Illumina Q1 2025 Earnings Report

Illumina EPS Results

• Actual EPS: $0.97
• Consensus EPS: $0.96
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.98

Illumina Revenue Results

• Actual Revenue: $1.04 billion
• Expected Revenue: $1.03 billion
• Beat/Miss: Beat by +$6.37 million
• YoY Revenue Growth: -1.40%

Illumina Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 4:30PM ET

Illumina (NASDAQ:ILMN) offers sequencing- and array-based solutions for genetic and genomic analysis in the United States, Singapore, the United Kingdom, and internationally. It operates through Core Illumina and GRAIL segments. The company offers sequencing and array-based instruments and consumables, which include reagents, flow cells, and library preparation; whole-genome sequencing kits, which sequence entire genomes of various size and complexity; and targeted resequencing kits, which sequence exomes, specific genes, and RNA or other genomic regions of interest. It also provides whole-genome sequencing, genotyping, noninvasive prenatal testing, and product support services; and Galleri, a multi-cancer early detection test. In addition, the company is developing solutions to help accelerate cancer diagnoses, blood-based detection for minimal residual disease, and other post-diagnostic applications. The company serves genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies. It markets and distributes its products directly to customers, as well as through life-science distributors. Illumina, Inc. was incorporated in 1998 and is based in San Diego, California.

Illumina Q1 2025 Earnings Call Transcript

Key Takeaways

• Illumina delivered flat constant-currency Q1 revenue of $1.04 B and non-GAAP EPS of $0.97, at the upper end of guidance, driven by over 60 NovaSeq X placements, especially in clinical markets.
• Export restrictions in China prompted separate guidance for Greater China, with full-year 2025 sales now expected at $165–$185 M, down from >10% of revenue in prior years.
• A global $100 M cost reduction program, largely implemented for 2025, underpins the company’s target of 500 basis points of margin expansion by 2027 (ex-Greater China) and helps cap OpEx growth.
• U.S. import tariffs are projected to add an $85 M cost headwind in 2025; supply-chain optimizations and targeted pricing actions aim to offset ~50% this year and nearly fully by 2026.
• Illumina’s innovation pipeline remains robust, featuring early-access launches of a spatial multiomics solution (commercial in 2026), a perturbedSeq single-cell CRISPR platform later this year, and proteomics and ConstellationMAP systems on track for 2025-26.

Presentation

[Operator]

Good day, ladies and gentlemen, and welcome to the First Quarter twenty twenty five Alumina Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Brian Blanchett, the interim head of investor relations.

[Brian Blanchett, VP - Finance & Treasurer, Interim Head of Investor Relations at Illumina]

Hello, everyone, and welcome to Illumina's first quarter twenty twenty five earnings call. Today, we will review our financial results released after market close and provide commentary before opening for Q and A. Our earnings release is available in the Investor Relations section of illumina.com. Speaking today are Jacob Tyson, Chief Executive Officer and Ankur Dhingara, Chief Financial Officer. Jacob will provide an update on Illumina's business, followed by Ankur's review of the company's financials.

[Brian Blanchett, VP - Finance & Treasurer, Interim Head of Investor Relations at Illumina]

All financial information shared on this call relates to Core Illumina. For historical consolidated financials, please refer to our earnings release and SEC filings. Please note that all revenue growth rates discussed during the prepared remarks are presented on a constant currency basis to exclude the impact of foreign exchange fluctuations. We encourage you to review the GAAP reconciliation of our non GAAP measures, which can be found in today's release and in the supplementary data available on our website. This call is being recorded, and the audio will be archived in our Investors section of our website.

[Brian Blanchett, VP - Finance & Treasurer, Interim Head of Investor Relations at Illumina]

It is our intent that all forward looking statements regarding the financial results and commercial activity made during today's call be protected under the Private Securities Litigation Reform Act of 1995. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Illumina files with the Securities and Exchange Commission, including our most recent Forms 10 Q and 10 ks. With that, I now turn the call over to Jacob.

[Jacob Thaysen, CEO at Illumina]

Thank you, Brian, and good afternoon, everyone. Before we begin, I want to take a moment to recognize our former chair of the board of directors, Steve McMillan, for his leadership in strengthening Illumina's position in genomics innovation. His contributions have positioned us well for the significant opportunities ahead. I look forward to working closely with our new chair, Scott Gottlieb, as we advance our mission, execute our strategy and progress the omics ecosystem. I'm also pleased to welcome Keith Meister to the board.

[Jacob Thaysen, CEO at Illumina]

His deep investor experience in genomics and strong track record of driving shareholder value will be invaluable as we build our momentum and deliver on our strategic priorities. Despite the macroeconomic challenges we have faced over the past few months, we have a good start to the year. Thanks to the Illumina team's continued focus on execution and operational excellence, we delivered Q1 revenue and EPS at the upper end of our guidance range. Illumina is a resilient franchise with multiple drivers of near and long term growth, and there is a lot to be encouraged by this quarter. Our NovaSeq X instruments continue to perform well, exceeding our expectations with another quarter of over 60 placements in Q1, following more than 90 placements in Q4.

[Jacob Thaysen, CEO at Illumina]

The X transition continues to progress well, particularly among clinical customers, reaffirming both the value we provide and the resilience of the clinical markets. We also saw a sequential increase in ex and overall high throughput consumables, a clear indicator that this key growth driver continues to gain traction and demonstrate elasticity. Our innovation pipeline remains unmatched. We are advancing the Multiomics ecosystem, and every day, our technologies enable customers to generate insights that were previously not possible. With this foundation, we focused on achieving our long term financial goals.

[Jacob Thaysen, CEO at Illumina]

We continue to execute on our strategy to deliver high single digit revenue growth and 500 basis point margin expansions by 2027, excluding our Greater China region, which has been affected by the recent regulatory developments. At the same time, we are navigating a dynamic environment with discipline and urgency. Developments around China, US funding uncertainty, and global trade dynamics have introduced new pressures for our customers. These are important concerns, and we are taking clear actions to address them. But these are transitory challenges that will not define Illumina's long term success or our leadership in advancing the genomics revolution.

