Illumina, Inc. (NASDAQ:ILMN) Q4 2023 Earnings Call Transcript

Illumina, Inc. (NASDAQ:ILMN) Q4 2023 Earnings Call Transcript February 8, 2024

Illumina, Inc. beats earnings expectations. Reported EPS is $0.14, expectations were $0.01. Illumina, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2023 Illumina Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ 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 Salli Schwartz, Vice President of Investor Relations.

Salli Schwartz: Hello, everyone, and welcome to our earnings call for the fourth quarter and year end 2023. During the call today, we will review the financial results we released after the close of market and offer commentary on our commercial and regulatory 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. Participating for Illumina today will be Jacob Thaysen, Chief Executive Officer; and Joydeep Goswami, Chief Financial Officer and Chief Strategy and Corporate Development Officer. Jacob will provide an update on the state of Illumina’s business and Joydeep will review our financial results, which include GRAIL.

As a reminder, GRAIL must be held and operated separately and independently from Illumina, pursuant to the transitional measures ordered by the European Commission, which prohibited our acquisition of GRAIL under the EU merger regulation. This call is being recorded and the audio portion will be archived in the Investors 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 10-Q and 10-K. With that, I’ll now turn the call over to Jacob.

Jacob Thaysen: Thank you, Salli. Good afternoon, everyone. As you know, I joined Illumina as CEO a little over four months ago. In this time, part of my focus has been on meeting with customers to understand their priorities, hear their feedback and develop more collaborative relationships. Our customer thinks highly of Illumina and our solutions. And they want to work-in strategic partnerships with us to move the whole MTS ecosystem forward. Now that we have announced that we will divest GRAIL, it has been easier for our customers to plan what the future looks like with Illumina. These meetings have been instructive and inspiring. During my recent trip to Europe, I was able to see first-hand how we’re working with our customers, governments and the broader genomics community to accelerate whole-genome sequencing adoption safely and more effectively and to understand rare diseases in cancers as a part of the standard-of-care.

I’ve also learned about Germany’s modern project that aims to fully integrate comprehensive genomic testing into the healthcare system there beginning in Q2 this year. Within the hallways of our headquarters and several global offices I have also been connecting with our talented employees, who are committed to driving innovation and continuing to build outer genomics ecosystem. I’ve also had an opportunity to engage with many of you at recent investor conferences. These conversations are informing my leadership agenda and importantly have reinforced my confidence in Illumina’s core business. 2023 was a dynamic year for Illumina. NovaSeq X has been the most successful high-throughput product launch in our history. We ended the year with 352 NovaSeq X shipments above the 330 to 340 we expected.

Amid a challenging macroeconomic backdrop that we saw many of our customers remaining constrained in their purchasing decisions. In the fourth quarter, we delivered higher-than-expected consolidated revenue of approximately $1.12 billion. Americas’ revenue, which is more than half of our business was flat year-on-year. Europe revenue was up 17% year-on-year on a relatively easy prior year comparable. EMEA revenue declined 1%, although that included a 10 percentage point impact from sanctions in Russia. Greater China revenue was down 13% year-over-year, reflecting continued geopolitical challenges and local competition and mid-throughput. As I’ve noted before, China and our customers there are important to Illumina. We’ve already taken certain pricing and other strategic actions that are beginning to yield results.

We will share more specifics on our progress there over time. Globally, we expect our customers will remain cautious. And for now, we continue to expect 2024 results to look very similar to 2023. While some macro headlines are encouraging, we haven’t yet seen that translate to increased investment in our industry and therefore have not reflected in our guidance. Joydeep will take you through more details in our guidance in a few minutes. While we cannot control the external environment, the management team and I remain committed to accelerating value creations across the enterprise. As you are aware, I’ve laid out three key priorities that I believe will position Illumina for accelerated growth and profitability as market conditions improve.

My first priority, driving our top line is centered on continuing to grow our installed base and helping customers accelerate utilization of these instruments in new and existing applications. I discussed earlier, how pleased we are with the first year of NovaSeq X shipments. The high throughput more broadly across the NovaSeq X and NovaSeq 6000, we placed more than 400 instruments in 2023. In 2024, we will support this growing installed base as customers launched large projects and more sequencing intensive applications like multiomics liquid biopsy and minimal residual disease or MRD. We anticipate ongoing high throughput instrument orders throughout 2024, primarily coming from further conversion of NovaSeq 6000 customers to the X from customer fleet expansion and long-term from new to high throughput customers.

