Illumina (ILMN) 4 Nov 222022 Q3 Earnings call transcript

Good day, ladies and gentlemen and welcome to the Third Quarter 2022 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.

Hello, everyone and welcome to our earnings call for the third quarter of 2022.

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

had be to Relations found our at not release, the section had website can it in illumina.com. you a review chance earnings of If the Investor Chief be and Strategy Development Officer, Interim deSouza, will Goswami, as Corporate today well Financial Illumina and Joydeep for President Participating and Chief Executive as Officer; Chief Francis Officer. provide and GRAIL. our review which include Joydeep an financial on state the update will will Francis of business Illumina's results

of and Commission's a the reminder, and outcome the adopted Compliance into order monitored order commission entities GRAIL, As distinct with acquisition an of the has is period. separate by investigation GRAIL Illumina's European an to operated pending requiring independent and an interim trustee. the for Illumina be as held monitoring

Illumina and confidential X GRAIL be to in and the made is website. be Investors and arm's be legally required intent the financial permitted not section archived today's Commercial regarding length. results the business activity the This companies GRAIL. must of unless interactions period, be independently share GRAIL are will under between the Litigation best must During Securities run during exclusively at of being Private Act XXXX. in information and that our call our is our this commercial It will undertaken protected of audio call Reform recorded forward-looking all statements portion interest

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

of line and revenue challenges. third Illumina year-over-year Good despite on basis macroeconomic expectations you, up X% our Sally. X% everyone. $X.X and in quarter, the with billion currency Thank delivered afternoon, deepening in constant a

sustainability Looking shipped excited than XX QX, customer Forum, XXXX in with had launch viewers innovation the and Genomics than prior have and a we weight NovaSeq NovaSeq and at Customer throughput, power, love NovaSeq the to industry-leading that year, more down a and in our in including our ambient XX,XXX expectations. We pipeline advanced XX their reached unexpected expectations. reduction high our they road in of effectiveness at line more X response shipping the in XX% an performance fantastic Labs in revolutionary already our is efficiency XXX exceeding traction platforms, X's QX received. breakthroughs in we cost packaging, orders are We X have map for where words, already across instruments addition NovaSeq to from sessions. it's waste. we Series Illumina by and

track XK driven innovation our by At XX excited map, XXXX high-throughput the which NextSeq chemistry as in offerings both the the biology, shipments in Forum, is scaling also ongoing cellular now remains and first-ever cancer we year-over-year. X part on by and primarily up over and adoption XK year. leap NextSeq units in and QX were existing research FDA was XXXX. CE-marked XK, for to multiomics launch sequencer. XX saw and expect of road DX, X record of our of XX% customers. SBS accelerated provide We're manufacturing XXX XXXX This we Illumina In NovaSeq to new launched on increase ship proceeding XK, across And molecular Our and IVD DX the units registered NovaSeq the to well mid-throughput, throughput Genomics spectrum. we

platform, instruments our remains. These to by X% throughput expanding long installed and year-over-year. a XX% to point customers reads up were genetic will installed appreciate sequencing clinical spectrum growth segments. shipments customers across Clinical from sequencing. across our larger consumable are provide disease the Illumina's in continued unique contribute shipments continued Customer on continue a by reads oncology positive sites. and additional and Sequencing and customer receiving and a feedback We're long our to Illumina platforms access a for of our genome to market Shifting complete were of to early year-over-year, base base. up the with ability complete driven high-quality, demand cost-effective deliver entry great future revenue. view throughput activity consumables utility also to testing run This testing. sequencing enrichment single enhancing low Finally, drive complete

lab expected online. to business though, and as new consumables towards continue due customers delays testing X% deleveraging inventory testing have and to expansion dynamics. up macro Oncology our customers decentralized consumables As our ramped clinical came applications, customers shift broader persisted year-over-year larger high-throughput grew

grow, offer TSO announced provides care customers company, grew GRAIL a digital assay, continued year-over-year insurance Oncology took Health, progress partnership as clinical Karim life GRAIL across systems first-of-its-kind part including approaching TruSight Galleri than its seen XXX the employees John Also, to number and standard of insurance to Galleri's proficiency. offering million results alone. up division providers. to cancers carrier The clinical market-leading advantage of health GRAIL The early reimbursement with through large accounts insurance care team to total with X.X Galleri became to adoption to make oncology to of at good health of final million. Galleri. PATHFINDER the Evidence XXX, first and of U.S. to signing presented $XXX multi-cancer utility, ecosystem, screening, demonstrated delivering for oncology, range Karim's detected assays as efficacy with health also employers expanded in the continues participants testing of Our in increase. added September TSO from force compared XX% broad In and care its a life more platform. in and employers. QX, life study a test customers screening value-based Manulife QX continues centers study. GRAIL first over partnership excellence recently connecting the the when of compelling and orders Also results ESMO, Hancock, grow. sales detection The the that standard doubled self-insured has

