ~$1.07 billion, instruments revenue projected to decline mid-30s vs 2023, consumables revenue forecasted to grow low single-digit vs 2023. 2025: looking forward to returning to growth, but specific guidance to be provided later.

Near-term macroeconomic environment constraints affecting purchasing behavior. Competition in the mid-throughput market. Uncertainty in clinical assay transitions and their impact on revenue.

Q: On guidance, specifically about revenue drop and clinical transition visibility A: Jacob and Ankur discussed revenue guidance, clinical transition progress, and seasonality. Jacob mentioned no clinical cliff, with strong momentum towards X, and Ankur noted seasonal decline in consumables Q: Mid-throughput decline origin and 2025 considerations A: Jacob talked about competition and China's progress, Ankur on mid-throughput competition and 2025 outlook. Jacob mentioned China's reset and competition in mid-throughput Q: X transition pricing headwind and margin expansion A: Ankur discussed transition price impact within model range and margin expansion progress, aiming for 500 basis points by 2027 Q: Consumable revenue growth breakdown and mid-throughput placements A: Ankur mentioned consumables growth in research and clinical, mid-throughput placements not broken out yet Q: Clinical X transition pricing and contracts A: Jacob and Ankur discussed X transition pricing elasticity and contract implications, with customers moving to X for benefits Q: Seasonality and GB revenue impact A: Ankur talked about seasonality in consumables and X consumables shelf life affecting Q4 revenue Q: Revenue guidance change breakdown A: Ankur explained revenue guidance change due to deal closure velocity, affecting instruments, consumables, and services equally Q: Macro headwinds and 2025 placement shift A: Jacob discussed macro headwinds and consumables as an indicator of potential turn around Q: Margin cost savings and 2025 headwinds A: Ankur talked about $100 million cost savings this year and 2025 margin expansion plans, focusing on cost reduction across COGS and ops Q: Free cash flow and buyback strategy A: Ankur discussed cash generation, buyback strategy, and M&A, with cash used for buybacks and acquisitions Q: Europe vs Americas market dynamics A: Jacob talked about Europe's steady performance and Americas' competitive challenges, with Europe having easier compares going forward Q: Single cell opportunity with Fluent A: Jacob discussed Fluent acquisition and single cell market opportunity, seeing it as expanding the market and supporting customers Q: MiSeq 100 launch and NextSeq XLEAP impact A: Jacob talked about MiSeq i100's market reception and NextSeq chemistry adoption, expecting pickup in low throughput in 2025