So, that said, given the significant number of placements in 2023, we believe we will ultimately ship fewer high throughput instruments in 2024. As you aware, XLEAP-SBS chemistry has been the engine for our X platform, delivering significant improvements in quality, turnaround time and cost. This quarter, we’ll be making XLEAP available to our mid-throughput customers. On the existing NextSeq 1k/2k instruments without having to upgrade their instruments. This offering will further strengthen our leadership position around the world and drive progress in markets such as single cell, spatial and proteomics. As we grow installed base, we’ll remain focused on supporting our customers as they launched new projects. This will build momentum for consumables demand this year and going forward.

Already our efforts to develop this demand is paying off. In Q4, we saw higher-than-expected growth in X consumables sales following the late October, launch of our much anticipated 25B reagent kit. More recently in January, we launched a 1.5B kit, which together with the 25B and 10B flow cells allows us to offer a full suite of products to the NovaSeq X customers. While we will continue to see customers reduce their inventories of NovaSeq 6000 consumables as they transition to the X building pull-through on the NovaSeq X will drive our overall high-throughput consumables growth this year. Turning to my second priority. I’m focused on delivering operational excellence, by applying greater rigor throughout our P&L while sustaining innovation and growth.

We’ve launched and multi-year effort, focusing on improving our margins through greater productivity and pursuing additional areas for cost-savings. In January, we took an additional action to further optimize our global workforce. Over the past year, we’ve made cumulative role reductions totaling approximately 12%. Our most recent actions included adjustment that we aligned with our late 2023, portfolio optimization efforts. You’ll see us continue to take steps to not only manage our near-term cost, but also to build our agility to deliver more sustained growth and margins over time. Illumina is taking a highly disciplined approach to support our customers, employees and partners and to deliver shareholder returns. Throughout a range of macroeconomic environments.

Moving to my third priority, which is working to resolve GRAIL as quick as possible. Since joining Illumina, I’ve made an imperative to move with speed on GRAIL. In December, we announced that we would divest GRAIL, with a goal of finalizing the terms of the transactions by the end-of-the second-quarter this year. We’ll continue to pursue parallel paths. The divestiture will be executed through a third-party sale or capital markets transaction, consistent with the European Commission divestiture order. To-date, we’ve been able to make swift progress GRAIL, From 10 has been confidentially filed with the SEC. Our advisors are actively moving the process forward on both sale and capital market path. The special committee of the Board, that we established in Q3 continues to help ensure this process move forward efficiently.

I’m encouraged by the momentum we’ve entered 2024 with and I’m committed to seeing our initiative through for now I will ask Joydeep to share more detail on our results for 2023 and our outlook for 2024.

Joydeep Goswami: Thank you, Jacob. I’ll start by reviewing our consolidated financial results followed by segment results for Core Illumina and GRAIL and then conclude with my remarks on our current outlook for 2024, I’ll be discussing non-GAAP results, which include stock-based compensation. I 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. In the fourth quarter, consolidated revenue of $1.12 billion was up 4% year-over-year, both on a reported and constant-currency basis. Consolidated revenue was flat from the third quarter of 2023. Non-GAAP net income was $22 million or $0.14 per diluted share, which included dilution from GRAIL’s.

Non-GAAP operating loss of $152 million for the quarter. Non-GAAP EPS exceeded our expectations, driven by higher revenue and gross margin and lower operating expense for the quarter. Our non-GAAP tax rate was 55.4% for the quarter and 41.8% for full year 2023, compared to 29.3% in Q4 2022 and 26% for full year 2022. Although both periods reflect the impact of R&D capitalization requirements. The impact of our effective tax rate in 2023 was more significant due to our lower earnings. In addition, our non-GAAP tax-rate for both years include a meaningful impact from the consolidation of GRAIL losses. Absent the impact of GRAIL, our full year 2023 core tax rate was in the mid-20s. Our non-GAAP weighted-average diluted share count for the quarter was approximately $159 million.

