01—Abstract
Summary
Summary of the 10-Q filed May 3, 2024. Cited figures are marked; the original filing is the authoritative source.
Illumina, Inc. reported a first-quarter 2024 net loss of $126 milliona, compared with net income of $3 million in Q1 2023, on total revenue of $1,076 million versus $1,087 million a year earlier.
Loss from operations widened to $111 millionb from $64 million, driven by a $59 million rise in operating expense that included $36 million of restructuring charges, partially offset by a $12 million increase in gross profit. Gross margin improved to 62.0% from 60.3%, reflecting a more favorable sequencing consumables mix and cost savings, while Core Illumina instrument revenue fell 29% on fewer high-throughput and mid-throughput shipments. Cash and cash equivalents rose to $1,108 million, and operating cash flow was $77 million.
The filing is dominated by the pending divestiture of GRAIL, which Illumina acquired in August 2021. The European Commission approved the divestment plan on April 12, 2024, and the company aims to finalize divestiture terms by the end of Q2 2024, though it states there can be no assurance on timing. The company has accrued $478 millionc for the European Commission's €432 million Article 14(2)(b) fine, which it has guaranteed while appealing.
Multiple shareholder derivative and securities class actions, plus an SEC inquiry and a DOJ civil investigative demand, are pending and described as being at early stages. GRAIL's segment posted a loss from operations of $227 milliond in Q1 2024 versus $204 million a year earlier, while Core Illumina's income from operations declined to $116 million from $142 million. The company stated it does not intend to make share repurchases during fiscal year 2024 and that its current liquidity is sufficient for at least the next 12 months.
02—Key points
Key Highlights
- Net loss of $126 million in Q1 2024 versus net income of $3 million in Q1 2023; loss per share of $(0.79).
- Total revenue of $1,076 million, down 1% from $1,087 million, with Core Illumina instrument revenue down 29% on fewer high-throughput and mid-throughput shipments.
- Gross margin rose to 62.0% from 60.3%, driven by a more favorable sequencing consumables mix and cost savings.
- Loss from operations widened to $111 million from $64 million, including $36 million of restructuring charges and $32 million of impairments.
- GRAIL divestiture is pending; the European Commission approved the divestment plan on April 12, 2024, with a goal of finalizing terms by end of Q2 2024.
- A €432 million European Commission fine is accrued at $478 million, guaranteed in lieu of cash payment while under appeal.
- Cash and cash equivalents of $1,108 million; the company does not intend to repurchase shares in fiscal 2024.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2024, Illumina lost $0.12.
- Revenue$1.08B100.0%
- Cost of revenue−$409.0M38.0%
- Gross profit$667.0M62.0%
- Operating costs−$778.0M72.3%
- Operating income−$111.0M10.3%
- Interest, other & tax−$15.0M1.4%
- Net income−$126.0M11.7%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 3, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.08B— | — |
| Cost of Revenue | $409.00M— | — |
| Gross Profit | $667.00M— | — |
| R&D Expenses | $339.00M— | — |
| SG&A Expenses | $439.00M— | — |
| Operating Expenses | $778.00M— | — |
| Operating Income | -$111.00M— | — |
| Interest Expense | $18.00M— | — |
| Net Income | -$126.00M-$139.00M | +9.4% |
| EPS (Basic) | $-0.79— | — |
| EPS (Diluted) | $-0.79— | — |
| Shares Outstanding (Basic) | 159.00M— | — |
| Shares Outstanding (Diluted) | 159.00M— | — |
05—Questions
Frequently Asked Questions
Why did Illumina's net result swing to a loss this quarter?
Net loss was $126 million versus net income of $3 million a year earlier. Operating expense rose $59 million to $778 million, including $36 million of restructuring charges, and loss from operations increased to $111 million. The effective tax rate was (15.3)% versus 103.9% in Q1 2023, with the provision for income taxes at $17 million compared with a $81 million benefit a year earlier.
What is the status of the GRAIL divestiture?
On December 17, 2023, Illumina announced it will divest GRAIL, and on April 12, 2024, the European Commission approved the divestment plan. The company expects to finalize terms by the end of Q2 2024 through a third-party sale or capital markets transaction, but states there can be no assurance regarding timing.
What financial exposure remains from the European Commission fine?
The fine of approximately €432 million, imposed July 12, 2023, is accruing interest at 5.5% per annum. As of March 31, 2024, the company had accrued $478 million, including accrued interest and foreign currency fluctuations. Illumina provided guarantees in October 2023 to satisfy the obligation in lieu of cash payment while it appeals.
How is Illumina's liquidity position?
Cash and cash equivalents were $1,108 million at March 31, 2024, of which approximately $614 million was held by foreign subsidiaries. Operating activities provided $77 million in cash, and the company stated its cash, short-term investments, operating cash flow and available Credit Facility borrowing capacity are sufficient for at least the next 12 months. No borrowings were outstanding under the $750 million Credit Facility.
How did the two business segments perform?
Core Illumina revenue was $1,056 million, with income from operations of $116 million, down from $142 million. GRAIL revenue was $27 million, with a loss from operations of $227 million compared with $204 million in Q1 2023.
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