On May 2, 2024 Illumina, Inc. (Nasdaq: ILMN) ("Illumina" or the "company") reported its financial results for the first quarter of fiscal year 2024, which include the consolidated financial results for GRAIL (Press release, Illumina, MAY 2, 2024, View Source [SID1234642587]).
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"The Illumina team delivered results ahead of our expectations by supporting our customers with innovative solutions that enable the next wave of progress in genomics and multiomics," said Jacob Thaysen, Chief Executive Officer. "Our customers are leveraging the NovaSeq X to drive increased sequencing activity, even in a persistently challenging global macroeconomic environment. Additionally, our team’s strong execution and continued focus on operational excellence enabled us to deliver year-over-year improvement in both gross margin and non-GAAP operating margin."
First quarter consolidated results
GAAP Non-GAAP (a)
Dollars in millions, except per share amounts
Q1 2024
Q1 2023
Q1 2024
Q1 2023
Revenue $ 1,076 $ 1,087 $ 1,076 $ 1,087
Gross margin 62.0 % 60.3 % 66.5 % 64.7 %
Research and development ("R&D") expense $ 339 $ 341 $ 335 $ 339
Selling, general and administrative ("SG&A") expense $ 439 $ 378 $ 349 $ 343
Operating (loss) profit $ (111) $ (64) $ 33 $ 21
Operating margin (10.3) % (5.7) % 3.1 % 1.9 %
Tax provision (benefit) $ 17 $ (81) $ 13 $ 5
Tax rate (15.3) % 103.9 % 46.4 % 27.3 %
Net (loss) income $ (126) $ 3 $ 14 $ 13
Diluted (loss) earnings per share $ (0.79) $ 0.02 $ 0.09 $ 0.08
(a) See the tables included in the "Results of Operations – Non-GAAP" section below for reconciliations of these GAAP and non-GAAP financial measures.
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Capital expenditures for free cash flow purposes were $36 million for Q1 2024. Cash flow provided by operations was $77 million, compared to cash flow provided by operations of $10 million in the prior year period. Free cash flow (cash flow provided by operations less capital expenditures) was $41 million for the quarter, compared to $(42) million in the prior year period. Depreciation and amortization expenses were $108 million for Q1 2024. At the close of the quarter, the company held $1,115 million in cash, cash equivalents and short-term investments.
First quarter segment results
Illumina has two reportable segments, Core Illumina and GRAIL.
Core Illumina
GAAP Non-GAAP (a)
Dollars in millions Q1 2024 Q1 2023 Q1 2024 Q1 2023
Revenue (b)
$ 1,056 $ 1,076 $ 1,056 $ 1,076
Gross margin (c)
65.7 % 63.8 % 67.1 % 65.2 %
R&D expense $ 241 $ 259 $ 237 $ 257
SG&A expense $ 336 $ 286 $ 254 $ 257
Operating profit
$ 116 $ 142 $ 218 $ 187
Operating margin 11.0 % 13.2 % 20.6 % 17.4 %
(a) See Table 3 included in the "Results of Operations – Non-GAAP" section below for reconciliations of these GAAP and non-GAAP financial measures.
(b) Core Illumina revenue for Q1 2024 was down 2% as compared to Q1 2023 and down 2% on a constant currency basis. Amounts for Q1 2024 and Q1 2023 included intercompany revenue of $7 million and $9 million, respectively, which is eliminated in consolidation.
(c) The year-over-year increase in gross margin was primarily driven 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.
GRAIL
GAAP Non-GAAP (a)
In millions Q1 2024 Q1 2023 Q1 2024 Q1 2023
Revenue $ 27 $ 20 $ 27 $ 20
Gross (loss) profit $ (22) $ (25) $ 12 $ 9
R&D expense $ 101 $ 86 $ 101 $ 86
SG&A expense $ 104 $ 93 $ 96 $ 87
Operating loss $ (227) $ (204) $ (185) $ (164)
(a) See Table 3 included in the "Results of Operations – Non-GAAP" section below for reconciliations of these GAAP and non-GAAP financial measures.
Key announcements by Illumina since Illumina’s last earnings release
•Released XLEAP-SBS chemistry on NextSeq 1000 and NextSeq 2000 Systems, our fastest, highest quality, and most robust sequencing by synthesis (SBS) chemistry to date
•Launched Illumina Complete Long Reads (ICLR) with Enrichment, a flexible, cost-effective solution to enhance coverage of known challenging-to-map regions with targeted long reads where they provide the most value
•A recent literature review, published in the Nature journal Genomic Medicine, showed that short-read genomic sequencing (GS) reduces the time it takes to diagnose and treat pediatric patients who may have a rare genetic condition
•Appointed Ankur Dhingra as Chief Financial Officer and Jakob Wedel as Chief Strategy and Corporate Development Officer
•Appointed Jenny Zheng as Head of Region, Greater China
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A full list of recent Illumina announcements can be found in the company’s News Center.
Key announcements by GRAIL since Illumina’s last earnings release
•Presented new data at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Annual Meeting that:
•Demonstrated the first real-world evaluation of repeat multi-cancer early detection (MCED) / Galleri testing showing the potential value of adding repeat MCED screening
•Exhibited 4-year overall survival follow-up demonstrating the prognostic significance of detecting cancer with a methylation-based cfDNA platform like Galleri
•Illustrated data demonstrating the power of Galleri to preferentially detect high grade, clinically significant prostate cancer over indolent cases.
•Announced a collaboration with AstraZeneca in which participants from Japan will have their samples tested using GRAIL’s novel risk classification test on its Methylation Platform
A full list of recent GRAIL announcements can be found in GRAIL’s Newsroom.
Financial outlook and guidance
For fiscal year 2024, the company continues to expect Core Illumina revenue to be approximately flat compared to fiscal year 2023 and Core Illumina non-GAAP operating margin to be approximately 20%. While Illumina continues to move as quickly as possible to resolve GRAIL, the company is focusing its financial outlook on Core Illumina, as the specific timing and impact of the GRAIL divestment remains uncertain.
The company provides forward-looking guidance on a non-GAAP basis. The company is unable to provide a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP reported financial measures because it is unable to predict with reasonable certainty the financial impact of items such as acquisition-related expenses, gains and losses from our strategic investments, fair value adjustments related to contingent consideration and contingent value rights, potential future asset impairments, restructuring activities, and the ultimate outcome of pending litigation without unreasonable effort. These items are uncertain, inherently difficult to predict, depend on various factors, and could have a material impact on GAAP reported results for the guidance period. For the same reasons, the company is unable to address the significance of the unavailable information, which could be material to future results.
Conference call information
The conference call will begin at 2 p.m. Pacific Time (5 p.m. Eastern Time) on Thursday, May 2, 2024. Interested parties may access the live teleconference through the Investor Info section of Illumina’s website at investor.illumina.com. Alternatively, individuals can access the call by dialing 866.400.0049 or +1.323.701.0225 outside North America, both using conference ID 9170634. To ensure timely connection, please dial in at least ten minutes before the scheduled start of the call.
A replay of the conference call will be posted on Illumina’s website after the event and will be available for at least 30 days following.