• Revenue of $1.18 billion for Q2 2023, up 1% from Q2 2022 (up 3% on a constant currency basis) and up 8% from Q1 2023
• Shipped 109 NovaSeq X instruments in Q2 2023; boosting our supply capacity to more than 390 instruments for fiscal year 2023
• GAAP diluted loss per share of $(1.48) for Q2 2023, compared to GAAP diluted loss per share of $(3.40) for Q2 2022, which included $609 million in legal contingencies
• Non-GAAP diluted earnings per share of $0.32 for Q2 2023, compared to non-GAAP diluted earnings per share of $0.57 for Q2 2022
• Now expect fiscal year 2023 consolidated revenue growth of approximately 1% from 2022, including Core Illumina revenue that is approximately flat with 2022 and GRAIL revenue still in the range of $90 million to $110 million
• Now expect GAAP diluted loss per share of $(2.08) to $(1.93) for fiscal year 2023
• Now expect non-GAAP diluted earnings per share of $0.75 to $0.90 for fiscal year 2023

"Illumina's second quarter consolidated revenue grew 8% sequentially from the first quarter, and we saw higher-than-anticipated NovaSeq X shipments," said Charles Dadswell, Interim Chief Executive Officer. "Despite additional placements, we expect our second half revenue to be negatively impacted by customers remaining more cautious in their purchasing, a more protracted recovery in China, and a larger-than-expected temporary decline in high throughput consumables as customers transition to the NovaSeq X. In response, we are increasing customer support for the NovaSeq X and continue to manage our expense base in a disciplined way." 

Second quarter consolidated results

Capital expenditures for free cash flow purposes were $47 million for Q2 2023. Cash flow provided by operations was $105 million, compared to $125 million in the prior year period. Free cash flow (cash flow provided by operations less capital expenditures) was $58 million for the quarter, compared to $54 million in the prior year period. Depreciation and amortization expenses were $108 million for Q2 2023. At the close of the quarter, the company held $1,559 million in cash, cash equivalents and short-term investments, compared to $2,037 million as of January 1, 2023. On July 12, 2023, the European Commission imposed a €432 million fine due to the completion of the GRAIL acquisition during the pendency of the European Commission's review. While expected and accrued for over the last year, Illumina believes that the fine is unlawful, inappropriate, and disproportionate, and is appealing the decision. Illumina plans to issue a guarantee and defer the payment of the fine pending the outcome of the appeal of the EU General Court's ruling that the European Commission has jurisdiction to review the GRAIL acquisition.

Second quarter segment results

Illumina has two reportable segments, Core Illumina and GRAIL.

Core Illumina

GRAIL

As previously stated, Illumina is committed to moving as quickly as possible through the legal and regulatory processes associated with its acquisition of GRAIL. If the company loses either its appeal in the US Court of Appeals for the Fifth Circuit or its appeal in the European Court of Justice (ECJ), Illumina expects to move quickly to divest GRAIL in a manner that serves the best interests of its shareholders. Should the company win both appeals, Illumina would undertake a detailed review of the GRAIL business, as it would no longer be subject to the hold separate, and determine the optimal outcome for the asset, also in the best interests of Illumina's shareholders. Success in the ECJ appeal removes any fines; prevailing in the appeals increases the options to deliver value to shareholders. The legal and regulatory processes are finite; Illumina expects decisions from the US Court of Appeals for the Fifth Circuit in late 2023 and from the ECJ in late 2023 or early 2024.

Key announcements by Illumina since Illumina's last earnings release

• Announced the five founding members of the Alliance for Genomic Discovery (AGD), in which AbbVie, Amgen, AstraZeneca, Bayer, and Merck will co-fund the sequencing of 250,000 whole-genomes and have access to the data for use in drug discovery and therapeutic development
• Launched DRAGEN 4.2, which expands upon award-winning accuracy combined with renowned flexibility and scalability to enable efficient workflows and extract meaningful insights from genomic data
• Announced strategic partnership with Pillar Biosciences, Inc. to make Pillar's suite of oncology assays commercially available globally as part of the Illumina portfolio of oncology products
• Unveiled PrimateAI-3D, an artificial intelligence (AI) algorithm that predicts with unprecedented accuracy disease-causing genetic mutations in patients
• Named three new independent directors to the board: Stephen P. MacMillan, Chairman, President and CEO of Hologic, Scott B. Ullem, Corporate Vice President and CFO of Edwards Lifesciences, and Andrew Teno, Portfolio Manager at Icahn Capital LP
• Elected Stephen P. MacMillan as non-executive chair of the board
• Appointed Charles Dadswell, General Counsel, as Interim Chief Executive 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

• Announced results from the prospective SYMPLIFY study, showing strong performance of Galleri in the symptomatic population of more than 6,000 patients and demonstrated the feasibility of using a Multi-Cancer Early Detection (MCED) test to assist clinicians with decisions regarding referral from primary care
• Presented data at ASCO, showing support that real-world performance of Galleri is consistent with previous large-scale clinical studies, including the cancer signal detection (CSD) rate and accuracy of the Cancer Signal Origin (CSO) prediction to guide diagnostic workup
• Announced results from a retrospective analysis of the interventional PATHFINDER study, demonstrating that in the majority of cases (78%), the test's CSO-directed initial diagnostic evaluation led to a diagnostic resolution
• Completed second year study visits for the NHS-Galleri study, in which 130,000 participants came back for their second appointment (retention rate of 91.3%)

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 the company's 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 year 2023, the company now expects consolidated revenue growth of approximately 1% compared to fiscal year 2022. The company now expects Core Illumina revenue to be approximately flat compared to fiscal year 2022. GRAIL revenue is still expected to be in the range of $90 million to $110 million.

The company now expects GAAP diluted loss per share of $(2.08) to $(1.93) and non-GAAP diluted earnings per share of $0.75 to $0.90. The GAAP and non-GAAP diluted (loss) earnings per share guidance ranges continue to assume that the existing R&D capitalization requirements are not repealed in fiscal year 2023 and, as a result, reflect a tax expense impact of approximately $75 million.