[Jacob Thaysen, CEO at Illumina]

In light of this, we are revising our guidance to reflect both the headwinds and the proactive steps we are taking to protect earnings. I will now walk through each of these factors, and Ankur will provide more details in his remarks shortly. In China, our ability to export sequencing instruments has been restricted. We now expect lower revenue from the region in 2025, driven by minimal instrument placements. To provide greater clarity on the fundamentals of our global business, we will issue distinct guidance for the Greater China region and the rest of the world until the situation is resolved.

[Jacob Thaysen, CEO at Illumina]

We continue to engage with the regulatory authorities in China on potential solutions to support a sustainable long term presence in the market, and we will keep you updated, on any material developments as the situation evolves. In The US, ongoing uncertainty in research funding is weighing on our customers and affecting purchasing timelines. We are working closely with our customers to help them navigate this environment, offering flexible solutions to sustain their research projects and drive continued genomic innovation. In March, we took decisive actions to address the impact of China and the research environment by executing a global incremental $100,000,000 cost reduction program. As of this call, we've already implemented the necessary actions to realize the full savings in 2025, reinforcing our disciplined approach to operational execution.

[Jacob Thaysen, CEO at Illumina]

Since our last update, the US government enacted a baseline import tariffs of 10% with significantly higher rates for certain countries. These tariffs are increasing cost for alumina. To address this, our teams are actively working to minimize the impact through supply chain optimization, cost measures, and pricing actions. With these actions underway, we expect to partially offset the impact in 2025. And at current level, our aim is to more fully mitigate the impact in 2026.

[Jacob Thaysen, CEO at Illumina]

The Illumina team is navigating these external pressures carefully and strategically, ensuring that our core business and our commitment to our customers and to advancing innovation remain strong and unaffected. We have made significant progress in delivering competitively differentiated innovations that keep our customers at the forefront of discovery. Our Multiomics roadmap, a growing portfolio of omics and sequencing applications, is key to advancing the ecosystem and in helping us achieve our long term targets. I will share a few examples. In February, we announced our new spatial offering, featuring a significantly larger capture area, higher resolution and greater sensitivity than existing technologies.

[Jacob Thaysen, CEO at Illumina]

This powerful solution will enable researchers to analyze millions of cells per experiments, increasing the likelihood of identifying rare cell populations. These advancements open new possibilities for research applications that were previously unattainable. This offering will integrate seamlessly into Illumina's end to end workflows and connect with Illumina connected Multionics, our new tertiary analysis solution powered by Partech's intuitive data visualization technology. We have begun early access, and early customer feedback has been very positive, emphasizing our spatial solutions accessibility without the need for special equipment purchases and how it streamlines a previously complex analysis and interpretation process. We plan to release our new spatial offering in 2026.

[Jacob Thaysen, CEO at Illumina]

Also tied to our multiomics strategy, we recently announced a new single cell offering for CRISPR research with applications in an oncology, immunology, and drug target discovery. Our new perturbedSeq solution will allow researchers to study how genetic changes affect single cells at scale, accelerating drug discovery, and advancing our understanding of complex diseases. This is the next evolution of Fluence PIP seq technology, which we acquired last year. By capturing both CRISPR, guide RNA, and messenger RNA transcript from the same cell, our solution will enable researchers to perform genome wide CRISPR screens at market leading costs, providing deeper insights with greater efficiency. The solution is expected to launch later this year.

[Jacob Thaysen, CEO at Illumina]

Additionally, our innovation pipeline remains on track. Our proteomics solution developed in collaboration with Standard Biotools is in early access, and we are looking forward to our commercial launch in the first half of twenty twenty five. Our ConstellationMAP breeds and five based genome technologies are already in early access with full commercial launches on track for 2026. We're excited about these innovations with advancing Multiomics while empowering our customers with deeper insights than ever before. The core of Illumina is strong, and our growth projections ex China on track as we deliver on our strategy.

[Jacob Thaysen, CEO at Illumina]

I'll now ask Ankur to share more details on our results and outlook for 2025, and we will go from there directly into q and a.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Thank you, Jacob, and good afternoon, everyone. I will give you an overview of first quarter financial results and provide more color about our revenue, expenses, earnings and developments on our balance sheet and then speak about our outlook going forward. Before I get into the details of the financial performance, let me provide a high level view of how the first quarter played out relative to our expectations. In q one, despite the dynamic environment, Team Illumina delivered a quarter of excellent execution, enabling us to deliver financial results towards the high end of our guidance. Revenue was flat year over year at top end of our guidance, and EPS at $0.97 was also towards the top end of the range.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Now let me provide you with details of the financial performance. First quarter revenue of $1,040,000,000 was down 1.4 year over year on an as reported basis. This included 1.2 points of headwind from foreign exchange, and constant currency revenue was roughly flat. Excluding China, revenue was slightly up year over year on a constant currency basis. Sequencing consumables revenue of $696,000,000 grew approximately 1% year over year, driven by strength in high throughput consumables and the continued transition of high throughput sequencing to X.

[Ankur Dhingra, Chief Financial Officer at Illumina]

During the second half of the quarter and correlated with uncertainty around NIH and other research funding levels, we started to see our customers, especially in research and academia, be slightly more conservative in consumables purchases. We estimate this phenomena impacted consumables growth by approximately one point year over year. Despite this, the sequencing activity on the connected instruments remain strong. We typically see a seasonal increase in ordering activity in Q1, including long range purchase commitments, leading to building of backlog. We report that as performance obligations in our 10 Q.

[Ankur Dhingra, Chief Financial Officer at Illumina]

And this ordering activity was stronger than the last couple of years, an encouraging sign for the rest of the year. Now about the X transition, which continues to progress well. In Q1, roughly 68% of high throughput gigabases shipped and approximately 43% of high throughput consumables revenue was on the NovaSeq X Series. Greater than 80% of high throughput gigabases shipped to our customers in research markets is already on NovaSeq X Series. And now over 50% of clinical volumes are also on X.