results. used than is cancer In combined. XX% Preventative Services predictive fact, more value higher cancer Galleri like screening Galleri's detected of on than detection with Task real-world Galleri Galleri the X.X%. the all the market. are high screen tests PPV is test screenings of analysis of annual XX,XXX for the test cancers An results positive recommended shows a which setting biennial available the screen a in U.S. PATHFINDER Force about X.X%, has mammography PPV commercial first of single with only colorectal significantly the commonly And multi-cancer concordance study a

also to of testing, In the participants generation with system Galleri test for evidence high has and reporting addition, National year-over-year. sequencing funding the grew increasing continues been grow. XX.X% positive XX% consumable is with rare experienced with level and China a genetic geographies, including participants multiple EMEA satisfaction In shipments disease health of study PATINA test. in diseases

neurodevelopment genome whole create exome efficiencies that test X Medicine customer example, around seeing September, genome potential study both and for disorders. the excitement Institute, For is for whole We're from published in to a sequencing. sensitive sequencing a also indicating for Genetics Karolinska in first-line NovaSeq

markets. expected XXXX. down of shipments Sequencing QX year-over-year research to spend to to and Biobank and and consumable Turning our inventory in were completion manage as COVID UK from continue project and the applied surveillance X% capital customers due headwinds the

progress We in to these continue and support same customers genomic-based making facilitating drug discovery. the our at are through ongoing dynamics time,

area and states. targets like partner across genomic In on recent and find markets, this promising we help drug opportunities with grow, based are continues OMIC pharmaceutical collaboration of insights. genomics As our AstraZeneca infectious broadening range with we accelerate to to our disease will disease a microbiology companies

General this the vulnerable we a help tuberculosis progress For million example, and hope and and the TB claims strains. countries a are Screen by work, first with recently we than in after each help effectively more resistant can for deaths the towards rise impacted combat lives We populations time X.X that detect year TB to partnership pandemic. more decade, worldwide. multidrug with to announced eliminating on make

XXXX. and towards now end XXXX Turning entering of the

We're around the for era. year-end latest staying focused share their our road advancing quarter turn them innovations. We on FY Customers confident to 'XX the detail outlook. genome revised to Joydeep prudent our map XXXX our to for supporting our into persist continue over the feel Despite adjust that we address and shortly. will in challenges macroeconomic trajectory. to it's near-term discussed our the we Joydeep guidance long-term call more have accelerate I'll challenging remain previously innovation and growth the near-term now world expect on environment, and the to guidance accordingly. macroeconomic our excitement

Thanks, Francis.

third GAAP of our the quarter followed remarks our results, GRAIL. data include constant up In non-GAAP release start be Illumina consolidated year-over-year which found basis. X% available quarter, supplementary and reminder, hedging. a discussing financial results these can currency with $X.XX I compensation. include financial encourage by for effects current conclude on then results in reconciliation of the you to net billion, revenue a X% financial view which results be consolidated of website. I in GRAIL the core or As and for segment additional the outlook earnings third our measures consolidated reviewing was will on today's on for XXXX. I'll and our results by stock-based

and expected, core as persisted XXXX as and, that inventory later quarter inflation expansions anticipated remarks. our my leading of I accelerated As business supply from our and as chain customer issues delayed tighter in impacted impact in will address customer by lab the growth headwinds well through the capital FX. cases, negative for the year some full have dynamics guidance These to reduction which third was

the third loss goodwill to capital of per GRAIL includes $X.XX market or which were the for GAAP was value segment, due conditions Non-GAAP $XX operating million loss related the loss or primarily from and higher impairment a negative non-GAAP discount quarter, a including quarter. GRAIL per stand-alone impact earnings the current net calculation diluted fair of rates, net premium $X.XX of to $XXX risk the segment. billion, share, share billion GRAIL's dilution For of on diluted $XX.XX million of $X.XX the including

implemented increased was and XXXX, R&D the quarter expense and capitalization rate in from primarily Jobs increased Our requirements XX.X% which last non-GAAP XX.X% by Act Cuts the of XX.X% tax due XXXX. of Tax to impact QX

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

start revenue sequencing Illumina flat was of year-over-year. the results. on constant basis, $XXX Core Moving will currency by I or year-over-year effects results net of discussing Core hedging. of Core Illumina financial billion of approximately X% to consumables was the revenue up a $X.X flat of Illumina. million segment approximately

from headwinds foreign our growth impact driven rates, project of connected of base expected, Biobank the inventory installed decrease activity X the customers cash for and remains by conclusion As exchange year-over-year U.K. quarter revenue. increased Sequencing anticipated COVID the instruments in by clinical of customer in management, on the XXXX strong. muted the and surveillance was

