The paragraph introduces the fourth quarter 2024 earnings conference call for Illumina, where participants are in a listen-only mode initially. Salli Schwartz, Vice President of Investor Relations, welcomes attendees and outlines the agenda, which includes reviewing financial results, providing commentary on commercial activities, and a Q&A session. Jacob Thaysen, CEO, and Ankur Dhingra, CFO, will deliver prepared remarks. The company divested Grail in June 2024, and the call will focus on non-GAAP results, with reconciliations available online. Comparisons will be made year-over-year and sequentially with constant currency revenue growth rates.

The paragraph is part of a recorded investor call, where forward-looking statements about Illumina's financial and commercial activities are discussed, noting that these are protected under the Private Securities Litigation Reform Act of 1995. The statements are subject to risks and uncertainties, and actual results may vary from projections. Illumina assumes no obligation to update these statements, directing investors to its SEC filings for more information. Jacob Thaysen then addresses a recent announcement from the Chinese Ministry of Commerce, indicating that Illumina is in communication with relevant parties to resolve the issue. Despite China representing about 7% of global revenue, Illumina continues to comply with local laws and sees growth opportunities in the Chinese market. The company had a transformative 2024, setting the stage for future success in 2025, with significant progress towards strategic goals despite challenging market conditions.

In the third paragraph, the company outlines its new corporate strategy aimed at achieving revenue growth by 2025 and reaching high single-digit growth by 2027. The focus is on enhancing customer and partner relationships to expand the genomics ecosystem, introducing innovations to improve sequencing workflows, and implementing operational excellence initiatives to boost margins and earnings per share. The NovaSeq X transition is progressing well, with increased usage among research and clinical customers. In Q4, the company reported $1.1 billion in revenue, a 1% increase from the previous year, driven by consumables and higher-than-expected NovaSeq X shipments. The installed base of NovaSeq X instruments grew to 630 units. Regionally, revenue increased in the Americas and Europe, while declining in EMEA but slightly rising in Greater China. The company's key priorities remain customer collaboration, continuous innovation, and operational excellence.

The paragraph discusses the company's priorities of enhancing customer and partner collaboration and continuous innovation. They are engaging in partnerships, such as with NVIDIA, to improve the analysis of multiomics data and participating in the Truvera genome project to build a large genetic database. Additionally, the company is launching cost-effective, high-performance products like the NovaSeq X and new cycle kits to support multiomics applications and respond to the demand for high-quality insights at lower costs.

The paragraph discusses Illumina's ongoing efforts to expand its portfolio of automated workflows, such as the MySeq I 100, which has seen strong uptake since its launch. Additionally, Illumina is collaborating with Standard BioTools to develop a fully integrated proteomics solution and has launched a pilot program to analyze UK Biobank samples. The company is also extending its early access program for Constellation map read technology that effectively detects structural variants. Illumina is committed to customer engagement, innovation, and operational excellence, achieving over $100 million in cost savings through efficiencies in manufacturing and logistics. The company emphasizes its new operating model's ability to improve margins even in challenging market conditions.

The paragraph outlines the company's guidance for 2025, noting the recent developments in China and the macroeconomic environment. The company predicts low single-digit revenue growth and a non-GAAP operating margin improvement to 23%. It expects diluted EPS of $4.50 to $4.65 and aims for high single-digit growth by 2027. The three growth drivers are expanding sequencing, entering multiomics, and enhancing data and services. The CEO thanks employees for their commitment, and Ankur Dhingra will provide more details about 2024 results and the 2025 outlook.

The paragraph provides an overview of Illumina's financial results for the fourth quarter, highlighting that their revenue reached $1.1 billion, surpassing expectations and growing 1% year-over-year. This growth was primarily driven by the high-throughput consumables business and strong performance from NovaSeq X placements, particularly among clinical customers. Sequencing consumables revenue grew by 2%, with significant contributions from the transition to the NovaSeq X series. Additionally, total sequencing output on connected high and mid-throughput instruments increased by over 30% compared to the previous year, with strong demand from both clinical and research customers.

