Good morning, everybody. I'm Doug Schenkel. I lead Wolfe Research's Life Science Tools and Diagnostic group. It's my pleasure to welcome Jacob Thaysen, CEO of Illumina. Jacob, thanks for being here. Joshua, thanks for inviting us. From the company, not up on stage, but Ankur and Conor are here as well. If I mess anything up, I'll look over there. Thank you guys all for joining us. In terms of the framework for this morning, I wanted to quickly maybe start by talking about the state of the company, how things have continued to evolve under your leadership. The second thing is I really want to focus on unpacking some of the new disclosures from Q3 on the clinical side. I do want to spend a few minutes on how we should be thinking about the clinical transition. Third, it's kind of a hodgepodge of recent development questions as well as, from a policy standpoint, what's going on in China, competitive dynamics. Assuming we have a little bit of time left, maybe tying this together and get into how we should think about 2026 and beyond, at least as much as we can think about that as we sit here in November. Good. Jacob, you've been CEO for, I think it's just over two years. Global two years now, yeah. Yeah. Is it three? Is it? No. We're in year three. September 2023, so a little more than two years. Yeah. Sometimes it feels like a long time. Yeah. So So we knew you well from originally Dako and then Agilent. You did a fantastic job there. When you came on board, we looked at your, as much as we could, how you executed to plan. You consistently exceeded plan in those roles. At the same time, this is your first CEO gig, and you picked a doozy. I mean, there's a lot of opportunity here, but there was a lot that needed to be evolved. I think it's fair to say, just as it seemed like you were on the cusp of kind of getting to the other side of some of these dynamics, it was like Whac-A-Mole with policy dynamics popping up, coming into this year. You sure picked an interesting one for your first CEO gig. That being said, as we get towards the end of 2025, coming off of a really good Q3, and I'd say a good Q2 as well, how are you feeling about the outlook? Are we getting to the other side of kind of some of the challenges the company faced and some of the policy dynamics that popped up over the course of this year? Yeah. That's a good question. First and foremost, I still very much enjoy being in Illumina. I did know when I took the job that it would not be an easy ride. For me, it was more important that what Illumina stands for and the opportunity in front of us is still significant. That thesis that I came into the company has really not changed. I also recognize that there were some changes we had to do. I mean, the first one we had to do was to make sure GRAIL could be shipped off and come on to, and I think they're doing a great job now as an independent company. The second one was to clarify what is the strategy for the company going forward, where we're now focusing more on end-to-end workflow with the highest quality insights with the lowest end-to-end cost. Of course, really start to execute on that. With the aim to where we've put out the ambition to improve or get back to high single-digit growth in 2027 and also improve our margins with approximately 500 basis points, up to 26% overhead margin in 2027. That is the strategy. That's what we executed on. When we came into 2020, the first year was, of course, a lot to get a handle on what the business is and, as mentioned, clarify the strategy. Coming into 2025, we felt that that was kind of the year where we were more focusing on execution rather than developing strategies. We were hit with a few hiccups in the beginning of the year: China, NIH funding, tariffs, but also, of course, new competition coming in. I think you're right now. We have been focusing on getting the ship right, and now it's about execution. I feel like, knock on wood, that we have through a challenging year, and we fully in execution continue with that. The opportunity in front of us is still massive. Sequencing is still not the standard of care in healthcare. There are so many opportunities for us in front of us that we can talk more about. One of the things that you just mentioned there, which I think is important, and it's pretty impressive given how many things that have popped up that have been out of your control, the target that you outlined, I think it was last year, of getting to high single-digit revenue growth by 2027, getting over 500 basis points of operating margin expansion and growing earnings at a double-digit level. In spite of all the curveballs, those targets are still very much intact. Is that right? That's correct. We still committed to that. I think what we have modified is saying right now outside of, not with China, China is still something we need to work through. The high single-digit growth is ex-China at this point. The hope would be, is it fair to say in any outcome in China, and I want to be careful about this, but just given as we exit this year, I think China is going to be down to about 2%-3% of sales. As we fast forward a year, in any scenario, growth should be accelerating. That we would expect, for sure. Just to say, China is starting to be very small. We would love to get back to grow China again, for sure. At this point, we still need to work through the situation in China. In terms of what gets you to those targets more quickly and what the risk is, China is obviously a major toggle in their way. Are there other things we should think about that either are an opportunity to accelerate timelines or maybe represent a risk? Yeah, I think overall, I mean, when we lay out the strategy, the whole underlying logic in the strategy was that the main driver is going to be the transition to the ex. I