Apr 22, 2013
Executives
Rebecca Chambers - Senior Director, Investor Relations Jay T. Flatley - Chief Executive Officer, President and Director Marc A.
Stapley - Chief Financial Officer and Senior Vice President Christian O. Henry - Senior Vice President and General Manager of Genomic Solutions
Analysts
Tycho W. Peterson - JP Morgan Chase & Co, Research Division Doug Schenkel - Cowen and Company, LLC, Research Division Derik De Bruin - BofA Merrill Lynch, Research Division Ross Muken - ISI Group Inc., Research Division Amanda Murphy - William Blair & Company L.L.C., Research Division Daniel Brennan - Morgan Stanley, Research Division Isaac Ro - Goldman Sachs Group Inc., Research Division William R.
Quirk - Piper Jaffray Companies, Research Division Amit Bhalla - Citigroup Inc, Research Division Jonathan P. Groberg - Macquarie Research Daniel Arias - UBS Investment Bank, Research Division
Operator
Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Illumina Earnings Conference Call. My name is Phillip and I'll be your operator for today.
[Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms.
Rebecca Chambers, Senior Director of Investor Relations. Please proceed.
Rebecca Chambers
Thank you, Phillip. Good afternoon, everyone and welcome to our earnings call for the first fiscal quarter -- the first quarter of fiscal 2013.
During the call today, we will review the financial results released after the close of market and offer commentary on our commercial activity, after which we will host a question-and-answer session. If you have not had a chance to review the earnings release, it can be found in the Investor Relations section of our website at illumina.com.
Participating for Illumina today will be Jay Flatley, President and Chief Executive Officer; Marc Stapley, Senior Vice President and Chief Financial Officer; and Christian Henry, Senior Vice President and General Manager of our Genomic Solutions business. Jay will provide a brief update on the state of our business and markets and Marc will review our first quarter financial results.
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 expected 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 information available 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.
Before I turn the call over to Jay, I would like to let you know that we will be participating in a number of upcoming conferences this quarter; including the Bear growth conference, the Bank of America Merrill Lynch conference, the UBS conference and the Goldman Sachs conference. For those of you unable to attend, we encourage you to listen to the webcast presentation, which will be available through our Investor Relations section of our website.
With that, I'll now turn the call over to Jay.
Jay T. Flatley
Thanks, Rebecca, and good afternoon, everyone. Q1 was an extraordinary quarter for Illumina.
Our business continued to accelerate, delivering orders substantially above our plan, with strong underlying trends across all geographies. Revenue grew 21% year-over-year to $331 million, which was not only the sixth quarter of sequential growth, but also a record for quarterly revenue.
Total micro-array revenue increased 1% year-over-year, due to a combination of BlueGnome, strong instrument shipments and a robust quarter in genotyping services. Additionally, we saw a sequential increase in both sample volume and orders.
Our outlook for arrays is generally as expected, with customer interest remaining high in our standard micro-array products, including Infinium OmniExpress Exome, Core Exome and the Omni2.5 products. In fact, we set a record for whole genome association, with approximately 300,000 samples shipped in the quarter.
Additionally, our iSelect genotyping products are doing well across many customer types, including consumer customers. Our consumer array business appears to have hit a pricing sweet spot, leading to significant market elasticity.
This resulted in a large order during the quarter, which is deliverable over several years. Turning to our sequencing business.
Total sequencing revenue grew 32% year-over-year to more than $235 million. This substantial growth was a result of increased demand for consumables, sequencing services and HiSeq instruments.
In fact, during the first quarter, sequencing consumables grew more than 40% compared to Q1 of last year, as a result of our larger install base, higher utilization per instrument and share gains in our Sample Prep business. Our Sample Prep kits continue to demonstrate robust year-over-year growth, as more customers switch from competitor's products or homebrew.
Our Nextera kits drove a significant portion of the growth, along with demand from TruSight kits from commercial customers. New product introductions, specifically the Nextera Rapid Capture Exome Kit, which enables the fastest exome enrichment workflow, have been positively received.
Since launched in Q1, a large genome center has switched from a competitor's exome enrichment platform to our new exome kit and many other customers are beginning to adopt this accelerated workflow. Shipments of our TruSeq targeted RNA kits will begin this month.
These kits offer highly customizable gene expression profiling and will serve as a technology alternative in the mid-plex realtime PCR market, which we estimate to be approximately $300 million in size. The sequencing instrument revenue increased 7% compared to the first quarter of 2012, as we saw a resurgence in HiSeq instrument sales, including unit shipment levels above those seen in the fourth quarter of 2011.
We attribute this demand to acquisition of new customers, as well as capacity constraints in our install base. In the first quarter, more than 40% of HiSeq shipments were to first-time HiSeq users including a large order from a Japanese pharmaceutical company and the Tohoku Genome Center.
Additionally, capacity constraints are being felt by academic and translational customers given the increasing demand for sequencing, as the cost per data point comes down. We're committed to accelerating the adoption of sequencing through continued improvements to our SBS chemistry.
One example of this is the recently announced product roadmap for the HiSeq 2500, which will provide the ability to sequence up to 300 g in approximately 60 hours. We remain on track to launch this reagent and software enhancement in the second half of 2013.
Importantly, this product enhancement does not take advantage of our recently announced ordered array technology, which will further improve system performance, as we deploy it in particular kits. Demand for HiSeq 2500 upgrades is further evidence of the value proposition we're providing to our customers.
Approximately, 20% of the installed base has now been upgraded and feedback continues to be very positive, siting improved accuracy and queue flexibility. We expect to ultimately upgrade around 35% of the existing HiSeq install base by year end.
As expected, MiSeq orders were modestly lower sequentially, given the particularly strong Q4 results, but normalizing for the exceptional Q4. This quarter, MiSeq orders continued to demonstrate the steady quarterly growth that we've become accustomed to in the first 3 quarters of 2012.
MiSeq ASPs were stable, compared to the prior quarter, despite the new 15 for 15 program, which offers a discount on the instrument when bundled with the purchase of 15 consumable kits. This program is intended to help our customers initiate their sequencing projects more quickly.
Interest in the MiSeq platform remains high and our competitive position is incredibly strong. Feedback from our sales force points to stable competitive dynamics, with MiSeq still winning over 80% of head-to-head competitions.
