Illumina Reports Financial Results for Third Quarter of Fiscal Year 2024
Core Illumina revenue of $1.1 billion for Q3 2024, down 2% from Q3 2023 and on a constant currency basis
Core Illumina GAAP operating margin of 68.6% and non-GAAP operating margin of 22.6% for Q3 2024
Core Illumina GAAP diluted EPS of $4.03 and non-GAAP diluted EPS of $1.14 for Q3 2024
Lowered fiscal year 2024 Core Illumina revenue guidance to decline ~3% from fiscal year 2023; expect Q4 2024 Core Illumina revenue of approximately $1.07 billion
Raised fiscal year 2024 Core Illumina non-GAAP operating margin guidance to a range of 21% to 21.5%
Raised fiscal year 2024 Core Illumina non-GAAP diluted EPS guidance to a range of $4.05 to $4.15
SAN DIEGO, Nov. 4, 2024 /PRNewswire/ -- Illumina, Inc. (NASDAQ:ILMN) ("Illumina" or the "company") today announced its financial results for the third quarter of fiscal year 2024. The financial results for YTD 2024 and Q3 2023 and YTD 2023 include the financial results for GRAIL which was spun off on June 24, 2024.
"During the third quarter, the Illumina team delivered strong operating results, and revenue met our expectations," said Jacob Thaysen, Chief Executive Officer. "We are making good strides towards Illumina's strategic goals, both in launching breakthrough innovation and in helping our customers accelerate their adoption of the NovaSeq™ X."
"The near-term macroeconomic environment remains constrained, and we are slightly lowering our 2024 revenue guidance," Thaysen continued. "The underlying demand for Illumina's products and applications remains strong and we are demonstrating significant progress in driving margin and earnings expansion."
Third quarter Core Illumina segment results
GAAP
Non-GAAP (a)
Dollars in millions
Q3 2024
Q3 2023
Q3 2024
Q3 2023
Revenue (b)
$ 1,080
$ 1,106
$ 1,080
$ 1,106
Gross margin (c)
68.9 %
64.7 %
70.5 %
66.0 %
Research and development (R&D) expense
$ 253
$ 238
$ 249
$ 235
Selling, general and administrative (SG&A) expense
$ 239
$ 216
$ 268
$ 246
Legal contingency and settlement
$ (488)
$ (1)
$ ,
$ ,
Operating profit
$ 741
$ 262
$ 244
$ 249
Operating margin
68.6 %
23.7 %
22.6 %
22.5 %
Tax provision
$ 77
*
$ 48
*
Tax rate
10.8 %
*
21.0 %
*
Net income
$ 642
*
$ 181
*
Diluted EPS
$ 4.03
*
$ 1.14
*
* Prior year information not provided.
(a)
See tables in "Results of Operations - Non-GAAP" section below for GAAP and non-GAAP reconciliations.
(b)
Core Illumina revenue for Q3 2023 included intercompany revenue of $8 million which, prior to the spin-off of GRAIL in Q2 2024, was eliminated in consolidation.
(c)
The increase in gross margin was driven by execution of our operational excellence priorities that delivered cost savings, including freight, and improved productivity and a more favorable mix of sequencing consumables.
Third quarter consolidated results
GAAP
Non-GAAP (a)
Dollars in millions
Q3 2024
Q3 2023
Q3 2024
Q3 2023
Revenue
$ 1,080
$ 1,119
$ 1,080
$ 1,119
Gross margin
68.9 %
61.1 %
70.5 %
65.4 %
R&D expense
$ 253
$ 315
$ 249
$ 312
SG&A expense
$ 239
$ 303
$ 268
$ 328
Goodwill and intangible impairment
$ ,
$ 821
$ ,
$ ,
Legal contingency and settlement
$ (488)
$ (1)
$ ,
$ ,
Operating profit (loss)
$ 741
$ (754)
$ 244
$ 93
Operating margin
68.6 %
(67.3) %
22.6 %
8.3 %
Tax provision (benefit)
$ 15
$ (28)
$ 48
$ 35
Tax rate
2.1 %
3.6 %
21.0 %
39.7 %
Net income (loss)
$ 705
$ (754)
$ 181
$ 52
Diluted earnings (loss) per share
$ 4.42
$ (4.77)
$ 1.14
$ 0.33
(a) See tables in "Results of Operations - Non-GAAP" section below for GAAP and non-GAAP reconciliations.
