Analyst Conference Summary

conference date: May 8, 2025 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2025 (first quarter, Q1 2025)

Forward-looking statements

Overview: Not growing. Lowered FY 2025 EPS guidance.

Basic data (GAAP):

Revenue was $1.04 billion, down 5% sequentially from $1.10 billion and down 1% from $1.056 billion in the year-earlier quarter.

Net income was $131 million, down 30% sequentially from $187 million, and 87% up from $70 million year-earlier.

Diluted EPS was $0.82, down 30% sequentially from $1.17, and up 86% from $0.44 year-earlier.

Guidance:

For fiscal 2025 now expects a revenue decline of 1% to 3%, which includes a $150 million reduction in revenue from China. Lower operating margin due to about $85 million in tariff related costs. Non-GAAP diluted EPS $4.20 to $4.30. For Q2 2025 revenue $1.04 to $1.06 billion.

Conference Highlights:

Jacob Thaysen, CEO, said "I am proud that the Illumina team delivered strong Q1 revenue and EPS, a good start to the year in an increasingly dynamic business environment. Our outlook for the year has weakened due to shifting policy and geopolitical developments and we have taken swift incremental actions to protect our earnings. Our strategic focus remains on customer collaboration, driving differentiated innovations, and delivering on our long-term financial targets of growth and profitability." Believes has multiple drivers of growth both short and long term. Clinical market remains resiliant, consumable sales were good. However, there is uncertainty in U.S. research funding, which started to affect consumables revenue in March.

On June 24, 2024 Illumina divested GRAIL. Illumina retains a 14.5% stake in Grail.

Introduced a $100 million cost reduction program, to help offset reduction in China business. Q1 China revenue ws $72 million. Hopes for a 500 bp margin expansion by 2027.

Product revenue was $880 million, services $161 million. $109 million of the product revenue was for instruments, $696 was for consumables.

Illumina shipped >60 NovaSeq X instruments in Q1 2025. [NovaSeq X is the most powerful and expensive of its sequencers.] Installed base ended at systems. MiSeq i100 sales were over .

In 2025 will launch a new single-cell product for CRISPR. In 2026 will launch a spatial assay with larger capture area and greater resolution. The proteomics solution should launch in 1H 2025.

Non-GAAP numbers: net income $154 million, up 12% sequentially from $138 million, and down 1% from $155 million year-earlier. Diluted EPS was $0.97, up 13% sequentially from $0.86, and down 1% from $0.98 year-earlier.

Cash, equivalents and investment balance was $1.24 billion, up sequentialy from $1.22 billion. $1.49 billion term debt. Cash flow from operations was $240 million. Free cash flow was $208 million. Capital expenditures were $32 million. Cash used to repurchase stock was $200 million.

GAAP cost of revenue was $358 million, leaving gross profit of $683 million. Operating expenses were $519 million, consisting of: $252 million for research and development; $267 million for selling, general, and administrative. Leaving income from operations of $164 million. Other income was $18 million. Income tax $51 million.

Q&A selective summary:

When do you see revenue rebounding and margins increasing? Clinical v. research growth outside China? We see a resilient business. Believe will go back to high single digit growth. Outside of China it is all about transitioning to the X. Revenue will follow. We can grow off the new EPS guideline. Clinical business remains strong.

Low and mid throughput consumable trend? Overall market is responding to our the i100 launch, good demand for the instrument. This segment is more challenged when market conditions are difficult, they typically are smaller organizations or demands. But customers are switching to the new chemistry we introduced, which is cheaper for them.

Conservative guidance? Q1 is when longer term contracts tend to be made or renewed. They have been stronger this year than in the past.

Seeing specific changes in buying due to tariffs? Not in Q1, a bit in China in Q2. We do expect more impact as the year progresses.

Pricing, competition? We will insure our customers have competitive pricing, but we are prudent. With tariffs we are working on mitigating impacts on our customers, we believe customers will understand any increases and stick with us for the long-term.

Customers delaying to try future releases from competitors? It is very difficult to satisfy our customers. We do see them looking at our competitors' products. So far we have not seen any disruptions based on potential technology.

2026? China is a small percent of our business, as is NIH spending. We are working with Chinese authorities, seeking a solution. It is an important market. Our customers there want us there.

Grail divestiture? FEC investigation is done, no negative findings. We continue to look for acquisitions in the space. We generate a lot of cash, which gives us flexibility. We will also continue to buy back shares.

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