NovaSeq adoption year-over-year While activity the as XX% capital management of various Illumina This NextSeq by instruments year-over-year as XK to to availability continue well macroeconomic sequencing which in expected Francis revenue to grew DLAs and by expansion pace as shipments driven for XK, was tempered see Core Sequencing Illumina record offset was customer customers. purchasing NovaSeq $XXX strong due delays to declined XX% lower million shipments of decline advance mentioned. by by partially research next year's challenges, new of X. we lab

was in surveillance total $XX our by instruments. COVID in and quarter, in comprised decline million with in XX% testing down approximately $X a COVID service contributed primarily and a third lower installed expectations Core base established capacity driven by on and nearly increase as This instrument in $XXX contract million consumables million line $XX up licensing core service year-over-year, the revenue sequencing million driven revenue samples year-over-year, revenue. sequencing was During largely other of and in in shipments and instrument was surveillance an Illumina XX% higher revenue of growing XXXX.

genetic from and million, Core by to $XXX up growth year-over-year oncology Americas to cancer consumables for Illumina. the results Revenue primarily was Moving for driven testing, due X% NovaSeq research customers. testing demand regional

revenue. in of shipments region customer of of by instrument As on on of delays X% in demand by a was was a was million decrease a the basis, EMEA growth management XX% offset Biobank the inventory by in revenue revenue surveillance decline a quarterly routine year-over-year Strong or or and a represented for in as conclusion program largely as restrictions for NGS-based expansion XXXX Greater clinical well year NovaSeq in in more the primarily currency revenue increase testing. that COVID X% resumed surveillance a hedges. March the represent constant currency million and COVID oncology capital after expected, net sales the channel to a sequencing increase of growth well clinical $XXX COVID a as decline than Record mid-throughput driven began this research lab region revenue. of year-over-year $XXX decrease were basis. a that X% growth effect strong driven U.K. by offset as the lifted constant consumables and in customers

We continue the base be impacted COVID-XX the rates to GDP slowing region. growth to expect growth policy, from by business exchange in headwinds X and

testing. and in continued grew X% a region of NIPT or notably constant Growth in net markets, year-over-year Finally, Indonesia strong hedges. in driven on APG oncology revenue of the emerging currency $XX the India, and XX% of strength million in by Thailand was demand basis, and effects

million gross Core volumes year-over-year, higher to freight mix. planned. basis making of in offset operating product than leverage on map. of continued innovation to due non-GAAP less of are $XXX up cost Despite lower to R&D the of fixed and year-over-year originally the rest Illumina P&L. decreased $XX operating our Illumina XX.X% manufacturing primarily by lower Core primarily investments were increase, Core had year-over-year costs, expenses to the road expenses XXX Moving million due $XX favorable non-GAAP margin Core non-GAAP Illumina headcount we we Illumina were approximately points partially million growth advancements support and

quarter Grail revenue totaled related lower of on for compensation hiring well cost primarily consisted Transitioning expense and expenses consisted As Galleri spend, of our and of and expenses revenue prioritizing result as focused for quarter discretionary of million to $XX a results financial non-GAAP trials. the primarily lower headcount travel. the initiatives fees. to as million GRAIL. Grail containment including outlook the operating performance-based given test for $XXX clinical

related flow items. settlement Moving to quarter linearity. days XX to litigation and in onetime sheet mentioned to with BGI last Cash negative consolidated was XX to cash due to $XX a quarter. used flow last due was a compared payment outflow and million, balance operations days net you revenue to the DSO

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

approximately be X% full $XX and up consolidated XXXX year XXXX revenue revenue Moving range in now flat compared now guidance. Illumina core We expect GRAIL revenue to to to million million. XXXX the to flat year-over-year, including of to $XX

revised macroeconomic through full more expected for year the Our the outlook observed we October. challenging headwinds reflects

reduction impact primarily customers core and consumables For One, and in reduction our in previous Europe. research across this recruitment Europe consumables is the is FX from of of large and the The instruments for approximately XX-XX split negative X/X impact NovaSeq some purchases higher-than-expected remaining factors. and X by approximately deleveraging. guidance due X; Illumina, two, around the primarily inflation in delays projects excitement to inventory driven of delayed and expectations X/X XXXX research the in on our Americas

ranges per million primarily research system of by large guidance the year-over-year full have remainder guidance to to are are customers. sequencing expect the of This slightly line expect revenue consumables challenges Illumina PopGen previously revenue range eliminated we core be ranges driven approximately year-over-year. provided. we intercompany continues at year, now core consolidation. instrument to some recruitment flat our sequencing $XX be approximately with we for million revenue For and $X.X Illumina that down $X.X pull-through revenue, Within to sales GRAIL in which million our below The of slightly include in XXXX, to historical now and

