Joydeep Goswami: And on the GRAIL, I think I’ve mentioned this earlier. Look, there are several options now on the table that we could help pay for the 2.5 years of funding requirements. So for example, if you went for a spin, there are options around a sponsored spin where a sponsor could put in a fair chunk of the money, or some or all of the money that is required for that funding. The other one, which is more of a capital markets transaction, which is more of a split kind of option where you could go and raise money in capital markets for GRAIL and IPO market for GRAIL. So we’re looking through and working through those various options. They’re, of course, dependent on specific market conditions and interest in GRAIL from private placement. So we’ll keep you posted on that as we go out to the market and consider those options.
Operator: And we’ll take a question from Catherine Schulte with Baird.
Catherine Schulte: Hey guys, thanks for the questions and welcome, Jacob. I guess just on your comments on ’24, when you say results might look similar to ’23, in that case, I guess, how do you view Core Illumina op margins? Would those also look similar to ’23 or given some of the cost reductions that you guys have talked about, do you think there’s room for improvement there?
Jacob Thaysen: Yeah, thanks for that. So I think right now that Illumina have a wonderful model, actually. I think we have really strong operating gross margins. So obviously with growth, we can really fuel that to the bottom also, but in a flat environment and with, of course, we are seeing that more challenging. So right now we are — we expecting to be flat both on top line and on the bottom line.
Joydeep Goswami: Yeah, and I think, you’re right. We do expect to see an improvement in gross margins next year, obviously with more zeroables mixed in there. Off the cost reductions that we have made this year, I just want to remind you that some of that, substantial portion of that has already been recognized this year. So they won’t be incremental to next year as we go through. And then offsetting those two positives is, we do expect that the variable compensation and sort of rationalization and year-over-year comp on that will eat away into that goodness that you’ve had and coupled with merit increases in inflation, right? So, and again, we did not pay executives the stock-based compensation and variable compensation this year as our performance has not been up to par. So we do expect that that will come back into next year as we correct some of that.
Jacob Thaysen: But I think on that, I think, everything I see here, as I mentioned, also the gross margins are strong in the company, but there’s a lot we can do to continue to improve that. So I don’t see anything that is, for me at least coming in here, see there’s any difference in the thesis about Illumina going back to what has been historical margins. And we will work on that. I think historically we have been, the logic has been, this will come through growth and clearly we need growth to drive some of that, but we will also really focus on operational excellence see to build that going forward.
Operator: And our next question comes from Conor McNamara with RBC Capital Markets.
Conor McNamara: Hi guys, thanks for taking the question and Jacob, welcome to San Diego. Just, if I look at kind of what you’ve said about 2024, from pre-pandemic levels from 2019 to 2024, that would imply an annual growth rate on the core business of about 5%, which is roughly in line with, the overall life science tools market, despite the fact that you guys have consistently spent about 20% of sales in R&D. So if I’m an investor looking at Illumina, should I think of this as an EBIT margin expansion story from here where you bring R&D down in line with peers or do you think that you guys can’t, you can drive a return to growth above historic life science tools growth levels?
Jacob Thaysen: Yeah, that, again, I want to be careful on coming with too many comments right now. I’m 40 days into my work here, to my job here, but I think I still believe that Illumina has a better growth opportunity than many of the other life science tools company and I will come back and give you more insights when I’m ready for it later in 2024, but I don’t think that Illumina is in a place where it’s in the level of many of the other companies right now, but it’s too early for me to give you a clear guidance, but yeah, so wait and see.
Operator: And our next question will come from Rachel Vatnsdal with JP Morgan.
Rachel Vatnsdal: Great, thanks for taking the questions and welcome to Illumina, Jacob. So first up, I just wanted to ask on Core Illumina margins, follow up on some of the earlier questions. Specifically, it looks like that implied 4Q margin stepped down for Core Illumina, but also given the lower placement number, your mix should be more skewed towards consumables than typical in 4Q. So is there anything else that we should look at from a one-time perspective or anything else on the puts and takes on that margin implied for 4Q?
Jacob Thaysen: Joydeep, do you want to take that?
Joydeep Goswami: Yeah, so Rachel, a couple of things, right? So you will see margins and operating margins decline. We are seeing a step down in revenue from Q3 into Q4. So that’s one element of that. The second element is gross margins are impacted for several reasons, right? One, that we do see every time you see a reduction in volume, you have less absorption of fixed costs, so you have that flowing into it. The second piece is around, yes, we are seeing some shift from instruments into consumables, but we are seeing a reduction because of the transition effects of NovaSeq 6000 consumables, which are highly profitable and so you’re seeing a little bit of gross margin decline because of that. And then the third is we have some components of strategic deal revenue that we have coming in, in Q4 versus Q3, and that is also pulling down our gross margin.