Increased adoption is being seen for applications outside of core research, including a multiunit ordering in Q1 from the U.K.' s Health Protection Agency, which is now part of Public Health England.
We're focused on expanding our commercial reach this year, with 50 additional sales reps, which we're in the early stages of hiring. With this investment and our strong competitive position, we're confident in our ability to broaden our geographic reach, while building awareness in peripheral markets like microbiology and food safety.
Today, both our MiSeq and HiSeq platforms are enabled to stream data to BaseSpace. More than 30,000 sequencing runs have been submitted by customers to BaseSpace, providing us with an invaluable resource to assess realtime instrument and reagent performance.
Today, we have approximately 6,000 registered users and many researchers are sharing data across their research centers, a capability that greatly enhances the customer experience. The next major update to BaseSpace will roll out in Q2 and include an e-commerce capability, allowing the purchase of apps in our BaseSpace store.
Given the rapid adoption of BaseSpace and positive feedback on this groundbreaking cloud solution, we believe we're building a foundation for a powerful committee of collaboration for life science researchers and eventually clinicians. Our FastTrack Services business achieved record shipments in the first quarter.
We shipped more than 4,000 genomes, a 60% sequential increase, and also recognized a significant milestone by surpassing our 10,000th genome shipped. We continue to gain momentum in sequencing services.
We're pleased to be the sequencing subcontractor on the initial award for the VA Million Veteran Program, where we will be working with Personalis to sequence and genotype more than 1,000 veterans. The fundamentals of this business are strong and we're in discussions on a number of large population-based studies, but we would like to remind everyone that service revenue can fluctuate significantly based on the timing of project completions.
Importantly, part of this momentum is coming from shorter turnaround times for our FastTrack Services and in this quarter, we completed a project of more than 1,000 genomes in just 12 weeks. We recently added 2 new partners to the Illumina Genome Network: the Peking University Nova Gene in Beijing, China; and the HudsonAlpha Institute in Alabama, which is already accepting customer projects.
In our clinical business, we continue to see strong demand from nontraditional customers looking to employ NexGen sequencing technology and in Q1, close to half of the HiSeq orders were to commercial, clinical and translational customers. Sessions at recent conferences, including HEBT, ACMG and AACR, point to increasing evidence that rapid progress is being made to adopt NGS sequencing in clinical settings.
Illumina remains the clinical partner of choice, given that only our instruments can accurately and efficiently sequence panels of genes, whole exomes or whole genomes, flexibility customers are seeking in the clinical market. At AACR, we announced the release of our TruSight Tumor content sets and already have seen a number of customers, including Clarient and Ambry Genetics, adopt the panel for use in sematic variation, detection in tumors.
We remain incredibly passionate about accelerating the adoption of NexGen sequencing in the clinic. We continue to push forward on our reproductive health strategy.
Our MiSeqDx system and cystic fibrosis full gene sequencing assay submissions are currently being reviewed by the FDA. During the first quarter, we also submitted our Infinium Dx CytoSNP-12 assay and iScan Dx array scanner for 510(k) clearance.
These products are intended to be used as an aid in the postnatal diagnosis of autism spectrum disorders, developmental delay and intellectual disability. Bolstering our efforts in carrier screening and cytogenetics are products from our acquisitions of BlueGnome and Verinata Health, which specializes in preimplantation screening for in vitro fertilization and prenatal testing, respectively.
Through internal development and acquisitions, we now possess a broad portfolio of diagnostic platforms and methods, a solid foundation to accomplish our goal of leading the genetic revolution in reproductive health. The acquisition of Verinata closed in late February and we're pleased with the initial integration progress.
While it's very early in the life cycle of the verify test, we're seeing significant growth in demand, assisted in part by our distribution partnership with PerkinElmer. Today, we're not prepared to share with you the run rate of testing, but are pleased that volumes have met or even slightly exceeded our expectations.
Last week, Verinata announced that the verifi test is now available to Aetna members. This announcement, which was aided by the relationship between PerkinElmer and Aetna, makes the verifi test assessable to Aetna's approximately 20 million covered lives.
Additionally, through our distribution agreement with PerkinElmer, we're in active discussions with other payers to expand verifi coverage. In future quarters, we hope to share with you our strategy for working with the FDA to bring the market in IVD, noninvasive prenatal test and also our plans for working with other NIPT customers.
We're in the early stages of developing our IVD application approach, including the level of data required and timelines for submitting the test for regulatory approval. We believe an IVD test will significantly expand the global market and enable all test providers to be successful in this field.
We've also completed an in-depth study of alternative scenarios for working with our existing NIPT customers and are in the process of executing on that strategy. This is inherently delicate, will take some time to implement and, of course, may take a number of different paths, but we believe that our strategy remains sound and actual.
Before closing, a quick update on funding. The effects of the sequester on future buying patterns of our customers remains to be determined, but to date, we've not been impacted and our business remains robust.
We continue to see significant interest in our platforms and ordering patterns from our academic and government customers are stable. Several factors lead us to believe that this trend will likely continue.
First, a number of NIH centers, including NHGRI, have been conservatively funding grants at 90% under the continuing resolution. Second, NIH funding to sequencing base grants has also increased at a double-digit CAGR over the last few years, including a 4-year high for new sequencing-based grants in 2012.
Lastly, outside of the U.S., funding is steady, if not improving. In Europe, funding is expected to be stable, with a Horizon 2020 budget and Asian funding is improving modestly, as evidenced by the Japanese stimulus.
Overall, Q1 was an exceptional start to the year. We grew revenue year-over-year and sequentially, despite a strong Q4 and a historically soft Q1.
Our order rates remained strong and our long-term strategies for continued technology leadership are driving forward. We remain dedicated to improving human health by unlocking the power of the genome and enabling our customers across multiple markets to do this ever more efficiently and economically.
The sequencing market has enormous potential and we're uniquely positioned to capitalize on these opportunities. I'll now turn the call over to Marc, who'll provide a detailed review of our first quarter results.
Marc A. Stapley
Thanks, Jay. As Jay mentioned, our positive momentum continued in Q1 and led to a number of new records, including record revenue and record sequencing consumable shipment.
These results were due to strength seen across all of our geographic regions, generating revenue of $331 million, an increase of 21% year-over-year, which includes BlueGnome and Verinata. Organic revenue grew 18% year-over-year as a result of impressive instrument sales, demand for whole genome sequencing services and sequencing consumables.
