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Illumina Q1 Revenues Grow 6 Percent, Miss Estimates

NEW YORK (GenomeWeb) – Illumina reported after the close of the market on Tuesday that it missed its first quarter 2016 revenue forecast, consistent with a preliminary estimate it provided last month.

Illumina's Q1 revenues were up 6 percent to $571.8 million from $538.6 million in the prior-year quarter. Analysts, on average, had predicted the firm would recognize $596.3 million. On a constant currency basis, revenues were up 7 percent.

"As we have previously shared, Q1 was a slower start to the year than we expected," Illumina CEO Jay Flatley said in a statement. "Our view of the growth potential of the sequencing market remains unchanged, as the largest opportunities are in their earliest stages of development. In the near-term, we are focused on improving execution to restore the growth rate we believe our markets can support," he added.

On a conference call following the earning release, Flatley provided additional detail of why the company's first quarter results were below expectations. The majority of the Q1 shortfall was due to "orders booked that did not translate into revenue," he said. There were a number of reasons for this, he added, including manufacturing constraints on arrays, receiving orders too late in the quarter, customer requests for delayed shipment, and complex large deal structures especially for instruments like HiSeq X that resulted in partial revenue deferral.

In particular, he said, the firm shipped 19 fewer HiSeq instruments in Q1 than it had forecasted, valued at $14 million.

In addition, as Illumina previously said, it had a particularly weak quarter in Europe. To address that, the firm has moved a key sales leader, Scott Thomas, to Europe. He has already started "rolling out a more disciplined sales process," Illumina President Francis de Souza said during the call. 

Consistent with last month's revised full-year forecast, Illumina forecasted 12 percent revenue growth for full-year 2016. In the second quarter of 2016, Illumina anticipates between $590 million and $595 million in revenue.

Product revenue in Q1 was up 5 percent to $482.8 million from $459.1 million in Q1 2015. Instrument revenue declined 20 percent to $118 million from $146 million in the prior year quarter. Meantime, consumable revenues grew 17 percent to $361 million from $308 million, Illumina CFO Marc Stapley said during the call.

Service and other revenue was up 12 percent to $89.0 million from $79.4 million in the year-ago quarter. The microarray business, which Flatley called an "emerging brightspot," was up 1 percent to $90 million.

The firm's Q1 net income attributable to Illumina stockholders was down 34 percent to $89.6 million, or $.60 per share, from $136.7 million, or $.92 per share, in Q1 2015. On a non-GAAP basis, Illumina posted a net income of  $.71 per share, falling short of Wall Street's estimate of $.74 per share.

Illumina's R&D expenses grew 35 percent to $124.0 million in the quarter, from $91.8 million, while SG&A expenses jumped 28 percent to $149.2 million from $116.3 million. The firm also recognized $2 million in legal contingency expenses.

It ended the quarter with $754.9 million in cash and cash equivalents and $588.2 million in short-term investments.

In late morning trade on Wednesday, shares of Illumina were down .56 percent to $132.90.