[Ankur Dhingra, Chief Financial Officer at Illumina]

We continue to make progress in the framework we previously disclosed that in the second half of twenty twenty five, approximately 50% of high throughput revenue and approximately 75% of GB shipped will be on the NovaSeq X series. With continued strong underlying sequencing volume growth and strong adoption of X, over time, the price effect of lower mix of six k consumables fades away, and a much larger part of high GB growth translates to revenue growth. About sequencing activity, total sequencing GB output on our connected high and mid throughput instruments grew at a rate of more than 30% year over year, with robust growth from both clinical and research customers. Sequencing instruments revenue of $109,000,000 was approximately flat year over year in Q1, with a higher than expected number of X Series instruments shipped in high throughput and the successful launch of the MySeq i100 in our low throughput portfolio. The clinical transition to NovaSeq X continues as approximately 60% of Xs placed in Q1 were to clinical customers.

[Ankur Dhingra, Chief Financial Officer at Illumina]

As you know, early in March, our ability to export instruments into China was restricted. We had in country inventory to ship our instrument orders in Q1. Sequencing service and other revenue of $142,000,000 was down approximately 5% year over year, in line with expectations, mainly due to the timing of certain strategic partnership revenues last year related to the AGD consortium. Excluding those, our core services and informatics business grew in the mid single digits. Moving to the rest of Alumina P and L.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Non GAAP gross margin of 67.4% for the first quarter increased 30 basis points year over year. Margins were slightly lower than anticipated as we saw a higher mix of instruments business. In addition, we're in the process of rolling out software upgrades for our high throughput instruments, which is improving their performance. As part of this upgrade, we're also pulling forward some of the routine instrument service, which has had a higher cost impact than we had assumed. The vast majority of the upgrades should be completed by q two.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Our manufacturing cost actions continue to make good progress. Non GAAP operating expenses were $489,000,000 This reflects our ongoing focus on cost optimization and prioritizing key growth investments. During the quarter, we initiated additional actions to reduce our full year expenses by $100,000,000 and realized a partial benefit in Q1. Given these cost reduction initiatives, we do not expect the typical seasonal rise in OpEx that occurs post Q1 to repeat in 2025 and expect OpEx to be flat to slightly down for the remainder of the year. The $100,000,000 in cost actions to be realized in 2025 are inclusive of certain stock based compensation changes and represent over $225,000,000 in total run rate reductions when fully annualized over the next four years.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Non GAAP operating margin was 20.4% in Q1. Looking at our results below the line, non GAAP other expense, which is largely comprised of net interest expense, was $15,000,000 and non GAAP tax rate was 22%. And our average diluted shares were approximately $159,000,000.1000000 lower than last quarter driven by share repurchases, net of dilution from employee equity awards. Altogether, non GAAP EPS of zero nine seven dollars per diluted share came in at the high end of our guidance range. Moving to cash flow and balance sheet items for the quarter.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Cash flow provided by operations was a robust $240,000,000 As a reminder, our annual cash bonus is paid out in q one. Capital expenditures were $32,000,000 and free cash flow was $2.00 $8,000,000 In q one, we repurchased approximately 1,730,000.00 shares of Illumina stock for $200,000,000 at an average price of $115.74 per share. These repurchases were completed in February. We ended the quarter with approximately $1,240,000,000 in cash, cash equivalents and short term investments and gross leverage of approximately 1.8x gross debt to last twelve months EBITDA. Now moving to guidance for the year 2025.

[Ankur Dhingra, Chief Financial Officer at Illumina]

As you may have seen in the press release, we are updating our guidance to reflect the impact of recent changes in the geopolitical environment. We remain confident in the continued strong position of our business and underlying growth in sequencing demand. However, the overall environment remains dynamic, and we are providing estimates of known changes as of today and reflecting these impacts in our guidance. As it relates to our business in China, we will now be providing guidance separately for Greater China region. This will allow for visibility into the evolution of our business in China as well as that the over 95% of our business in 2025 outside Greater China is making significant progress towards our long term financial targets.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Starting with revenue. We are reducing our revenue guidance for Greater China by $125,000,000 at the midpoint in connection with export restrictions on instruments and the projected impact on the remainder of our China business. For rest of the world, we are lowering our revenue guidance to reflect the effect of two items. First, reducing revenue by 2% to 4% quarterly, weighted more towards our research customers due to a constrained funding environment, partially offset by second, approximately 1% of additional quarterly growth driven by clinical customers as we've seen strong instrument placements over the last couple of quarters. The net impact of these two items is approximately $60,000,000 over the next three quarters.

[Ankur Dhingra, Chief Financial Officer at Illumina]

In addition, we're taking pricing actions that provide incremental revenue benefit, primarily in the back half of the year. FX favorability relative to our previous guidance adds about $25,000,000 to our projected reported revenue. All put together for rest of the world, this represents revenue growth of 1% at the midpoint. More about China. We are in active dialogue with the regulatory authorities for our long term resolution.

[Ankur Dhingra, Chief Financial Officer at Illumina]

We're taking a pragmatic view in our guidance and have taken expense actions to offset the impact on our earnings, both for this year and on a cumulative basis going forward. The guide assumes $165,000,000 to $185,000,000 in full year revenue in the Greater China region, of which $72,000,000 was recognized in Q1 and $60,000,000 is projected for Q2 of 'twenty five, and only $43,000,000 of contribution at midpoint in the second half of the year. To the extent there is a positive resolution in China, it will represent additional upside to this guidance. Now shifting into our product assumptions. Excluding the Greater China region, we expect sequencing consumables growth between flat and 2%, driven by strong sequencing activity, especially with our clinical customers.