In Q1, shipments to the Americas grew 28% year-over-year and European shipments increased 16% over the same period. Shipments to APAC increased 21% year-over-year as a result of strength in Greater China and Japan.
Shipments to Japan, more than doubled sequentially, despite the weakening yen, and benefited from the end of their fiscal year and the stimulus program. Instrument revenue for the first quarter was $88 million, an increase of 11% compared to the first quarter of 2012, as both HiSeq and array instruments saw significant year-over-year growth.
MiSeq unit shipments increased year-over-year, but MiSeq revenue was down slightly. This was a result of ASPs being above list in Q1 of last year, due primarily to the premium pricing we received on units shipped to Japan.
Consumable revenue in the quarter was $205 million, an increase of 19% compared to the first quarter of 2012, primarily due to our growing installed base, higher demand for Sample Prep and sequencing consumables and BlueGnome. Consumable revenue represented 62% of total revenue, a slight decrease from 63% in the prior year period and prior quarter.
In Q1, the annual pull through per sequencing instrument within our projected ranges are 45k to 50k for MiSeq and 300k to 350k for HiSeq. As compared to Q1 of last year, HiSeq pull through per instrument increased significantly due to positive trends in Sample Prep and customer utilization.
Services and other revenue, which includes genotyping and sequencing services, instrument maintenance contracts and revenue from Verinata, doubled versus Q1 2012 to equal $35 million in the first quarter. This increase was driven by the significant number of genomes processed in the quarter, a strong quarter of micro-array services and the ongoing growth in our extended maintenance contracts associated with an increasing install base.
Turning now to gross margin operating expenses, I will highlight our adjusted non-GAAP results, which exclude legal contingencies, non-cash stock compensation expense, expenses related to Roche's unsolicited tender offer and other items. I encourage you to review the GAAP reconciliation of non-GAAP measures included in today's earnings release.
Our adjusted gross margin for the first quarter was 69.2% as compared to 69% in the first quarter of 2012. Despite the impact of the lower consumable mix and acquisitions, gross margins were up slightly year-over-year due to operational efficiency.
Adjusted research and development expenses for the quarter were $53 million or 16% of revenue compared to $48 million or 15.4% of revenue in the fourth quarter of last year. The sequential increase in R&D expense primarily due to headcount additions to support our robust pipeline of product and development, including technology we acquired with Moleculo, as well as 5 weeks of expense from Verinata.
Adjusted SG&A expenses for the quarter was $66 million, or 19.9% of revenue, compared to $62 million, also 19.9% of revenue in the fourth quarter of last year. The sequential increase was primarily due to the impact of Moleculo and Verinata.
Adjusted operating margins was 33.3% compared to 33.1% in the fourth quarter of 2012, primarily due to the impact of higher gross margins. Adjusted operating margins were lower in Q1, compared to the 35.1% reported in the first quarter of last year due to increased investment in R&D and SG&A to support our long-term growth, as well as acquisitions.
In the first quarter, we recognized approximately 500k of adjusted other income. Our non-GAAP tax rate for the quarter was 27.5% compared to 34% in the first quarter of last year.
The Q1 tax rate benefited from the recognition of the entire 2012 R&D tax credit. Excluding this and other items, our normalized tax rate for the quarter would've been 31.2%.
Non-GAAP net income was $63 million for the quarter and non-GAAP EPS was $0.46. This compares to non-GAAP net income and EPS of $48 million and $0.36, respectively, in the first quarter of 2012.
We reported a GAAP net loss of $23 million or $0.18 per diluted share in the first quarter of 2013, compared to net income of $26 million or $0.20 per diluted share in the prior-year period. Current period results include the charge of $107 million for the litigation associated with the Syntrix verdict, $1 million of which was recorded in COGS and $106 million of which was recorded in operating expenses.
This amount is higher than the $96 million assessed in the judgment due to a catch up estimate of royalties with BeadChip shipments through Q1 and pre-judgement interest of $1 million, which was accrued using the t-bill rate and is subject to court opinion. We continue to believe that the Syntrix judgment has no merit and, therefore, we intend to pro forma out the impact of the royalty accrued during our appeal.
Ongoing expenses related to Roche's unsolicited tender offer was $7 million and the charge from the relocation of our headquarters decreased to $800,000 for Q1. During the quarter, we generated cash flow from operations of $88 million.
Capital expenditures were approximately $21 million, resulting in $66 million of free cash flow. DSO decreased to 58 days compared to 63 days last quarter, primarily due to more even shipments in the current quarter.
During the period, approximately 489,000 shares were repurchased for $25 million under our previously announced repurchase program, leaving slightly more than $140 million of authorization remaining. We ended the quarter with $1.1 billion in cash and short-term investments.
Having moved to providing guidance largely on an annual basis, we will not be updating our full-year guidance today, given that we just completed the first quarter. However, I would like to provide a reminder of a few key variables to consider when modeling out the balance of 2013.
Firstly, we will get a full quarter on the Verinata dilution previously communicated. Secondly, operating expenses will ramp throughout the year as previously discussed.
And finally, we will return to our normalized tax rate for the remainder of 2013. In summary, we're incredible pleased with the trends of our business and our Q1 result.
Our order intake and pipeline remains strong and our product development, clinical strategy and investments, both to expand our reach and build further infrastructure, are progressing as planned. We continue to be diligently focused on exemplary execution of our business strategy.
Thank you for your time. Operator, we'll now open the line for questions.
Operator
[Operator Instructions] Your first question comes from the line of Tycho Peterson from JPMorgan.
Tycho W. Peterson - JP Morgan Chase & Co, Research Division
In the prepared comments, you talked about 40% of the HiSeq shipments coming to first-time customers. Can you give us a little more sense of the mix there?
I know you talked about the genome center in Japan, but can you just talk a little bit more about the customer ordering patterns?
Jay T. Flatley
Well, it's distributed among commercial customers, translational customers and sort of a nontraditional uses of HiSeq. Certainly, what's happening in the NIPT market was a factor.
We had a number of systems that went into those types of customers. There are a number of companies that are working on various types of cancer diagnostics and we certainly have some shipments into that group of customers as well.
We're not going to sort of parse it down to exactly how many into each bucket, but probably more than any quarter in recent memory, the HiSeq mix was higher fraction outside the academic centers and, I think, provided a large portion of the upside we saw for HiSeqs in the quarter.
