Q1 2010 Earnings Call
April 28, 2010 5:00 pm ET
Jay Flatley - Chief Executive Officer, President and Director
Christian Henry - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and General Manager of Life Sciences Business Unit
Peter Fromen - Senior Director of Investor Relations
William Quirk - Piper Jaffray Companies
Sung Ji Nam - JPMorgan
Jonathan Groberg - Macquarie Research
Matthew Notarianni - Robert W. Baird
Ross Muken - Deutsche Bank AG
Zarak Khurshid - Caris & Company
Marshall Urist - Morgan Stanley
Steven Lichtman - JMP Securities LLC
Derik De Bruin - UBS Investment Bank
Doug Schenkel - Cowen and Company, LLC
Previous Statements by ILMN
» Illumina, Inc Q4 2009 Earnings Call Transcript
» Illumina Q3 2009 Earnings Call Transcript
» Illumina, Inc. Q2 2009 Earnings Call Transcript
Good day, ladies and gentlemen, and welcome to the First Quarter 2010 Illumina Inc. Earnings Conference Call. My name is Jasmine, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. Peter Fromen, Senior Director of Investor Relations. Please proceed.
Thank you, operator. Good afternoon, everyone, and welcome to our First Quarter 2010 Earnings Call. During the call, we will review our financial results released today and offer commentary on our commercial activity. After which, we will host a question-and-answer session. If you had not had a chance to review the earnings release, it can be found in the Investor Relations section of our website at illumina.com.
Presenting for Illumina today will be Jay Flatley, President and Chief Executive Officer; and Christian Henry, Senior Vice President and General Manager of Life Sciences and Chief Financial Officer. This call is being recorded, and the audio portion will be archived in the Investors section of our website.
It is our intent that all forward-looking statements regarding our expected financial results and commercial activity made during today's call, be protected under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed.
All forward-looking statements are based upon current information available, and Illumina assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause results to differ, we refer you to the documents that Illumina files with the Securities and Exchange Commission, including Forms 10-Q and 10-K.
Before I turn the call over to Christian, I want to let you know that we will participate in the Deutsche Bank Health Care Conference during the week of May 3; the Baird Growth Stock Conference in Chicago, the week of May 17; and the Goldman Sachs Health Care Conference in Los Angeles, the week of June 14. For those of you unable to attend any of the upcoming conferences, we encourage you to listen to the webcast presentation, which will be available through the Investor Relations section of our website.
With that, I'll now turn the call over to Christian.
Good afternoon, everyone, and thank you for joining us today. During today's call, I will review our first quarter financial results. And then Jay will discuss our commercial progress, and provide an update on the state of our business and markets.
In the first quarter, we recorded $192 million of total revenue. This represents growth of 16% over Q1 of last year. Product revenue was $174 million, growing 11% over the prior-year period, and was led by significant growth in our sequencing products. While our Microarray business declined relative to Q1 2009, revenue was up sequentially for the second consecutive quarter. And we now believe our Array business has stabilized.
Consumables revenue for the quarter was $114 million compared to $103 million in Q1 of 2009. This represents a year-over-year growth of 11%, and was driven by strong growth in sequencing consumables, offset by a decline in total microarray consumables. Annualized sequencing consumable pull through on the Genome Analyzer was above our projected range of $150,000 to $200,000 per system.
Despite lower revenue on a year-over-year basis, microarray consumables still represent more than half of our total consumables revenue. The decline relative to last year was primarily attributable to lower sales of whole-genome genotyping arrays, but was partially offset by growth in focus content arrays. Annualized microarray consumable pull through on the installed base of array readers was in our targeted range of $400,000 to $500,000 per system.
Total instrument revenue for the quarter was $57 million, up 13% compared to $50 million in Q1 of last year, and was based largely on the growth of the sale of sequencing systems. Instrument revenue declined sequentially, as we began to transition the HiSeq 2000 into our sequencing portfolio. Initial demand for the HiSeq has been strong. However, as we communicated last quarter, our manufacturing capacity was constrained in Q1, resulting in a limited number of shipments. We expect to be manufacturing the HiSeq system at significant volumes by the end of the second quarter. The sequential decline in sequencing instrument revenue was slightly offset by microarray instrument revenue, which grew both sequentially and on a year-over-year basis.
Services and other revenue, which includes genotyping and sequencing services, as well as instrument maintenance contracts was $18 million compared to $9 million in Q1 of last year. The primary driver of year-over-year growth was the increase in service maintenance contracts associated with our growing installed base of sequencing systems. However, we also had a particularly strong quarter on our FastTrack Services business due to the completion of a few large contracts.
Before discussing our gross margins and operating expenses for the quarter, I'd like to note that we recorded a pretax amount of $17 million related to non-cash stock-based compensation. This impacted our EPS by a tax-adjusted amount of $0.09 per pro forma diluted share for the quarter. I want to remind you that going forward, we will include this expense in our presentation of pro forma net income and earnings per share. However, in our discussion of gross margin, operating expenses and operating margin, I will highlight both our GAAP expenses, which includes stock compensation expense and other non-cash charges, and the corresponding non-GAAP figures. I encourage you to review the GAAP reconciliation of our non-GAAP measures included in today's earnings release.