This story has been updated to correct the number of NovaSeq X shipments in the quarter.
NEW YORK – Illumina highlighted accelerating consumables sales for its NovaSeq X instrument and a change to its strategy in China as potential currents it can ride as it continues to navigate a tough market.
On Thursday after the close of the marker, the San Diego-based sequencing instrument maker reported that its first quarter revenues fell 1 percent year over year.
For the three months ended March 31, Illumina recognized revenues of $1.08 billion, compared to $1.09 billion in Q1 2023, beating analysts' average estimate of $1.05 billion. On a constant currency basis, revenues were also down 1 percent. Core Illumina revenues were $1.06 billion, down 2 percent year over year from $1.08 billion. Grail, the cancer liquid biopsy subsidiary that Illumina is in the process of divesting, recorded revenues of $27 million, up 35 percent year over year from $20 million a year ago.
Revenues were actually better than Illumina had expected, new CFO Ankur Dhingra told investors on a conference call following the release of the results, and were driven by three factors: strong high-throughput consumables sales, timing of revenue from certain strategic partnerships, and "some customers accelerating delivery of a few NovaSeq X instruments from Q2 into Q1."
"At the same time, we're still not seeing any significant improvement in the macroeconomic environment or our business in China," Dhingra said. The firm is also monitoring the impact of a strengthening US dollar.
"While we are seeing early strength in consumables to start the year, it's being offset by capital constraints that are continuing to weigh on instrument purchases," he said. "While it was a decent start to the year, we remain cautious due to the persistently challenging global macro environment where customers are still constrained in their purchasing decisions," CEO Jacob Thaysen said. "As expected, we are seeing this playing out across our regions, notably with lower NovaSeq X placements versus the first quarter of 2023, where we shipped our first X instrument to fulfill a strong pre-order book."
Thaysen noted that Illumina saw revenues decline in three geographic regions. Revenues from the Americas were down 4 percent, year over year; revenues in Asia-Pacific, the Middle East, and Africa were down 3 percent; and revenues in Greater China declined 14 percent. European revenues were up 7 percent year over year.
To help with the firm's China business, Illumina has installed a new head of the Greater China region, Jenny Zheng, which Thaysen said he hopes will "stabilize" business there. "[She] is introducing changes to make our business more 'in China for China', which will include improving our local manufacturing and partnerships in the region," he said.
Product revenue for the quarter totaled $876 billion, down 5 percent from $922 million a year ago, while service and other revenue totaled $200 million, up 21 percent from $165 million. Driven primarily by an increase in revenue from strategic partnerships and higher instrument service contract revenue on a growing install base.
Illumina shipped 55 NovaSeq X instruments, bringing the installed base to more than 400. "Approximately half of our customers are using the 25B flow cell" launched in the quarter, Thaysen said, the largest available. "We are encouraged by that momentum."
Illumina's net loss for the quarter was $126 million, or $.79 per share, compared to net income of $3 million, or $.02 per share, in Q1 2023. On an adjusted basis, EPS was $.09, beating the analysts' average estimate of $.04 per share.
Illumina's R&D expenses fell a fraction of a percent year over year to $339 million from $341 million. Of those, Grail R&D expenses made up $101 million, up 17 percent from $86 million in Q1 2023.SG&A expenses grew 16 percent year over year to $439 million from $378 million. This includes Grail SG&A expenses of $104 million, up 12 percent from $93 million a year ago.
As of April 2, Illumina had $1.11 billion in cash and cash equivalents.
Illumina reiterated that it expects approximately flat revenues for its core business in 2024 compared to 2023.
Looking forward, Thaysen said Illumina will "continue to develop more sample-to-answer solutions to enable the genomics and multiomics ecosystem" and will be sharing its new "comprehensive strategy" at a virtual event this fall.
In morning trading on the Nasdaq, Illumina's shares were down 1 percent at $122.62.