Capital expenditures for free cash flow purposes were $32 million for Q3 2024. Cash flow provided by operations was $316 million, compared to $139 million in the prior year period. Free cash flow (cash flow provided by operations less capital expenditures) was $284 million for the quarter, compared to $94 million in the prior year period. Depreciation and amortization expenses were $70 million for Q3 2024. At the close of the quarter, the company held $939 million in cash, cash equivalents and short-term investments.
Key announcements since our last earnings release
Presented strategy and three-year financial outlook that features accelerating revenue growth and significant margin expansion
Introduced the MiSeq i100 Series: Illumina's simplest, fastest benchtop sequencers
Announced plans to provide updates on key innovations in whole-genome sequencing, proteomics, and single-cell technology at the American Society of Human Genetics Annual Meeting
Announced European Court of Justice ruled in favor of Illumina in jurisdictional appeal regarding GRAIL
Obtained FDA approval for TSO Comprehensive with two companion diagnostics to rapidly match patients to targeted therapies
Announced Bengaluru global capability center, expanding presence in the region
Appointed Todd Christian as Senior Vice President of Services, Arrays, and Genomics Access
Announced that Charles Dadswell will step down as General Counsel, initiated search for successor
A full list of recent announcements can be found in the company's News Center.
Financial outlook and guidanceFor fiscal year 2024, the company is lowering its guidance for Core Illumina revenue to decline ~3% (down ~3% in constant currency) compared to fiscal year 2023. For the fourth quarter of 2024, the company expects Core Illumina revenue of ~$1.07 billion. The company is raising its guidance for Core Illumina non-GAAP operating margin to a range of 21% to 21.5%, and for Core Illumina non-GAAP diluted EPS to a range of $4.05 to $4.15 for fiscal year 2024.
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 impact of items such as acquisition-related expenses, gains and losses from strategic investments, fair value adjustments to contingent consideration, 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 informationThe conference call will begin at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Monday, November 4, 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 877.400.0505 or +1.323.701.0225 outside North America, both using conference ID 2966739. 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.
Statement regarding use of non-GAAP financial measuresThe company reports non-GAAP results for diluted earnings per share, net income, gross margin, operating expenses, including research and development expense, selling general and administrative expense, legal contingencies and settlement, and goodwill and intangible impairment, operating income, operating margin, gross profit, other income (expense), tax provision, constant currency revenue growth, and free cash flow (on a consolidated and, as applicable, segment basis) in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The company's financial measures under GAAP include substantial charges such as amortization of acquired intangible assets among others that are listed in the reconciliations of GAAP and non-GAAP financial measures included in this press release, as well as the effects of currency translation. Management has excluded the effects of these items in non-GAAP measures to assist investors in analyzing and assessing past and future operating performance. Non-GAAP net income, diluted earnings per share and operating margin are key components of the financial metrics utilized by the company's board of directors to measure, in part, management's performance and determine significant elements of management's compensation.
The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.
Use of forward-looking statementsThis release may contain forward-looking statements that involve risks and uncertainties. Among the important factors to which our business is subject that could cause actual results to differ materially from those in any forward-looking statements are: (i) changes in the rate of growth in the markets we serve; (ii) the volume, timing and mix of customer orders among our products and services; (iii) our ability to adjust our operating expenses to align with our revenue expectations; (iv) our ability to manufacture robust instrumentation and consumables; (v) the success of products and services competitive with our own; (vi) challenges inherent in developing, manufacturing, and launching new products and services, including expanding or modifying manufacturing operations and reliance on third-party suppliers for critical components; (vii) the impact of recently launched or pre-announced products and services on existing products and services; (viii) our ability to modify our business strategies to accomplish our desired operational goals; (ix) our ability to realize the anticipated benefits from prior or future actions to streamline and improve our R&D processes, reduce our operating expenses and maximize our revenue growth; (x) our ability to further develop and commercialize our instruments, consumables, and products; (xi) to deploy new products, services, and applications, and to expand the markets for our technology platforms; (xii) the risks and costs associated with the divestment of GRAIL; (xiii) the risk of additional litigation arising against us in connection with the GRAIL acquisition; (xiv) our ability to obtain approval by third-party payors to reimburse patients for our products; (xv) our ability to obtain regulatory clearance for our products from government agencies; (xvi) our ability to successfully partner with other companies and organizations to develop new products, expand markets, and grow our business; (xvii) uncertainty, or adverse economic and business conditions, including as a result of slowing or uncertain economic growth or armed conflict; (xviii) the application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments and (xix) legislative, regulatory and economic developments, together with other factors detailed in our filings with the Securities and Exchange Commission, including our most recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts' expectations, or to provide interim reports or updates on the progress of the current quarter.