[Ankur Dhingra, Chief Financial Officer at Illumina]

For sequencing instruments, we are assuming that our customers will continue to manage their capital investments closely. We expect demand for NovaSeq X instruments to remain relatively constant and low throughput growth driven by placements of the MiSeq i100, which is being received very well. We expect sequencing instruments, excluding Greater China, to be roughly flat year over year. Now moving to EPS. As you may recall, our devised EPS guidance in March, which maintained EPS of approximately 4.5 took into consideration the reduction in Greater China region revenue and the impact from our more constrained funding environment as well as new actions we initiate to help protect our earnings growth.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Our new EPS guidance additionally takes into consideration the developments thereafter, and the primary factor loading our guidance is the new tariff environment. For Illumina, the estimated gross cost of tariffs for 2025 is approximately $85,000,000 The largest part of this relates to goods shipped from our manufacturing facility in Singapore to The U. S. The remainder relates to parts and subassemblies imported to our manufacturing operations in The U. S.

[Ankur Dhingra, Chief Financial Officer at Illumina]

As well as alumina products sold into China. For Q2, given the inventory effects, we will see a partial period impact and a 30,000,000 to $35,000,000 impact in the following quarters. Our current guidance does not assume any incremental tariffs, including any counter tariffs from the EU or other countries. We're taking several actions across supply chain optimization, pricing and enacting other expense measures to fully mitigate the impact of these tariffs. These actions take time, and we will realize an incremental benefit from these actions in 2026.

[Ankur Dhingra, Chief Financial Officer at Illumina]

For 2025, we are expecting to mitigate roughly half of this tariff impact and hence reducing the EPS at midpoint by $0.25 from the revised guidance provided in early March. In addition to our ongoing focus on reducing costs, we also plan to continue to repurchase shares under our previously approved repurchase authorization, which has $1,200,000,000 remaining at the end of the quarter. These repurchases should provide a small in year accretive benefit to EPS. Embedded in our FY 'twenty five EPS guidance is a contribution from Greater China of approximately $0.35 For comparison, in FY 'twenty four, we estimate Greater China EPS to be approximately $0.76 Our rest of the world EPS this year at midpoint of guidance would be $3.9 growing at a rate of 15% over similar compared last year. As I mentioned before, the expense actions we triggered in March will give us incremental benefit going forward and drive earnings growth irrespective of the outcome in China.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Bringing it all together, our updated guidance for the year reflects revenue in the range of $4,180,000,000 to $4,260,000,000 a decline in the range of 3% to 1% and excluding Greater China, a range of flat to 2% growth. We expect a non GAAP operating margin of approximately 21.5 to 22%, an expansion of 45 basis points at the midpoint versus twenty twenty four. The net impact of tariff related items is a reduction of 125 basis points in operating margin. We are also lowering our non GAAP tax rate, which is now expected to be approximately 22%. This results in an EPS guidance range of $4.2 to $4.3 Now moving to the second quarter of twenty twenty five.

[Ankur Dhingra, Chief Financial Officer at Illumina]

For the second quarter, we expect total revenue range between $1,040,000,000 to $1,060,000,000 This includes revenue in Greater China region between $55,000,000 and $65,000,000 and revenue outside the Greater China region in the range of $980,000,000 to $1,000,000,000 or down between 23% year over year, driven predominantly by a decline in certain strategic partnership revenues and the research market dynamics I've spoken to. We are only applying the pricing actions to new orders. Therefore, there will be minimal benefit in Q2. We expect non GAAP operating margin of approximately 21% and non GAAP earnings per share in the range of 1 point dollars to $1.04 both of which include the estimated $15,000,000 in direct cost impact due to tariffs. Our guide, like before, implies a stronger half two contribution versus half one, which is premised on both continued improvement in consumables growth with transition of X and also the effect of just triggered expenses and pricing actions whose contributions increase in half two.

[Ankur Dhingra, Chief Financial Officer at Illumina]

In closing, I would like to acknowledge the perseverance and commitment of all the Illumina employees amidst an increasingly dynamic environment. I remain confident in the path forward and Illumina team's ability to execute towards our near term and long term financial targets. Thank you for joining our call today. I will now invite the operator to open the line for q and a.

[Operator]

Our first question will come from Doug Schenkel at Wolfe. Please unmute your line and ask your question.

[Doug Schenkel, Managing Director at Wolfe Research LLC]

Hey, guys. Good afternoon, and thank you for all of the detail. At a simple level, I I think an investment in Illumina here requires a belief that revenue growth will start to rebound, you know, sooner than later, you know, meaning, hopefully, next year, and that margins will expand to, you know, something above 25%. You're doing what you can do to control cost. That's been commendable.

[Doug Schenkel, Managing Director at Wolfe Research LLC]

I think where most of the questions reside right now are on the top line growth outlook. So you did a lot to help us with that already. But if if I'm I'm hoping you might be able to help us in a few different ways. So on the quarter, outside of China, what was your total clinical revenue growth, and what was your total research growth? And then kind of building off of that, as we think about guidance for the year, what are you assuming by end market?

[Doug Schenkel, Managing Director at Wolfe Research LLC]

It seems like you might be assuming a double digit decline in the research end market and still kind of mid single digit plus growth on the clinical side. And then the last thing is, in China, it's gonna be down to 4% of sales based on your guide, which is down significantly from ten percent two years ago. That said, you know, if 4% goes down from there next year, it still could be a headwind in a period where we're hoping that things start to improve. Are there other things you're contemplating to manage that risk as we think about, you know, not just 2025 but beyond? Thank you.

[Jacob Thaysen, CEO at Illumina]

Thanks, doc. And there was certainly a few questions you so let me let me start here, and then I'm sure Ankur needs to help me also on remembering all the questions. But first and foremost, we we see a very resilient business. Think Illumina have shown over the last period of time that even in very strong headwinds, we're still able to to actually have a lot of activities out there. There's a lot of of sequencing activity, which is a part of the underlying logic of going back to high single digit growth that we we believe we will step into over the next few years.

