Analyst Conference Summary


conference date: February 7, 2023 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2022 (fourth quarter, Q4 2022)

Forward-looking statements

Overview: Not a good quarter. Shrinking y/y revenue, even on a constant currency basis.

Basic data (GAAP):

Revenue was $1.08 billion, down 4% sequentially from $1.12 billion and down 10% from $1.20 billion in the year-earlier quarter.

Net income was negative $140 million, up sequentially from negative $3,816 million, and down from $112 million year-earlier.

Diluted EPS was negative $0.89, up sequentially from negative $24.26, and down from $0.71 year-earlier.


For the full year 2023 expects a 7 to 10% growth rate. Non-GAAP EPS $1.25 to $1.50.

Conference Highlights:

Francis deSouza, President and CEO, said "Our fourth quarter operating results were in line with our expectations, with ongoing traction across our product portfolio amid a challenging macroeconomic environment. Illumina's continued focus on innovation across multiple new products, including the NovaSeq X, the most powerful, most sustainable, and most cost-effective sequencer ever developed, have been met with strong customer interest. Our order book is exceeding expectations and we have begun shipping instruments. GRAIL ended the year with accelerating consumer excitement for its Galleri test; more than 4,500 health providers ordered the test in 2022, contributing to more than 60,000 tests ordered to date."

Product revenue was $913 million, services $170 million. No longer releasing instrument and consumable revenue figures. Segments are now Core and Grail.

NovaSeq X Series (NovaSeq X and NovaSeq X Plus), is available as of Q1 2023, enabling the highest levels of accuracy at immense scale, with the power to sequence more than 20,000 genomes per year. In Q3 2022 Illumina partnered with GenoScreen to expand global access to genomic testing for multi-drug resistant tuberculosis (TB) by combining Illumina sequencing products and the GenoScreen Deeplex Myc-TB assay.

Grail had $23 million in revenue and a $197 million operating loss. European regulators are requiring Grail to continue to be run as a separate company for now. The merger review is ongoing.

Core segment had revenue of $1.07 billion and an operating profit of $70 million.

Non-GAAP numbers: net income $22 million, down 59% sequentially from $54 million, and down 81% from $117 million year-earlier. Diluted EPS was $0.14, down 59% sequentially from $0.34, and down 81% from $0.75 year-earlier.

Cash, equivalents and investment balance was $2.04 billion, up sequentialy from $1.04 billion. Long term debt $1.5 billion. Cash flow from operations was $147 million. Free cash flow was negative $59 million. Capital expenditures were $88 million. Cash raised by issuing notes was $991 million. Cash used to repurchase stock was $0 million.

GAAP cost of revenue was $411 million, leaving gross profit of $672 million. Operating expenses were $799 million, consisting of: $346 million for research and development; $432 million for selling, general, and administrative. $21 million legal contingency and settlement. Leaving income from operations of negative $127 million. Other expense was $41 million. Income tax benefit $28 million.

Q&A selective summary:

NovaSeq X orders? Estimated 300 for full year 2023. Customer demand very strong. Had 340 intruments spoken for. Now have 155 in preorder and over 250 in advanced pipeline. Will update on actual shipments each quarter. Customers also like ease of use for workflow. Clinical customers are designing new assays on the X, planning transitions from older instruments. Actual orders tend to be made when budgets are available.

2023 guidance given 2H 2022? We pulled in the transition to X. We expect 2H to be stronger than 1H. Late in 2022 we placed a chunk of mid-level instruments, which should result in consumables uptake for them in 2023. Expect Covid hangover should abate, also lower negative FX impact.

Grail in EU? We are expecting the divestiture order to come out around the transition to Q2, and we will appeal it. We are preparing for either eventual outcome. We are working to get capital investments for Grail.

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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