Ankur Dhingra
Chief Financial Officer at Illumina
Thank you, Jacob, and hello, everyone. I'm very excited to join Team Illumina to improve human health by unlocking the power of the genome. I'm passionate about making a positive meaningful impact in health care. I am very familiar with the rule -- the role Illumina has played in establishing and advancing the genomics industry over the last 25 years. Building on that strong foundation, I'm confident we can continue leading, supporting our customers and delivering on the promise of what genomics can do for patients around the globe. I would also like to express my thanks to Joydeep for his support as I transition into my role. It's been a great first 2.5 weeks. I'll start by reviewing our segment results for core Illumina and GRAIL followed by consolidated financial results and then conclude with my remarks on our current outlook for 2024. I will be discussing non-GAAP results, which include stock-based compensation. I encourage you to review the GAAP reconciliation of these non-GAAP measures, which can be found in today's release and in the supplementary data available on our website. Starting with our segment financials. Core Illumina first quarter revenue was $1.06 billion, which is down 2% year-on-year, both on a reported and constant currency basis.
This revenue performance exceeded our expectations and was primarily driven by three areas: first, strong performance in high-throughput consumables; second, timing of revenue from certain strategic partnerships; and third, some customers accelerating delivery of a few NovaSeq X instruments from Q2 into Q1. Core Illumina sequencing consumables revenue of $698 million was up 1% year-over-year, primarily due to growth in high throughput. On a sequential basis, NovaSeq X consumables grew in the double digits following the successful launch of the 25B flow cell. Total sequencing GB output on our connected high and mid-throughput instruments grew over 35% year-over-year and grew at a high single-digit rate quarter-over-quarter. Research and applied activity benefited as transition to the NovaSeq X continues to ramp and 25B adoption grew at large core labs. Clinical activity continued to be driven predominantly by the NovaSeq 6000. As a reminder, we believe this data is a useful reference that shows the general activity trends across our installed base and is directionally correlated with revenue over time. Sequencing instruments revenue for core Illumina of $110 million declined 29% year-over-year in Q1 2024. The year-over-year decline was driven both by one, an expected decline in mid-throughput shipments as capital and cash flow constraints continue to impact purchasing behavior and moderate instrument placements; and second, lower NovaSeq X placements as compared to significant preorder launch-related shipments in the first quarter of 2023.
For NovaSeq X, as Jacob noted, we shipped 55 instruments in Q1. Core Illumina sequencing service and other revenue of $151 million was up 27% year-over-year, driven primarily by an increase in revenue from strategic partnerships and hired instrument service contract revenue on a growing installed base. Moving to the rest of the core Illumina P&L. Core Illumina non-GAAP gross margin of 67.1% for the quarter increased 190 basis points year-over-year, driven primarily by a more favorable mix of sequencing consumables and execution of our operational excellence priorities that delivered cost savings, including freight and improved productivity. This was partially offset by certain strategic partnership revenue that is lower margin and increased warranty and field service costs. Core Illumina non-GAAP operating expenses of $491 million were down $23 million year-over-year primarily due to decreased labor expense as a result of reduced headcount and continued savings from our cost containment initiatives. Core Illumina non-GAAP operating expenses were lower than expected due to timing of project spend shifting from Q1 into Q2 and lower stock-based compensation expense due to onetime reversals. Putting it all together, core Illumina non-GAAP operating margin was 20.6% in Q1 2024 compared to 17.4% in Q1 2023.
Transitioning to financial results for GRAIL. GRAIL revenue of $27 million for the quarter grew 35% year-over-year driven primarily by adoption of Galleri. GRAIL non-GAAP operating expenses totaled $197 million and increased $24 million year-over-year driven primarily by increased headcount to support commercial expansion and research and development. Moving to consolidated financial results. In the first quarter, consolidated revenue of $1.08 billion was down 1% year-over-year, both on a reported and constant currency basis. Non-GAAP net income was $14 million or $0.09 per diluted share, which included dilution from GRAIL's non-GAAP operating loss of $185 million for the quarter. Non-GAAP EPS exceeded our expectations driven primarily by higher core revenue and lower core operating expenses in the quarter. Our Q1 non-GAAP tax rate was 46.4% compared to 27.3% in Q1 2023, with both periods including a meaningful impact from the consolidations of GRAIL's operating loss, which increased by $21 million year-over-year. Absent the impact of GRAIL, our Q1 2024 and Q1 2023 tax rates were in the mid-20s. Our non-GAAP weighted average diluted share count for the quarter was approximately 159 million. Moving to consolidated cash flow and balance sheet items for the quarter. Cash flow provided by operations were $77 million. Capital expenditures were $36 million and free cash flow was $41 million, and we did not repurchase any common stock.
We ended the quarter with approximately $1.12 billion in cash, cash equivalents and short-term investments. Moving now to 2024 guidance. As a reminder, Illumina is moving as quickly as possible to resolve GRAIL and the company is focusing its 2024 financial outlook on core Illumina given the uncertainty around the specific timing and impact of the GRAIL divestment. Our guidance does not assume any impact from the potential divestment of GRAIL in 2024. We will provide non-GAAP EPS guidance for 2024 upon completion of the divestment. We are encouraged by our results in Q1 that came in ahead of our expectations both for topline and margins. We've also seen the seasonal rebuild of our total performance obligations or backlog, which increased more than 20% from the end of Q4. At the same time, we're not -- still not seeing any significant improvement in the macroeconomic environment or our business in China, and we are monitoring the impact of a strengthening U.S. dollar. While we are seeing early strength in consumables to start the year, it's being offset by capital constraints that are continuing to weigh on instrument purchases.
As such, we are reiterating our full year 2024 core Illumina revenue guidance of approximately flat from 2023 and non-GAAP operating margin of approximately 20%. Our operating margin expectations continue to reflect the benefit of gross margin improvement and disciplined management of our expenses, including reduced headcount, offset by normalization of our performance-based compensation as well as the impacts of inflation. For the second quarter of 2024, we expect core Illumina revenue in the range of $1.072 billion to $1.084 billion, reflecting a year-over-year decline of 6.5 to 7.5 percentage points. The year-over-year decline is predominantly because of the lower NovaSeq X instrument shipments given the significant backlog we worked through early last year following the launch. At the midpoint, this guidance reflects a $22 million sequential increase from Q1 of 2024. For the second quarter, we expect core Illumina non-GAAP operating margin of approximately 18%, resulting from a seasonal step-up in operating expenses in Q2 compared to Q1 primarily due to an increase in stock-based compensation expenses from the timing of equity grants. We also expect an increase due to some project spending shifting into Q2 from Q1. With that, I will now turn it back over to Jacob for his closing remarks. Thank you.