[Jacob Thaysen, CEO at Illumina]

There's nothing from that perspective outside of China. We're not seeing a significant change from a strategic perspective on what we told you already this summer, which is all about transitioning to the x. And with that, when we're transitioning over, we will see that the volume that we are seeing in the market will translate more deeply into revenue growth. And we are stepping into this in twenty five year where we have where we are on our track to deliver at least 50% of the revenue on DX, on high throughput on DX by by by the second half of this year, and then we will see the revenue come after that. So so we feel still good about that.

[Jacob Thaysen, CEO at Illumina]

We do believe that we are still intact from the strategic framework. And right now, we're saying ex China because we will see how China goes. You're absolutely right that to this this year in '25, we are would be approximately 5% if if we don't see a change in the in in the current situation in China. And, obviously, we're also expecting that there'll be further decline into '26 if we don't see any change. But it is important to state also that the cost actions we took here in in in a few weeks ago has an impact of hundred million this year, but as as Ankur also mentioned, will have a total fully analyzed value over the next few years of of more than 200,000,000.

[Jacob Thaysen, CEO at Illumina]

And thereby, we are have made the actions to fully compensate for whatever will happen in in China over the next period of time. So I think that's important, and, therefore, we also see that the 4 point 4 dollars and 20 5 cents EPS is the new base for us to grow based on a strategic framework of of from double digit to teens growth. So I think I just wanna start by recommitting to our to our strategy. But, obviously, right now, we are looking at the ex China business, which is 95% of our business. So, Ankur, maybe you can provide a little more insights on what we have anticipated from a smaller growth rate perspective.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Yeah, Doug. I'll I'll address the research versus clinical question both for the for the near term, what's contemplated in the guide, etcetera. So as as you look at q one in context, everyone knows the the changes in the geopolitical environment there. The when when you look at our clinical versus versus our research business, in q one, our clinical business has continued to demonstrate the strength where we've talked about very strong x placements carrying over from q four going into q one as well. When I look at our consumables business in clinical, it grew mid single digits.

[Ankur Dhingra, Chief Financial Officer at Illumina]

And and as you know from our guide detail, we are we have increased our expectations from the clinical business for the remainder of the year as well, where we continue to see very good demand. We continue to see very good adoption of the tests that are on market as well as newer tests that we are anticipating would be coming into the market for the latter part of the year. The research side, which has seen more challenging times in the last few months, our research business was down, I'm talking consumables, in the in the high mid to high single digit range. And as we think about the remainder of the year, given that the the changes in the research environment started happening somewhere in the middle part of the quarter, as we look at it going forward and as we look at the conversations that we've had with our research customers, especially in the academia and the government side, has has more challenges given from two factors. One, that their funding environment is constrained.

[Ankur Dhingra, Chief Financial Officer at Illumina]

And second, because of the tariffs, there will be some inflationary impact coming from any direction. So that dual impact will continue through the years. We've lowered our expectations from the research market for the rest of the year. Our guide now assumes a a mid double digit, like close to percent decline, especially in that A and G space for the rest of the year, so more than what we've seen in q one both for full quarter impact as well as some of the additional impacts that that business would see. So stronger clinical, but, yeah, research research expecting it to be weaker.

[Operator]

Thank you. We'll move next to Dave Westenberg with Piper Sandler. Please unmute your line and ask your question.

[David Westenberg, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Hi. Thank you very much for, taking the question. So I want to just hit on the some of the consumables in mid throughput and low throughput. I'm assuming it could be one of maybe three things, either switching to axe directly or indirectly through a service provider, some sort of competitive headwind or maybe just kind of a lack of funding. Maybe there's some other variables, but I would assume those would be the three.

[David Westenberg, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Would you be able to kind of quantify, you know, on a kind of percentage basis, know, which is happening here. It is and I'm just thinking about this in terms of, elasticity absorption when I'm talking about that first variable versus the second variable, which is obviously kind of worst news. And the third variable, you know, obviously shutting down, which might be transitory due to kind of funding. So it would be great to hear, if you could kinda quantify that. And then just a real quick, thing about the conservatism on the guide here.

[David Westenberg, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Ankur, I believe you said that you had more commitments from customers, like, as a is like a contract commitment. Just wanna know if I understood that correctly because it would, would give us some comfort in the guide. I think you said that. I just wanna confirm that you actually did say that. Thank you.

[Jacob Thaysen, CEO at Illumina]

Yeah. Yeah. Thanks, Steven. Let let me start by addressing the overall market in the mid and and low throughput. And and first and foremost, we are super excited about the myCGI 100 that we launched here in in the late last year, and we are seeing continued momentum in that market.

[Jacob Thaysen, CEO at Illumina]

So we're very excited about that, and and the MyCGI 100 has been very well received, and we continue to see a lot of of interest coming in. And we have a very strong order book on on the MyCGI 100. So low throughput, really excited about that, and a lot of momentum currently. In in the in the mid throughput, and we've talked about that over, I would almost say, since I came in here, is that overall, we have seen that in in in difficult market conditions, this is a segment that is more challenged than the high throughput. And the reason is that the mid throughput is is less so of an production environment, but more of an of an environment where you have other research segment or a small, you could say, clinical account that that might not have the volume to fill up on a high throughput, and thereby, it's not used to the same same level and the same rigor as you have in the in the high throughput with with the small and and manufacturing kind of logic.

[Jacob Thaysen, CEO at Illumina]

So therefore, also, you're seeing when the when there's constraints in the in this environment, this is the place where you might push out an acquisition or a purchase of an additional instrument. You might actually decide to shift over to an service provider where we will still get the the flow of the reagent or the consumables. So so the overarching signal is the same as we have said before is that that's why this market overall is is more constrained than than the the high throughput market. Also, reminder is that we did put the x sweep chemistry in approximately a year ago, and we are seeing a lot of grade. We have seen a huge part of of our of our customers shifting to the excess chemistry because it is a better chemistry and provides more a better price point for customers, but also importantly, higher quality and and provides actually a higher capacity for the sequencer.