Moving to segment results. Core Illumina fourth quarter revenue of $1.1 billion was up 3% year-over-year on both a reported and constant currency basis and included an anticipated reduction of approximately 5 percentage points from two primary categories. One, the decrease in COVID surveillance and the effect of sanctions in Russia that together represented approximately 3 percentage points. And two, the year-over-year reduction in China revenue that represented approximately 2 percentage points. Despite these impacts Core Illumina revenue exceeded expectations due to stronger than projected NovaSeq X placements and uptake in X consumables with strong early demand for the 25B flow cell that launched in Q4. Core Illumina sequencing consumables revenue of $687 million was flat year-over-year.

Stronger-than-expected NovaSeq X consumables purchases were largely offset by the anticipated reduction in NovaSeq 6,000 consumables and the impact of pricing transitions. As customers continue to adopt the NovaSeq X. Total sequencing consumables revenue was also impacted by COVID, Russia and China factors that I previously noted, as well as the continued impact of macroeconomic conditions on customer’s purchasing behavior. COVID surveillance contributed approximately $4 million in total revenue in Q4 2023, compared to $20 million in Q4 2022. Turning to sequencing activity. Total activity on our connected high and mid-throughput instruments grew 46% year-over-year in the quarter. Following the 29% year-over-year growth we reported in Q3. Sequentially, Q4 sequencing activity grew 13% from Q3.

As a reminder, we believe this data is a useful reference that shows the general activity trends across our installed base and is directionally correlated with revenue over time. Sequencing instruments revenue for Core Illumina, of $161 million grew 10% year-over-year in Q4, driven primarily by NovaSeq X, which more than offset the decline in NovaSeq 6000 shipments. Growth in high-throughput instruments was partially offset by the expected decline in mid and low throughput shipments due to capital purchase and cash-flow constraints that continue to impact our customers’ purchasing behaviors, as well as local competition in China. For NovaSeq X, we exited Q4 were 390 orders since launch. Our shipments of 79 NovaSeq X instruments in Q4 brought our total installed-base to 352 instruments.

While we expect most of our NovaSeq 6000 customers to transition to the NovaSeq X over time, we’re still very early in this transition. As of the end of 2023, our net installed base for NovaSeq 6000 was approximately 1,770 instruments, which reflects approximately 110 instruments that have been deactivated, between 2017 and 2023. The majority of these were in 2023, due to customer transitions to NovaSeq X. We expect this to increase in 2024 as customers continue to ramp up utilization of NovaSeq X. Additionally, going forward, we will be reporting our annual instrument installed base figures on a net basis, which accounts for instruments that have been decommissioned or inactivated since launch. The information included on this slide includes additional details to help you with your modeling.

We will be posting this presentation to our Investor Relations website following our prepared remarks. Core Illumina sequencing service and other revenue of $152 million was up 16% year-over-year, driven primarily by an increase in revenue from strategic partnerships and higher instrument service contract revenue on a growing installed base. Moving to the rest of Core Illumina P&L. Core Illumina non-GAAP gross margin of 64.7% for the quarter decreased 260 basis points year-over-year, primarily driven by the mix of lower-margin strategic partnership revenue, lower instrument margins due to the NovaSeq X launch, which is typical with a new platform introduction and increased field services and installation costs, partially offset by lower freight costs.

Core Illumina, non-GAAP operating expenses of $507 million were down $21 million year-over-year, primarily due to continued expense reduction initiatives and lower performance-based stock-compensation expense year-over-year. As a result of these factors and higher revenue, Core Illumina Non-GAAP operating margin was 18.5% in Q4 2023 compared to 17.8% in Q4 2022. Transitioning to financial results for GRAIL. GRAIL revenue of $30 million for the quarter grew 30% year-over-year, driven primarily by adoption of Galleri. GRAIL non-GAAP operating expenses totaled $167 million and increased $1 million year-over-year. Moving to consolidated cash flow and balance sheet items for the quarter. Cash flow provided by operations was $224 million. Capital expenditures were $51 million and free-cash flow was $173 million.