consolidated X.X% revenue range now non-GAAP expect reflecting approximately of we XXXX, operating to the Illumina and year in lower XX% margin operating core margin full outlook. of non-GAAP For XX%, our

be the $X.XX approximately earnings which expect non-GAAP $X.XX consolidated previously a tax non-GAAP and which the includes expect now X% operating requirements in dilution XXXX We diluted continues assume million. loss of range a non-GAAP We of expected from than by that QX. repealed Tax share $XXX approximately implemented will rate capitalization lower Jobs in R&D per GRAIL to expense Act the of Cuts to of

we outstanding for shares approximately Lastly, diluted of XXX expect shares to continue million XXXX.

we into We experiencing persist are expect XXXX. the macroeconomic to headwinds

As growth. continued managing and expenses a last proactively revenue are in we sustainable we prudently operating noted call, focus our with long-term earnings on

well us to and scale gain At areas We other are you'll areas. time, in positioned to innovation see needs from seize key efficiencies future customers' opportunities and to scale same our that map. align additional the road

continue will customers, the to over final remarks. his in will to industry genomics hand I for call growth. progress our and to support We drive and adapt now Francis the investments our expenses enable further back long-term our

Joydeep. Thanks,

identify and As prioritizing in continue of to road long-term Joydeep our economic remain to shared, same At innovation are the near-term effects opportunities confident we the growth we global time, will mitigate environment. the map our trajectory.

announced high to X earlier, hearing sustainable the shared continue and NovaSeq for most evolve I and Illumina reads sequencer we're optimism genomics our long powerful Series. industry innovations we As yet the at the will most Illumina Genomics from praise ahead complete long over Forum, look innovations the we term. to tremendous with These the

potential invite to current our the through line help open era for seize the challenges I'll now genome operator will We and the of the together. the customers Q&A.

Brennan our with And first Cowen. Instructions] question [Operator come will Dan from

with research large XX I Joydeep, model. -- NovaSeq in I'll regarding guess guide, the of order you're hand speak customer, and Maybe XXX over you XXX activity? attractive the mentioned very future X while on customers characterize in you coming color orders are the about the And ahead some customer our as conservative, early to terms get more side? lot the that genome would XQ could Where shipment order XXX wanted on already, to books, a to there's then the focus like and centers XX Francis and momentum XXX next smaller the expected you X of of north possibly I in would about talk advanced X months? so secondarily, from clinical orders versus you shipments expect given but to including customers

question, Great. Thanks for Dan. the

So questions. through me work let those

are of been in Forum. addition from very we Illumina you're we've a more X. into expect with broad usual Genomics from very strong and going outside a as the customers expected you'd segments. clinical it's around we're NovaSeq from to of are pleased centers some well customers expectations mix mix the First Frankly, we sort response as of all, be high customer customers the adopters. right, We're of the a stronger had from The than to And we gotten the U.S. seeing very, seeing U.S. customers swath both from genome the that early of coming

of we So even brush on of sort early XXXX broad nice launched when adopter little than more a few years saw we clinical customers a and the maybe side ago. the NovaSeq first bit a

got As QX hand, means out, the you that already you that pointed, our already initial that shipments in XX out. sold orders we've are pointed orders

a So in strong the we're And already. shipments. for move XXX are healthy down customers year pipeline X NovaSeq really pipeline entering that position the really of very a

a we it's as it shipment called is availability So is Because XXX you point the the supply manufacturing is shipment look year the out, we number to ramp year, with we backlog we than as we'll the the by strong very demand second ship out, when first it and the number for to have into as of next that for the couple than more of at X demand. continue And we're service can of NovaSeq book. just units, number get entering constrained that for the you year capability demand start year. us to that the you I expect more way can year, going the quarters clear be that the the up half think to over about

Vijay question Our next Evercore with from ISI. comes Kumar

you give This a a big constraints you The if like perspective north Nova really guys we're just on a mean, into month I to announcement Can on will, looks X-parter, prior year. from some be you compares to prior X. product how like this XXX could mention. a the had color the orders. X. it here order I for year us the NovaSeq cycle at Francis, an of next

implied So maybe the cycle guidance for. compare the here and prior QX versus on

QX are next shaping if XX%. year a be I being out maybe think high minus mid-single think next of territory, revenues to year top the And negative first I in line. about to maybe

fiscal any color 'XX So helpful. on about how be think to would

Vijay. for Thanks sure. Yes, the question,

said we even been launches the modeled So right question, the we we to compare has If on we X to launches, say XXX if have the which than I'd really the a reaction of And to of the we orders the time anticipated. stronger we at in customer than have we've last NovaSeq the with as But already, the sense I I some previous the to certainly were strong. previous have where advanced you're in XX pipeline. reaction based our we number other that it similar off were orders at been previous better launches. with are look

in redone a to certainly cells, for because instrument, into supply component chemistry, cells. year. entirely we've manufacturing flow year, the constrained. new is strong So ramped new be this And going new every new of flow an line position Again, process NovaSeq entirely the manufacturing very up we new So right? next FFM, next number shipments going

