On November 3, 2022 Illumina, Inc. (Nasdaq: ILMN) reported its financial results for the third quarter of fiscal year 2022, which include consolidated financial results for GRAIL (Press release, Illumina, NOV 3, 2022, View Source [SID1234623047]).
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"Our third-quarter results were in line with our expectations, with traction across our portfolio offset by challenging macroeconomic dynamics that we expect will continue into 2023," said Francis deSouza, Chief Executive Officer. "Customer response to our latest innovations has been very positive; we already have 50 NovaSeq X orders globally. As we close out 2022 and look toward 2023, we are focused on helping customers navigate the current environment and delivering these technologies to help customers reimagine what’s possible with genomics."
(a) See the tables included in "Results of Operations – Non-GAAP" section below for reconciliations of these GAAP and non-GAAP financial measures.
(b) Consolidated financial results for GRAIL are included in Q3 2022 and in Q3 2021 for the period after the acquisition on August 18, 2021.
(c) During the third quarter of 2022, the company recognized $3.91 billion in goodwill impairment related to the GRAIL segment, primarily due to the negative impact of current capital market conditions and higher discount rates, including a standalone risk premium, on the fair value calculation of the GRAIL segment.
Capital expenditures for free cash flow purposes were $67 million during the third quarter of 2022. Cash flow used in operations was $(52) million, which included a one-time payment related to the litigation settlement with BGI, compared to $(272) million in the prior year period, which included transaction expenses related to the GRAIL acquisition on August 18, 2021. Free cash flow (cash flow used in operations less capital expenditures) was $(119) million for the quarter, compared to $(324) million in the prior year. Depreciation and amortization expenses were $103 million during the third quarter of 2022. At the close of the quarter, the company held $1,041 million in cash, cash equivalents and short-term investments, compared to $1,339 million as of January 2, 2022.
Third quarter segment results
Following the acquisition of GRAIL on August 18, 2021, Illumina has two reportable segments, Core Illumina and GRAIL. GRAIL financial results are reflected for the period after the acquisition.
Key announcements by Illumina since Illumina’s last earnings release
Announced multiple breakthrough sequencing innovations at the inaugural Illumina Genomics Forum, including:
NovaSeqX Series (NovaSeq X and NovaSeq X Plus), available in Q1 2023, enabling the highest levels of accuracy at immense scale, with the power to sequence more than 20,000 genomes per year
NovaSeq 6000Dx, available now as the first FDA-registered and CE-marked in vitro diagnostic (IVD) high-throughput sequencer
Illumina Complete Long-Reads, available in 2023, delivering a complete and accurate representation of the genome at the single molecule on both existing and new sequencing platforms
XLEAP-SBS Chemistry on the NextSeq 1000/2000 available in 2024
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, a targeted next-generation sequencing (NGS) based test for rapid and extensive detection of anti-TB drug resistance
Deepened strategic collaboration with AstraZeneca to accelerate drug target discovery based on human omics insights by combining strengths in artificial intelligence based genome interpretation and genomic analysis along with industry expertise
Opened the first manufacturing site in China to enable localized production for NGS instruments and consumables
Partnered with Minderoo Foundation to accelerate scientific understanding of marine systems using the power of high-throughput sequencing
Introduced new research test for genitourinary pathogen and antimicrobial resistance identification that applies metagenomics to detect and quantify pathogens
Hosted both Investor Day and ESG Investor Event in October with presentations from management on company strategic direction, key business areas, innovation roadmap developments and ESG strategy
A full list of recent Illumina announcements can be found in the company’s News Center.
Key announcements by GRAIL since Illumina’s last earnings release
Expanded offering of Galleri across the U.S. through partnerships with Carrum Health, to include Galleri as part of its comprehensive cancer care to self-insured employers, and with Henry Ford Health, the first healthcare provider in Michigan to offer Galleri
Announced final results from the PATHFINDER multi-cancer early detection screening study at ESMO (Free ESMO Whitepaper) Congress 2022, demonstrating that adding multi-cancer early detection screening to standard care screening more than doubled the number of cancers detected
Partnered with John Hancock, the first life insurance carrier to offer access to Galleri to customers
A full list of recent GRAIL announcements can be found in GRAIL’s Newsroom.
Financial outlook and guidance
The non-GAAP financial guidance discussed below reflects certain pro forma adjustments to assist in analyzing and assessing our core operational performance, including our Core Illumina and GRAIL segments. Please see our Reconciliation of Consolidated Non-GAAP Financial Guidance included in this release for a reconciliation of these GAAP and non-GAAP financial measures.
For fiscal 2022, the company now expects consolidated revenue to be flat to 1% higher compared to fiscal year 2021. We now expect GAAP diluted loss per share of $(26.56) to $(26.41) and non-GAAP diluted earnings per share of $2.35 to $2.50. The GAAP and non-GAAP diluted (loss) earnings per share guidance ranges continue to assume that the R&D expense capitalization requirement implemented by the Tax Cuts and Jobs Act of 2017 will be repealed in the fourth quarter of 2022. If the R&D expense capitalization requirement is not repealed in 2022, the company’s tax expense will be negatively impacted.
Core Illumina revenue growth is now expected to be approximately flat from fiscal year 2021. GRAIL revenue is now expected to be in the range of $55 million to $65 million.
Conference call information
The conference call will begin at 2 p.m. Pacific Time (5 p.m. Eastern Time) on Thursday, November 3, 2022. Interested parties may access the live teleconference through the Investor Info section of Illumina’s website under the "Company" tab at www.illumina.com. Alternatively, individuals can access the call by dialing 866.409.1555 or +1.313.209.4906 outside North America, both using conference ID 7679670. 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.