[Jacob Thaysen, CEO at Illumina]

So, of course, we're also going through and and and price rebalancing in this space. So I think those are the two main drivers for the weakness in in the in the mid throughput space. Granted, there's also more competition here. I think I mentioned that before. And and, of course, especially in in China where we've seen strong competition, obviously, with the with the situation we have in China, that is, of course, a a very weak point for us right now right now, at least on the instrument placements.

[Jacob Thaysen, CEO at Illumina]

On the other hand, I will say that that from what I can see from the from the research that's come out is that we have actually performed very well in China versus our closest competitor there. So so overall, it's a challenging environment, but I think it's much more macro than it is a competitive environment. I think there was another question. Maybe, Ankur, you can dive in more.

[Ankur Dhingra, Chief Financial Officer at Illumina]

So about the the performance obligations and the backlog build, so let me contextualize that. As as a seasonal item, usually in q one, Illumina does see a fairly this is the time when a lot of our long range contract negotiations and renewals happen, and we report that number as performance applications in our 10 q. So you should take a look at that. And my comment there is about this year, we have seen those order bookings, long range order bookings to grow pretty significantly, actually. Our performance obligations are up double digits year over year, and has grown much better than than what we've seen in the last couple years.

[David Westenberg, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Thank you.

[Jacob Thaysen, CEO at Illumina]

Please.

[Operator]

Our next question comes from Jack Meehan at Nephron. Please unmute your line and ask your question.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Thank you and good afternoon.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Good afternoon, Jack.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Jacob, I was wondering with the tariff dynamics going on in the market at the moment, whether you thought that might have influenced any of the demand in the first quarter. And then I don't know if you're willing to share anything since Liberation Day, just, you know, how customers, just from a demand perspective, whether the announced tariffs have influenced any purchasing behavior at all? Thank you.

[Jacob Thaysen, CEO at Illumina]

No. Thanks, Jack. And I would say for for Q1, we haven't seen any change we we didn't see any specific or or change in behavior from our customers related to to the tariff situations. And and I don't think we've seen the same here in Q2. We have seen a little bit of pull in in China, I think, from a concern about what would happen in China.

[Jacob Thaysen, CEO at Illumina]

But for the rest of the world, I don't think we're seeing anything materially. So that has not been an impact on the quarterly progression in the quarter.

[Ankur Dhingra, Chief Financial Officer at Illumina]

But as as you know, just to add there, is that at least for the rest of the year, we are certainly anticipating as that as the impact of tariff becomes more better known and start showing up in the cost that are that there will be some impact and have, have accordingly taken our guide down. Yeah.

[Operator]

Thank you. Our next question comes from Vijay Kumar at Evercore. Please unmute your line and ask your question.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

Hey, Ankur, Jacob. Thanks for taking my question. I just want one on the revenue guidance assumptions, you don't mind. The prior guidance is up low singles, and I think the current guidance updated guidance is down low singles, maybe a change of 300, four hundred basis points. When I look at your change in China assumptions, so it feels like almost all of it came from China reduction.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

So I'm not sure where where the research Ankur, when you said research, you're resuming down 15%, how that's being baked into. And and, the offset, is is clinical really like, did it change versus, the prior assumption? Like, where is the offset coming from if research did change? Thank you.

[Jacob Thaysen, CEO at Illumina]

Yeah. Let me let me start and and have, Ankur again dwell deeper into the numbers here. But overall, we we did anticipate already when we came out with our March forecast that we had already expected that would both be an impact from China and from the NIH funding. So we had that already built in. So so that is that was the overall expectations in it.

[Jacob Thaysen, CEO at Illumina]

Obviously, at that point of time, we said that there was various outcome we could be we couldn't been expecting. And and so now we're providing the full details of this. Overall so so that's the high level direction we are taking. We we feel we have a good sense for now where the academic and government is going. And as was Ankur was mentioning, at at this point, we are we are expecting that it will continue with a a 15% decrease, and and and that's the main main driver for it.

[Jacob Thaysen, CEO at Illumina]

On the other hand, we see actually that our clinical customers are showing up stronger here in q one. So anticipate, and we're seeing we're seeing that in our numbers also that that the clinical business is, is more robust and and stronger than than, and and we're really pleased with that right now.

[Ankur Dhingra, Chief Financial Officer at Illumina]

Yeah. At the

[Ankur Dhingra, Chief Financial Officer at Illumina]

highest level, Vijay, to add add a little bit more detail is that, yes, the biggest part of the changes in China that we have separated it out. For the rest of the world, the puts and takes are that the research business is down. We said roughly about if you take a midpoint, about three percentage points. And all I'm talking about is the rest of the the remainder three quarters, so the annualization will be what it will be. But about three points lower, so that's roughly about $90,000,000, so to speak, for on the research and tariff related impact.

[Ankur Dhingra, Chief Financial Officer at Illumina]

We are seeing clinical stronger both in terms of our continued x placements as well as the units that we're anticipating will come live. So clinical provides roughly about a point offset. And then we've talking just spoken about mitigating actions relative to tariffs, and part of that includes certain pricing actions, and I'm anticipating roughly about a point of contribution from there as well. So that's mostly the the, you know, puts and takes. There's also a small component from FX, which relative to our last guide has become less unfavorable.

[Ankur Dhingra, Chief Financial Officer at Illumina]

So guide to guide, it's now more favorable, and that's adding about half a point to the reported growth. Not not in the constant currency, but on the reported side.

[Vijay Kumar, Senior Managing Director at Evercore ISI]

That's helpful. Thank you, guys.

[Operator]

We'll move next to Tycho Peterson at Jefferies. Please unmute your line and ask your question.

[Tycho Peterson, Managing Director at Jefferies Financial Group]

Hey. Thanks. Ankur, I wanna stress test your your kind of assumptions around price here. You know, it it it sounds good. I'm just curious where in the portfolio you think you can take price.

[Tycho Peterson, Managing Director at Jefferies Financial Group]

Obviously, you've got competitors, you know, including one giving away free sequencing. So just talk a little bit about, you know, your your confidence that you can actually start to push higher pricing.

