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 (ILMN, Financial) 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 (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 (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.
