Analyst Conference Summary


conference date: November 9, 2023 @ 2:00 PM Pacific Time
for quarter ending: October 2, 2023 (third quarter, Q3 2023)

Forward-looking statements

Overview: No growth, GAAP loss, slight non-GAAP profit.

Basic data (GAAP):

Revenue was $1.12 billion, down 6% sequentially from $1.18 billion and flat from $1.12 billion in the year-earlier quarter.

Net income was negative $754 million, down sequentially from negative $234 million, and up from negative $3.81 billion year-earlier.

Diluted EPS was negative $4.77, down sequentially from negative $1.48, and up from negative $24.26 year-earlier.


FY 2023 revenue down 2% to 3% y/y. Non-GAAP EPS $0.60 to $0.70. GAAP EPS negative $6.67 to $6.57. Currently does not expect near-term (2024) improvement in the macroeconomic environment.

Conference Highlights:

Jacob Thaysen, (newly) CEO, said "While the environment remains challenging, I am confident in our ability to navigate it and position the company for long-term success. I came to Illumina for the opportunity presented by our core business. While I evaluate the company's strategy, we will remain focused on driving on further placements of the NovaSeq X, which will boost consumables demand. We will also continue optimizing our operations and drive stronger execution." Revenue was up 1% y/y on a constant currency basis due to customer cautiousness. Looking to possibly divest all or part of Grail. Plans to reduce expenses by about $175 million per year.

Product revenue was $941 million, services $178 million.

NovaSeq X Series (NovaSeq X and NovaSeq X Plus), was 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. Shipped 97 in Q3. Expects 330 to 340 shipments in 2023, lower than prior guidance.

During Q3 2023, Illumina recognized $712 million in goodwill impairment and $109 million in intangible asset (IPRD) impairment related to the GRAIL segment.

Grail had $21 million in revenue and a $$1.02 billion operating loss. $821 million of that was goodwill and intangible impairment. Grail must be held separately because the EU forbade a merger.

Core segment had revenue of $1.11 billion, flat from $1.11 billion year-earlier, and an operating profit of $262 million. Non-GAAP operating profit was $249 million. Instrument revenue increased 10% y/y to $179 million. Sales in China were down. Consumables revenue $695 million, down 4% y/y.

Non-GAAP numbers: net income $52 million, up 4% sequentially from $50 million, and down 4% from $54 million year-earlier. Diluted EPS was $0.33, up 3% sequentially from $0.32, and down 6% from $.34 year-earlier.

Cash, equivalents and investment balance was $933 million, down sequentialy from $1.56 billion. Long term debt $1.5 billion. Cash flow from operations was $139 million. Free cash flow was $94 million. Capital expenditures were $45 million. Cash used to repurchase stock was $0 million. $750 million was used to pay down debt.

GAAP cost of revenue was $435 million, leaving gross profit of $684 million. Operating expenses were $1.44 billion, consisting of: $315 million for research and development; $303 million for selling, general, and administrative; $821 impairment charge. Leaving income from operations of negative $754 million. Other expense was $28 million. Income tax benefit $28 million.

Q&A selective summary:

Grail special committee, etc.? 3 board members, the CEO, to work with management on divestiture. Two and a half years of cash support to Grail, per EU, we are still working on exactly what number that is.

NGS market overview? Core business still has a lot of opportunity. Overall market is very healthy.

NovaSeq orders, backlog? On X, demand remains strong. Continue to improve the software.

25B launch? Early indication is customers of X have a faster growth rate. 25B will spur even more capacity, large single-cell experiments. But will take a while for customers to validate and get up and running.

Competition in China? We have a Chinese competitor with good-enough capabilities, but we still think China is a good market for us. Many of our customers prefer to work with us. We have a strong brand and installed base, plus an inovative road map.

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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 2023 William P. Meyers