Joydeep Goswami: Maybe I’ll jump in on China, right. So, yes, we did see, like other companies, a slower than expected recovery in the second half of the year. Remember, we had expected China in the first half of the year to be somewhat soft and recovering from the COVID challenges. And then we had expected an acceleration in that recovery in the second half of the year. We do not currently see that happening, both because of some of the challenges that you’ve seen in the broader economy in China, but also for us from an increased competitive intensity that we are seeing in China in the mid throughput and low throughput segments. Your second part of the question was on the everything ex-China, right? So, there it’s a – I don’t think the situation is dire as it was in last year.
What we are seeing is a little bit of conservatism, given the economic uncertainty in the speed at which people are coming back online or purchasing. So we have seen a little bit of lengthening of cycles in terms of purchasing behavior, both on our instrument side for mid throughput and low throughput and also on some of the consumables pieces. Activity, as I indicated, remains strong, but it’s just that any newer projects and newer instruments that are coming in are slower than we had expected. Our win rate in – and we track this pretty closely – in terms of both mid throughput and, of course, on the high throughput side remains high. In fact, it picked up slightly compared to Q1 in Q2. So, again, I think it’s more of a lengthening out of cycles and purchasing cycles, rather than anything related to competitive intensity on those fronts.
On the X, the issue is not competition at all. As I indicated, we are seeing continued strong interest and strong interest from, of course, our existing customers, but also new newer customers or people that are moving up from mid throughput. We continue to see that our ability to actually deliver on the instruments continues to maintain that interest. As Chuck mentioned, in terms of what these instruments are enabling, there’s a whole new set of experiments that are on a larger scale going forward. Again, this is a lead indicator for us. Obviously, people have not ramped up on the X fully. But it is a lot about transitioning to the X and being able to take advantage of the many capabilities that it’s providing beyond just the price aspect of it.
So the DRAGEN onboard, the faster capabilities, the simplicity of the workflow, obviously, the ambient ship reagents. So there’s a lot that goes into that, beyond just the focus on, oh, it’s going to help us with the lower price per Gb.
Operator: And our next question will come from Dan Arias with Stifel.
Dan Arias: Joydeep, obviously, quite a few moving parts here on the top line and the OpEx line. And it looks like what you’re doing in terms of cost reduction and expense management is part of a multiyear effort. I guess, given where this year is headed, how are you thinking about op margins next year for the core business relative to the 25% target that you talked about last quarter?
Joydeep Goswami: A couple of things. So, one, you’re right, we started off as we committed to in our Q1 earnings call. We started off a broad look at cost structure. And actually at the end of Q1, we proceeded with beginning a cost reset that we have executed on and actually have taken out on a run rate basis more than $100 million annually of cost. During the second half of the year, just given some of the uncertainties in the broader economic space, we continue to keep a very close eye on managing expenses and being very careful about allocating expenses to the highest return areas, including the innovation areas that that Chuck talked about. Given the challenges we are having this year, obviously, we acknowledge that getting to margins next year is going to seem like a stretch, but we remain very committed to planning for and delivering on those margins. And that’s the way we’re moving forward.
Operator: And we have a question from Vijay Kumar with Evercore ISI.
Vijay Kumar: I had a two part question. Mostly on the guidance here. I think, third quarter, you said 3%. Your comps for fourth quarter look pretty easy. And historically, when I’ve looked at your sequential revenue ramp from second quarter, it’s always been up. Now look at your second quarter trends sequentially, instruments are up, consumables are up, your pull-through per box is up, China was up. So, anything incremental headwinds that we should be thinking about for the back half? Why your back half shouldn’t follow historical patterns? And I think a related question here. You mentioned 800,000 to 900,000 pull through on the Nova 6k. I think there’s been some concern. The pull through on the NovaSeq X perhaps might be lower because of the lower sample price point.
Maybe can you just walk us through your assumptions around pull through for the Nova X? Could we perhaps see a rebound because I’m assuming inventory levels here for customers are pretty low and they need to restock?
Joydeep Goswami: That was a long, multipart question. So let me let me try to get to unpack some of that. So first of all, for the full year guidance, given that it has come down, the components roughly fall into three categories. About 25% of the reduction kin guidance really comes from China. And as I mentioned earlier, for China, that’s a two part thing. We are seeing a slower than expected recovery in the larger economy, including some liquidity challenges for mainly our clinical customers. And we are seeing a higher competitive intensity that affect the mid throughput and low throughput segments. That’s 25%. The other 75% is roughly equally split into two buckets. So one part is around the transition to the X and the gap we are seeing in terms of the high throughput consumables, right?
