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II

ILLUMINA, INC. (ILMN)·Q4 2024 Earnings Summary

Executive Summary

  • Core Illumina delivered Q4 2024 revenue of $1.104B (+1% y/y), non-GAAP gross margin of 67.4%, and non-GAAP EPS of $0.95; consolidated non-GAAP EPS was $0.86 .
  • Management reaffirmed FY2025 guidance (reported revenue $4.28–$4.40B, non-GAAP operating margin ~23%, non-GAAP EPS $4.50–$4.65) and added Q1 2025 guidance (revenue flat to down 1% y/y, non-GAAP operating margin ~20.5%, non-GAAP EPS $0.93–$0.98) with explicit exclusion of potential China impacts; non-GAAP tax rate expected ~22.5% .
  • Sequencing activity and NovaSeq X momentum continued: 91 X-series placements in Q4 (installed base 630), pull‑through averaged $1.3M per system in 2024; ~65% of high‑throughput GB output and ~40% of high‑throughput consumables revenue on X; total GB output grew >30% y/y .
  • Stock reaction catalysts: durable margin expansion from operational excellence ($100M+ 2024 cost savings), H2‑weighted 2025 growth, and near‑term overhang from China’s “unreliable entities list” (China ~7% of revenue) .

What Went Well and What Went Wrong

What Went Well

  • Revenue and EPS exceeded internal expectations; non‑GAAP EPS $0.95 benefited from higher revenue and lower tax rate; cash from operations $364M and free cash flow $322M in Q4 .
  • NovaSeq X adoption and utilization: 91 placements in Q4, installed base 630; 2024 pull‑through averaged $1.3M/system; consumables strength drove y/y revenue growth .
  • Operational excellence: non‑GAAP gross margin up 270 bps y/y; >$100M cost savings in 2024; FY2025 non‑GAAP op margin guide ~23% (+170 bps y/y) .

Select management quotes:

  • “The Illumina team delivered fourth quarter revenue that exceeded our expectations...” .
  • “We achieved additional cost savings from greater manufacturing and logistics efficiencies contributing to more than $100 million in cost savings across 2024.” .

What Went Wrong

  • Instruments softness persisted: Q4 sequencing instruments revenue $155M (−3% y/y); mid‑throughput tempered by capital constraints; Q1 2025 guide calls instruments down and total revenue flat to −1% y/y .
  • Macro and China uncertainty: guidance excludes impact from China’s “unreliable entities list”; China ~7% of revenue; near‑term overhang for stock narrative .
  • Consumables below some expectations intra‑quarter; management cited usual Q4 seasonality and shorter shelf life on X consumables inventory dynamics .

Financial Results

Core Illumina – Income Statement and Margins (quarterly)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$1,100 $1,080 $1,104
GAAP Diluted EPS$1.09 (non-GAAP EPS; GAAP not disclosed in call) $4.03 $0.73
Non-GAAP Diluted EPS$1.09 $1.14 $0.95
Non-GAAP Gross Margin %69.4% 70.5% 67.4%
Non-GAAP Operating Margin %22.2% 22.6% 19.7%
Cash from Operations ($USD Millions)$243 $316 $364
Free Cash Flow ($USD Millions)$213 $284 $322

Notes: Q3 GAAP EPS benefited from legal contingency (EC fine reversal) and other items; management emphasizes non-GAAP for operating performance .

Consolidated – Q4 y/y comparison

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$1,122 $1,104
GAAP Diluted EPS($1.11) $1.17
Non-GAAP Diluted EPS$0.14 $0.86
Non-GAAP Operating Margin %4.6% 19.7%

Product vs. Service revenue (consolidated)

MetricQ3 2024Q4 2024
Product Revenue ($USD Millions)$914 $939
Service & Other Revenue ($USD Millions)$166 $165

Business mix details (company commentary)

MetricQ4 2024
Sequencing Consumables Revenue ($USD Millions)$698 (+~2% y/y)
Sequencing Instruments Revenue ($USD Millions)$155 (−3% y/y)
Sequencing Service & Other Revenue ($USD Millions)$151 (−1% y/y)

KPIs and Operating metrics

KPIQ2 2024Q3 2024Q4 2024
NovaSeq X systems placed (quarter)62 58 91
NovaSeq X installed base (cumulative)469 527 630
NovaSeq X avg pull-through per system>$1.0M (annual) —$1.3M (2024 avg)
High-throughput GB output growth (connected instruments)>40% y/y >40% y/y >30% y/y
Share repurchases—770k shares, $98M @ $127.71 avg 134k shares, $17M @ $129 avg
Regional revenue growth y/y (constant currency)—Americas −6%, Europe +12%, Greater China −23% Americas +3%, Europe +3%, MER −10%, Greater China +1%
X transition mix~45% of high‑throughput GB; >25% of high‑throughput consumables revenue on X >55% GB; >35% consumables revenue on X >65% GB; ~40% consumables revenue on X; ~50% of clinical volume transitioned

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported Revenue ($USD Billions)FY2025$4.28–$4.40B (low single-digit cc growth) $4.28–$4.40B; low single-digit cc growth; excludes China impact Maintained; added China exclusion
Non-GAAP Operating Margin %FY2025~23% ~23% Maintained
Non-GAAP Diluted EPSFY2025~10% growth (not a range) $4.50–$4.65 Specified range
Non-GAAP Tax Rate %FY2025—~22.5% New detail (lowered)
Sequencing Consumables (cc)FY2025—Low single-digit growth New detail
Sequencing Instruments (cc)FY2025—Low single-digit decline New detail
High-throughput GB on X2H 2025—~75% of high-throughput GB shipped New detail
Reported Revenue (cc)Q1 2025—Flat to −1% y/y New
Non-GAAP Operating Margin %Q1 2025—~20.5% New
Non-GAAP Diluted EPSQ1 2025—$0.93–$0.98 New
FY2024 Core RevenueFY2024 (Q3 update)Decline ~3%; Q4 Core ~$1.07B Actual FY Core $4.332B (−2% y/y) Slight beat vs lowered guide
FY2024 Non-GAAP Op Margin %FY2024 (Q3 update)21%–21.5% Actual 21.3% In‑range
FY2024 Non-GAAP EPSFY2024 (Q3 update)$4.05–$4.15 Actual $4.16 Slightly above

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
NovaSeq X transition & elasticityQ2: ~45% GB on X; ~25% consumables revenue on X; GB output >40% y/y; pricing headwind diminishes as mix shifts Q4: >65% GB; ~40% consumables revenue on X; 91 placements; 2024 pull‑through $1.3M/system; total GB output >30% y/y Strengthening adoption; elasticity offsetting pricing
Instruments demand & mid-throughputQ2/Q3: mid-throughput impacted by capital constraints; stable win rates; pipeline grows Q4: instruments −3% y/y; Q1 2025 instruments down; NovaSeq X single‑flow‑cell broadens entry price Persistent macro pressure
Operational excellence & cost savingsQ2: margin expansion ahead of plan; $200M multi‑year savings targeted Q4: >$100M 2024 savings; non‑GAAP gross margin +270 bps y/y; FY2025 op margin guide up 170 bps Executing; margin tailwind
China/macroQ2/Q3: China weak; de‑risked guidance Q4: China “unreliable entities list”; guidance excludes impact; China ~7% of revenue; continuing to serve customers Elevated risk; cautious stance
AI/data partnershipsStrategy: DRAGEN, multi-omics; roadmap NVIDIA collaboration; UK Biobank proteomics pilot; Regeneron/Truveta genome project Expanding ecosystem
R&D execution & footprintQ3: ~$1B R&D; Singapore consolidation; India GCC ramp Continued emphasis; efficiency focus; R&D near ~$1B core FY2024 Efficiency initiatives progress
Regulatory/legalQ3: EC fine reversal; GRAIL spin‑off FY2024: legal contingency reversal (−$456M); GRAIL impairment detail Legacy items largely addressed

Management Commentary

  • Strategy focus: “For 2025, we will continue our transformation, executing our refreshed strategy that prioritizes a sharp focus on customers and our own operational excellence...” .
  • China: “China represents approximately 7% of our global revenue… we continue to see significant opportunity…” .
  • Growth cadence: “Top line growth is skewed towards the second half of the year… pricing transition expecting to come down a little bit… drives higher profitability…” .
  • Margin/tax: “We’re lowering our non-GAAP tax rate now expected to be approximately 22.5%… non-GAAP diluted EPS $4.50–$4.65” .
  • Consumables: “Non-GAAP EPS of $0.95… driven by higher revenue and some benefit from a lower tax rate” .

Q&A Highlights

  • China overhang and levers: Management is assessing implications and will use margin, tax, and operating leverage to protect EPS targets if needed; committed to long‑term margin expansion and EPS growth .
  • Volume/elasticity: Higher throughput and deeper sequencing on X driving volume; elasticity supports consumables growth despite lower price per GB; clinical transition staged by assay .
  • Q1 mix: Expect consumables up sequentially and y/y in Q1; instruments down; total revenue flat to −1% y/y .
  • Pricing approach: Application‑specific pricing with clinical customers to enable higher volumes for specific tests; end‑to‑end workflow solutions (single‑cell, proteomics) .
  • Operational initiatives: Manufacturing/logistics efficiencies; consolidation in Singapore; India capability center (150 employees) to drive cost and tax benefits .

Estimates Context

  • Wall Street consensus from S&P Global was unavailable at time of retrieval due to rate limits; therefore, we cannot include quantitative “vs. estimates” comparisons for revenue or EPS in Q4 2024. We anchored the recap on company-reported actuals and qualitative “exceeded expectations” statements from management .

Key Takeaways for Investors

  • NovaSeq X adoption remains the central growth driver; elasticity and higher utilization underpin consumables growth into 2025 even as instruments remain capital‑constrained near term .
  • Margin expansion is durable: operational excellence yielded >$100M savings in 2024 with further efficiency levers across COGS and OpEx, supporting FY2025 non-GAAP operating margin ~23% .
  • Guidance is H2‑weighted and excludes China impact; monitor developments around the “unreliable entities list” and any U.S./China trade/tariff actions for potential estimate adjustments .
  • Near term setup: Q1 2025 softer instruments but positive consumables; sequential margin dip to ~20.5% before ramping through the year, consistent with transition dynamics .
  • Strategic partnerships (NVIDIA, UK Biobank, Regeneron/Truveta) and product innovation (single‑flow‑cell X, 25B kits, MiSeq i100) broaden multi‑omics/data opportunities and support pull‑through .
  • China is ~7% of revenue; management continues serving customers and seeks resolution; this is the principal risk overhang on the 2025 narrative .
  • Cash generation is strong ($364M CFO, $322M FCF in Q4; core FY FCF $1.07B); capital allocation (buybacks, tuck‑in M&A) enhances shareholder returns while funding growth .