And happening. so is that with happy we're way the scale-up really

So compare that number I ahead. if be the shipments QX I for would you the gave

would expect be we shipments where the before. would we where were shipments first XX so as we we launched of the And first did were QX, to XXXX, in in ahead the we're x well. with the XXX XX NovaSeq ahead year the than then units more of of NovaSeq that expecting to be when we slightly that So XXXX ship quarter

turn previous it how now with compares Joydeep. over to launches. So it I'll Maybe that's

Yes.

mentioned what's clinical these shifting strong trend some continued this the is customers research right? X the -- demand, coming as in strong we Francis earlier, demand changed for attribute as to now strong which And So to clinical of studies. seeing, NovaSeq X right? on of just maybe for well, thing NovaSeq, from early are We

think trend. I positive that's a So

and I think -- relationship then your with XXXX. QX into next question for was about the

So of things we inflation October, QX, some the out, QX towards macroeconomic including we the as early of talked we have to that the And a for to for us mentioned prudent into conditions we see caused call these also reasons about, I few a more be of seen into into FX. and a earlier our and XXXX. take right, but on pointed end deepening approach QX conditions now conservative persist

So conditions. look FX definitely of I of at we're COVID talked mentioned we further XXXX. have likely surveillance to will be know macroeconomic conditions. already that a We've the taking that is to some factors us about we decline those the worsened And for headwind some continued has into into accelerated as XXXX. the changed and negative. expect and

before. point in that So reads. terms where kind course, growth of of the interest to guided had are Illumina moderate I in X continue feel factors during that expect to But long I Overall, in and earlier XX% to NovaSeq probably we the is be of what the this technologies feel to some some of we and and the complete other guidance we this expected gone this of think -- we at like budgeting than XXXX rather we Dan, yet. haven't point, range revenue at closer and we see including mentioned had the for IGF,

will Arias Dan from with our question next Stifel. And come

sounded on last the issue XQ quarter, It weren't. the you delays bit. XQ to just like were lab more a little delay phenomenon can Francis, than they a touch

You were in line quarter. this

obviously more would So we the quarter just is getting here adjusted extended seems than fourth little assumption bit think. which a

when what's of some where these to of being you And and call then sort they going actually for expectations on talk be? to labs getting can just going So there? your need

Yes, sure.

what get So the had year in about to about we time both on later those the some ended And last is some when than of next up that fact seen we're found those that ramped up results call, going and the this a we've were year. we delays that customers later into talked we talked little being cases, expected. looking

come we're And from out was somewhat pushed then so even what into a dates year. And being push the opening quarter pushed have next this seeing expected year for out too. next been to out

around and effects supply persisting are those delays. pandemic-related definitely are impacting the So chain lab

question And Puneet our with come will SVB Souda from next Securities.

later the the that flow is XX could around be most to us given and give XX on. year. read for appears just is next in it cell growth So It can then to to want that is to also and in that's in little top still of that B on clarify billion turn I NovaSeq be cells. earlier, to line. going you XXXX, I get first capacity just XX one, portfolio, hours the meaningful And XX today just around through XXb the mentioned your entire XX XX% that samples that delivered NovaSeq wanted XXXX launching sort bit the a flow

into how us the that -- of And just see you does that? ramp through maybe all sort So XX mean for walk in terms pull-through do XXXX. of what into

Puneet. you, Thank

play give bottoms thinking about at the guide both. to to factors QX for are XX% QX of how we the intended talk we've get budget. going a next next of was I'll we done once just some It into were and year intended me saying the around that let gave we wasn't answer about into specific start as year. we'll that talk So guide the by

similar terms have of take it they very of footprint, In because instrument flow terms output think the the on right. and absolutely it's we'll terms workloads. in probably That comparing to same of in existing you're cells, the of I some

a familiarity flow cell. sense that of we'll will move feel to X customers and And with so see the

then customers been have talking call been is the fundamentally waiting see and $XX customers large really price that those points generation to for studies, next you'll us that billion to the programs X enabling about that. very to so of close are And studies. start have of with the intended we the the unlock And that

is and can NovaSeq that very familiar in first will terms be output will you so of flow think view as it cell existing workloads XXXX there the the And them about to customers point that cell their X demand. using start it and sort And as into series. bigger we'll elasticity next of entry wave does unlocks in the the that of flow the it's then

into Dan, maybe faster and forward obviously, cycle. side right? expect switch Puneet, on little bit customers research customers the add, to a consumables will because clinical with much move to transition, they're later invalidated the workflows We the

