Analyst Conference Summary

conference date: August 6, 2024 @ 2:00 PM Pacific Time
for quarter ending: June 30, 2024 (second quarter, Q2 2024)

Forward-looking statements

Overview: Most of the operating loss was from GRAIL, so that should disappear in Q3.

Basic data (GAAP):

Revenue was $1.11 billion, up 4% sequentially from $1.07 billion and down 5% from $1.18 billion in the year-earlier quarter.

Net income was negative $1.99 billion, down sequentially from negative $126 million, and down from negative $234 million year-earlier.

Diluted EPS was negative $12.48, down sequentially from negative $0.79, and down from negative $1.48 year-earlier.

Guidance:

Lowering core revenue for 2024 to a 2% to 3% decline y/y. Core non-GAAP EPS $3.80 to $3.95.

Conference Highlights:

Jacob Thaysen, CEO, said "Consumable sales remained solid as customers continued to increase their sequencing activity, but instrument demand has softened in a constrained funding environment. We are progressing our operating excellence initiatives and will deliver expanded margins this year." Dragen software update was released in Q2 2024.

On June 24, 2024 Illumina divested GRAIL. Illumina retains a 14.5% stake in Grail. The rest of the Grail stock was distributed to Illumina stockholders.

In Q3 2024 Illumina acquired Fluent Biosciences.

Product revenue was $927 million, services $185 million.

Illumina shipped 62 NovaSeq X instruments in Q2 2024. Had sold 469 X instruments to date. [NovaSeq X is the most power and expensive of its sequencers.] Expects to ship fewer high-throughput devices in 2024 than in 2023.

The flat 2024 revenue guidance is largely due to capital constraints on customers.

Grail segment has $29 million in revenue and an operating loss of $2.08 billion.

Core segment had revenue of $1.09 billion, down 7% from $1.16 billion year-earlier, and an operating profit of $442 million. Non-GAAP operating profit was $242 million.

Non-GAAP numbers: net income $57 million, up sequentially from $14 million, and up from $50 million year-earlier. Diluted EPS was $0.36, up sequentially from $0.09, and up from $0.32 year-earlier.

Cash, equivalents and investment balance was $994 million, down sequentialy from $1.11 billion. No Long term debt. Cash flow from operations was $80 million. Free cash flow was $48 million. Capital expenditures were $32 million. Cash used to repurchase stock was $0 million. $0 million was used to pay down debt.

GAAP cost of revenue was $391 million, leaving gross profit of $721 million. Operating expenses were $2.36 billion, consisting of: $325 million for research and development; $147 million for selling, general, and administrative; $1.89 billion goodwill impairment. Leaving income from operations of negative $1.64 billion. Other expense was $339 million. Income tax $12 million.

Q&A selective summary:

$1 million NovaSeq X pull through? We want to help better model revenue from NovaSeq X. About 45% of consumables revenue is already on X. Gaining about 5% per quarter.

Pricing of equipment? X+ has had stable pricing. X will be at a lower price point for customers that are capital constrained. But they can later upgrade to X+. X will launch later this year.

My math says you are headed to single digit revenue growth next year? It too early to have a detailed conversation about 2025.

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