Tycho W. Peterson - JP Morgan Chase & Co, Research Division
Then, on the consumables side, did you guys have any demand pull forward in front of the previously announced price increases? Anything you can talk to on that front?
Jay T. Flatley
Yes. We think we certainly had some.
Of course, that doesn't show up in our revenue in Q1. It only goes in as an order and, therefore, into our backlog to be shippable throughout the rest of the year.
But we think that last year we had a similar situation where we had a number of customers pre-order on standing contracts and we had that again this year. I would point out that, for those who avoided the price increase last year by taking a standing contract, that last year's price increase gets incorporated this year.
So by putting in a standing order, they avoid this year's price increase, but can't carry forward the one they missed from last year.
Tycho W. Peterson - JP Morgan Chase & Co, Research Division
Okay. And then one last one.
Any update on kind of negotiations with BGI? And I guess on China, as well, you did the Kindstar deal.
So any thoughts on that opportunity?
Jay T. Flatley
Yes. Our contract -- our supply agreement contract with BGI has now expired.
So that just happened recently. So we're very actively in negotiation with BGI for a renewal of that contract.
Not finished yet, but we'll keep people posted if there's any material developments there that we feel need updating. They remain a very significant customer for us.
Kindstar is a very interesting organization in China. It's a relatively young company, but funded well.
Some interesting venture capitalist involved with Kindstar. And they have some very powerful rights, we think, to take technology that's been initially developed here in the United States through some partnerships and to market those diagnostic tests in China.
They're very interested in expanding broadly across the Chinese market. And so I think working with them is a very important step forward for us.
Operator
The next question comes from the line of Doug Schenkel of Cowen and Company.
Doug Schenkel - Cowen and Company, LLC, Research Division
This was a very impressive quarter in many ways, especially for HiSeq in particular. Could you provide some detail on what the recent mix of 2500 versus 2000 placements has been and how the consumable pull through is trending on the different platforms?
Jay T. Flatley
I think on the 2500 side, I think about 2/3 -- about 2/3 of the business was in the 2500 configuration and about 1/3 in 2000. So it mirrors what we expected.
I think the -- we're seeing a real trend and I think the one we've talked about previously as being a bit surprising to us and that trend being how important fast turnaround times are for this customer base, particularly in clinical markets, in queue management as we mentioned in the script. And because customers now have had a taste of being able to get data back very quickly, I think we're seeing people sort of getting hooked on that, where they love having their data back in days rather than weeks.
And so I think that's going to continue to drive that 2500 migration of the platforms. In terms of rate and consumption, we're not prepared today to break down the mix between those 2 instruments.
At some point in the future, we might, but we're not planning to do that today. But you can see, overall, the numbers are pretty consistent with where we've been over the last several quarters, in terms of pull through.
So the potential is higher on the 2500. Yes.
Doug Schenkel - Cowen and Company, LLC, Research Division
It is higher on the 2500 just because of the pricing. Okay.
And then...
Jay T. Flatley
And the effective turnaround time, Doug, is the -- sort of the amount of sequenced rate kit you use per unit time is faster on a 2500. And therefore, you could do more runs at higher average price and so it's a significantly higher number.
Doug Schenkel - Cowen and Company, LLC, Research Division
Okay. That's all very helpful.
And then there's a decent pick up in R&D spend in the quarter. I think this was planned, but, I guess, I was curious given how strong a revenue quarter you had, did you accelerate R&D spend in the quarter?
Or again, was this as planned? And, I guess, separately, could you highlight some key areas of investment and when you would expect we will be able to learn a little bit more about the expected returns on this investment?
Jay T. Flatley
Sure. What you saw in the income statement was all planned.
So there was nothing extraordinary in R&D outside of the fact that we made 2 acquisitions. So the numbers do include Moleculo and 5 weeks of the Verinata expenses rolled into that R&D number.
So that certainly accounts for a portion of that increase. We are continuing to hire, particularly in the engineering part of R&D, as well as in bioinformatics, are 2 significant areas of hiring for us.
And those resources are being applied across a broad spectrum of product development activities, including continued work on BaseSpace in future iterations of what we plan to do with BaseSpace, new platform development, as well as continuing to work on, over time, increase integration of our platforms to ease the sample prep burden.
Operator
Your next question comes from the line of Derik De Bruin.
Derik De Bruin - BofA Merrill Lynch, Research Division
So Marc, could you just clarify a little bit on the operating expense guidance? You're basically saying that you're going to see an increase going forward.
Is that absolute dollar amount percentage of sales that you're talking about? I'm just trying to get a general run rate given -- do we view as a current -- do we increase off of here from the absolute dollar amount?
Just a little bit of color, please.
Marc A. Stapley
Yes, I would say, Derik, both. It's the type of investments we talked about on our call last quarter investing in our infrastructure, adding a full quarter of Verinata, in particular, that will have an effect as well.
So you should expect an uptick in both items and then our normal planned headcount adds to support the business. We talked about sales reach as well.
We'll continue to drive that pretty hard in the second quarter.
Derik De Bruin - BofA Merrill Lynch, Research Division
And my guess is you wouldn't expect the large number of HiSeq orders' sales to -- that you had in Q1 to repeat in Q2, Q3?
Jay T. Flatley
Well, I'd say the underlying strength of the business and the trends we're seeing are quite positive. Obviously, we're not prepared to predict what the incoming order rate is going to be this quarter, but I think the fundamentals of what we're seeing in the market and in the performance of the platform and the competitive strength we have here are good signs.
And so, obviously, we think that, that business will continue to do well. HiSeq remains the flagship instrument in the entire universe of sequencing products and we expect that to continue to be the case for a long time.
Derik De Bruin - BofA Merrill Lynch, Research Division
Speaking of competition, did you see a pick up in order activity during the quarter, given that your main competitor was a little bit distracted?
Jay T. Flatley
We may have. It's a little hard to attribute any particular orders to that, Derik, so I guess I wouldn't claim that, that was exactly the cause.
I think what we sense is that the competitive dynamics have been quite favorable for us, perhaps in part to distraction, I'm not sure about that part. But certainly, to the delays that have been sort of publicly out there on various competitive platforms, where the sort of promised performance enhancements have not happened on schedule.
