Illumina, Inc.

Good day, ladies and gentlemen, and welcome to the fourth quarter 2024 Illumina 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 2024. During the call today, we will review the financial results we released after the close of market and offer commentary on our commercial 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 for Core Illumina. As a reminder, we divested GRAIL in June of 2024. For a review of historical financial results for GRAIL and Consolidated Illumina, please see our earnings release and our SEC filings. We will be discussing non-GAAP results, which includes stock-based compensation. We encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's release and in the supplementary data available on our website. As we go through the results, please note that year over year refers to comparisons against the corresponding period in fiscal 2023, while sequential is as compared against the third quarter of fiscal 2024. Additionally, please note that all revenue growth rates discussed are presented on a constant currency basis to exclude the impact of foreign exchange fluctuations. 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 10Q and 10K. With that, I will now turn the call over to Jacob.

Thank you, Sally. Good afternoon, everyone. Before we get started, I wanted to take a moment to address the recent announcement from the Chinese Ministry of Commerce that we know is on top of mind for many of you and for us. We are in dialogue with the relevant parties and promptly seeking additional information to reach a resolution. Illumina has a longstanding presence in China, where we continue to serve the local markets, including both our clinical and research customers. Wherever Illumina operates, we comply with all applicable laws and regulations. And as a reminder, China represents approximately 7% of our global revenue, and we continue to see significant opportunity to bring our innovations to the healthcare ecosystem there. Now, let me turn to the overall review. 2024 was a transformative year for Illumina, enabling us to enter 2025 with momentum. As I shared with you last month, we made significant progress towards our strategic goals despite market conditions. We launched our new corporate strategy to return to revenue growth in 2025 and step into high single-digit revenue growth by 2027. We deepened our focus on customers and partners to further expand the genomics ecosystem into multiomics. We introduced new innovations across the sequencing workflow to support what matters most to our customers, the highest quality insight for the lowest end-to-end cost. We made strong progress with the NovaSeq X transition, with research and clinical customers increasingly use the instruments for deeper and broader sequencing. We built a new leadership team and refined our organization structure, and we rolled out a robust operational excellence initiatives to improve our margins and to drive double digit to teens EPS growth. We just at the beginning of our transformation and are confident that 2025 will bring us closer to our goals. Turning to our Q4 results. In the fourth quarter, Illumina delivered revenue of $1.1 billion, exceeding expectations and reflecting approximately 1% growth from the prior year. The transition to the NovoCX continues to progress well. The Q4 year-over-year revenue growth driven primarily by consumables as customers increase their instrument utilization. In 2024, NovoCX pull-through averaged $1.3 million per system. Sequentially, our results exceeded expectations due to the higher than anticipated shipments of the Novosig X series. We placed 91 instruments during the quarter, bringing the installed base to 630. Across our regions, America's revenue, which is more than half of our business, was up 3% year-over-year on a constant currency basis. Europe's revenue was up 3%, MER revenue was down 10% and Greater China revenue was up 1%. We continue to focus on three key priorities to guide execution of our strategy. First, deeper customer and partner collaboration. Second, continuous innovation. And third, commitment to commercial and operational excellence. Our first priority, deeper customer and partner collaboration, is centered on providing a range of targeted solution to serve the increasingly diverse need of our customer base to evolve the broader ecosystem and enable higher volumes of sequencing. Last month, we announced several examples on how we're partnering with leading players to broaden our reach into the intersection of technology, healthcare, and pharma. These partnerships will enable our customers to generate more detailed data and richer insights. Our recently announced collaboration with NVIDIA brings together Illumina's software capabilities and NVIDIA's advanced AI tools to enhance the analysis and interpretation of multiomics data for customers. We are also proud to take part in the Troveta Genome Project alongside Troveta, Regeneron, and several leading health systems across the US. Together, we are creating one of the largest genetic databases linked with phenotypic data, sequencing 10 million exomes exclusively using Illumina technology. Our second priority is continuous innovation. which is underpinned by spending time with customers and partners to share insights and support their ambitions. In December, we began shipping the new single-flow cell NovoSig X, which delivers the same high-quality performance and speed as the NovoSig X+, but at an even more accessible price point. We also began shipping our new 25B100 and 200 cycle kits for the NovoSig X, which are key for advancing multi-omics applications. These kits also support our recently introduced single-cell solution, formerly known as PIP-seq from Fluent Biosciences. As we mentioned during the strategy update, our customers are increasingly focused on getting the highest quality insight for the lowest end-to-end cost. To meet this need, we continue to expand our portfolio of fully automated, streamlined workflows, including with our new MiSeq i100, which accelerates sample to answer for oncology, microbiology, and for several other applications. Uptake since launch in Q4 has been strong. We placed more than 70 instruments with early access customers before year end. Also, we've been developing proteomics solutions in collaboration with Standard BioTools. This is a fully integrated end-to-end workflow that offers greater automation and ease of use compared to other on-market products. As a part of this rollout, Illumina announced the pilot proteomics program to analyze 50,000 UK biobank samples to generate a new collection of NGS-based proteomics data. We are also extending our early access program for our Constellation map read technology. The customers who have elected to enroll in the program have been encouraged by Constellation's ability to detect structural variance that was previously challenging to identify with short read sequencing. As we said during our strategy update last year, we are committed to keeping customers updated on our innovation roadmap at industry conferences and events. We look forward to sharing more at the ATPG conference later this month. An equally important priority is our commitment to commercial and operational excellence. By getting closer to our customers, enhancing productivity, and optimizing our investment spend, we are building a foundation that powers Illumina's long-term success. We have made great progress in building a culture where every employee is contributing to commercial and appraisal excellence. In Q4, we achieved additional cost savings from greater manufacturing and logistics efficiencies, contributing to more than $100 million in cost savings across 2024. Our ability to improve margins, even under tough market conditions, showcases the essence of the new Illumina operating model. And you'll see more of that going forward. Turning to 2025, our guidance does not attempt to reflect any impact from the recent China announcements, which we are promptly assessing. Our full year guidance also assumes a continuation of the current macroeconomic and political environments. We are closely monitoring the evolving circumstances in Washington, particularly as it relates to research funding. Ultimately, we committed to supporting our customers globally and the important work they do to advance scientific discovery using the powers of genomics. Within this context, our views for 2025 are aligned with the commentary we provided in mid-January. We continue to expect revenue to grow in the low single-digit percentage range on a constant currency basis and a non-gap operating margin of approximately 23%. 170 basis points improvement from 2024. We also expect diluted EPS in the range of $4.50 to $4.65. We have a clear vision for expanding the exciting markets in which we operate and a future defining roadmap to support our customers. We remain focused on delivering on our long-term financial targets to achieve high single-digit percentage growth by 2027, more than 500 basis points of operating margin expansion, and double-digit to teens EPS growth. As we said before, three growth drivers will help us achieve these goals. One, leading with our strong core business of sequencing as we progress the X transition. Two, scaling our entry into multiomics this year and next. And three, expanding our data and services to add an additional layer of growth. Before turning to Ankur, I want to thank our employees for their commitment and performance this past year. I'm very proud of the Illumina team for staying focused on delivering innovation to support our customers and the patients they serve and driving margin improvements. I'll now ask Ankur to share more detail on our 2024 results and the outlook for 2025.