Invitae Corp (NVTA)·Q2 2023 Earnings Summary

Executive Summary

• Q2 2023 delivered stable top-line and stronger profitability metrics: revenue of $120.5M (-12% YoY on reported basis; ~+1% YoY pro forma), non-GAAP gross margin expanded to 49.8% (8th consecutive quarterly improvement), and quarterly cash burn improved to $53.3M .
• Management lowered full-year revenue guidance to $480–$500M (from “over $500M”) on reimbursement headwinds and the exit of the pharmacogenomics (PGx) testing business, while improving ongoing 2023 cash-burn guidance to $220–$245M (from $250–$275M) and maintaining non-GAAP GM at 48%–50% .
• Within oncology, U.S. hereditary cancer test volumes grew 8% YoY on a pro forma basis, but payments/fee-for-service were softer; management is focused on expanding call points into community oncology and improving payment rates and average payment per test .
• Street estimate comparisons from S&P Global were unavailable via our data tool this quarter; we therefore do not present vs-consensus figures for EPS or revenue (see “Estimates Context”).

What Went Well and What Went Wrong

• What Went Well

  • Continued profitability progress: non-GAAP gross margin expanded to 49.8% (from 40.1% a year ago) as the company posted its eighth consecutive quarterly improvement; non-GAAP gross profit rose ~10% YoY to $60.0M .
  • Cash discipline: quarterly cash burn improved to $53.3M; ongoing FY23 cash-burn guidance improved to $220–$245M (prior $250–$275M) .
  • Demand pockets: “Rare disease, women’s health and our data business all posted strong double-digit revenue growth,” and U.S. hereditary cancer volumes rose 8% YoY on a pro forma basis .

• What Went Wrong

  • Top-line headwinds: revenue guidance cut to $480–$500M (from >$500M) driven by lower-than-expected insurance payments in hereditary cancer and weaker fee-for-service revenue .
  • Strategic pruning: exiting PGx testing (Seattle lab closure) will reduce 2H and FY23 revenue by ~$(3)M, though accretive to gross margin .
  • GAAP losses remain large despite improvement drivers: GAAP net loss was $(206.5)M (vs. $(2.5)B in 2Q22, which included a $2.3B impairment); non-GAAP net loss was $(78.2)M .

Financial Results

Quarterly snapshot (oldest → newest):

Segment mix (reported):

Key operating metrics:

Cross-references: Non-GAAP gross profit rose to $60.0M in Q2 (from $54.7M in 2Q22) ; GAAP operating expenses of $259.5M in Q2 vs. $2.5B in 2Q22 (driven by prior impairments) .

Guidance Changes

Management noted PGx exit reduces 2H/FY23 revenue by ~$(3)M, accretive to GM trajectory .

Earnings Call Themes & Trends

Management Commentary

• “We continued our steady march toward becoming a profitable business… Non-GAAP gross margin and cash burn trajectory… continued to show meaningful improvements. On a pro forma basis, total revenue was up approximately 1% year-over-year… oncology sales were impacted by lower-than-expected insurance payments and lower fee-for-service revenue.” — Ken Knight, CEO .
• “We’re maintaining our non-GAAP gross margin guidance of 48% to 50%… bringing down our previous cash burn guidance to a range of $220 million to $245 million from… $250 million to $275 million.” — Management on guidance .
• “We made the decision to exit our pharmacogenomics testing business and close the Seattle lab… impact on second half and full year 2023 revenue is expected to be approximately $3 million, although it will be accretive to… gross margins.” — Ken Knight .

Q&A Highlights

• Margin durability and cadence: Management reiterated 48%–50% non-GAAP GM for FY23 and discussed intra-year cadence consistent with this range, underscoring operational improvements in labs, supply chain, and logistics .
• Revenue guidance drivers: Cut was tied to reimbursement/pricing and the PGx exit (~$(3)M headwind), not demand; hereditary cancer volumes were up on a pro forma basis .
• Commercial focus: Expanding call points into community oncology to address underutilization of hereditary cancer testing and improve payment rates/APPT .
• Liquidity: Company remains ahead on burn trajectory and cited “additional secured debt capacity” as optionality if needed .

Estimates Context

• S&P Global consensus estimates (EPS and revenue) were unavailable due to a data mapping issue for this ticker in our SPGI tool at the time of analysis; therefore, we do not present vs-consensus comparisons this quarter. We attempted to retrieve: Primary EPS Consensus Mean and Revenue Consensus Mean for Q2 2023 and FY 2023 but could not access SPGI data (tool mapping error).

Key Takeaways for Investors

• Mix vs price: Underlying demand is healthy in hereditary cancer (pro forma volumes +8% YoY), but revenue realization was pressured by payment rates and fee-for-service trends; near-term top-line risk remains tied to reimbursement progress .
• Profitability vector intact: Non-GAAP GM expansion and improved burn remain on track (FY23 GM 48%–50% maintained; ongoing burn guidance cut to $220–$245M), supporting the medium-term path to self-sustainability .
• Strategic focus sharpened: Exiting PGx trims revenue (~$(3)M) but supports margin and capital allocation to core hereditary cancer, women’s health, rare disease, data, and MRD/PCM .
• Working capital and collections are critical: Management prioritizes revenue cycle management to improve payment rates and average payment per test; progress here is a potential catalyst for both revenue and margins .
• Liquidity runway: Cash and marketable securities declined to $335.6M; however, cash burn trajectory improved and secured debt capacity offers flexibility if needed .
• Trading setup: Near-term stock reaction likely keyed to reimbursement narrative vs. evidence of sustainable GM/burn improvements; execution on community oncology expansion and collections could re-rate sentiment absent top-line acceleration .

Sources

• Q2 2023 8-K earnings press release and financials: .
• Q1 2023 8-K earnings press release and financials: .
• Q4 2022 8-K earnings press release and financials: .
• Q2 2023 earnings call transcript: Motley Fool, InsideArbitrage, and Seeking Alpha transcripts .
• Q1 2023 earnings call transcript: .