Illumina Reports Financial Results for Second Quarter of Fiscal Year 2022


  • Revenue of $1.16 billion for Q2 2022, up 3% from Q2 2021, and up 5% on a constant currency basis

  • GAAP diluted loss per share of $(3.40) for Q2 2022, compared to GAAP diluted earnings per share of $1.26 for Q2 2021; GAAP diluted loss per share for Q2 2022 includes $609 million in legal contingencies

  • Non-GAAP diluted earnings per share of $0.57 for Q2 2022, compared to non-GAAP diluted earnings per share of $1.87 for Q2 2021

  • Expect full year revenue for fiscal year 2022 to grow 4% to 5% from fiscal year 2021, primarily reflecting the ongoing negative impact of foreign exchange rates, customer lab expansion delays, and macroeconomic-driven conservatism around immediate capital and inventory commitments, including in Greater China

  • Expect GAAP diluted loss per share of $(2.93) to $(2.78) for fiscal year 2022

  • Expect non-GAAP diluted earnings per share of $2.75 to $2.90 for fiscal year 2022

SAN DIEGO, Aug. 11, 2022 /PRNewswire/ — Illumina, Inc. (Nasdaq: ILMN) today announced its financial results for the second quarter of fiscal year 2022, which include consolidated financial results for GRAIL.

Illumina, Inc. (PRNewsfoto/Illumina, Inc.)

Illumina, Inc. (PRNewsfoto/Illumina, Inc.)

“Our second quarter results did not meet our expectations as challenges in a complex macroeconomic environment more than offset the growth we continue to see in sequencing runs on our platforms,” said Francis deSouza, Chief Executive Officer. “As we strategically navigate these dynamics, we continue to advance our innovation roadmap in support of our long-term growth trajectory. At our upcoming Illumina Genomics Forum and Investor Day events, we look forward to showcasing our breakthrough technologies that demonstrate the power and potential of genomics.”

Second quarter consolidated results

GAAP

Non-GAAP (a)

Dollars in millions, except per share amounts

Q2 2022 (b)

Q2 2021

Q2 2022 (b)

Q2 2021

Revenue

$  1,162

$  1,126

Gross margin

66.0 %

71.2 %

69.4 %

71.8 %

Research and development (“R&D”) expense

$     327

$     202

$     327

$    202

Selling, general and administrative (“SG&A”) expense

$     410

$     413

$     339

$    269

Legal contingencies

$     609

$       —

$       —

$       —

Operating (loss) profit

$    (579)

$     187

$    141

$    338

Operating margin

(49.8) %

16.6 %

12.2 %

30.0 %

Net (loss) income

$    (535)

$     185

$      91

$    276

Diluted (loss) earnings per share

$   (3.40)

$    1.26

$   0.57

$   1.87

(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 Q2 2022, but not in Q2 2021, as GRAIL was acquired on August 18, 2021.

During the second quarter of 2022, Illumina recognized $609 million in legal contingencies, including an accrual of $453 million, recorded in Q2 2022, for the potential fine that the European Commission may impose of up to 10% of our consolidated annual revenues and an estimated accrual of $156 million, also recorded in Q2 2022, related to the settlement of our litigation with BGI in July 2022.

Capital expenditures for free cash flow purposes were $71 million during the second quarter of 2022. Cash flow from operations was $125 million, compared to $253 million in the prior year period, with the year-over-year decrease primarily attributable to GRAIL’s operating loss. Free cash flow (cash flow used in operations less capital expenditures) was $54 million for the quarter, compared to $209 million in the prior year. Depreciation and amortization expenses were $93 million during the second quarter of 2022. At the close of the quarter, the company held $1,327 million in cash, cash equivalents and short-term investments, compared to $1,339 million as of January 2, 2022.

Second 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.

Core Illumina

GAAP

Non-GAAP (a)

Dollars in millions

Q2 2022

Q2 2021

Q2 2022

Q2 2021

Revenue (b)

$  1,156

$  1,126

Gross margin

69.3 %

71.2 %

69.8 %

71.8 %

R&D expense

$     249

$     202

$     249

$     202

SG&A expense

$     339

$     413

$     270

$     269

Legal contingencies

$     609

$       —

$       —

$       —

Operating (loss) profit

$    (396)

$     187

$     288

$     338

Operating margin

(34.3) %

16.6 %

24.9 %

30.0 %

(a) See Table 3 included in “Results of Operations – Non-GAAP” section below for reconciliations of these GAAP and non-GAAP financial measures.

(b) Core Illumina revenue for Q2 2022 was up 3% from Q2 2021, and up 4% on a constant currency basis. Amount for Q2 2022 includes intercompany revenue of $6 million, which is eliminated in consolidation.

GRAIL

GAAP

Non-GAAP (a)

In millions

Q2 2022

Q2 2021

Q2 2022

Q2 2021

Revenue

$      12

Gross (loss) profit

$     (29)

$        4

R&D expense

$      86

$      86

SG&A expense

$      72

$      70

Operating loss

$   (187)

$   (152)

(a) See Table 3 included in “Results of Operations – Non-GAAP” section below for a reconciliation of these GAAP and non-GAAP financial measures.

Key announcements by Illumina since Illumina’s last earnings release

  • Unveiled DRAGEN v4.0, Illumina’s most accurate and comprehensive secondary analysis platform, boosting capabilities in key areas including oncology, pharmacogenomics, single-cell sequencing, and population genomics with a single platform

  • Launched Research Use Only (RUO) TruSight™ Oncology 500 HRD test codeveloped with Merck to enable researchers to unlock deeper insights about the tumor genome, and introduced new pan-cancer companion diagnostic (CDx) for TSO Comprehensive EU, codeveloped with Bayer, to match patients with rare genetic mutations to targeted therapies

  • Partnered with Allegheny Health Network to assess in-house comprehensive cancer genomic profiling (CGP) to enhance patient care

  • Announced new 2×300 base pair read lengths on NextSeq™ 1000 and 2000 systems, new data on Infinity long-read technology and developments in informatics solutions at AGBT General Meeting

  • Announced inaugural Illumina Genomics Forum with 45 speakers, including former U.S. President Barack Obama, technologist, business leader, and philanthropist Bill Gates, and other leaders in genomics and healthcare from around the world

  • Received validation of net-zero targets by the Science Based Targets Initiative (SBTi), among first companies in the world

  • Appointed Joydeep Goswami, Chief Strategy and Corporate Development Officer, as Interim Chief Financial Officer

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

  • Enrolled 140,000 participants in NHS-Galleri trial, largest study of multi-cancer early detection test

  • Announced strategic collaboration with AstraZeneca to develop companion diagnostic tests and identify patients with high-risk, early-stage disease who could benefit from novel therapies

  • Expanded offering of Galleri® across the U.S. through partnerships with Mercy, one of the 25 largest U.S. health systems, Community Health Network in the Midwest, with Ochsner Health, the largest Gulf South health system, and with Intermountain Healthcare in Utah

  • Partnered with Fountain Health Insurance to offer Galleri® as part of annual wellness benefits

  • Collaborated with U.S. Dept. of Veterans Affairs and Veterans Health Foundation to provide Galleri® to 10,000 veterans across the U.S. over next 3 years

  • Named Best Overall Medical Device Company in 2022 MedTech Breakthrough Awards

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 growth in the range of 4% to 5%. We now expect GAAP diluted loss per share of $(2.93) to $(2.78) and non-GAAP diluted earnings per share of $2.75 to $2.90. 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 or deferred in the fourth quarter of 2022. If the R&D expense capitalization requirement is not repealed or deferred in 2022, the company’s tax expense will be negatively impacted.

Core Illumina revenue growth is now expected to be in the range of 3.5% to 4.5%. GRAIL revenue is now expected to be in the range of $50 million to $70 million.

Conference call information
The conference call will begin at 2 p.m. Pacific Time (5 p.m. Eastern Time) on Thursday, August 11, 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 6659694. 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.

Statement regarding use of non-GAAP financial measures
The company reports non-GAAP results for diluted earnings per share, net income, gross margin, operating expenses, including research and development expense, selling general and administrative expense and legal contingencies, operating income (loss), operating margin, gross profit, other income (expense), constant…



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2022-08-11 13:05:00

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