01—Abstract
Summary
Summary of the 10-Q filed November 6, 2024. Cited figures are marked; the original filing is the authoritative source.
Illumina, Inc. reported a sharply different quarter and nine-month period in its 10-Q for the quarter ended September 29, 2024.
Third-quarter total revenue was $1,080 milliona versus $1,119 million a year earlier, and net income was $705 million, compared with a net loss of $754 million in Q3 2023. The swing was driven largely by a $489 million gain from the reversal of the European Commission fine (recorded in legal contingency and settlement) following the Commission's withdrawal of the fine, and by the absence of the $821 million goodwill and intangible impairment recorded in Q3 2023. For the nine months (YTD 2024), revenue fell 3% to $3,268 million, gross margin rose to 65.3% from 61.2%, and the company posted a net loss of $1,410 million, reflecting a $1,889 million goodwill and intangible impairment, largely tied to GRAIL, and a $319 million net other expense that included a $332 million unrealized loss on Illumina's retained GRAIL investment.
The filing centers on the June 24, 2024 Spin-Off of GRAIL, Inc., in which Illumina distributed approximately 85.5% of GRAIL's common stock to its stockholders and retained about 14.5%. GRAIL's assets, liabilities, and results were not reclassified as discontinued operations. Illumina contributed $974 millionb of Disposal Funding, and GRAIL cash of $968 million was deconsolidated.
Balance sheet metrics shifted accordingly: total assets fell to $6,014 millionc from $10,111 million at year-end 2023, goodwill fell to $1,113 million, and term debt rose to $1,988 million from $1,489 million after the issuance of $500 million of 2026 Term Notes and repayment of a $750 million delayed draw term loan. The filing also reports ongoing legal exposure. The company disclosed numerous stockholder derivative suits, federal and state securities class actions tied to the GRAIL acquisition, an SEC investigation, and a Department of Justice civil investigative demand under the False Claims Act.
The filing states that the lawsuits are at an early stage and that the company cannot predict their outcomes. Cash and cash equivalents ended the quarter at $869 milliond, and the company repurchased 770 thousand shares during Q3 2024 at a total cost of $99 million under a new $1.5 billion authorization.
02—Key points
Key Highlights
- Q3 2024 net income of $705 million versus a net loss of $754 million in Q3 2023, driven by a $489 million gain from reversal of the EC fine accrual and no goodwill impairment in the quarter
- Q3 2024 total revenue of $1,080 million, down from $1,119 million in Q3 2023; YTD 2024 revenue of $3,268 million, down from $3,382 million
- YTD 2024 gross margin of 65.3% versus 61.2% in YTD 2023, citing operational excellence, a favorable consumables mix, and lower warranty and field service costs
- YTD 2024 net loss of $1,410 million, including a $1,889 million goodwill and intangible impairment and a $332 million unrealized loss on the retained GRAIL investment
- GRAIL Spin-Off completed June 24, 2024; Illumina retained about 14.5% of GRAIL common stock, initially recorded at $397 million
- Term debt increased to $1,988 million from $1,489 million after issuing $500 million of 4.650% 2026 Term Notes and repaying the $750 million delayed draw term loan
- Multiple GRAIL-related securities class actions, derivative suits, an SEC investigation, and a DOJ civil investigative demand remain pending; the company says outcomes cannot be predicted
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Illumina kept $0.65.
- Revenue$1.08B100.0%
- Cost of revenue−$335.0M31.0%
- Gross profit$745.0M69.0%
- Operating costs−$4.0M0.4%
- Operating income$741.0M68.6%
- Interest, other & tax−$36.0M3.3%
- Net income$705.0M65.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 6, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $1.08B$1.18B | −8.2% |
| Cost of Revenue | $335.00M$444.00M | −24.5% |
| Gross Profit | $745.00M$732.00M | +1.8% |
| R&D Expenses | $253.00M$358.00M | −29.3% |
| SG&A Expenses | $239.00M$462.00M | −48.3% |
| Operating Expenses | $4.00M$820.00M | −99.5% |
| Operating Income | $741.00M-$88.00M | +942.0% |
| Net Income | $705.00M-$234.00M | +401.3% |
| EPS (Basic) | $4.43$-1.48 | +399.3% |
| EPS (Diluted) | $4.42$-1.48 | +398.6% |
| Shares Outstanding (Basic) | 159.00M158.00M | +0.6% |
| Shares Outstanding (Diluted) | 160.00M158.00M | +1.3% |
05—Questions
Frequently Asked Questions
Why did Illumina report net income in Q3 2024 after a large loss in Q3 2023?
Q3 2024 net income of $705 million was primarily due to a $489 million gain from reversing the European Commission fine accrual and related interest, recorded in legal contingency and settlement after the Commission withdrew the fine in September 2024. Q3 2023 included an $821 million goodwill and intangible impairment that did not recur in Q3 2024.
What is the status of the GRAIL Spin-Off and what stake does Illumina still hold?
The Spin-Off was completed on June 24, 2024, with Illumina distributing approximately 85.5% of GRAIL's common stock to its stockholders. Illumina retained approximately 14.5%, which was initially recorded at $397 million, and recorded a $332 million unrealized loss on that investment through September 29, 2024. Illumina also contributed $974 million of Disposal Funding to GRAIL.
How did Illumina's liquidity and debt position change during the nine months?
Cash and cash equivalents decreased to $869 million from $1,048 million at year-end 2023, and cash decreased by $179 million overall. Term debt increased to $1,988 million from $1,489 million after the $500 million 2026 Term Notes issuance and the $750 million delayed draw term loan repayment. The revolving credit facility of $750 million had no borrowings outstanding as of September 29, 2024.
What legal risks does the filing identify?
The filing describes several GRAIL-related matters: federal and state securities class actions, multiple stockholder derivative suits, an SEC investigation, a Department of Justice civil investigative demand under the False Claims Act concerning cybersecurity compliance representations, and a Delaware books-and-records action. The company states that the securities and derivative suits are at an early stage and that it cannot predict their ultimate outcome, and it intends to vigorously defend them.
What drove the decline in revenue and what share repurchases occurred?
Year-to-date revenue fell 3% to $3,268 million, primarily due to lower sequencing instrument revenue from fewer high-throughput and mid-throughput instrument shipments, partly offset by higher sequencing consumables and service revenue. During Q3 2024, Illumina repurchased 770 thousand shares for a total cost of $99 million under a new $1.5 billion authorization, leaving approximately $1.4 billion available as of September 29, 2024.
06—Continue