And come our Qin question with from JPMorgan. next will Julia

the the I you But at delays, for of research noted a by some Day event same be challenges recruitment including think Analyst remember, will some time, the could I you it be some that noted XQ, catalyst POPC enabled project meaningful world. the initiatives of PopSeq program. for around at in there NovaSeq, the

how the POPSEQ guess, of contribution be terms our in I think that, should how about programs next So revenue year? in will light of we meaningful

Yes.

small let is be. address in both around with sequencing -- QX these important experiencing One these of that delays we delays in said is are there QX, very associated specific your future being past the X about existing we're how they're two, small the projects. programs parts are programs. programs. So that It's programs number that experiencing me around those a and enabling population and handful some question. recruiting a of some what And of ongoing will effects then In to some seeing proxy

expecting projects a they slower and they did. than in We go. have will bit will complete recruiting to on they and get But these little were QX the doubt that no continue

Now think that X like. if next if generation, you what we enables the about

projects, very And measured earnest very for to So the very we're we genome the X. been is just they projects while Day here important they're customers announced viable economically frankly, number since things some team, that, then of brought about in millions. large until in are large is that samples Investor talking last sometimes that's the want large out have we And cases, about relevant the making a that to about projects. an weeks in do. X role in on of us plays exome not the we the projects our the talking X over talked one those what Where and

scalable systems. together a role pharma in or technology that helpful price many instrument or cases, at make parties, these the national not bringing also So enabler but out biobanks we it's health projects a -- viable in are whether the putting companies only points by

around We tell the And the weeks, off those been are that convene few I and demand are than more Susan helping our create, are today than cohorts to that for bring you world to get interested the for programs responsible together can have over much to the have that's bigger in systems high power busy of example, to put projects that last diverse ground. they very X health in team parties or those commercial today. leveraging together are the we around

so mover I be front. X And needle a on that think will very the substantial

from will question next come Sandler. Westenberg Piper David with our And

Sorry little I some an ordering on the you on quarter on a the there was consumable expiration behavior. continues know that, to continuation a a of that it's on last happen. fourth these I your the there's but into I corporates -- bit lasting asked of down of expectation Joe, it Maybe burn around like think some of quarter. usually question maybe my right I little look date dynamics that consumables it's mentioned, compared is X know that -- to model does bit continued

XXXX, not question. is, these the And in one all was be why I then in given consumables if interpreting they have in. have that is would QX? I'm They from what or up that flowing -- think in budgets? budgets it's not and a a in your we have sorry missed are really fact have getting get how ordered there market customers XX% of into So a sequencing They QX that general NIH this, and to at the for would that lot context tests if slowdown still they catch have of this

Yes.

Let me try to stand again.

As said, are we process Francis of the still budget. in

So the a see. the conditions from we of more XX% wasn't as a macroeconomic guide. It's meant --

were parts, we very the we or actually deleveraging David. inventory So maybe from inventory on what So we QX, had on point question in in accelerated that I a of are with has think part it actually with deleveraging. inventory coming of first, of maybe we provided terms small your terms quite expected decelerated, seeing X about additional right? incremental deleveraging guidance

end slower had we QX. down up from been of see which demand things X in terms of the right? have mentioned rather one, part expected, at had of slowed We activity. Now things than terms communicated that we we right, whether that's what So did had or slowed in specific

few a are not inflation-related is issues time. budget projects will expect some that that an we issue. recruit, were them PopGen customers mostly recover -- So mentioned, that of not had cut inflation right? This that things X with issue. key those will the So an Francis related handful of a not is customers over large had and these This research

So other and was did The did slowdown see to specifically right? happening. customers inflation related, in that Europe, see research thing there, we related we a FX

of some We specific But next as that it's persist. a will structural continue a some macroeconomic these are headwinds factors. this by temporary of change not that very into year caused It's change. expect again,

our America. Michael from of question with And will come next Ryskin Bank

but year sequentially, if I especially like down decision, goes deal million the write-down, since. $XX of to midpoint same $XX clarify quarter I for what was around in rationale, squeeze and back divestment Grail then to of out the year of right discussions million the third for quarter? Great. the underlying One, you think taken on GRAIL sort you through impact year that on to in to or billion. the in all try want think second Could puts Does did also, takes a a the the we've talk any on goes ago the they're but And billion? the the that sort into you have $X.XX reason the this a $X fiscal topic. couple ago

there? lumpy what's coming some it orders just through? So going Just was on

Yes.

the of So let me take question. part your first

little not few of So of a equity terms out has an used an the Again, of of bit was regulatory last results customers right? accounting of Impairment, over value of driver GRAIL up performance The in Europe. primary change, really it really underlying as a no quarters. really clinical improved GRAIL's is by and more valuation the on in and signing has coming impact has the on result fact, again, changed we its our options book front on of it our change conditions, GRAIL our capital market the the on those the the continuing turn Investor I'll and the as was had pursuant described discount over the current some reassessment higher Day. accounting of various of triggered decisions how -- progressing earlier to and in it's are requirement Francis.