mean, we continue to see that as the main driver. The faster we can get through the transition, the faster we get the pricing, of course, situation behind us. We have seen over the last few years that the volume have definitely, when I came into the company, there was a lot of questions, does elasticity still work? And it does. I mean, we are seeing massive amount of volume sequencing. We continue to grow volume very, very rapidly, and I expect that to continue to do so. That transition to the ex, going through that cycle, is still the main driver to get back to growth. We are also seeing that the new innovations we are coming up with, especially in the multi-omics arena, are starting to contribute to growth over the next period of time. It is still going to be, and we have said for the high single-digit growth in 2027, the contribution from those new launches is probably still in the multi-omics space in 1%-2% point that will contribute to the growth. We expect that to be even better going beyond that time horizon. If academic research is starting, if that starts to turn to more positive, that will definitely accelerate the growth. We are not expecting that at this point of time. We are expecting more the environment as we see it right now to continue. If we see some uptick on that, that could happen, then that would help us for growth. Along those lines, the framework, my words, not yours, but the one I've been using as we model things out and we talk to investors is in a "normal academic environment." That's probably a lower single-digit growth market for now. Hopefully, it's better. A lot of the growth comes from moving past the pricing dynamics and the ex transition and really participating as an arms dealer to high volume growth clinical, and then strategically layering in the things you've done to basically get more share of wallet, whether it's multi-omics, whether it's sample frap. Is that a good basic framework? That's a good framework. In the end, we believe the reason we're doing that also is that we believe that the customers, and we see the customers are looking for a vendor that can supply most of those workflows. We will continue to work with the whole ecosystem. In some areas, we will compete. In other areas, we will collaborate. Even with the same product lines, if a customer wants to have a competing sample prep, I have no issue in collaborating with a partner to make sure that the customer gets what they want to. There are areas also we're saying, look, we can actually by putting all these things together and supply them with one workflow, that there's a massive advantage for the customer. We want to be able to support them with that. I think you're right. I mean, the way you think about it is the right way. On top of that, we do think that pharma, it has never been separated out as a segment. We always thought about clinical and academic research or the research market. I do think pharma is starting to become a real contributor. And how I think about pharma is not just them buying a sequencer, but the pharma is really interested to look at massive samples, massive amount of samples. It can be hundreds of thousands, not millions of genomes. Or it can be where we talk about perturb-seq, where they want to do billions of cells. That is extremely expensive right now. It is something we can help accelerate by offering that type of services to multiple pharma partners at the same goal. We start to see that as a business opportunity also. That is why we created the BioInsight business here recently to really start to accelerate that. I think over time, that will start to be meaningful also. All right. Fantastic. Super helpful. I'm going to try to go through a number of questions that have popped up over the last few weeks on the new clinical disclosures. For those of you who aren't aware, on the fourth quarter call, third quarter call, excuse me, you shared some new disclosures and presented some really helpful slides in terms of research versus clinical, taking China out of there. There was a third slide where you talked about almost some case studies or a case study of the first 40 clinical customers that converted, started to convert to the ex and are fully converted at this point. Those were 40 clinical customers. That does not include new to high-throughput sequencing. These are customers that were on the 6,000 before and have moved over to the ex. That's the first thing. Yes. That's who are these customers. The slide didn't have percentages for growth. I don't want to admit, but we might have got a ruler out to try to look at the scale. It looks like kind of the point of that slide is in the first full year of transition, you still grow. It's probably under 5% growth if my measuring is about right. Then as you move past that, you start to grow with volume again and the growth accelerates. I know that sounds basic, but is that an important takeaway here? That's important. This whole thing, going from the 6K to the ex, obviously customers are seeing a very strong price reduction when they go through that. Of course, I know the concern was, oh, our customers just pocketing that price reduction. What is really happening is that customers are using this opportunity because they also compete out there. Our customers are competing with each other, as you know. They need to be competitive by putting new and better assays out there. These assays are substantially bigger in size. They need to fit it into reimbursement costs and so on. They see the opportunity to improve their offering to their clinical customers also. They do that by better assays, larger assays. That's what you see is that the first year, you have actually the volume price is almost in an equilibrium. You start to see the volume come back, the growth coming back by. You've