About IlluminaIllumina is improving human health by unlocking the power of the genome. Our focus on innovation has established us as a global leader in DNA sequencing and array-based technologies, serving customers in the research, clinical, and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture, and other emerging segments. To learn more, visit www.illumina.com and connect with us on X, Facebook, LinkedIn, Instagram, TikTok, and YouTube.
Illumina, Inc.
Condensed Consolidated Balance Sheets
(In millions)
September 29,2024
December 31,2023
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$ 869
$ 1,048
Short-term investments
70
6
Accounts receivable, net
699
734
Inventory, net
574
587
Prepaid expenses and other current assets
161
234
Total current assets
2,373
2,609
Property and equipment, net
832
1,007
Operating lease right-of-use assets
453
544
Goodwill
1,113
2,545
Intangible assets, net
305
2,993
Deferred tax assets, net
617
56
Other assets
321
357
Total assets
$ 6,014
$ 10,111
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$ 191
$ 245
Accrued liabilities
784
1,325
Total current liabilities
975
1,570
Operating lease liabilities
613
687
Term debt
1,988
1,489
Other long-term liabilities
313
620
Stockholders' equity
2,125
5,745
Total liabilities and stockholders' equity
$ 6,014
$ 10,111
Illumina, Inc.
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(unaudited)
Three Months Ended
Nine Months Ended
September 29,2024
October 1,2023
September 29,2024
October 1,2023
Revenue:
Product revenue
$ 914
$ 941
$ 2,718
$ 2,864
Service and other revenue
166
178
550
518
Total revenue
1,080
1,119
3,268
3,382
Cost of revenue:
Cost of product revenue (a)
235
293
739
884
Cost of service and other revenue (a)
84
95
286
285
Amortization of acquired intangible assets
16
47
110
143
Total cost of revenue
335
435
1,135
1,312
Gross profit
745
684
2,133
2,070
Operating expense:
Research and development (a)
253
315
913
1,013
Selling, general and administrative (a)
239
303
813
1,127
Goodwill and intangible impairment
—
821
1,889
821
Legal contingency and settlement
(488)
(1)
(474)
14
Total operating expense
4
1,438
3,141
2,975
Income (loss) from operations
741
(754)
(1,008)
(905)
Other expense, net
(21)
(28)
(358)
(45)
Income (loss) before income taxes
720
(782)
(1,366)
(950)
Provision (benefit) for income taxes
15
(28)
44
36
Net income (loss)
$ 705
$ (754)
$ (1,410)
$ (986)
Earnings (loss) per share:
Basic
$ 4.43
$ (4.77)
$ (8.86)
$ (6.23)
Diluted
$ 4.42
$ (4.77)
$ (8.86)
$ (6.23)
Shares used in computing earnings (loss) per share:
Basic
159
158
159
158
Diluted
160
158
159
158
(a) Includes stock-based compensation expense for stock-based awards:
Three Months Ended
Nine Months Ended
September 29,2024
October 1,2023
September 29,2024
October 1,2023
Cost of product revenue
$ 7
$ 7
$ 19
$ 22
Cost of service and other revenue
1
2
5
5
Research and development
33
36
115
117
Selling, general and administrative
43
41
152
142
Stock-based compensation expense before taxes
$ 84
$ 86
$ 291
$ 286
Illumina, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(unaudited)
Three Months Ended
Nine Months Ended
September 29,2024
October 1,2023
September 29,2024
October 1,2023
Net cash provided by operating activities
$ 316
$ 139
$ 473
$ 254
Net cash used in investing activities
(42)
(54)
(130)
(146)
Net cash used in financing activities
(332)
(707)
(523)
(1,183)
Effect of exchange rate changes on cash and cash equivalents
7
(4)
1
(9)
Net decrease in cash and cash equivalents
(51)
(626)
(179)
(1,084)
Cash and cash equivalents, beginning of period
920
1,553
1,048
2,011
Cash and cash equivalents, end of period
$ 869
$ 927
$ 869
$ 927
Calculation of free cash flow:
