Illumina (ILMN) Q2 2024 earnings summary

Executive summary

• Q2 2024 core operations revenue was $1.1 billion, down 6% year-over-year but up 3% sequentially, exceeding guidance due to strong consumables growth on NovaSeq X Plus and operational improvements.

• GRAIL spin-off completed in June 2024, with 85.5% of shares distributed to stockholders and 14.5% retained; Illumina continues to support GRAIL with sequencing technology.

• Significant impairments related to GRAIL resulted in a consolidated GAAP net loss of $1.99 billion for Q2 and $2.11 billion YTD 2024.

• Management is focused on stabilizing the business, accelerating growth, and operational excellence, including a new commercial structure and portfolio optimization.

• Operational excellence initiatives and new product launches, including DRAGEN software and expanded oncology menu, contributed to improved margins.

Financial highlights

• Sequencing consumables revenue was $737 million, flat year-over-year but a record for the quarter; high-throughput consumables grew both year-over-year and sequentially.

• Sequencing instruments revenue was $116 million, up 5% sequentially but down 40% year-over-year due to lower NovaSeq X placements and mid-throughput shipments.

• Non-GAAP gross margin was 69.4%, up 240 basis points year-over-year; non-GAAP operating margin reached 22.2%.

• Non-GAAP net income was $174 million, or $1.09 per diluted share; cash and equivalents at quarter end totaled $994 million.

• Free cash flow for Q2 2024 was $48 million; YTD 2024 free cash flow was $213 million.

Outlook and guidance

• Full-year 2024 revenue is projected to decline 2%-3% from 2023, with instrument revenue expected to fall in the mid-30% range and consumables to grow at the upper end of low single digits.

• Non-GAAP operating margin guidance raised to 20.5%-21% for the year; non-GAAP diluted EPS expected in the range of $3.80-$3.95.

• Q3 2024 revenue expected between $1.075 billion-$1.085 billion, with operating margin around 20% and EPS of $0.80-$0.90.

• Macroeconomic factors, including inflation and global uncertainty, are expected to continue impacting sales and customer behavior in 2024.