Yes, the number. in of terms GRAIL

played on ramp-up board month the July of in QX sales then picked And was talked of the GRAIL the and really quarter terms about that first of the way the driven pace the that So in brought on up out, quarter by test ordering. in slow call. partially force we has the the September,

paid And the last of weeks the quarter in in first of month few so off that's this quarter. last and

And so the that's the of what's driving shape curve.

their terms is In their from revenue off they're midpoint QX MRD expectations start the and the the playing for guide And for they're same. year, that's the to other QX pharma associated development. then of getting strong remains factor a in the with of out partnerships the

come from And Canaccord. with Kyle our Mikson next question will

the X, I Just NovaSeq for wondering me. multiple the mortgage trade-ins XXXX. a your near equivalent are term, X in basically of part On what was is given the bundles and quick expectations question just for like

the provided on the thoughts of kind earlier? Francis, complete could the spoke then to maybe you numbers you given long-read shipment the recently? updates about in maybe just that space, kind So the others your wondering just if context offering of talk today separately in can 'XX on of you from that PacBio share And

Yes.

was take our me of expectation let first So which first the part around trade-ins.

platform. based we keep with when launch customers, always know their us our customers on that whole experience have So we help a new

we've trade-in X,XXX. and recently And programmed a to in, And and have want this now can when going, more much appreciated certainly, there that that. once to customers And purchased for quarter X,XXX that the you you have programs now trade platform, in next we've now expect been launched have get as so that have you we if trade on so to actually customers on new done that always through take launch a it into buy And buy we and have even very we going that up us up we year. taken can it us some year. to next

product. that's of a standard launching part So our a new

In really existing use from to terms seen our reads, enthusiastic base across throughput we've their response customers our the installed of sizes. a around long complete able being

take to X than way short-read lower do the do and sample Nova on that of whether to can low or them they that advantage perhaps long-read So workloads you're way a inputs platforms. XXXX a all both to to and in allows MiSeq, the other

read on ability reads that to platforms combine expect any we if And you so that effectively end you compromising could fundamentally much, enabling in platforms it up with be than you And accuracy enrichment, you you much other have complete do if cost especially without long to with way. the the existing to space. do the long more

more cost still it effectively. the you you So, much standard of can do get and accuracy gold

So read the with last is that's few was of hard historically really that exciting. to bit genome, short that genome it What last technology. the it is read percent opens up does

question next Stanley. our will come Morgan with Savant And from Tejas

for X-parter here. a Francis, you

for you out to Analyst alluded metered you down talk XXXX the the So higher for of a clinical X. then the because proportion I want mix higher guys Day users. to ramp a of consumables, about NovaSeq today, clinical at the But

different about off the trying least essentially, around If to that ops the at to far cycle, you last continue So out PopGen over terms of of because just that that XXXX POPSEQ delays called in guide you call couple is will as some product really this is dynamics think remember so recruitment next right, as to your goes, I'm here. timing. years those removed just around X the second time juxtapose unpredictable here? of I elasticity over in question get Can tail of of NovaSeq from the And of consumables we had the see as it that sort you out confidence be became what demand? you sort drives my

Yes, great question.

take first. the first So let me X

be to that NovaSeq continue entire be going production years them that And to the while. in workloads that be on a for right you workload running today, clinical absolutely measured production on and will a -- to are transition are then a run quarters metered you XXXX you're will you it So if move there'll in the. sense before the

getting feedback So be to workloads. the What's us that clinical though, their we about purchases to about from that to new continues that believe we're is continues and exciting, talking our be really are really customers. what are customers

they'd the X. an it's so to on then, X,XXX, to development saying of expand the production starting idea they're to on on up of instead it with they And ramp that that areas course, like want into the that into start

And than has expected. we that been more substantial so

are bunch So our into that expanding clinical new a of that there customers that areas. large are means clinical

well. exciting so an And for it's the development field. development for as exciting also It's an

right? bringing out in they -- what In that's it down for a POPSEQ, And learning call are out for land. so new is we're still happens in isn't deals, if they're figure deal there, happen we know, to trying are as deals of if come talked of of up we're starting if develop. we'll in deals, a on our not. whether they to we and guide, doing big we you these guys in variability to And quite big our as had when big or when or will or QX. the see may are the them POPSEQ we terms which have the once out they how a It big as production, But quarter terms new that we'll then on certainly, that and that of you ramp is POPSEQ binary what about tend

again, less building tend more conservative variability of guide. be in new terms -- entirely So deal we'll more on our which coming that to than that's into rather

with newer much to because go elasticity technologies. intensity and Francis requirements have called add, out these these just what new clinical going I I'd seeing about that the continuing a mentioned Francis, throughput think we the NovaSeq with question it consistent are introduction which also I higher up is some right? towards of regarding is great of tests tests think the And higher we more side, which are

