Illumina Reports 35% Decline in China Revenue Amid Global Q2 Revenue Drop

Illumina's Q2 Revenue Drops 6%, Company Lowers Core Revenue Guidance.

Illumina said Tuesday after the market close that its overall and core revenue for the second quarter fell 6% year over year, driven by a decline in sequencing instrument revenue.

In the three months ended June 30, the core revenue of this San Diego-based sequencing technology company was $1.09 billion, compared to $1.16 billion for the same period last year, representing a 6% decrease at constant exchange rates.

Total revenue, including that from Grail which the company spun off in late June, also fell by 6% to $1.11 billion, compared to $1.18 billion in the same period last year, surpassing Wall Street's consensus estimate of $1.08 billion.

Illumina Reports Product Revenue of $927 Million, Down from $1 Billion in Q2 2023; Services and Other Revenue at $185 Million, Up 5% from $175 Million a Year Ago

CEO Jacob Thaysen said in a statement: "The Illumina team delivered results above our expectations this quarter, driven by our rigorous execution against our strategic priorities."Consumables sales remained robust as customers continued to increase sequencing activities, but instrument demand was weak due to funding constraints.We are advancing our operational excellence program and will achieve higher profit margins this year.

In the conference call with investors after the earnings release, Illumina officials explained that sequencing instrument revenue fell 40% year-over-year from $193 million in Q2 2023 to $116 million due toDecrease in the shipment volume of medium-throughput instruments and a decline in the placement of NovaSeq X compared to shipments related to pre-orders from the same period last year.

Sequencing consumables revenue was flat year over year at $737 million. Chief Financial Officer Ankur Dhingra said high-throughput consumables revenue grew year over year, with 25% of revenue coming from NovaSeq X Plus. "By the middle of 2025, nearly half of high-throughput sequencing consumables revenue should transition to NovaSeq X," he said.

Driven by strategic partnerships and service contract revenue, service revenue increased 7% year-over-year to $143 million.

Illumina placed 62 NovaSeq X Plus instruments this quarter, down from 109 in the same period last year, bringing the total installed base to 469.

Thaysen said that revenue from the Americas was "relatively flat" compared to $623 million a year ago.Revenue from China fell 35% from $115 million a year ago;Revenue from Europe declined 5% from $303 million a year ago; revenue from Asia, the Middle East, and Africa fell 8% from $118 million a year earlier.

Thaysen also stated that Illumina will release several new products in the fourth quarter. The single-flow cell NovaSeq X instrument, "suitable for customers seeking a low-cost entry-level X series product," will begin shipping in the fourth quarter and can be upgraded to the X Plus, which requires two flow cells. The company will also launch 100-cycle and 200-cycle 25B flow cells designed for large-scale counting applications. "In addition, our next software update for NovaSeq X and X Plus will increase output and include other improvements," he said.

Net loss for the quarter was $1.99 billion, or $12.48 per share, compared to a net loss of $234 million, or $1.48 per share, in the second quarter of 2023. The loss includes $1.89 billion in goodwill and intangible asset impairment related to Grail assets. On an adjusted basis, Illumina reported earnings per share of $1.09, compared to $0.32 in the same period last year, surpassing Wall Street's consensus estimate of $0.09 per share.

Illumina's R&D expenses decreased by 9% from $358 million a year ago to $325 million, while its SG&A expenses dropped by 68% from $462 million a year ago to $147 million.

The company had $920 million in cash and cash equivalents and $74 million in short-term investments at the end of the quarter.

For 2024, Illumina has lowered its core revenue guidance to a year-over-year decrease of 2% to 3%, or a decline of 1.5% to 2.5% on a constant currency basis.

The company also announced guidance for Illumina Core adjusted full-year earnings per share, ranging from $3.80 to $3.95.

"For the third quarter of 2024, we expect Illumina's core revenue to be between $1.08 billion and $1.09 billion," Dhingra said. "The decline compared to the previous year is mainly due to a decrease in NovaSeq X instrument shipments, as we processed a large backlog of orders last year following the launch."

On Wednesday, during early trading on the Nasdaq, shares of Illumina rose 8% to $125.48.