[Jacob Thaysen, CEO at Illumina]

Yeah. So let let me start there, and then we can have, Ankur go into some more details also. But overall, I think, Illumina have a long history, of course, of of continued to drive down pricing, and we will continue to, of course, ensure that our customers have competitive pricing, and we we can facilitate competitive pricing. But on the other hand, also, in these environments, you you wanna also and the customer wants to work with companies that will be here in in years from now. And, therefore, we have a prudent approach to both our pricing strategy and, of course, also how we can go out and offer really innovative projects to our innovative solutions to our customers.

[Jacob Thaysen, CEO at Illumina]

So we we feel and and and with this situation with the tariffs coming in, obviously, we would love to mitigate as much as possible, and we're working on mitigating as much as possible to have as little as impact to our customers. But at this point, as you can see also, we we do have a we are we we we believe it was correct, and we did a lot of analysis and seeing what the number and how much we could we could put in. And, obviously, nobody likes a price increase. I mean, I don't like that personally. No customers is gonna like that.

[Jacob Thaysen, CEO at Illumina]

So we we recognize that this is have impact on our customers, but we feel good about that we'll be able and our customers to understand this that Illumina is for the long term. So if you work with us and we work through this tough time also, we will get out on the other side and continue to be driving innovations to to our customers and make them successful. If you wanna give your sequencing away for free, I I can guarantee you don't have a business in a few quarters.

[Operator]

We'll move next to Connor McNamara at RBC Capital Markets. Please unmute your line and ask your question.

[Conor McNamara, Equity Research Analyst at RBC Capital Markets]

Hey guys, thanks for all the color on the tariff impact. Really appreciate that. But just to expand a little bit on the competitive front, are you seeing customers delay or defer equipment purchasing in anticipation of current or any future product offer offerings from competitors?

[Jacob Thaysen, CEO at Illumina]

Yeah. No. That's a great question. It's something we have heard a few times now also is that, you know, we we we continue to be in a competitive space here. We we actually think we're doing really well against our competition.

[Jacob Thaysen, CEO at Illumina]

But but as we also know, there were there were a new announcement coming out here a few weeks ago, which I would call a technology overview. It was not a product launch. And with all technology overview, it's it's easy to impress. It's very difficult to satisfy our customers. So I think right now, there is some excitement around this.

[Jacob Thaysen, CEO at Illumina]

You can go out there and make a lot of promises. But in the end, it comes down to that every day you have to deliver again and again and again. And I think especially in tough times, customers will go to a company that can provide and be and where you have certainty of of of deliverables, but all and delivering, but also that we can make sure that you can be successful in whether you are clinical customer or whether you're a research customer. So we feel really good about that. But we have not seen, at this point of time, any disruption due to or any any customers that we have seen have delayed decisions based on potential technology that, to be frank, we don't know yet what it is.

[Jacob Thaysen, CEO at Illumina]

And I don't think our customers know exactly what that new technology will be. It's a brand new technology. It will take time to prove that. All technologies have to go through the, you know, almost the verification through the the academic research space, but they will go out. They will do some their paper.

[Jacob Thaysen, CEO at Illumina]

They will do their analysis, their research on it, and and it will take time. There will all be kinks in technologies. This is not an easy space. This is not an an a mature market, and it will take time. So we'll see how it goes, but right now, there's no no impact.

[Operator]

We'll move

[Operator]

next

[Operator]

We'll move next to Mike Riskin at Bank of America. Please unmute your line and ask your question.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Great. Can you guys hear me?

[Jacob Thaysen, CEO at Illumina]

Yes. We can, Mike. Hi.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Great. Thanks for taking the question. You know, you spent a lot, of the call talking about China and and what's changed and your views on China for the rest of the year. You talked about academic and government headwinds this year. How do we think about both of those markets going into 2026?

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

And what I mean by that is, if you're going to be doing $60,000,000 per quarter in China in 3Q, 4Q, Does that go to zero in 2026? Or do you think that's a sustainable level from which maybe you can start to grow again? And same thing on A and G. If we look at what's happening in The U. S.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

On NIH and things like that, doesn't seem like this is a temporary headwind. It's just know, taking a step back and looking at next year and the year after. These are two pivotal markets. Where do you think they go from here after the headwinds seen this year? Thanks.

[Jacob Thaysen, CEO at Illumina]

Yeah. Thanks, Mike. And I I I agree with you that, we are spending way too much talking about China that is at 5% of our business, and we're also likely talking way too much time on on some headwinds in NIH where we have very strong markets that continues to grow strongly, especially in the clinical market. And by the way, in in Europe, which continues to be very, very strong performance for us. So I agree.

[Jacob Thaysen, CEO at Illumina]

We are spending all of us are spending way too much on a very small part of of our business, and we are a very resilient business that continues to drive a lot of activities out there and and generating fantastic cash flow. So let's just start there. China, we we as as Ankur is mentioning, we are working, of course, with the Chinese authorities to see whether we can find a solution to this. But but we have taken the actions right now that that in the case that that we won't be able to have a long term sustainable business in China, we will still be able to compensate that with the cost measures we have taken. We are as as you can see in our numbers, we are expecting the at at this point, the China business to to continue to decrease in in revenue over the in in the second half of the year.

[Jacob Thaysen, CEO at Illumina]

And if there's nothing that will change in in in our conversations with the regulators there, of course, it will continue to reduce in in '26. If and and but we are very still hopeful. We believe China is a is an important market, and we I was had the opportunity here last week to actually to to spend time with some of our Chinese colleagues, and it's very clear that the Chinese customers really want us to continue in this market. And we really wanna help them continue to be successful. So we don't know at this point, but we are doing everything we can to rectify the situation.

