Illumina, Inc.

We're about to begin. Good day, ladies and gentlemen, and welcome to the fourth quarter 2022 alumna earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Sally Schwartz, Vice President of Investor Relations.

Hello, everyone, and welcome to our earnings call for the fourth quarter and year-end 2022. During the call today, we will review the financial results released after the close of the market and offer commentary on our commercial activities, after which we will host a question-and-answer session. If you have not had a chance to review the earnings released, it can be found in the investor relations section of our website at Illumina.com. Participating for Illumina today will be Francis D'Souza, President and Chief Executive Officer, and Joydeep Goswami, Chief Financial Officer and Chief Strategy and Corporate Development Officer. Francis will provide an update on the state of Illumina's business, and Joydeep will review our financial results, which include GRAIL. As a reminder, GRAIL must be held and operated separately and independently from Illumina pursuant to the interim measures ordered by the European Commission which prohibited our acquisition of GRAIL under the EU merger regulation. This call is being recorded and the audio portion will be archived in the investor section of our website. It is our intent that all forward-looking statements regarding our financial results and commercial activity made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon current available information and Illumina assumes no obligation to update those statements. To better understand the risks and uncertainties that could cause actual results to differ, We refer you to the documents that Illumina files with the Securities and Exchange Commission, including Illumina's most recent forms 10Q and 10K. With that, I'll now turn the call over to Francis.

