Analyst Conference Summary


conference date: February 10, 2022 @ 2:00 PM Pacific Time
for quarter ending: January 2, 2022 (fourth quarter, Q4 2021)

Forward-looking statements

Overview: Rapid y/y revenue growth on recovery from pandemic dip. First quarter including Grail acquisition. EPS, however, is down sharply y/y.

Basic data (GAAP):

Revenue was $1.20 billion, up 8% sequentially from $1.11 billion and up 26% from $953 million in the year-earlier quarter.

Net income was $112 million, down 65% sequentially from $317 million, and down 56% from $257 million year-earlier.

Diluted EPS was $0.71, down sequentially from $2.08, and down from $1.75 year-earlier.


For full year 2022, Illumina expects consolidated revenue growth in the range of 14% to 16%, GAAP earnings per diluted share of $3.04 to $3.24, and non-GAAP earnings per diluted share of $4.00 to $4.20. Core Illumina revenue growth in the range of 13% to 15%. GRAIL revenue is expected to be in the range of $70 million to $90 million

Conference Highlights:

Francis deSouza, President and CEO, said "Opportunities are also expanding across new markets like proteomics, infectious disease and drug discovery. In addition, momentum for Grail's groundbreaking multi-cancer early detection blood test continues to accelerate. We are also making great progress on exciting new innovations, like our breakthrough Chemistry X and our Infinity long-read technology, to help clinicians and scientists make discoveries that improve patient care." The decrease in net income was attributable largely to the operating loss of $182 million generated at Grail, which contributed $10 million in revenue. For now the EU is requiring Grail to be operated independently.

Sequencing instrument revenue was 16% of total revenue, with 196 total instruments sold. Ended with a record instrument backlog, about twice the size it was at the end of 2020. Consumable revenue was 73% of revenue. Services generated 10% of revenue. Oncology testing led consumable sales. NIPT (non-invasive prenatal testing) is also growing rapidly. Whole genome sequencing for critically ill children is also growing. NovaSeq high-throughput instruments unit sales are growing rapidly. Over 20,000 installed instruments at the end of 2021.

In Q3 2021 Illumina, on August 18, closed the Grail acquisition to accelerate patient access to life-saving, multi-cancer early-detection tests; we are holding Grail as a separate entity pending EU regulatory review of the merger. Grail hopes to lead in early cancer detection with the Gallery system. Signed agreements with several health system partners to begin offering services in Q4 2021 and then in 2022. English NHS large clinical trial is underway. MRD products will also be a growth driver.

Non-GAAP numbers: net income $117 million, down 47% sequentially from $221 million, and down 35% from $179 million year-earlier. Diluted EPS was $0.75, down 48% sequentially from $1.45, and down 39% from $1.22 year-earlier.

Cash, equivalents and investment balance was $1.23 billion, down sequentialy from $1.3 billion. Long term debt $ billion. Cash flow from operations was $282 million. Free cash flow was negative $212 million. Capital expenditures were $70 million. Cash used to repurchase stock was $0 million.

Product revenue was $1.07 billion, services $133 million.

GAAP cost of revenue was $381 million, leaving gross profit of $817 million. Operating expenses were $776 million, consisting of: $350 million for research and development; $426 million for selling, general, and administrative. Leaving income from operations of $41 million. Other income was $45 million. Income tax benefit $26 million.

Q&A selective summary:

Chemistry X color? We are getting fantastic reactions from customers. Chemistry X is moving into manufacturing. Will give us higher speeds in research and clinical settings, with higher accuracy and better price per sequence. All new products will be based on it. Infinity technology will combine the best of long reads and short reads.

Guidance sequencing growth, affect of Chem X rollout? We have a record instrument backlog. We do not expect to sell instruments for Covid surveillance in 2022, so a headwind. Our customers understand our plans for Chem X, but no new product has been announced yet, and we usually see upgrades from customers over multiple year periods.

Grail is getting traction for companies to provide as a benefit to employees.

We are very confident about our guidance, we have good visibility and are starting with a strong backlog.

Discussed what parts of the market Chem X could catalyze, but did not say what might be introduced first. Some tests could be returned to customers within 8 hours, which would open up some segments of the market. Some tests could be much cheaper.

Competition in low throughput clinical market? We have terrific products in that part of the market, including newer ones. Recently newer customers are coming in at the higher end of the portfolio than in the past. Customers want more power, not low throughput. Grail has the only product that can detect 50 cancer types plus tissue of origin.

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Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. This is journalism, not advice.

Copyright 2022 William P. Meyers