Illumina(ILMN) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - First quarter revenue was $1,040 million, down 1.4% year over year, with constant currency revenue roughly flat [20][19] - Non-GAAP EPS was$ 0.97, at the upper end of guidance [19][27] - Non-GAAP gross margin increased by 30 basis points year over year to 67.4% [25] - Non-GAAP operating margin was 20.4% in Q1 [27] Business Line Data and Key Metrics Changes - Sequencing consumables revenue was $696 million, growing approximately 1% year over year [20] - Sequencing instruments revenue was approximately flat year over year at$ 109 million [23] - Sequencing service and other revenue was down approximately 5% year over year to $142 million [24] Market Data and Key Metrics Changes - Clinical business showed mid single-digit growth, while research business was down in the high mid to high single-digit range [50][49] - Approximately 68% of high throughput gigabases shipped were on the NovaSeq X Series [22] - Over 50% of clinical volumes are now on the NovaSeq X Series [22] Company Strategy and Development Direction - The company aims for high single-digit revenue growth and 500 basis points margin expansion by 2027, excluding Greater China [10] - A$ 100 million cost reduction program was initiated to address challenges from China and research funding uncertainty [12] - The company is focusing on advancing the Multiomics ecosystem and has a strong innovation pipeline [9][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic challenges but expressed confidence in the company's resilience and growth potential [7][10] - The company is revising guidance to reflect headwinds from China and research funding uncertainties [11][29] - Management emphasized that the challenges are transitory and will not define long-term success [10] Other Important Information - The company is engaging with regulatory authorities in China for potential solutions to support a sustainable long-term presence [11] - The impact of new tariffs is estimated to be approximately $85 million for 2025, with actions being taken to mitigate this [35][36] Q&A Session Summary Question: What is the outlook for revenue growth and margin expansion? - Management believes that revenue growth will rebound and margins will expand above 25% in the future, despite current challenges [42] Question: What are the clinical and research revenue growth rates? - Clinical revenue grew mid single digits, while research revenue declined in the high mid to high single-digit range [50][49] Question: How is the company managing risks related to China? - The company has taken actions to offset potential risks from China, including a$ 100 million cost reduction program [46] Question: How are tariffs impacting demand? - No significant change in customer behavior was observed in Q1 due to tariffs, but future impacts are anticipated [68][70] Question: What are the assumptions behind the revenue guidance? - The guidance reflects a 15% decline in research revenue, offset by stronger clinical performance [76][78]