And I think that, probably more importantly, has been an impact on our incoming order rates and customers deciding that, if they need to buy a sequencer now, MiSeq is the platform to do it with.
Derik De Bruin - BofA Merrill Lynch, Research Division
And just one final question. You had about $7 million in revenues in BlueGnome in Q4.
Could you let us know what that -- did that -- I guess, did that increase on a sequential basis, did it go up this quarter?
Marc A. Stapley
We didn't break it down, Derik. But what we did say was we talked about the organic growth being 180 -- excuse me, being 18%.
So you can back into it and get very close to that number.
Operator
Next question comes the line of Ross Muken from ISI.
Ross Muken - ISI Group Inc., Research Division
So I guess, on sort of the marketing, it seems like in general, you're sort of getting a disproportionate amount of the budget given some of the tightness we've heard from others. And so you talked about sort of the overall funding environment still being quite positive.
So as you sort of think about areas where you're seeing within even your mix maybe incremental dollars and this is just on the base academic side sort of go after new experiments. Is it a mix of sort of you bring new product to the market that's growing your sort of wallet share, I guess, as a pie.
Is it also same-store on some of the legacy reagents and consumables and some of the legacy sort of experiments or areas where you're seeing growth as well? I'm just trying to get a sense where the sort of the underlying, as everyone has to kind of reappropriate.
It's clear you're getting the total dollar greater, but if you sort of dig down deeper, is it really same-store up on everything? Or is it sort of a mix of sort of up and down depending on where you look in the P&L?
Jay T. Flatley
I'd say it's a pretty broad mix, Ross. So certainly, on the legacy install base called same-store sales, if you will, very clearly, we've seen an uptick in utilization rate over the last 4 quarters.
So what was sort of depressed a year ago, because people were cautious and maybe sort of moderating their projects, we've seen that certainly pick up. I think the fraction of the total dollar pie going to sequencing continues to be very, very favorable.
I mean the growth rate we're seeing in those numbers is terrific. I think the application sequencing across a broader suite of experiments is another really important factor, particularly in markets like RNA.
More and more customers were saying to us we're giving up arrays altogether, we're moving everything to sequencing for RNA-based experiments. We're starting to see these -- little more methylation activity, dramatic increase in work in the cancer field now from the large cancer institutes, as well as the academic centers.
We're beginning to see uptake of the MiSeq product in forensic type applications, early on there still, so I think the market there is going to be much, much larger for us. But we're starting to get orders from that type of customer from customers in biology.
So the market expansion phenomenon here, I think, is a very important underlying powerful factor for us.
Christian O. Henry
I think the other thing too, Jay, is we've really been focused on increasing our portfolio of Sample Prep products, for example. And so we're now are capturing more and more of the dollars every quarter.
We had a really strong quarter in Sample Prep. We have our new exome product out that has been very well-received.
And I think those are -- that's part of our strategy, to capture more of the total dollars within an account.
Ross Muken - ISI Group Inc., Research Division
That's super helpful, Chris. And that's sort of what I was trying to get at.
On the NIPT side, I mean, obviously, you have a unique view of that market, having sort of an inherent product on your own, as well as being a supplier. I mean, obviously, we're seeing a very, almost hyperbolic sort of growth in volumes there.
I mean, what have you sort of learned, just being able to have this unique set about the market and about the trajectory and how you sort of fit into that overall, since you sort of acquired the asset? And what could you sort of share about how it sort of made you think about maybe not immediate term, because I know you're not guiding to this year, but longer-term views on the potential AUM of that opportunity and how you kind of have a unique play on much of it?
Jay T. Flatley
I think I'd start by saying the uptick of this test in the NIPT space has been astonishing to watch. We've tracked this for quite some time through the earliest intellectual property filings through our work with our existing NIPT customers.
And we had put a somewhat accelerated development chart around this, but it's moderated by sort of what we knew about how long it takes traditional diagnostic test and new diagnostic test to come in to the marketplace. And this has sort of exceeded our wildest expectations in terms of the uptake rate.
And clearly, that has to do with the fact that its used, to some extent, as a screen up front of an existing test that is expensive and invasive. And clearly, the change in the guidelines, way earlier than we thought, was an important impact there, as is the pace of the reimbursement decisions we're seeing being made supporting NIPT.
So I think all those factors have created, I guess, what you call the hyperbolic acceleration here and clearly, that was a key motivator for us to get more directly into the market altogether. As I've talked about in the script, one of the more important things for us to do to make sure this becomes a very broad worldwide market, where we can penetrate the more fragmented opportunities in Europe and in China in particular, is to get to an IVD-based product.
And that will allow us to sell quite broadly into thousands of labs, literally, and directly into hospitals as well. And at that point, I think this business alone, the market size here is $1 billion plus and even at IVD pricing.
And I think that's sort of the ultimate direction that this will tend to go. We do believe that there's probably going to continue to be an LDT market because some of these elements in these prenatal testing happen rarely.
And so it would be quite difficult to do a large enough scale clinical trial to demonstrate statistical significance for some of those. So there may, for quite some time, be the coexistence of an LDT market and an IVD market and, in combination, we think, quite a large opportunity.
Operator
Your next question comes the line of Amanda Murphy from William Blair.
Amanda Murphy - William Blair & Company L.L.C., Research Division
So I had a few follow-ups on the consumable side, specifically for the HiSeqs. So if you think about the HiSeq install base, how should we think about average utilization?
So it seems like you're seeing an increase in utilization. Is that something you're seeing across all the customers, whether it be someone who has a single HiSeq or multiple?
And then just another question there in terms of the incremental buyers. So you mentioned some of the users are running into capacity issues.
I'm just curious who that is because some of the genome centers, obviously, have been running at pretty high-capacity for some time. So curious who that Incremental buyer is of the HiSeq -- of the existing user base.
Jay T. Flatley
I mean, to be clear, the utilization comparisons we were making were to a year ago. If you look sequentially, HiSeq consumables per average installed instrument were in, roughly, the range as it's been for a couple of quarters, which is a number we're quite pleased with, to be honest.
I think in terms of the profile of the customer base, what we very clearly seen is the large centers getting sort of refilled with projects. And so many of them have now come back and said, "Wow, a year ago, we were running at some fraction of the capacity and now we're running full tilt."
