Illumina (ILMN) Q1 2012 Earnings Call April 23, 2012 5:00 pm ET Executives Kevin Williams - Marc Stapley - Chief Financial Officer, Senior Vice President and Principal Accounting Officer Jay T. Flatley - Chief Executive Officer, President and Director Christian O. Henry - Senior Vice President and General Manager of Genomic Solutions Analysts Tycho W. Peterson - JP Morgan Chase & Co, Research Division Doug Schenkel - Cowen and Company, LLC, Research Division Amanda Murphy - William Blair & Company L.L.C., Research Division Derik De Bruin - BofA Merrill Lynch, Research Division Daniel Brennan - Morgan Stanley, Research Division Isaac Ro - Goldman Sachs Group Inc., Research Division David C. Clair - Piper Jaffray Companies, Research Division Nandita Koshal - Barclays Capital, Research Division Daniel Arias - UBS Investment Bank, Research Division Daniel L. Leonard - Leerink Swann LLC, Research Division Jonathan P. Groberg - Macquarie Research Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division Sung Ji Nam - Cantor Fitzgerald & Co., Research Division Presentation Operator
Participating for Illumina today will be Jay Flatley, President and Chief Executive Officer; Marc Stapley, Senior Vice President and Chief Financial Officer; and Christian Henry, Senior Vice President and General Manager of our Genomic Solutions business. 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 will 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 actual results to differ, we refer you to the documents that Illumina files with the Securities and Exchange Commission, including Illumina's most recent Forms 10-Q and 10-K. Before I turn the call over to Marc, I wanted to let you know we will participate in the Baird Growth Conference in Chicago the week of May 7, the Bank of America Health Care Conference in Las Vegas the week of May 14, the Goldman Sachs Global Health Care Conference in California the week of June 4 and the William Blair Growth Stock Conference in Chicago the week of June 11. Those of you unable to attend these conferences, I encourage you to listen to the webcast presentations which will be available through the Investor Relations section of our website. With that, I will now turn the call over to Marc. Marc Stapley Thanks, Kevin. Good afternoon, everyone, and thank you for joining us today. During the section of today's call, I will review our first quarter financial results and our guidance for the remainder of the year. I will then turn the call back to Jay to provide an update on our commercial progress and the state of our business and markets.
We've gotten off to a really strong start in 2012. In Q1, we had record orders for both MiSeq instruments and sequencing consumables. All 3 geographic regions beat their order forecast, and we built backlog for the third consecutive quarter.First quarter 2012 revenue of $273 million increased 9% sequentially due to another successful quarter of MiSeq shipments, microarray growth and growth in sequencing consumables. Revenue for the quarter decreased 3% compared to Q1 2011, as the year ago quarter included a significant number of HiSeq shipments associated with our Genome Analyzer trade-in program. Instrument revenue for the first quarter was $80 million, essentially flat sequentially and down 30% year-over-year, again due to the Genome Analyzer trade-in program and the decrease in microarray instrumentation. Consumable revenue for the quarter was $173 million, up 20% sequentially and up 17% compared to the first quarter of 2011. I'm very pleased with sequencing consumable revenue in the quarter, the result of both a larger installed base and a sequentially improved average annualized quarter on HiSeqs. HiSeq consumables, while still only in their second full quarter of shipment, are also beginning to ramp up. In addition, increased shipments from our Infinium microarrays, most notably our exome family of products, contributed to consumable revenue growth. Services and other revenue, which includes genotyping and sequencing services as well as instrument maintenance contracts, was $17 million for the quarter compared to $16 million in Q1 of last year. Now a discussion of gross margin and operating expenses, I will highlight our adjusted non-GAAP results, which exclude noncash stock compensation expense, restructuring charges and other noncash items. I encourage you to review the GAAP reconciliation of non-GAAP measures included in today's earnings release. Our adjusted gross margin for the first quarter was 69%. This compares to 70.2% last quarter and 68.2% in the first quarter of 2011. The sequential decline was attributable to the onetime catch-up benefit mentioned last quarter, which resulted from improvements in HiSeq reliability. The year-over-year gross margin increase was driven by a favorable mix of consumable versus instrument revenue and higher ASPs on the HiSeq 2000 as the Genome Analyzer trade-in program negatively impacted the ASP in Q1 2011.
Adjusted research and development expenses for the quarter were $41 million or 14.9% of revenue compared to 15% of revenue in the fourth quarter and 14.5% of revenue in the first quarter of 2011. Adjusted SG&A expenses were $52 million or 18.9% of revenue in the quarter compared to 20.1% of revenue in the fourth quarter and 18.5% of revenue in the first quarter of 2011.Read the rest of this transcript for free on seekingalpha.com