We did not repurchase any common stock. We ended the quarter with approximately $1.05 billion in cash, cash equivalents and short-term investments. Moving now to 2024 guidance. As Illumina continues to move as quickly as possible to resolve GRAIL, given the uncertainty around the specific timing and impact of the GRAIL divestment, the company is focusing its 2024 financial outlook on Core Illumina. Our guidance does not assume any impact for the potential divestment of GRAIL in 2024. Upon the completion of the divestment, we will provide non-GAAP EPS guidance for the full year 2024. As Jacob mentioned, our outlook assumes the current challenging macroeconomic environment persist in 2024 and tighter funding and budget pressures continue to impact our customers’ purchasing decisions.

We expect full-year 2024 core revenue to be approximately flat from 2023, reflecting the following offsetting factors. We expect Core Illumina sequencing instrument revenue to decline in the high-teens year-over-year, driven primarily by a decrease in NovaSeq X instrument placements. The reduction reflects the expected transition in our adoption curve, the early majority, customers from early adopters and the lower backlog entering 2024, compared to 2023. We also expect capital and cash flow constraints to continue to impact purchasing behavior and moderate instrument placements in 2024. We expect Core Illumina sequencing consumables revenue to grow in the low-single digits year-over-year, driven primarily by modest growth in high-throughput consumables as increased NovaSeq X consumables purchases and sequencing volume outpaced the expected decline in NovaSeq 6000 consumables and the impact of pricing transitions.

Moving to annual pull through. Going forward, we will be calculating and providing pull-through figures based on the instruments’ net installed base. As I mentioned previously, supplemental information is included in our earnings presentation. To help with modeling, which will be posted to our Investor Relations website. Following our prepared remarks. Importantly, this does not change reported revenue in any way. We expect annual pull-through for NovaSeq 6000 approximately $700,000 to $800,000 per system in 2024 as customers continue to transition sequencing volume to NovaSeq X. We expect annual pull-through for NextSeq 1k/2k in the range of $80,000 to $130,000 per system in 2024, which primarily reflects the impact of customers transitioning to XLEAP chemistry as it becomes available on NextSeq 1k/2k.

We expect annual pull-through for MiSeq in the range of $30,000 to $40,000. We expect the remainder of our pull-through ranges to be in line with historical guidance. We expect Core Illumina total sequencing revenue to be approximately flat year-over-year. This includes intercompany sales to GRAIL of approximately $30 million, which are eliminated in consolidation. We expect Core Illumina Non-GAAP operating margin of approximately 20%. Our operating margin expectations reflect the benefit of our continued gross margin improvement and expense reduction initiatives, offset by normalization of our performance-based compensation, as well as the impacts from inflation and market-based merit increases. For the first quarter of 2024, we expect Core Illumina revenue in the range of $1.03 million to $1.04 billion, reflecting a Year-over-Year decrease of 3.5% to 4.5%, driven predominantly by the following factors.

We expect lower NovaSeq X instrument shipments year-over-year given that we are entering 2024 with a more modest backlog, compared to the significant pre-order book. We entered 2023, following the launch of NovaSeq X. We expect the increase in NovaSeq X consumables purchases year-over-year to be largely offset by the anticipated reduction in NovaSeq 6000 consumables and the impact of pricing transitions. Consistent with the trend we saw in Q4. We expect an increase in sequencing service and other revenue year-over-year, driven by strategic partnership initiatives and higher instrument service contract revenue on a growing installed base. For the first quarter, we expect Core Illumina non-GAAP operating margin of approximately 18%. Lastly, for the first quarter, we expect Core Illumina non-GAAP net other expense of approximately $12 million, with the year-over-year increase driven primarily by lower interest income on our lower cash balance following the repayment of our convertible notes in mid-2023.

I will now turn it back over to Jacob for his closing remarks. Thank you.

Jacob Thaysen: Thanks, Joydeep. Before we close and move to Q&A, I want to discuss what I believe success looks like, both this year and the years ahead. Illumina has the opportunity to truly drive the next-generation sequencing ecosystem forward. We will deepen our relationships with our customers and seek out greater ways to collaborate and partner with them to drive greater adoption of NGS. Our goal is to make our customers the heroes in their labs. And to support them as they expand their work in genomics and multiomics. In turn, this will help capitalize our market-leading innovation and continue to differentiate Illumina and maintain our industry-leading position across research and clinical markets. We will also continue to drive innovation that is focused on our customers’ priorities.