[Jacob Thaysen, CEO at Illumina]

But if not, we have taken the cost structure to do so. The academia and government, yes, there's headwinds right now. I truly believe that everybody will all many politicians both in US and rest of the world sees that the academic research is pivotal in order to drive the industry forward, not not only the academic research, but, of course, being the funnel into pharmaceuticals and and, of course, the medical science overall. So I I do believe this is an an a short term or temporary headwind, and we'll come out on the other side stronger. This here, the twenty first century will is a is a is a century of quality, and and this is a hiccup, and we will have strong performance going forward in this space.

[Operator]

Our next question comes from Kyle Mixon at Canaccord. Please unmute your line and ask your question.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

Yeah. Hey, guys. Thanks for the question. It's just on the the investigation to Grail recently. It looks like the SEC said to close that.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

If that were to happen, would that give you more freedom to move into larger acquisitions or deals that involve buying clinical labs with, you know, big market opportunities such as MRD? And then taking us to back, you know, it's been almost years since that data. Sure. Has that actually helped you accelerate Cortlumina? Kinda seems like on the surface, like, maybe not given the performance, but, you know, you have more attention on the pipeline now.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

So just would love to hear your thoughts on that. Thanks.

[Brian Blanchett, VP - Finance & Treasurer, Interim Head of Investor Relations at Illumina]

Hey, Kyle. Sorry. We didn't hear that second part of your question.

[Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets]

On the, just it's been a year almost since the divestiture. Has that actually helped you accelerate core Illumina?

[Ankur Dhingra, Chief Financial Officer at Illumina]

Thanks. Thanks.

[Jacob Thaysen, CEO at Illumina]

Yeah. So so let me start by the first thing and say we, of course, very pleased that that that the SEC investigation is done, and there was no findings, which we also expected. So we are very pleased to have this behind us. We we continue to, of course, look at opportunities from from value added act bolt on acquisitions, and we are we continue to monitor the space of that. We, of course, are very disciplined in in where we believe we can see opportunities, but we also are generating a lot of cash every year.

[Jacob Thaysen, CEO at Illumina]

So we it gives us flexibility to look at different things. I think I can say confidently that MRD is not not the like, not the space we would be looking into for the time being. Ankur?

[Ankur Dhingra, Chief Financial Officer at Illumina]

Yeah. So thanks for for writing that, Jacob. Clearly, very good balance sheet. Very pleased with what our cash flow generation has been now three quarters since since GRAIL generating over a billion dollars of cash. Was also very pleased with our q one results where despite some of the research out of market the way it was and despite paying that annual bonus out of the quarter, we generated over $200,000,000 in cash as well.

[Ankur Dhingra, Chief Financial Officer at Illumina]

So very pleased, puts us in a very, very good position. As you know, we've also bought back roughly 200,000,000 worth of shares during the quarter, but our primary focus remains on growth bolt on m and a. And there are several technologies which we think can can take advantage of our size, our scale, as well as our large install base, which is where our our primary focus is. And and, hopefully, there will be some that we will be able to actually move on. Yeah.

[Ankur Dhingra, Chief Financial Officer at Illumina]

At the same time, as we've said, don't intend to keep accumulating cash either. And as I stated in my in my script, we will continue to, for the rest of the year, keep buying back some shares opportunistically as well.

[Jacob Thaysen, CEO at Illumina]

And let me just clarify my comment on MRD. I think there's a huge opportunity in MRD, not just not from an m and a perspective from from Illumina Sun. Yeah.

[Operator]

And our final question from Rachel Battenstall with JPMorgan. Please unmute your line and ask your question.

[Analyst]

Hello. Thank you for taking the question. This is Marta on for Rachel. In terms of your mitigation actions for tariffs that you've discussed, can you talk about which actions have already been implemented and which ones still, like, are to be implemented? And then how do you expect that to impact your EPS pacing for the rest of the year?

[Analyst]

And then a quick clarifying questions. Are you assuming any four q budget flush at this point? Thank you.

[Jacob Thaysen, CEO at Illumina]

Yeah. So so from the tariff perspective, obviously, this has only been even though it feels a long time, it's only been a few weeks before we have we we have all of us have have gotten our hands around what the tariff situation is. And, of course, it's it's it's it's still a movie that is playing. So, of course, it is a flexible or it's a it's a moving target right now. But as far what we can see today, and I think that's what we're also mentioning is that our current view is that that the impact for twenty twenty five year is gonna be approximately 85,000,000 and be able to to offset that approximately half of that.

[Jacob Thaysen, CEO at Illumina]

Most we are both looking at changing some of our supply chains. Obviously, we're working with a lot of our suppliers itself, but also thinking about where are we manufacturing. We have most of our manufacturing is happening either in Singapore and and US, and we actually so and that that setup, it can be optimized. But at at this point, we're not looking to make substantial changes in in that in that footprint. But we have already been out taking actions also on a pricing perspective, and so we we feel good about the actions we've taken today, and we will we will continue to optimize on our footprint going forward in our supply chain.

[Operator]

And that will conclude our q and a session. I will hand it back to Brian Blanchett for closing remarks.

[Brian Blanchett, VP - Finance & Treasurer, Interim Head of Investor Relations at Illumina]

Great. Thank you for joining us today. A replay of this call will be available in the investor section of our website. This concludes our call, and we look forward to seeing you at our upcoming events. Thank you.

[Operator]

And again, and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time, and have a great day.

Participants

Executives

• Brian Blanchett, VP - Finance & Treasurer, Interim Head of Investor Relations
• Jacob Thaysen, CEO
• Ankur Dhingra, Chief Financial Officer

Analysts

• Doug Schenkel, Managing Director at Wolfe Research LLC
• David Westenberg, Managing Director & Senior Research Analyst at Piper Sandler Companies
• Jack Meehan, Equity Research Analyst at Nephron Research LLC
• Vijay Kumar, Senior Managing Director at Evercore ISI
• Tycho Peterson, Managing Director at Jefferies Financial Group
• Conor McNamara, Equity Research Analyst at RBC Capital Markets
• Michael Ryskin, Managing Director at Bank of America Merrill Lynch
• Kyle Mikson, Managing Director & Senior Research Analyst at Canaccord Genuity - Global Capital Markets
• Analyst