now lapsed the pricing and now the volume is pure improvement. That's what you see. First year is little small growth, and then you start to really see the volume come back and the growth come back based on the volume improvements. At this point, as we're sitting here today, how much of your existing clinical customer base has converted? Yeah, it's still, if you looked at what we were out suggesting or showing, is that we have now 50% of the revenue now on the ex of our high-throughput customers. The research customers have more or less completely moved over now. You are, of course, less than 50% of the revenue on the clinical customers. There are still opportunities there. We see that as the clinical opportunity. As we have seen now, customers actually will grow, clinical customers, most of them will use the opportunity to expand their assays. We are less than 50% at this point still. Okay. Actually, it's an aside, but I think it's an important one. I want to ask it because it's what I've been saying. I want to make sure I'm not saying something wrong. Going back to how we talked about research returning to normalized low single-digit growth, part of my thesis there is it's the funding environment, but it's also for the most part, and there's going to be onesies and twosies. If you're a research customer at this point, consistent with what we've seen over Illumina's history, if you're going to move to the ex, most of those folks have moved to the ex already. Yes, correct. Okay. Most of the remaining conversion is really on the clinical side. Yeah. I would consider most of the research customers have moved over. And as you say, most of the conversion from now on is clinical. Okay. Of those who have not converted, I am going to try to do this in an uncharacteristically succinct way. There are, and just correct me if I am thinking about it wrong, some customers along the lines of what we talked about in research who will never convert. That is because they do not have the volume. I guess that is probably the biggest thing. They just do not have the volume. They don't have the volume. It makes sense for them to stay in the 6K. They have good reimbursements level. They are likely even profitable in that assay. It doesn't make sense for them to make the investment to go over to the ex at this point of time where they sit with the volume. They stay on the 6K. That's a smaller cohort of customers, at least volume-wise, that is staying there. You have another cohort that is staying with the current assays on the 6K. New assays, they move to the ex or they develop on the ex. These customers are growing out the gate because they have the volume on the 6K, stay on that, growth maybe a little bit. You see a lot of volume coming on the ex. That might be something like if I'm a customer that's running a panel or doing whole exome and then I'm moving to whole exome or whole genome, something where I'm sequencing wider, sequencing deeper. I keep running my old assay on the 6,000 and I roll out my new assay on the ex, which is going to use more, require more data generation, more gigs per sample. That's another cohort. That's another cohort. You have the third cohort that might remind us a little bit about this second cohort. That is now, and that's probably where you say, well, I was running exome on the 6K, but I actually believe that there's a bigger market if I do whole genome. I'm now starting to transition from exome over to genomes. I still have some customers who want to stay on the exome. You see that business is declining, you see a massive, you see you go exome, you have a much bigger assay, of course, and you start to see, and that goes on the ex and that starts to increase also. Even that customer base is actually seeing out of the gate improvements from a revenue perspective. Those two segments are absolutely the largest of our clinical segments. Because they're either like the first group, which is smaller, but that's sort of business as usual on the 6,000. The other two cohorts you just described, you're either replacing or transitioning. That is probably most emblematic of what we saw on the slide on the Q3 call. There is one group left, right, which is the group where the assay is essentially good enough as is without requiring more sequencing per sample. Yeah, you could imagine maybe an NIPT assay where customers are saying, look, I do want to move to the ex because I can get better pricing on the ex. You have a small segment that is less than 20% that have decided to say, I'm going to move to the ex because I get the price advantage. It is not a big customer base. By the way, most of them have already moved because they saw immediately the price opportunity to go there. I do not think that that is going to be, at least from what we can see, a big cohort going forward. Another, I think, subtlety to this is they're not all going to move to the 25B right away, right? I mean, in terms of the most drastic change in pricing, especially on the clinical side where you think about turnaround time and the need to batch. Is it fair to say that there's a high percentage of these that won't immediately move over to the 25B? If you think about those four cohorts, if most the two cohorts in the middle, that's where most volume is sitting, that's where they go for the 25B. The two other cohorts are likely still staying on the 10B flow, which also has a different price point that reminds more about the 6K high volume. You're right. That's what we're seeing. If you summarize all that in, you would actually see that this is a clinical opportunity. Overall, we see more the first year kind of a flattish growth, and then you start to see the volume come back. It kind of reminds about that slide we showed. Yep. That's super helpful. Thanks for indulging me on that. Very