• Revenue: $1.08 billion, down 2% year over year.
• Americas Revenue: Down 6% year over year.
• Europe Revenue: Up 12% year over year.
• EMEA Revenue: Up 7% year over year.
• Greater China Revenue: Down 23% year over year.
• Sequencing Consumables Revenue: $741 million, up 7% year over year.
• Sequencing Instruments Revenue: $104 million, down 42% year over year.
• Sequencing Service and Other Revenue: $150 million, up 6% year over year.
• Non-GAAP Operating Margin: 22.6%.
• Non-GAAP Gross Margin: 70.5%, up 430 basis points year over year.
• Diluted Earnings Per Share (EPS): $1.14.
• Cash Flow from Operations: $316 million.
• Free Cash Flow: $284 million.
• Cash, Cash Equivalents, and Short-term Investments: $939 million.
• 2024 Revenue Guidance: Expected to be down approximately 3%.
• 2024 Non-GAAP Operating Margin Guidance: 21% to 21.5%.
• 2024 Non-GAAP EPS Guidance: $4.05 to $4.15.

• Warning! GuruFocus has detected 7 Warning Signs with ILMN.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Illumina Inc (NASDAQ:ILMN) achieved a non-GAAP operating margin of 22.6% and diluted earnings per share of $1.14, exceeding expectations.
• The NovaSeq X Series surpassed $1 billion in cumulative revenue, marking a significant milestone.
• Sequencing Consumables revenue increased by 7% year over year, driven by strong uptake in X Consumables.
• Illumina Inc (NASDAQ:ILMN) is making progress in expanding margins and driving earnings through operational excellence.
• The company has initiated a share repurchase program, buying back 770,000 shares for $98 million.

Negative Points

• Revenue for the third quarter was down 2% year over year, with a decline in the Instruments business.
• Americas revenue decreased by 6% year over year, and Greater China revenue fell by 23%.
• The macroeconomic environment remains constrained, impacting purchasing behavior and moderating instrument placements globally.
• Illumina Inc (NASDAQ:ILMN) lowered its 2024 revenue growth expectations, now anticipating a 3% decline.
• The company faces competitive pressures, particularly in the mid-throughput segment.

Q & A Highlights

Q: On guidance, considering you are guiding revenue down slightly, do you expect Sequencing Consumable revenue to grow sequentially? How do you address concerns about a clinical cliff for consumable revenue as we look ahead to 2025? A: Jacob Thaysen, CEO: We don't see a clinical cliff. We are seeing strong momentum moving towards the NovaSeq X, with a lot of volume transitioning. We have good transparency with our customers, especially larger ones, about their plans and transitions. Typically, transitioning from 6K to X takes time, usually a year to 18 months. Ankur Dhingra, CFO: Our guidance assumes a typical seasonal decline from Q3 to Q4 in Consumables due to holidays, not due to any transition issues.

Q: Was the decline in mid-throughput mostly from China, or was it also in the US and Europe due to competition? What are your considerations for 2025, especially regarding the clinical transition? A: Jacob Thaysen, CEO: We see competition globally, with China showing some positive changes due to new leadership and strategy. In the US and Europe, competition is more intense in mid-throughput. For 2025, we are committed to returning to growth, stepping into positive growth from 2024's negative growth, aiming for high single-digit growth by 2027.

Q: Can you provide more details on the pricing impact of the clinical X transition and the elasticity of demand? A: Jacob Thaysen, CEO: The X platform offers substantial benefits, including lower costs and improved workflows. Customers are transitioning assays over time, often opting for larger panels and deeper sequencing, which supports elasticity. Ankur Dhingra, CFO: The transition is playing out as expected, with higher throughput offsetting price impacts. We saw solid growth in Consumables, with over 55% of volumes transitioned to X.

Q: How are you addressing the macroeconomic headwinds affecting placements, and what should we look for as a shift that can impact the placement rate positively? A: Jacob Thaysen, CEO: We are seeing improvements, particularly in Consumables growth, which is an early indicator of a turnaround. The MiSeq i100 launch is also expected to provide momentum. However, we are taking it quarter by quarter due to ongoing macroeconomic uncertainties.

Q: Can you elaborate on the impact of the MiSeq i100 launch and the XLEAP launch on the NextSeq? A: Jacob Thaysen, CEO: The MiSeq i100 is expected to be well-received, offering ease of use and operational benefits. It may attract customers who would have opted for mid-throughput instruments. Ankur Dhingra, CFO: The low throughput instruments business is a small part of our revenue, but the MiSeq i100 is generating substantial interest. The XLEAP chemistry has been well-received, with over 60% of NovaSeq users adopting it.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.