Thank you, Sally. Good afternoon, everyone. 2023 is off to an exciting start for Illumina and for Genomics, and I'm pleased to announce that we've started shipping the first NovaSeqX Plus systems to customers. Later in my remarks, I'll share how we're scaling our manufacturing and distribution infrastructure to ship 40 to 50 units in Q1 and over 300 units for the year. First, I'll cover our financial results for both the fourth quarter and full year 2022. Illumina delivered fourth quarter revenue of approximately $1.1 billion and full year 2022 revenue of approximately $4.6 billion. in line with the upper end of our revised guidance range. We placed more than 3,200 instruments in 2022, increasing our installed base to approximately 23,000 instruments worldwide. Delving now into each of our platforms, starting with high throughput. We've had a fantastic customer response to the NovaSeq X series launch. Both orders and the advanced pipeline continue to grow. There's strong global interest. with orders from more than 25 countries, four times more than in the first quarter of the NovaSeq 6000 launch. We're also seeing stronger-than-expected clinical adoption and orders from new to high-throughput customers who are bringing sequencing in-house due to NovaSeq X's ease of use and cost benefits. The NovaSeq X has had the strongest pre-order book of any Illumina instrument launch. and this demand will catalyze a multi-year upgrade cycle. We also shipped more than 340 NovaSeq 6000s in 2022, with more than one-third of those instruments for oncology testing, and nearly half to new to high throughput or new to Illumina customers. Placements were strong in the first half of 2022, even after a record 2021. Second-half placements were tempered by growing customer excitement, for the NovaSeq X series. Across 2022, average consumable pull through for the NovaSeq 6000 was approximately $1 million per instrument. Moving to mid throughput. In 2022, we shipped a record 1,215 instruments and saw the fourth consecutive record year for NextSeq shipments. The fourth quarter of 2022 was also the highest quarter on record for NexSeq 1K-2K shipments. Customers appreciate NexSeq 1K-2K's unique capabilities as the only mid-throughput sequencer with built-in analysis and the first mid-throughput instrument to include the 2x300 kits. Close to 25% of NexSeq 1K-2K units in 2022 were placed with new to Illumina customers. For low throughput, in 2022, we shipped approximately 1,670 instruments, bringing nearly 700 new customers to Illumina. Our low throughput instruments consistently open new geographies and applications, while serving as an effective entry point to sequencing. Shifting to our markets. Our clinical markets currently include testing for oncology, reproductive health, and genetic disease. In 2022, shipments to clinical customers represented 45% of core Illumina consumables. For 2022, oncology testing consumables grew 7% year over year from utilization of NGS-based molecular profiling across early detection, therapy selection, and minimal residual disease. We see expanding opportunities for our oncology products globally. For our TruSight Oncology 500 Distributed Therapy Selection Assay, sample volume grew approximately 60% year-over-year across more than 500 accounts. And for 2023, we expect more than $100 million in revenue for TSO500. Also in oncology, Grail continues to have strong demand from consumers, physicians, health systems, and payers. in a $40-plus billion market, and it had the fastest first-year revenue ramp in cancer screening test history. Grail has established over 60 partnerships with leading health systems, self-insured employers, and other healthcare stakeholders. In 2022 alone, more than 4,500 providers ordered the test, contributing to the more than 60,000 gallery test orders that have been received to date. The gallery test has received FDA breakthrough designation and was recognized by Time as one of the best inventions of 2022, by The Atlantic as one of the breakthroughs of the year, and by Fast Company as one of the world-changing ideas of 2022. The gallery was also featured in an AARP health story on game-changing medical breakthroughs improving lives today. Grail expects this exciting momentum to continue and to translate into an expected revenue CAGR of 60 to 90% over the next five years. Beyond oncology, genetic disease testing had a record quarter in Q4 and another strong year in 2022. For 2022, GDT consumable shipments grew 11% year over year, driven by broader adoption of whole genome sequencing globally and increased demand for rare disease treatment. We also saw additional evidence generation, with the European Society of Human Genetics updating its guidelines to recommend increased adoption of whole genome sequencing in diagnostics, as well as increased coverage for rare and undiagnosed genetic diseases. Recently, two of the largest health insurance companies in the U.S., based on the number of patients served, announced that whole genome sequencing will be covered for patients with rare and undiagnosed genetic diseases starting this quarter. And AIM Specialty Health, which provides lab benefits management services for more than a dozen regional health plans in the U.S., now considers comprehensive genomic profiling medically necessary for appropriate patients with advanced cancers. Tens of millions more Americans will be covered. a huge win for patients and our customers and for Illumina. Turning to our research and applied markets, consumable shipments represented 55% of core Illumina consumables in 2022. Boosting the diversity in genetic databases is a significant need for our customers as they work to understand the underlying cause of disease. Genomics, combined with clinical information, can increase drug discovery success by up to 150% and reduce costs by up to 50%. To achieve this, we need more samples over time and for more diverse populations. We recently announced an agreement with Amgen and its subsidiary DecoGenetics to sequence the first 35,000 genomes in our collaboration with Nashville Biosciences. This sample cohort will represent the largest data set of African Americans to date, as we aim to accelerate equitable access to precision health therapies, and they've already begun sequencing the first samples. Moving now to 2023, we're excited for this launch year and have now started shipping NovaSeqX Plus systems to our first customers. We're on track to ship 40 to 50 NovaSeq X instruments in Q1 and more than 300 instruments in 2023. To accomplish this, we've boosted our operational capabilities. We've built state-of-the-art consumable manufacturing facilities in the UK, Singapore, and San Diego, adding nine new production lines. At launch, we already have two to three months of inventory for each of the six core consumable SKUs. In our instrument manufacturing facility in Hayward, we are fully staffed in ramping up production and capacity. Right now, there are more than 60 NovaSeq X instruments in various stages of the production process. All primary and secondary sequencing metrics are meeting or exceeding specifications. In addition, we've taken steps to ensure our supply chain is strong. We began adding and onboarding new suppliers to the material and component supply fueling NovaSeq X production. We're also equipping our global commercial team to guide our customers as they receive the first NovaSeq X shipments. In January, we brought together more than 800 sales team members in a three-day training session, giving them new tools and insights to support customers as they accelerate genomics worldwide, with this powerful new instrument. The team is energized to bring these new capabilities to market and excited to see the outcome of years of preparation. We are confident that our organization's scale, reach, and experience will enable our customers to sequence more samples, run more analyses, and obtain more data than ever before. And NovaSeq X unlocks greater elasticity we expect average pull-through for the X to comfortably exceed NovaSeq 6000 over time. Illumina will remain focused on supporting our valued customers with transformative innovations and continue to advance our roadmap to accelerate the genome era. Customers' interest worldwide continues to be very strong, and they are eager to harness the capabilities of the X, the most powerful, most sustainable, and most cost-effective sequencer ever developed to further unlock the power of the genome. You'll hear more about the customer experience and data at AGBT this week. Now, before I turn the call over to Joydeep, I'd like to thank him and welcome him to the role as Illumina's Chief Financial Officer. With over two decades' experience in the industry, Joydeep brings strategic expertise, deep industry knowledge, and extensive global business experience to the role. He is a proven and disciplined leader with a strong track record of creating value and an ideal partner to help drive the next phase of Illumina's growth. I'll now turn the call over to Joy Deak for more detail on the quarter and our full year outlook.