This includes evolving our sequencing platform and delivering greater sample to answer solutions. There is an opportunity to further integrate customers’ workflow to build our share of wallet as we create greater value for our customers. Our comprehensive strategy work is well underway, and we will share more with you later this year. I’m excited to be part of Illumina’s leadership team that is driving our unmatched core business forward. Thank you for joining. I’ll now invite the operator to open the line for Q&A.

See also 15 Blue-Collar Jobs That Pay at Least $75,000 a Year and 25 Best Jobs That Can Make You a Millionaire Before Retirement.

Q&A Session

Operator: Thank you. [Operator Instructions] And our first question will come from Doug Schenkel with Wolfe Research.

Doug Schenkel: Hey, good afternoon everybody and thank you for taking the questions. I want to ask just about the 25B chip release and what you’re seeing in the field entering the early part of the year. As you know, 25B reduces the cost per genome to about $200, but it also requires customers to have enough samples to run to fully use up the flow cells. So what are — what have you seen in the first few months of availability? What’s spending on X consumables? How did that trend relative to Q3? And are you seeing signs in the field that sample access is not a problem as you see folks move to the 25B? Thank you.

Jacob Thaysen: Thanks, Doug. And, no, that was nice one question there. So let me start by saying that we’ve been very pleased with the pickup of the 25B since the launch in late November. In fact, it’s did kind of performed all our expectations and have been very received with their customers. So we continue to expect that this will continue to really drive X performance, but also, of course, it’s completely now unleashed the full performance of the instrument, and thereby, we also expect that the 25B — the availability of the 25B will have more customers to jump on to the X wagon here. I think we are seeing customers being able to load it. Of course, many of them are still doing validation work, but we are seeing that they have a big enough projects to load the closeout.

Joydeep Goswami: Yes. And just maybe one quick add right about 40% of our X customers so far have adopted the 25B.

Operator: And our next question will come from Puneet Souda with Leerink Partners.

Puneet Souda: Yes. Hi, Jacob, Joydeep thanks for taking the question. So, maybe just following up on that point. I mean sort of help us just understand how do you get to the low single-digit growth rate this year. There’s obviously 25B5, there’s reductions that are happening in — from just the X install, cost per database is lower, China continues to be challenging and then the market backdrop is challenging too? So just maybe talk to us a little bit about sort of how do you continue to have confidence in the sort of the low single-digit sequencing consumable growth rate and I would really appreciate if you could provide us some context around and details around GRAIL as well. What’s the progress there? Any level of interest that you’re finding? And what are you contemplating for spend on GRAIL this year? Thank you so much.

Jacob Thaysen: All right. Thanks for that, Puneet. And let me start by the latter part of this question about GRAIL, and then I’ll have Joydeep chime in on our expectations here on consumables growth. But as I mentioned, you know, we are very pleased with the announcement that we made here in December that we are now divesting GRAIL for sure and I’m actually very pleased with the progress so far. We have our advisers really moving ahead and now in connection and in conversations with rural parties. We are continuing to run a dual track, of course, can be a capital markets initiative or it can be a transaction. And so we still expect to be on track with the timeline we were previously talking about that we would have all the terms finalized by end of June. So we are — at this point, we are not talking about — since we are expecting to finish up with GRAIL this year, we’re not having any guidance on the expenditure for GRAIL this year.

Joydeep Goswami: Yes. And to address your question about the low-single-digits consumables growth, Puneet. So, let me start by saying we were very encouraged by the uptake of the 25B and 10B flow cells that we saw in the fourth quarter. We’re also very pleased to see the elasticity, the growth in underlying sequencing activity being driven by ex-customers, right? So both of those are good. We saw that uptick on sequencing activity now for the second quarter in a row. So again, it’s broad-based. It’s both research and clinical customers. And it’s quarter-on-quarter and year-on-year growth. So what’s offsetting that expected growth in X consumables, as you rightly pointed out, is the expected price transition as customers move from the NovaSeq 6000 to the X.