In Q4, Illumina experienced a 3% decline in sequencing instruments revenue, mainly due to reduced mid-throughput shipments caused by customer cash flow constraints, partially offset by the successful launch of the MySeq I 100. Sequencing service and other revenue decreased by 1%, influenced by strategic partnership timing from the previous year. Despite these declines, instrument services, CDX agreement revenue, and informatic solutions revenue grew as expected. The company achieved a non-GAAP gross margin of 67.4%, up 270 basis points year-over-year, due to improved productivity and cost savings from operational initiatives. Operating expenses were $526 million, reflecting cost control measures and investments, with the operating margin increasing 120 basis points to 19.7%. The non-GAAP tax rate was lower at 23.7% for Q4 and 23.6% for 2024. Non-GAAP net income was $152 million, with an EPS of $0.95 per diluted share, surpassing expectations. Cash flow from operations was $364 million, with capital expenditures of $42 million, resulting in a free cash flow of $322 million.

In Q4, Illumina repurchased 134,000 shares for $17 million, ending the year with $1.22 billion in cash and investments. Significant progress has been made towards Core Illumina's goals, establishing a strong cash generation profile and balance sheet. For 2025, the guidance does not reflect potential impacts from a recent China announcement and assumes stable macroeconomic and political environments. Revenue growth is expected in the low single digits, particularly in the second half, driven by the NovaSeq X transition and strong sequencing activity with clinical customers. Multiomic product launches are attracting research interest. The transition to the X series aims for 75% by late 2025, while instrument revenues may see a slight decline. Total sequencing revenue growth should align with overall company revenue growth.

The paragraph provides an overview of the company's financial expectations and performance insights. It anticipates a core non-GAAP operating margin of approximately 23% for 2025, reflecting improvements despite inflation challenges. A non-GAAP tax rate of about 22.5% is expected. The company forecasts non-GAAP diluted earnings per share to be between $4.50 to $4.65, projecting a 10% growth at the midpoint. Details for modeling purposes are available on their website. For the first quarter of 2025, revenue is expected to be flat to down 1% year-over-year due to declines in sequencing instruments and strategic partnership revenues. A non-GAAP operating margin of 20.5% and earnings per share between $0.93 to $0.98 are projected for Q1. Jacob Thaysen then expresses pride in the 2024 accomplishments and outlines a forward-looking strategy for 2025, encouraging engagement at future events. The paragraph concludes by opening the floor for a Q&A session.

The paragraph is from a Q&A session where Vijay Kumar from Evercore asks a question about the impact of potential disruptions in China on the company's revenue, clinical and research margin profiles, and guidance for the year. Jacob Thaysen responds by noting that the situation in China is new, having been known for only a few days. He highlights that China is a significant market due to its aging population and investment in healthcare, including sequencing. He emphasizes Illumina's strong position in serving the Chinese market with their NGS technology and states that the company is actively working with relevant parties to resolve the situation.

The paragraph is from a conversation about a company's business strategy and performance. The company, representing about 7% of total revenue, is not detailing its China business beyond this revenue figure. Vijay Kumar inquires about the year's business cadence, to which Ankur Dhingra responds that their top-line growth is expected more in the second half of the year due to the high-throughput sequencing transition. They are focusing on cost reduction and operational excellence. Dan Brennan then asks about the volume and elasticity changes, particularly regarding the transition from NovaSeq to NovaSeq X, and what is expected for 2025. Jacob Thaysen expresses enthusiasm about the ongoing shift towards the X model throughout 2024, suggesting that the transition is a focus and influence on their future strategies.

