First quarter 2018 results:
- Revenue of
$782 million , a 31% increase compared to$598 million in the first quarter of 2017 - GAAP net income attributable to
Illumina stockholders for the quarter of$208 million , or$1.41 per diluted share, compared to$367 million , or$2.48 per diluted share, for the first quarter of 2017; the prior year period included the impact of a pre-tax gain of $453 million as a result of the GRAIL repurchase of shares from Illumina - Non-GAAP net income attributable to
Illumina stockholders for the quarter of$214 million , or$1.45 per diluted share, compared to$94 million , or$0.64 per diluted share, for the first quarter of 2017 (see the table entitled “Itemized Reconciliation Between GAAP and Non-GAAP Net Income Attributable to Illumina Stockholders” for a reconciliation of these GAAP and non-GAAP financial measures) - Cash flow from operations of
$255 million compared to$168 million in the first quarter of 2017 - Free cash flow (cash flow from operations less capital expenditures) of
$165 million for the quarter compared to$85 million in the first quarter of 2017
Gross margin in the first quarter of 2018 was 68.8% compared to 61.5% in the prior year period. Excluding amortization of acquired intangible assets, non-GAAP gross margin was 69.8% for the first quarter of 2018 compared to 66.4% in the prior year period.
Research and development (R&D) expenses for the first quarter of 2018 were
Selling, general and administrative (SG&A) expenses for the first quarter of 2018 were
Depreciation and amortization expenses were
“Our strong first quarter, with momentum across both our sequencing and microarray businesses, was driven by the growing adoption of applications spanning oncology, clinical and non-clinical research, population genomics and personal genomics,” said Francis deSouza, President and CEO. “Genomic information is more valuable and actionable than ever before and we believe that we are in the earliest stages of a genomics revolution.”
Updates since our last earnings release:
- Released the NovaSeq S1 flow cell reagent kit for the NovaSeq 6000 System
- Received a product approval certificate for the NextSeq™ 550Dx instrument with the Ministry of Food and Drug Safety (MFDS) in South
Korea - Announced a collaboration with
Bristol-Myers Squibb to utilize Illumina’s next-generation sequencing (NGS) technology to develop and globally commercialize in-vitro diagnostic (IVD) assays in support of Bristol-Myers Squibb’s oncology portfolio - Announced a partnership with
Loxo Oncology to develop and commercialize a multi-gene panel for broad tumor profiling, targeting a distributable, NGS-based companion diagnostic (CDx) with a pan-cancer indication - Launched a study with Harvard Pilgrim Health Care, a not-for-profit health services company, designed to gather data intended to support wider average-risk patient access and reimbursement of NGS for non-invasive prenatal testing
- Appointed Dr. Phil Febbo to the position of Senior Vice President and Chief Medical Officer
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. Please see our Reconciliation of Non-GAAP Financial Guidance included in this release for a reconciliation of the GAAP and non-GAAP financial measures.
For fiscal 2018, the company now projects 15% to 16% revenue growth, GAAP earnings per diluted share attributable to Illumina stockholders of $4.45 to $4.55 and non-GAAP earnings per diluted share attributable to Illumina stockholders of $4.75 to $4.85.
Quarterly conference call information
The conference call will begin at
A replay of the conference call will be available from
Statement regarding use of non-GAAP financial measures
The company reports non-GAAP results for diluted net income per share, net income, gross margins, operating expenses, operating margins, other income, and free cash flow in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The company’s financial measures under GAAP include substantial charges such as amortization of acquired intangible assets, non-cash interest expense associated with the company’s convertible debt instruments that may be settled in cash, and others that are listed in the itemized reconciliations between GAAP and non-GAAP financial measures included in this press release. Management has excluded the effects of these items in non-GAAP measures to assist investors in analyzing and assessing past and future operating performance. Additionally, non-GAAP net income attributable to
The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.