So clearly that it's biased, to some extent, to those larger centers. But I think because of the new application breath, we're seeing it in other places as well.
Clearly, as in any large install base like this, there's going to be a distribution and so there's some customers who aren't using it very regularly. But I think on average, we're seeing it tick up across most of the installed base.
Marc A. Stapley
And Amanda, the other factor is the one Christian referenced a little bit earlier is taking share in Sample Prep, specifically over the last year, in particular. That's helping the utilization rate.
Amanda Murphy - William Blair & Company L.L.C., Research Division
Right. And then to that point on Sample Prep, what is -- do you have an estimate of where you're at in terms of market share and where you think -- obviously, the market is expanding as well, but curious how much more room you have there on the sample prep side?
Jay T. Flatley
Yes, I mean, we haven't quoted exact numbers there, but we do think we still have quite a bit of head room. The exome kit, the new exome kit is new and so far has made great progress.
But long runway, I think, to continue to convert customers over to that version of the exome kit. And as you know, it's a pretty diverse market, lots of different kinds of Sample Prep go on.
So it's a little hard for us to estimate market share, particularly, because a portion of the market is still doing homebrew and it's hard for us to get a handle on those. So it'd be probably not sufficiently accurate if we were to pick a number.
So we probably avoid doing it.
Amanda Murphy - William Blair & Company L.L.C., Research Division
Okay. Got it.
And then just one more question on the MiSeq. So you had the pricing program in place and you talked about a bifurcation in the user base in terms of consumable usage.
I know it's a bit early, but have you seen that program actually impact maybe not this quarter or Q1, but have you seen any evidence that it's impacting consumable usage at all, for the MiSeq?
Jay T. Flatley
You're talking about the 15 for 15 program?
Amanda Murphy - William Blair & Company L.L.C., Research Division
Yes, exactly.
Jay T. Flatley
Too early to tell. What we do know is that we had quite a number of customers take us up on that program.
And so that's a good early indicator, but it's too early for us to really tell if it's accelerated the movement of that initial bolus of MiSeq customers from sort of low output in the start up phases more rapidly towards a sort of standardized numbers on MiSeq. So it will probably take us another quarter or 2 to have visibility on it.
We are going to extend the program through the end of the second quarter.
Operator
Your next question comes from the line of Daniel Brennan of Morgan Stanley.
Daniel Brennan - Morgan Stanley, Research Division
Just wanted to start off with a question, just on the clinical side. Could you help us think about how your business is breaking down between the noninvasive premium assessing customers versus labs that are just buying the instruments themselves and running some of your panels on that.
Just be interested kind of more so on the latter part to the breakdown maybe between like a larger lab and small labs. Any color you can give kind of on the clinical update side.
Jay T. Flatley
Complicated answer, because we have multiple platforms here sort of convoluted with the multiple market segments. I guess, what I would say is that the NIPT market and the high-end part of the cancer market tend to be on HiSeqs.
And that's a growing part of the HiSeq sales, although HiSeq still tend to be dominated by academic sales. And IPT needs that level of tags and so has a very high throughput type of market.
For some of our larger cancer customers who are running large panels all exomes or whole genomes, they again would tend to use HiSeq because they want lots of data in the lowest price per base. Now on the flip side of that equation, we have customers who are doing the smaller panels.
So if you were running a panel of 30 or 40 genes, MiSeq would be the more appropriate platform. And I think in terms of mix, we're seeing about a 50/50 academic nonacademic mix of sales of the MiSeq platforms.
And in the 50% that are nonacademic, I would say maybe 1/2 to 2/3 of those are doing clinical type applications. The others are in microbiology and forensics and other types of uses of the platform.
Daniel Brennan - Morgan Stanley, Research Division
Okay. Great.
And then, Jay, maybe on the pharma customer base, I think maybe last year I think you had kind of rolled out, or maybe a push on a new initiative there to kind of refocus on that customer base or maybe they were refocusing of you. Just kind of wondering, is that a customer base that is showing up more frequently today, utilizing the instruments, maybe to help them do more targeted drug discovery.
Just kind of thinking about that, that customer. You mentioned the Japan pharma customer in this quarter.
Just kind of wondering how we should be thinking about pharma.
Jay T. Flatley
Yes, there's 3 parts to the pharma market as we think about it. There's the sale of instruments to pharma that are used in the traditional research activities, not for content discovery, but for helping to sort through drug targets, identify how to enrich patients into clinical trials, things like that.
That's a good market for us. They don't tend to buy 5, 10, 20 units to do that type of work.
They -- although the large Pharma companies will buy 1 or 2 for all of their labs around the world. So that's sort of what that part of the market looks like.
For the more large scale whole genome sequencing pharma market, we tend to see that being outsourced. So we see that in that in form of service contracts, where they might want to do 100 to a few thousand whole human genomes and sometimes RNA associated with those genomes as well, often cancer related.
The third part of the market, which I think is still an emerging opportunity in the near-term is probably more of a BD activity for us, as in companion diagnostic. So we really do sense that the whole thrust of companion diagnostics going forward is going to move during sequencing complete genes, 1 to maybe 20 genes.
And that is going to become a very important emerging opportunity and we're in discussions with a large number of pharma companies about working with them on companion diagnostic programs to accomplish that goal.
Operator
Your next question comes the line of Isaac Ro from Goldman Sachs.
Isaac Ro - Goldman Sachs Group Inc., Research Division
On diagnostics, can you maybe give us an update on where the marginal investments are focused right now, if we just put aside the Verinata initiative for a moment and touch on the cancer opportunity specifically?
Jay T. Flatley
Yes. A couple of different pieces in cancer.
I mean, clearly, we're working with lots of partners around the globe in cancer and some of them want customized panels to run on their instrument. So we're doing that.
We're working with sort of the large players in cancer customers, like Foundation Medicine who have a very large panel. And they're a very important partner for us, as we continue to push this technology into personalized medicine and actual diagnosis and treatment.
And I think that on the MiSeq platform, in cancer, it tends to be the smaller panels, anywhere from sort of the 8 genes that are reimbursed or maybe 10 or 12 genes now that are reimbursed, up to panels of 20 to 40 genes. And those tend to be more MiSeq type applications.
Isaac Ro - Goldman Sachs Group Inc., Research Division
Great. And then maybe just a follow-up on product specifics.
