Illumina, Inc. (NASDAQ:ILMN) Q3 2023 Earnings Call Transcript

Joydeep Goswami: I think mostly it’s — you’re talking about GRAIL data here. So this is one of the options that obviously the committee will consider and we will consider as a team, but it also really depends on the divestiture option that’s chosen and what we agree going back and forth with the European Commission here. So it is one of the things that is absolutely in consideration of the various options that, Jacob mentioned that the committee is going to bring up.

Jacob Thaysen: Yeah, and then the last question, I think was on the leadership team and I will put it more broadly saying that I will be performing a comprehensive business review over the next period of time. As again, I’ve been here 40 days and I’m really impressed with the team and the talented people we have in the organization. But I’ll of course keep you updated on what my thinking is while we move forward here in ’24.

Operator: And we have a question from Dan Leonard with UBS.

Dan Leonard: Thank you and hello, Jacob. Now that you’re sort of transitioning to maybe a bit more of a hand to mouth demand cycle for the X, given that you don’t have much backlog left, I was hoping you could elaborate what the pipeline looks like, any metrics you could offer. And is it possible you could quantify, how much is the sales cycle lengthening? Is it double what it used to be? Is it some different multiple? Just anything you could help us contextualize that.

Jacob Thaysen: I think Dan, again, I would like to invite Joydeep into provide a little more insights on where we are, but I can say generally speaking, the sales cycle is extended quite a lot from what we used to. Not only because it takes time to make the decision, but also to get it through all the levels that there’s much more scrutiny on all levels in the decision making and we’ve seen that. We see that in Illumina, but I think that’s a general thing that is happening in industry right now. But Joydeep, you want to go a little closer?

Joydeep Goswami: I just want to corroborate, Jacob right, what you said. We see strong interest still in the X and obviously with the launch of the 25D, that has perked up even more. And the pipeline continues to have hundreds of opportunities there, right. So we’re not suffering a decline in the pipeline. We continue to add opportunities to the pipeline. What has been, because of the macroeconomic situation, a little bit more challenging for us is converting that pipeline into orders as quickly as we had imagined. So that is the lengthening of the sales cycle that you talked about and we expect that that will continue for us and for others for a little bit of time into the future here, right, till macroeconomic conditions return, but there’s no doubt that they’re not — it’s not that the demand is shifting to some other technology or some other instrument.

It is still very much centered on the X and we still continue to have conversations with our customers to get them there and once they have bought it, to really ramp them up and get them ramped up as quickly as possible so that it can pull through the consumables as quickly as possible.

Jacob Thaysen: Yeah, and again, as Joydeep was saying, we have a healthy pipeline and just as an evidence that this is moving, we just here over the last few days, we received 10 pieces of, what is it, 10 instrument order on our X from one of our biggest customers. So we are definitely seeing that there is really customers really like the X and can really see that it can be utilized very nicely.

Joydeep Goswami: Now Jacob, that’s a good point. That’s a fleet expansion order. So they have had experience with the X and they are doubling down, right?

Operator: And we have a question from Sung Ji Nam with Scotia Bank.

Sung Ji Nam: Hi, thanks for taking the questions and welcome to Jacob. Just a quick one on GRAIL, kind of what’s the key driver of the guidance, updated guidance being at the low end of the prior range? Thanks.

Jacob Thaysen: I can handle it. So again, it’s mostly two things. So they did have this particular year some challenges with their PDX revenue. This is the pharma services revenue and then gallery sales are, while they’re growing nicely, have been lower than their initial expectations, right? So both those have impacted it.

Joydeep Goswami: But still a healthy growth.

Jacob Thaysen: So very healthy growth. We’re seeing that at 100%-ish.

Operator: And our next question comes from Kyle Mikson with Canaccord.

Kyle Mikson: Hey, thanks. Welcome, Jacob. Two part question. First on GRAIL, second on Core. On the GRAIL funding in conjunction with the divestiture, if it is a capital market transaction, company’s going to need 2.5 year’s cash. I think that was touched on earlier. You could provide that via equity raise or debt issuance. Could you just walk through what your exact options are to produce that capital if you don’t do equity or debt offering? And then on the Core business, you guys mentioned the initial view on 2024. Is that a little similar to 2023? Does that mean that revenue is going to be flat year-over-year for the third year in a row and then maybe you could just comment on orders and placements for next year? Like, could placements grow in 2024? Thank you.

Jacob Thaysen: Yeah, so let me start by the second question here and again, we will come out with the full guidance in our Q4 ’23 call in February, but I’m just sharing you with the initial view we have on 2024 right now and due to the macroeconomic environment, we want to, and we don’t see that change right now. If it changes during 2024, obviously, we will see more momentum in the business, but I felt it was important to share with all of you right now on how we see the year. There are more details behind it, but we’re still working through the rest of this year. And we’re still finalizing the 2000 and, of course, 2024 budget also. So it’s too early for me to share details about the year, but what I can tell you, as we said before, is that we still have a strong pipeline on X particularly and we expect, and we’re just seeing that the sales cycle is taking longer than we expected, but you should actually see that the consumables are starting to pick up in 2024 also.