Illumina, Inc.

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 first quarter of 2024. During the call today, we will review the financial results we released after the close of markets, and offer commentary on our commercial and regulatory activity, after which we will host a question and answer session. Our earnings release can be found in the Investor Relations section of our website at Illumina.com. Providing prepared remarks for Illumina today will be Jacob Tyson, Chief Executive Officer, and Ankur Dhingra, Chief Financial Officer. Jacob will provide an update on the state of Illumina's business, and Ankur will review our financial results, which include GRAIL. Jordip Goswami, who is serving as an advisor to the company through June 30th, will then join us for Q&A. As a reminder, GRAIL must be held and operated separately and independently from Illumina pursuant to the transitional 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 these 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 10-Q and 10-K. With that, I will now turn the call over to Jacob.

Thank you, Sally. Good afternoon, everyone. Before going into our first quarter results, I want to take a moment to thank our former Chief Financial Officer and Chief Strategy and Corporate Development Officer, Joydeep Goswami, for his many contributions to Illumina over more than four years. As Sally noted, Joydeep will stay on an advisory role through June to support a smooth transition. I also wanted to welcome our new CFO, Ankur Dhingra, who you will hear from shortly. and congratulate Jacob Wedel, who has now been named as Chief Strategy and Corporate Development Officer. Jacob joined Illumina in November and has been heavily involved in our long-term strategy planning. Throughout the quarter, I continued to meet with customers around the world and had the opportunity to bring a number of them to our San Diego headquarters to discuss new ways to collaborate, innovate, and shape what their future looks like with Illumina. Some of our customers shared how they are scaling up their projects with NovoCX to unlock greater discovery power. One key area of focus is harnessing whole genome opportunities in minimal residual disease. Other customers are starting to sequence deeper and are adding multi-omics layers to their projects, while others are looking at epigenomic biomarkers and methylation to help diagnose and characterize disease. We are seeing a significant opportunity to expand in multiomics. Customers are looking for more sophisticated solutions to support their work, and we are exploring all avenues to create value in this space. Our recent acquisition of Partech, a specialized multiomics software solution, is a building block of our expansion into this space. Our intent is to collaborate with our customers to understand how we can provide more sample-to-answer solutions. Illumina is at the heart of the ecosystem, and we will continue to catalyze the industry with an even greater focus on our customers' priorities. Turning to our first quarter results, I'll focus my comments on Core Illumina. In Q1, we delivered Core Illumina revenue of approximately $1.06 billion ahead of our expectations. While it was a decent start to the year, we remain cautious due to the persistently challenging global microenvironment where customers are still constrained in their purchasing decisions. As expected, we are seeing this playing out across our regions, notably with lower Novosig X placements versus the first quarter of 2023 when we shipped our first X instrument to fulfill a strong pre-order book. three of our regions declined year-over-year. America's revenue was down 4%, EMEA revenue was down 3%, and Greater China revenue was down 14%. Europe revenue was up 7% year-over-year, although we expect a decline in Q2 given the last year's strong X shipment in Europe in the second quarter. Nonetheless, Illumina management team continues to make significant progress executing against my three key priorities to accelerate value creation across the company. My first priority, driving our top line, is grounded in a growing installed base and helping customers realize the full potential of our instruments. In Q1, we shipped an additional 55 Novosig X instruments, bringing our total X installed base to more than 400 instruments. This is a solid start of the year and we expect momentum to continue to build. We also saw promising consumables demand throughout the quarter as our customers continue to scaling their operations and expanding their sequencing projects. With the launch of the 25B rating kit in Q4 and the 1.5B in Q1, and alongside with the well-received upgrade of the 10B flow cell, we are now providing our customers with the full suite of NovoSeq X products. In Q1, we also made XLEAP SBS chemistry available to our mid-throughput customers with the launch of our P4 flow cell on the existing NexSeq 1K-2K instruments. In the first several weeks post-launch, we have received exceptional feedback from customers who are reporting reads that exceed specs for quantity and quality. Customers are positive about the simple migration that's enabled them to run spatial and single-cell projects, and they are impressed with the accuracy they see with the dragon on board. Illumina continues to pursue strategic partnership and alliances to drive the entire genomics ecosystem forward. As a recent example, Pillar Biosciences announced FDA approval for its pan-cancer IVD for general tumor profiling on the Illumina MiSeq DX system. We've been partnering with Pillar since 2017 and are excited for this important milestone. Also in the quarter, Bristol-Myers Scripps joined our previously announced collaboration with Johnson & Johnson Innovative Medicine on the development of our multi-cancer whole genome sequencing-based molecular residual disease assay to better understand disease recurrence. You should expect to see more of these types of activities going forward. Now turning to my second priority. I'm continuing my focus on delivering operational excellence by driving margin improvement through increased productivity by sustaining innovation and growth. It has been my goal to align our organization in a way that best supports our customers' evolving needs. In March, we brought together our marketing and commercial teams under one customer-first global function. I'm confident that combining these teams into one global commercial organization will build our agility to better serve customers while delivering more sustained growth and margins over time. Additionally, we are focused on driving further improvements throughout our end-to-end supply chain and are taking a disciplined approach to improve our cost structure. In Q1, we implemented new initiatives to adjust pricing cross our portfolio to better cover our global operational costs. We also made progress in streamlining our real estate footprint as we exited select facilities in the Bay Area and in San Diego. These actions add to the number of ongoing initiatives that will continue to support our margins and increase further flexibility for investment in high-growth areas. We are also tightly focused on stabilizing our Greater China business. And in Q1, we brought on Jenny Tsang as head of region. Jenny has deep expertise in healthcare and global organization and a strong leadership and execution mindset. She's already proving to be a great leader of our China team and is introducing changes to make our business more in China for China, which will include improving our local manufacturing and partnerships in the region. Moving on to my third priority, which is working to resolve GRAIL as quickly as possible. In April, we reached an important milestone in the divestment process when the European Commission approved our divestment plan for GRAIL. The approved plan contemplates both sales and capital markets options, and we have made progress on both paths, consistent with the European Commission's divestiture order. In the event of a capital market transaction, we are required to capitalize GRAIL with approximately $1 billion, deflecting two and a half years of funding based on GRAIL's long range plan. The amount includes cash on GRAIL's balance sheet. We are on track to finalize the terms of the transactions by the end of the second quarter. I look forward to having additional updates for you soon. Overall, I'm encouraged by the progress we have achieved in the quarter and optimistic about delivering on our initiatives here in 2024. Now, I'll ask Ankur to share more detail on our first quarter results and outlook.