I think last quarter, you touched a little bit on head-to-head market share performance relative to the other desktop platform. Wondering if you could maybe update us on how that's going.
And then on Moleculo, any updates on how you guys are planning to commercialize that technology and, specifically, on kit development, how that's going?
Jay T. Flatley
Sure. In head-to-head competition, I think, if anything, our competitive position has increased to some extent.
In the script, we quoted that we think, on a head-to-head basis, we're over 80% win rate. Very few situations where we're competing head-to-head and lose.
I'm sort of feeling really good about that. I'll let Christian talk about Moleculo, since it's in his shop.
Christian O. Henry
Yes. And so with respect to Moleculo, we're -- our product development program is already underway.
We're going to launch first in services, hopefully late this quarter, and then follow it up with a kit later this year. We think the services aspect of this is interesting because it will get more customers experienced with the workflow and the data and how to do the bioinformatics.
And we've got a very aggressive schedule to put a kit together because we do think there's a pretty interesting opportunity to get long reads out into the market.
Operator
Your next question comes from the line of Bill Quirk.
William R. Quirk - Piper Jaffray Companies, Research Division
First question is, I realize it's just first quarter and we want to be sufficiently cautious, but you guys have printed a pretty strong quarter and, obviously, annualizing, you're basically going to be at your 15% guidance target. And so I guess I'll throw the question out there, did you consider bumping up the numbers?
I mean, it certainly sounds like several elements of the franchise are performing very well. Verinata's really yet to affect the numbers, et cetera.
Jay T. Flatley
Well, the consideration, Bill, that we had around guidance really comes back to our goal to try to solidify our hope of providing guidance on an annualized basis. And if we declare that that's really what we're trying to accomplish and then we update guidance every quarter, it sort of defeats the purpose of trying to get the annualized guidance.
So that's really the reason that we made an important decision to not comment on guidance this quarter and wait until we feel like we need to do that.
William R. Quirk - Piper Jaffray Companies, Research Division
Got it. And then just 2 more quick ones was for me.
Jay, I think it is pretty small, but can you just remind us, what percent of HiSeqs had been upgraded as of the fourth quarter?
Jay T. Flatley
About 20% have actually been upgraded in our current projection -- 20%, right?
Rebecca Chambers
As of the fourth quarter.
Jay T. Flatley
In the fourth quarter. I'm sorry, is the fourth quarter, was your question?
William R. Quirk - Piper Jaffray Companies, Research Division
Yes, as of the fourth quarter, right.
Rebecca Chambers
Less than 10%
Jay T. Flatley
Less than 10%. And now we're at 20%.
I'm sorry, I thought you meant the end of Q1. I apologize.
Our expectation is that we'll get to about 35% by the end of the year. That's our goal.
William R. Quirk - Piper Jaffray Companies, Research Division
Okay. Excellent.
And then last question for me is, just given the -- I should say a previous expressed interest in, obviously, working with the other parties in the NIPT market around patents in IP. And such given the review that's going to -- the 540 from Sequenom was going to undergo.
Is there any changes to your thoughts about how, I guess, this IP dialogue develops over the coming months and years?
Jay T. Flatley
Not yet. We've -- as I mentioned in the script, we have worked very hard on this over the past 6 or 8 weeks.
We've done a very in-depth study of what we think is happening in the market and the dynamics both domestically and x U.S. We've put together what we think is a very reasonable approach to the marketplace.
And we're in the process here, over the next month or 2, of beginning to roll that out with our existing NIPT customers. As I said, their response is unpredictable at this point, but we think we have a program that's a very rational one, given the strength of the intellectual property position we think we have.
Operator
Your next question comes the line of Amit Bhalla.
Amit Bhalla - Citigroup Inc, Research Division
I wanted to ask a question for Marc. Can you talk a little bit about the gross margin on a year-over-year basis.
You had some pretty nice revenue growth, but 20 basis points of gross margin expansion, I know there are some services components there and some dilution, but can you just walk us through the gross margin on a year-over-year basis why there wasn't more of an expansion?
Marc A. Stapley
Yes. I mean, I think, really, the dilution of the acquisitions is 1 reason, Amit, in particular.
Plus the HiSeq upgrades, when we've talked about those previously, the ones that we're doing, the ones that took us from 10% to 20% over the old promotional price of 50k per instrument, per upgrade, which is obviously dilutive. And then we had a good, good FastTrack Services performance in the quarter and FastTrack Services is always, as we said before, dilutive.
So it's just a different geography on the P&L. So those are the main reasons.
And then we have had some -- some operational efficiencies, as well, year-over-year that have helped drive the gross margin up despite some of those kind of headwinds.
Jay T. Flatley
Yes, I mean, Marc, also, the mix of consumables was up a little bit, which -- I mean, the mix of instrumentation versus consumables was up a little bit.
Marc A. Stapley
Yes, that's right. You're exactly right.
Plus the arrays for implementation was pretty strong this quarter as well.
Amit Bhalla - Citigroup Inc, Research Division
And can you put any numbers around some of those -- the headwinds on the gross margin, relatively, or in proportion to the impact?
Marc A. Stapley
You mean the headwinds going forward?
Amit Bhalla - Citigroup Inc, Research Division
No. The headwinds year-over-year, like 1/3 from dilution to deals, 1/3 from HiSeq upgrades, or however you want to characterize it.
Marc A. Stapley
No, not really. It would be a little granular.
I mean, the year-over-year improvement is relatively small, I would say. Those headwinds have been offset by -- largely by the operational improvement that we've been able to make over the last 12 months or so.
Amit Bhalla - Citigroup Inc, Research Division
Okay. And then, Jay, just in the context of guidance and assumptions, as we move towards later parts of the year, what is the underlying assumption you have for how our labs are going to play out with respect to funding sequestration?
What's the assumption there in the guidance?
Jay T. Flatley
Well, what we put in the guidance at the beginning of the year was a 2% to 4% impact from sequestration. We're sort of on the high-end of that in terms of what actually played out.
But 1 offsetting factor is the fact that under the continuing resolution, much of the NIH allocation was at 90% of the grand amount. And so that has a potential small upside effect that could neutralize any of the downside effects from the sequestration number being a little bigger than what we had in our guidance.
So I'd say from a guidance perspective we're sort of feeling neutral about it, but we're watching very carefully and we're interviewing our customers constantly to see what their thoughts are about it. And obviously you guys are doing the same thing.