And moving Credit with to Leonard Dan Suisse. on

core for half associated X/X, X, you make the I'm if the I the you sure you doing like with math were the to launching just reduction of I It the understand the attributed XXXX delays of X. in XX% Illumina. knew want guidance to change right, seems guide the

expectations? So what your from evolved differently

interest as knew in little based customers Yes, X,XXX bit positive more on you're applications applications. their customer about X. a previous a I production much finding around We is there for our new in are to way X And the launches we've And on launching they we tend about coming has X they're on how absolutely sequencing-intensive been to done. terms slower excited modeled the X. in to the right. for of customers and clinical were which, interest the be the of we surprised been what the keeping the not be using we've again, that board reasons while Joydeep sort really said, we're workflows as said, from expected we getting that and Frankly, our talked they're the we fully

has X but for as QX. effect look, X a And the X,XXX the surprise in and of an I'm in terms people to so saying, has in the that been enthusiasm it the for QX starts the are knock-on wait and ship upside going on hold to

Citi. with will question Patrick next our Donnelly And come from

base, piece? called in Are speaking question. of still seeing the that and little customer X more the the like there kind with you market? are cash, conversations past to I of kind maybe the Francis, outlook for out being the just diagnostics of inventory side. you a kind clinical What of know more that on conservative quarter, particularly the on kind

Yes. Thanks, Patrick.

has their in the to definitely shared So of seeing continue terms QX. to cash in and we're to are robust saying, with continue we conservatively want instruments the been commentary to And position the the can look, enabled have and play we of by they've the operations time, That's still our things line and confidence run perhaps seen At stable think levels X more lower around at we capability. pandemic. a through supply very generally even the our while manage One, for levels desire inventory activity concern their maintain and glad. seeing on inventory out. we than that that their also they fact and in in We same robust have a they be consistent that historically. runs level that integrity have

so to play. we're dynamic seeing continue that And definitely

Sergott come with Luke from And our next Barclays. question will

of as you I X it's and going going a through? out Can LEAP about ramp the NovaSeq profile you we year. continues operating to come margin higher next margin to think the is on you're figure us that kind important think come pull-through, to as And the the having give is what up need X to where of come to through? sense of

the Yes, and they're instruments design sure, with that the margins the use maintain replacing. point as expectation Luke. new the chemistry is instruments The to similar that X

over on think both NovaSeq So if it XXXX, side. as the similar generally in you a the time to side consumable look at on the X, certainly and example, for have you profile the should scales the about margin it to instrument

The on pass And to criteria we those and make our then fundamentally that's the savings product is technology invest idea the the that so lowers cost in customers. to use. design

and with bringing like new cells our so we're innovations on. like flow So optics, maintain X, the like the pass on the new same associated margins to and the the customers that savings

Meehan with And Research. our next question from Jack Nephron comes

guide I bit talk about to for wanted quarter. a here the little the fourth

the the me flat this guide can tonight. earnings a for and of consumables you year, lot think I check is on math my new by So

implies quarter. like what's talk given move. big through feels us just you're it price it in you concentrate part think customer it's And down seems I base, and Can like XX% one maybe there just of between fourth of that the just in volume? a on kind about the talking going

Yes.

line So previous have overall, tending carefully it to impacted, the Jack, quarters. be track is to actually the not piece be we consumables price is Pricing in right, it's volume seen what year, you're mostly full -- sequencing is and tends the -- in is for right? with flat. pretty This

primarily for an come Europe. reduction is the we some reasons and components, -- there around slow are is earlier stated out there's And By on research you the a it component at it. piece. pieces So then -- of FX inventory earlier, most then there we and of we part some in and what of called of there deleveraging volume large And revenues, had, which is has the specific look the seen a which the volumes, So right? the that related and have way, then through. FX customers right? down think in as two delays two terms additional have there's I component the the that which of inflation-related recruitment some if

component that those is is some one the the a So sources NovaSeq of had the of continue on well be purchases increased the right? there. that on to NovaSeq So then interest a mentioned NovaSeq largest as slowdown. The things as right? side, consumables And Francis of X X well, halted in

Thank conclude to that does will question-and-answer And Salli now hand you. our back over session. the Schwartz. I call

us for today. Thank you joining

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