The paragraph discusses the transition of customers to a new product, referred to as "X," which has resulted in increased volume and deeper sequencing compared to those using the older "6K" system. The speaker highlights the significant growth in volume, which is expected to remain above the average growth of mid-20% for some time. They are optimistic about having more than 75% of their volume on the new system by midyear. Dan Brennan acknowledges the progress and suggests there is further potential for growth in the next year, with more detailed modeling assumptions available on a slide. Following this, Puneet Souda from Leerink asks a question concerning the company's strong position in China and the potential reversal of a situation involving an unreliable entity list, seeking more clarification from Jacob.

The paragraph features a discussion involving Jacob Thaysen, Ankur Dhingra, and Puneet Souda about the transition of software and clinical volumes within a company. Despite recent developments involving another larger software company, details remain limited as the parties are still in dialogue. Ankur provides updates on the transition to a software version referred to as "X," indicating that at the end of the year, 50% of clinical volumes and over 65% of total volumes had transitioned, with expectations that the aggregate would reach 75% by 2025. Puneet seeks clarification on these timelines. Additionally, Doug Schenkel from Wolfe raises concerns about the lack of detailed financial information regarding China, which he believes affects stock perception.

In this paragraph, Doug asks Ankur and Jacob about their strategies for maintaining earnings per share (EPS) targets amidst ongoing challenges, particularly in China, and future uncertainties like upcoming announcements from Roche. Additionally, he inquires about their commitment to achieving mid-single-digit revenue growth and better-than-peer EPS growth in the next one to two years. Jacob responds by asserting his full ownership and responsibility for the company since taking over, highlighting their plan to return to high single-digit growth by 2027, deliver double-digit EPS growth, and achieve a 26% operating margin. Ankur adds that they are exploring all potential opportunities regardless of developments in China.

The paragraph discusses a company's focus on driving margin expansion and operating efficiency, projecting a 170 basis points increase year-over-year. During a call, Conor McNamara from RBC inquires about growth sequencing and any potential slowdowns in sales due to high X placements or customers delaying consumable purchases for a new product. Jacob Thaysen responds, confirming positive progress in conversion rates ahead of schedule, despite anticipated Q4 slowdowns due to fewer working days. The company is on track to reach its mid-year target for conversion and remains optimistic about their performance trajectory.

In the paragraph, Ankur Dhingra discusses the progress and opportunities at Illumina, highlighting that while some improvements have been made in manufacturing and team optimization, significant opportunities remain for 2024. The company has started consolidating their manufacturing and R&D in Singapore to benefit from cost savings and synergies, which also provides tax advantages. These efforts are already influencing the 2025 guidance positively.

The company has established an office in India with 150 employees and plans to expand its capabilities there, particularly in sales, marketing, and R&D, over the next two years to optimize its cost structure. In response to a question about China's market performance in 2025, Jacob Thaysen highlighted the positive impacts of organizational changes by the new head of China, Jenny, a year ago, leading to growth in the region. The company is seeing sequential improvements, with anticipated growth continuing into the fourth quarter.

The paragraph involves a discussion about the company's outlook and strategy regarding the Chinese market. Ankur Dhingra acknowledges that during their strategy day, they projected flat growth for China in 2025, and stated that they were not anticipating significant short-term growth from China, making the recent 1% growth in Q4 surprising. Despite some geopolitical and market barriers, such as BGI's exclusion from the US market, there's a question about whether reversing such exclusions in exchange for better access to China's market would be beneficial, suggesting the complexity of international business relations. Additionally, Tejas Savant queries about recent competitive challenges faced by the company due to losses to emerging competitors in specific projects. Jacob Thaysen responds by affirming that competition is taken very seriously.

The paragraph involves a conversation about competition and innovation in the industry between Tejas Savant and Jacob Thaysen. They acknowledge the presence of competition, affirming that it drives quality and innovation, particularly for Illumina. When asked about the impact of recent political developments in Washington, Thaysen states it's outside their control and decision-making. Tycho Peterson from Jefferies then asks about placements, clinical test transitions, customer uptake, and pricing dynamics. He specifically inquires about the potential influence of a new administration, clinical adoption projections, customer application-specific pricing strategies, and addresses a question about the UK Biobank.