last one on this. What's not captured here is new to sequencing, right? I mean, there are new companies that pop up. Everything we're focused on here is really kind of existing customers. What's not captured here are there are new customers buying sequencers for the first time. Correct. Okay. I know that sounds basic, but I think it's important to just note that. Okay. Actually, I'm going to slip in a quick Roche question. Yeah, please. First, have you seen any change in customer behavior subsequent to the announcement over the last several quarters that Roche is moving into the market? No, we have not. I mean, there's, of course, a lot of interest in understanding. There's always interest in new technology. I think it's actually good for the industry that this comes in and it challenges a little bit how we do things. I absolutely enjoy competition, especially when we're winning. I think it stimulates everyone. It also challenges the conversation, or you can say challenges us in having a better conversation with our customers and about what they're trying to achieve. That's very stimulating to actually be in that space. I mean, Roche is the newest one. We've always had competition. Of course, it's intensified a little bit here lately, but we feel really good where we are. I have not seen any changes in any of our customers with respect to in their behaviors with respect to Roche. There was an announcement yesterday that Roche, I think it was yesterday, that Roche and Freedom, Roche made another investment. Freedom is evaluating potentially developing their assays to go on Exelios. Long way to go, I'm sure, between announcement and when we see if that could happen. That being said, it kind of brings to mind, and I know it was a while ago, but you were at Dako when I think around the time that Roche bought Ventana. When Roche bought Ventana, how did other customers react to the fact that in a way they had kind of vertically integrated? Did that put you in a position at Dako to compete in a different way? Yeah, especially in our companion diagnostic business where we were working, or the company is still working, of course, with pharma companies where they have a drug they want to put out in the market. They need a companion diagnostic kit. We actually saw many of the pharma companies that preferred to work with Dako at that point of time and still do, and Agilent, of course, because they are not vertically integrated. These pharma companies, of course, are suspicious around how does that information flow between a Roche diagnostic business and a pharma business. I think you will see some of the same here, likely that there will be a lot of clinical customers that will be thinking about how do we want to work with a potential competitor also in the end. I think that there's a huge opportunity here over the next three to five years to really start to see decentralization and offer workflows for that. I think we are in a very, very strong position. My learning from my Dako days is also, and this is something that pharma starts to realize or decentralize, is that installed base matters a lot. I mean, if you want to have your assays out, you want to go with the ones that have the largest installed base. Here it's going to be a huge advantage for our ecosystem going forward also when you see decentralized assays coming out. Customers want to work with the one that have most instruments out there so they can ensure that they get their assays on the full installed base as quick as possible so they can get volume. We have a huge advantage there and we're going to definitely play to our advantage. One of the things we talked about earlier this morning, the team and me and you, of course, is you were in China recently. Yes. To provide some context, obviously that was one of the big curveballs coming into this year. There was some good news within the last few weeks where, let me make sure I'm not messing this up and you'll correct me if I am, but you were saying the export ban was lifted. The tricky part is you're still on the unreliable entity list. How do we kind of marry those two things? Essentially, I guess what I'm getting at is what does this allow you to do that you couldn't do a month ago? Sort of building off of that, how to go in China. Yeah. If you just remind back in February, actually when there was announcement of some tariffs coming out here from the U.S., what happened immediately after was that we were put on the unreliable entity list, but with no sanctions. Then another month went by and there were another tariffs announced. This was before, of course, the April tariffs, but before then. We were sanctioned that we could not import or export instruments into China. We have been in a situation from approximately March to now where we have been able to serve all our customers in China, but we have not been able to put new installations in. That changed. Two things happened over the last few months. What we actually mentioned in our Q3 call was that we have now been able to, we are able to serve our OEM customers so we can import or we can manufacture instruments in China, label it also with our white label it and serve our OEM partners there. We have been able to do so and we're doing that now. That's still less than 20% of our total China operations, but it's still, it's a good step forward. It helps. What happened after our Q3 call was that we were, the sanctions was lifted. Meaning that we can now go back and place instruments again in China. What is still a part of that is that customers need a permit to do so. We are working through what that actually means. We will get more clarity on that likely over the next quarter or so on what that actually means from placing instruments. In all circumstances, how we think about that is that from