We received reports continually streaming in about how people are feeling about the impact of sequestration. But, I guess, the bottom line of all of that, for us, is that we would probably say that it's embedded in the guidance that we have out there today.
Amit Bhalla - Citigroup Inc, Research Division
Got it. And then just a quick one for Christian.
On Moleculo, have you come to an idea of pricing, when it's kit-able?
Christian O. Henry
No. We haven't put any pricing together yet.
Operator
Your next question comes from the line of Jon Groberg from Macquarie.
Jonathan P. Groberg - Macquarie Research
Jay, could you, maybe, just give us an update on the livestock market? I know that's a market you've talked about in the past.
And I'm just -- maybe, anything you want to say about kind of how that market is trending and the opportunities that you see there?
Jay T. Flatley
I think it remains pretty strong. I mean, it's an evolving market.
It began -- or when it began a few years back, probably 3 or 4 years back, it was a lot of front end sequencing and sort of medium complexity arrays that fell out of that. Then as we got more and more sequencing, it migrated toward running some very high complexity arrays to try to sort out which of the variance had impact on the sort of desirable traits of cattle.
And now, I'd say it's probably moving directionally toward the lower complexity arrays as they understand more and more about what matters. And by low complexity I mean tens of thousands of markers as opposed to hundreds of thousands of markers.
But overall, I think the market remains a very strong one for us. It's an international market, so we're getting lots of business from South America, from some rich geographies in Europe and, obviously, the United States continues to do well there.
Jonathan P. Groberg - Macquarie Research
And on the -- just out of curiosity on those lower complexity arrays, any -- what are we talking about, or what are you learning in terms of price per sample that is kind of the right price to be thinking about there for that market to take on?
Jay T. Flatley
Is a typical pattern we see where as we go to these lower complexity arrays, the prices are going to want to be clearly sub $100, in some cases more like $50, but the potential volumes go way, way up, because you're getting increasingly into screening type applications. And as that happens, ultimately, you're going to be -- like we talked about in humans, you're going to be doing genotyping on every cow that's born and using that as a way to triage its future.
And we're probably still a couple of years away from where that -- where we get to that, but I think it's clearly headed in that direction.
Jonathan P. Groberg - Macquarie Research
And then if I could just follow up on, I think, your comments on MiSeq. Just to be clear, where your revenue was down, was that a year-over-year comment?
Your revenues were down and was that including consumables? Or were you talking about just instrumentation?
And then just to be clear on this 15 for 15, I think you said you were extending that through the second quarter. And just I'm thinking -- I'm just curious if I'm thinking about this correctly, but if you were providing a promotion where you said the ASPs were stable, but you're offering this 15 for 15 in a way as that everybody's thinking that maybe there wasn't as much demand for the product as you would have thought with that promotion?
Jay T. Flatley
So as year-over-year comparison on instruments -- and the 15 for 15 really doesn't have anything to do with demand for the product. If anything, I think it might accelerate demand.
But it was really put in place as a strategy to try to accelerate the adoption or the actual production of applications by our customers. Because what we see, and this basically is a tremendous tool to do this, is a bimodal distribution of reagent use among our MiSeq customers.
You have the large group of customers who are centered slightly above the average. You see a tail of people who use it all the time.
And you see a cluster of customers who use it a lot more slowly or a lot less per week or per month. And if you dive into that group of customers, what you find is that most of them are the new customers.
And so the conclusion is that it takes a while for customers to ramp up to begin to develop their applications, to get into the purchasing cycle of reagents. And so the goal of the 15 for 15 program is to make sure customers had reagents in their lab the day the instrument arrives, because this requires them to buy those reagents at the same time they buy the instruments so they have those reagents ready to run.
We send in our application specialists, to use those reagents, to teach them how to run the instrument and begin development of the application faster. So that was the goal of that program.
It's not a way to discount the instrument.
Jonathan P. Groberg - Macquarie Research
Got it. And just so I'm clear, on a year-over-year basis, when you said -- I know you're consumables in 1Q '12 are not high, but you were talking about instruments on a year-over-year basis for MiSeq?
Jay T. Flatley
That's right.
Operator
And our last question comes the line of Dan Arias from UBS.
Daniel Arias - UBS Investment Bank, Research Division
Jay, I think you kind of alluded to it with Dan's question, but for the clinical crowd, at this point, is there a general number of genes where above it you tend to see a switchover from panels to full exome test? Is it that 40 to 50 gene range?
Just trying to get a sense of how clear customers are rolling out their products there?
Jay T. Flatley
Yes, it will depend a little bit on what type of user it is, right? If you had a system in a large reference lab, like a lab core, or a quest, they would tend to buy the higher instruments, higher capacity instruments because they would tend to get lots of samples in.
And so, even for panels that are 50 or 100 genes, they could fill it up and run it on a relatively regular basis. If you were in a more regional side or a low throughput kind of environment, then you'd clearly be in MiSeq land because you might not be getting hundreds of samples a day and so you wouldn't be able to fill up the instrument and yet you want to send back the results relatively quickly.
And so it depends both on the number of genes, but there's that other dimension of how many samples arrive at the lab every day.
Daniel Arias - UBS Investment Bank, Research Division
Got it. Okay.
And then on the service side, with what you're seeing in the FastTrack business and also the clinical growth, is there starting to become a need for high coverage, say, like a 100x service offering there as the clinical grade outsourcing sort of kicks in a bit?
Jay T. Flatley
Yes, for cancer, in particular. In general, the kind of research projects we get will often be sequencing cancers up to 90x to 120x.
And there's still a lot of research work to be done to determine what the right level of coverage is and that might even depend on what stage cancer you're analyzing at a given point in time. So we do, do that routinely in our services lab.
So it's whole genome, but with higher coverage and we're able to accommodate that today.
Operator
Ladies and gentlemen, this concludes today's question-and-answer session. And I would now like to turn it back over to Rebecca Chambers for closing remarks.
Rebecca Chambers
As a reminder, a replay of this call be available at the webcast in the Investor section of our website, as well as through the dial-in instructions contained in today's earnings release. Thank you for joining us today.
This concludes our call and we look forward to our update following the close of the second fiscal quarter.
Operator
Ladies and gentlemen, that concludes today's conference. Thank you for your participation and you may now disconnect.
Have a great day.