In this paragraph, Jacob Thaysen discusses the company's strategy in dealing with a rational competitor in the market who is giving away instruments. He explains that historically, most customers transition to new technologies, but about 20% remain with older technology for various reasons. Over time, this group will shrink, but the transition takes longer for the last segment of customers. Thaysen mentions the company's involvement in a 50,000 sample pilot study for the UK Biobank project, a step their competitor also took before proceeding further. He emphasizes the company's successful business model and the necessity for competitors to eventually demonstrate profitability to sustain operations.

In this paragraph, Ankur Dhingra discusses the company's strategy regarding application-specific pricing with clinical customers. Rather than reducing prices across their entire portfolio, the company is engaging in discussions to create separate pricing structures for specific high-volume tests. This approach has been well-received by some customers who plan to launch new tests in the coming quarters. Additionally, the company is exploring similar strategies with its proteomics and single-cell solutions, focusing on providing comprehensive workflows and study programs instead of pricing based on data volume. The paragraph ends with the operator inviting Dave Westenberg from Piper Sandler to ask his question, particularly about NVIDIA's involvement.

The paragraph discusses the potential of a collaboration between Illumina and NVIDIA, specifically focusing on its implications for computing power in genomics. The partnership aims to leverage NVIDIA's capabilities in AI and GPU infrastructure to enhance Illumina's sequencing processes. This collaboration could create a network effect, benefiting customers by allowing them to compute large amounts of data more efficiently, especially in multiomics and predictive biological modeling. It also highlights the significance of NVIDIA's infrastructure in building foundational models for predicting diseases and advancing drug discovery. Additionally, the paragraph touches upon private sector opportunities in genome projects and the potential of sequencing at birth.

The paragraph discusses the collaboration between the company and NVIDIA to integrate models and programming languages into their infrastructure, providing customers access, which is generating global interest, especially from the pharmaceutical sector. The focus is on expanding from genomics to multiomics. It highlights the company's substantial R&D investment, just under $1 billion annually, as a long-term strategy to capitalize on opportunities in genomics and multiomics. The company aims to drive growth through continued innovation and R&D, despite the investment being higher than industry peers as a percentage of sales.

The paragraph discusses Illumina's optimistic outlook for the future of genomics and multiomics, highlighting a ten-year roadmap expected to significantly impact health and drug discovery. The speaker mentions efforts to improve efficiency and grow the company without solely focusing on cost-cutting. Additionally, it touches on a question from Sung Ji Nam regarding Project Stargate, a $500 billion AI infrastructure initiative. The project, which includes personalized cancer vaccines and tumor gene sequencing, presents opportunities for Illumina to play a proactive role in supporting healthcare advancements using new technologies. Jacob Thaysen acknowledges the commitment of the US to drive healthcare forward with innovative technology.

The paragraph is a transcript from a conference call where Patrick Donnelly from Citi asks about the performance and guidance related to consumables and the ability to sell products in China. Jacob Thaysen confirms that the company continues to serve customers in China despite regulatory challenges. Ankur Dhingra explains that the consumables results for Q4 were anticipated to be lower than Q3 due to holidays, but overall, the consumables performance was in line with expectations, with no surprises in both research and clinical sectors.

In the paragraph, the speakers discuss the company's quarterly results, expressing that they were generally in line with expectations despite a slightly lower figure for 6K. There were no concerning trends noted regarding conversion rates or overall activities. The company is optimistic about reaching a 75% conversion rate by the second half of the year. For Q1, there's an expected sequential increase in consumables from Q4, along with positive year-over-year growth, although instrument sales are anticipated to decline. The call concludes with an invitation for further engagement at future events.

This summary was generated with AI and may contain some inaccuracies.