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Illumina Q2 Revenues Drop 25 Percent

This story has been updated to include comments from Illumina's investor call and a Piper Sandler research note.

NEW YORK – Illumina reported after the close of the market on Thursday that its second quarter 2020 revenues fell 25 percent year over year, primarily due to the impact of the COVID-19 pandemic on research customers.

For the three months ended June 30, 2020, Illumina recorded total revenues of $633 million, compared to $838 million compared a year ago, falling short of the consensus Wall Street Estimate of $697.6 million.

Illumina tallied $527 million in product revenue, down 25 percent from $704 million in Q2 2019, and $106 million in service and other revenue, down 21 percent from $134 million a year ago.

"As expected, the second quarter was significantly impacted by pandemic-related disruption in our customers' operations and was particularly challenging for many of our research customers who remain closed or operating at limited scale," Illumina CEO Francis deSouza said in a statement. "It is clear that the role of genomics in infectious disease will continue to grow through and beyond this pandemic."

Sequencing revenues accounted for $566 million, or 89 percent of total revenues in the quarter. Sequencing systems revenues were $88 million, down from $129 million in Q2 2019. Sequencing consumables revenues were $387 million, down from $497 million a year ago; clinical sequencing consumables accounted for nearly half of those revenues, due to lower research consumables sales. Sequencing services and other revenues were $91 million, down from $102 million a year ago.

Total array revenues were $67 million, down approximately 39 percent year over year.

Revenues in all geographic regions were negatively impacted by lab closures, deSouza said on a conference call with investors following the release of results. Revenues from the Americas were $335 million; China, $79 million; Europe, Middle East, and Africa, $168 million; Asia Pacific, $51 million.

Shipments of Illumina's new NextSeq 2000 instruments were better than expected and about a quarter went to customers new to Illumina, CFO Sam Samad said.

Sequencing run rates, a metric Illumina uses to track customer recovery, are improving, deSouza said; however, many customers have yet to return to rates seen in the fourth quarter of 2019. Overall, research run rate was 65 percent of pre-COVID-19 run rates, while clinical run rates averaged 84 percent of the Q4 2019 run rate.

Illumina's Q2 net income attributable to stockholders was $47 million, or $.32 per share, compared to $296 million, or $1.99 per share, in the year-ago period. On an adjusted basis, EPS was $.62, short of analysts' consensus estimate for EPS of $.67.

Illumina's R&D expenses fell 7 percent to $155 million from $166 million, while its SG&A expenses fell 12 percent to $177 million from $202 million.

Illumina noted it repurchased approximately $143 million of common stock in the quarter.

The company finished the quarter with $1.77 billion in cash and cash equivalents and $1.5 billion in short-term investments.

The firm did not provide specific revenue or earnings guidance for the rest of the year; however, Samad said the firm is expecting sequencing revenues to grow "modestly" and array revenues to be "flat, to slightly up." He added that third quarter EPS would be "modestly higher" than in the second quarter.

In morning trading on the Nasdaq, shares of Illumina were down approximately 13 percent to $346.75.

Piper Sandler downgraded Illumina shares from Overweight to Neutral, due to a "lack of visibility on COVID-19 headwinds," analyst Steven Mah wrote in a research note.

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