now being able to place instruments again to actually start to place instruments, it's still going to take time. Customers need to, of course, get through their budgets, get into their budget cycle and so on. It takes usually approximately six months to get that. I think it's going to take some time into 2026 before we really see that roll again, but it creates more certainty of the business in China. I was in China last week and had conversations both with Mofcom there and of course with our China team to see whether in the end we would like to get off the list. We are working towards that, but as you can imagine, there is more to it than what we can control. All right, so stay tuned. I think, and this will be a transition to talking about 2026 a little bit. I mean, just as I think in Excel modeling terms, given how much China has come down since even the beginning of the year, if I think where China revenue was in Q1 versus where we're likely to end this year. And given what you just described in terms of even if things open up in China, it's going to take some time. It would be hard to grow in China next year mathematically, I would think. The hope would be off of a small base that with a better, with a good outcome in China that it can return to growth again at some point maybe next year, but certainly as we look ahead to 2027. That's at least our hope. I know Jenny and our General Manager in China will do her absolute utmost to make that happen. Yeah, I mean, I think it's still, we still need to work through all the details and that. China is a huge market. There's a huge opportunity. It's definitely worth investing, continue to invest in China. We've talked a lot about puts and takes at the top line. The operational improvement and what we've seen in the P&L and the free cash flow generation has been very impressive in a difficult time. One question I get is, given how many things have been thrown your way, have you started to eat into the opportunity too much? It doesn't sound like that's the case. It sounds like there is plenty to still optimize with. Yeah, I mean, clearly we have been focusing on coming into the company, I felt there was a huge opportunity to improve the way we work. That has been a part of the transformation of obviously all our focus is growing the top line. At the same time, there were a lot of opportunities to improve and be more effective and efficient in how we do things internally in the company. From decision making to how we run projects to how we actually execute in operations. We go through that and I think that's what a good company is doing. Continue to challenge yourself of how you do things. Instead of just adding more people to bad processes, you need to go in and fix the processes. When you do that, what is actually going to happen eventually is that it's a more, it's a higher, people have more pleasure in doing their work because you're not spending time on bad processes and just covering up for that. You actually are more effective in how you do things. I mean, there's a translation you have to go through, but we will continue to challenge ourselves how we do things. There are plenty of opportunities in front of us. We haven't even started really on AI yet. I mean, on the opportunities. Yeah, and I know we're over time, but I do want to close with you. The company was nice enough to host me at your Cambridge facility where a lot of innovation comes out of. I think at points in what has been a difficult period where you are optimizing, there can always be a concern that, okay, the level of innovation is slowing. I certainly didn't see that when I went to Cambridge and when we think about Constellation, Fluent, SomaLogic, 5base. I mean, how are you feeling about, I'm not going to make you choose your favorite new child here, but how are you feeling about the level of innovation and ability to bring new things to the market? Oh, I'm really excited. That's one of the reasons I also went to Illumina and why we have been very, very clear also to the market that we continue to be a very, and we will continue to invest very highly in innovation. There's still a lot in front of us of opportunities. You will see a lot of innovations coming out over the next years. I'm really proud of what we're coming out with also this year and next year. We talked about the 5base, Constellation. We have Spatial and of course Single Cell also and now with the Fluent, excuse me, with the SomaLogic acquisitions also and we came out with the Proteomics assay. A lot of exciting things. Now it's difficult to choose between the children here, but I do think if you look at the opportunities both with Constellation and I think the 5base really bringing methylation into standard of sequencing. I know everybody is saying, well, other companies are also going out and say we can do methylation. Yeah, everybody has been able to do methylation for years, but we have made it extremely simple both from sample prep, but also from getting the data out and combine that in your pipeline, informatics pipeline with, of course, standard DNA variant insights. We're making it extremely available and methylation is going to be a very important factor to look at both from screening, but also from a lot of clinical insights going forward. That is going to be a big opportunity. I think Constellation of now being able to actually look using short read, but actually get structural variances out and insights that you could not do with short reads before. It is going to be a huge opportunity for the company also. Those two I am super excited about because it really speaks into where the growth is going to come from the company, which is in the clinical sector here over the next period of time. All right, fantastic. Thank you again for being here. Really great.