Illumina Q3 Earnings: Further Cuts Full-Year Outlook, Prepares to Divest GRAIL

Revenue for Q3 2023 was $1.12 billion, a year-over-year increase of 0.36%, with a non-GAAP profit margin of 66%; core revenue for Q3 (excluding GRAIL) was $1.106 billion, a year-over-year decrease of 0.36%. Non-GAAP net profit for Q3 of fiscal year 2023 was $52 million, a year-over-year decrease of 3.7%, while under GAAP accounting standards, the loss reached $745 million, including an intangible asset impairment of $821 million related to GRAIL.

Cumulative revenue for the first three quarters of fiscal year 2023 was $3.382 billion, compared to $3.501 billion for the same period last year.A decrease of 3.4% year-over-yearCore revenue (excluding GRAIL) in the first three quarters was US$3.341 billion, a year-on-year decrease of 4.19%. (The earnings report specifically notes that the data in the report mainly consists of non-GAAP financial results, which replace or are superior to financial indicators calculated in accordance with generally accepted accounting principles. This is because GAAP-based financial metrics include substantial expenses, such as the amortization of acquired intangible assets, among others.)

By business segment, in the third quarter:

• Revenue from instruments was $179 million, an increase of 10% year-over-year.
• Service and other revenue reached 142 million U.S. dollars, increasing by 15% year-on-year.
• Consumables revenue reached 695 million yuan, a year-on-year decrease of 4%, with a 12% decline in the research field and a 10% increase in the diagnostics field; COVID-19 testing business revenue was 4 million US dollars, compared to 28 million US dollars in the same period last year.

Q3 GRAIL Revenue Reached $21 Million, a 110% Increase Year-over-Year; 97 NovaSeq X Units Shipped in Q3, with a Cumulative Total of 273 Units in the First Three Quarters.

By region,Illumina's Q3 Revenue in Greater China Drops 26% to $98 Million; Other Asian countries and Africa decreased by 22%, Europe increased by 1%, and the Americas increased by 10%.

In the third quarter, Illumina once again adjusted its financial forecast for the full year of 2023, expecting a 2%-3% decline in revenue for the year, compared to the initial forecast of 7%-10% growth shown in the first-quarter earnings report. Key priorities moving forward for Illumina include strengthening the sales of NovaSeq X and other instruments, advancing innovation in automation and sample-to-answer solutions, reinforcing its leadership position, strictly controlling R&D investment, cutting costs, and reallocating resources toward high-growth areas.

In this earnings report, the progress on the handling of GRAIL, Inc. was also disclosed: a special committee has been established to expedite decision-making regarding GRAIL; advisors have been hired and preparations for sales and capital market transactions are underway; there is an expectation to file documents with the U.S. Securities and Exchange Commission on a confidential basis.Thereafter, third parties will be contacted as sources of investment funds or potential buyers.Currently, Illumina is formulating its 2024 budget. The preliminary macroeconomic outlook for 2024 is as follows: Do not expect the macroeconomic environment to improve in the short term; ongoing geopolitical issues. The current assessment of Illumina's performance in 2024 is that it will be similar to that in 2023.