This is very similar to the price transition that you saw when you were moving from HiSeq to NovaSeq 6000. And then, of course, some of the expected again, reduction in NovaSeq 6000 consumables as customers switch from one platform to the other, right? So those — that is the really big piece on the — what’s leading to the lower or the low-single-digit growth rate in consumables in 2024.

Operator: And our next question will come from Vijay Kumar with Evercore ISI.

Vijay Kumar: Hey guys, thanks for taking my question, and I had a two-part question on the GRAIL. I know it was a confidential S1. When will that be made public? And the reason I ask is, GRAIL’s operating losses were $700 million last year. It’s really hard to foresee a capital market transaction with those kind of spend levels. So I would be very curious to see what the S1 assumptions are on GRAIL? And on consumable pull-through $700,000 to $800,000 on NovaSeq 6000, Joydeep, is there like a cadence perhaps Q1 we’re starting at the low-end? And is the assumption we exit Q4 at the high-end of that range?

Jacob Thaysen: Yes. Yes, so let’s start with the GRAIL question. And obviously, we’d like to provide as much information to all of you as possible. Right now, as you say, the filing is confidential. And I don’t think it will be public available before very late in Q1 maybe dipping into Q2 here. So I think that’s where we are at this. But as soon as it’s available, we’ll make sure you know.

Joydeep Goswami: Okay And then. Vijay I want to be sure you’re asking about NovaSeq 6,000 pull-through numbers and how they modulate through the year?

Vijay Kumar: Correct, Joydeep. Is there an assumption we start at the low end and exit the year at the high end or above the high end of the range?

Joydeep Goswami: No, there isn’t. I think, again, pull-through will reemphasize as a calculated number. So it’s more of the total amount of consumables sold in any quarter divided by the number of now the active installed base in the quarter, right? So — and we don’t have an assumption in terms of quarterly spread on that.

Operator: And our next question will come from Dan Arias with Stifel.

Dan Arias: Hi guys. Thanks for the questions. Jacob or Joydeep on the 6,000 X transition and just sort of thinking about the clinical side of things. A big part of that bucket are these commercial labs that are watching their own margins pretty tightly and trying to find ways to be just more efficient. So are you sensing that maybe you could see X adoption faster than in maybe in a normal environment in order for those folks to take advantage of the cost savings? It seems like you’re incentivized to do that, but I also know that the clinical wheel spin slowly, so I’m just not sure whether that’s a factor for them.

Jacob Thaysen: Yes. Of course, it’s a relevant hypothesis to come in with. What we have seen is that most of our clinical customers are using the opportunity with the lower cost of X to actually expand the depth of sequencing providing bigger panels and so on. So what we’re seeing is that most of the current panels continue to run on the NovaSeq 6000 and thereby continue to also drive volume there. And then they are right now validating many of the new assays or the new assays that might not have been possible in the 6000 to trust and so on to be on the X. So we’re quite encouraged about that. We’ve also seen several of our specialty labs customer now order tens of NovaSeq X. So I’m encouraged that we will see a lot of volume here going forward on this.

Operator: And our next question will come from Subha Nambi with Guggenheim Securities.

Subha Nambi: Hey, thank you guys. Thank you for taking the questions. You spent about $1 billion on R&D in 2022 relative to 2019, the revenue has grown at 6% CAGR. However, R&D has grown 12% CAGR. Why can’t you reduce R&D spend in dollar terms from current levels over the next one or two years? Can you outline where the spend is allocating?

Jacob Thaysen: Yes, thank you. You’re right that we continue to believe that there’s a lot of innovation that is required there by investment into R&D in order to drive the whole NGS ecosystem forward. We — as I said, one of the things — what I said previously, is one of the things that I was really excited about is the pipeline of innovation that we have in running right now and thereby, also there will be a lot of innovation coming out from Illumina over the next period of time here. And we continue to believe that we are in the early stages of the whole opportunities here in NDS, but even also multiomics and thereby, we continue to make investment into that. You’re also right that there has been an increase in R&D, and we’re certainly looking to change that trajectory over time. We still believe that a high level of investment is required, but you will see here over the next years that the percentage spending R&D versus revenue will start to come down.