Use of forward-looking statements
This release contains forward-looking statements that involve risks and uncertainties, including our financial outlook and guidance for fiscal 2018 and expectations regarding the development and commercialization of new products. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are: (i) challenges inherent in developing, manufacturing, and launching new products and services, including expanding manufacturing operations and reliance on third-party suppliers for critical components; (ii) the timing and mix of customer orders among our products and services; (iii) the impact of recently launched or pre-announced products and services on existing products and services; (iv) our ability to further develop and commercialize our instruments and consumables and to deploy new products, services, and applications, and expand the markets, for our technology platforms; (v) our ability to manufacture robust instrumentation and consumables; (vi) the success of products and services competitive with our own; (vii) our ability to successfully identify and integrate acquired technologies, products, or businesses; (viii) our expectations and beliefs regarding future conduct and growth of the business and the markets in which we operate; and (ix) the application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments, together with other factors detailed in our filings with the
About
| Illumina, Inc. | |||||||||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||||||||
| (In millions) | |||||||||||||||||
| April 1, 2018 | December 31, 2017 | ||||||||||||||||
| ASSETS | (unaudited) | ||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash and cash equivalents | $ | 1,560 | $ | 1,225 | |||||||||||||
| Short-term investments | 813 | 920 | |||||||||||||||
| Accounts receivable, net | 400 | 411 | |||||||||||||||
| Inventory | 350 | 333 | |||||||||||||||
| Prepaid expenses and other current assets | 71 | 91 | |||||||||||||||
| Total current assets | 3,194 | 2,980 | |||||||||||||||
| Property and equipment, net | 983 | 931 | |||||||||||||||
| Goodwill | 775 | 771 | |||||||||||||||
| Intangible assets, net | 168 | 175 | |||||||||||||||
| Deferred tax assets | 100 | 88 | |||||||||||||||
| Other assets | 322 | 312 | |||||||||||||||
| Total assets | $ | 5,542 | $ | 5,257 | |||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Accounts payable | $ | 151 | $ | 160 | |||||||||||||
| Accrued liabilities | 388 | 432 | |||||||||||||||
| Build-to-suit lease liability | 21 | 144 | |||||||||||||||
| Long-term debt, current portion | 620 | 10 | |||||||||||||||
| Total current liabilities | 1,180 | 746 | |||||||||||||||
| Long-term debt | 710 | 1,182 | |||||||||||||||
| Other long-term liabilities | 364 | 360 | |||||||||||||||
| Redeemable noncontrolling interests | 215 | 220 | |||||||||||||||
| Stockholders’ equity | 3,073 | 2,749 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 5,542 | $ | 5,257 | |||||||||||||
| Illumina, Inc. | |||||||||||||||||
| Condensed Consolidated Statements of Income | |||||||||||||||||
| (In millions, except per share amounts) | |||||||||||||||||
| (unaudited) | |||||||||||||||||
| Three Months Ended | |||||||||||||||||
| April 1, 2018 | April 2, 2017 | ||||||||||||||||
| Revenue: | |||||||||||||||||
| Product revenue | $ | 628 | $ | 491 | |||||||||||||
| Service and other revenue | 154 | 107 | |||||||||||||||
| Total revenue | 782 | 598 | |||||||||||||||
| Cost of revenue: | |||||||||||||||||
| Cost of product revenue (a) | 174 | 166 | |||||||||||||||
| Cost of service and other revenue (a) | 62 | 53 | |||||||||||||||
| Amortization of acquired intangible assets | 8 | 11 | |||||||||||||||
| Total cost of revenue | 244 | 230 | |||||||||||||||
| Gross profit | 538 | 368 | |||||||||||||||
| Operating expense: | |||||||||||||||||
| Research and development (a) | 137 | 145 | |||||||||||||||
| Selling, general and administrative (a) | 183 | 171 | |||||||||||||||
| Total operating expense | 320 | 316 | |||||||||||||||
| Income from operations | 218 | 52 | |||||||||||||||
| Other income, net | 3 | 451 | |||||||||||||||
| Income before income taxes | 221 | 503 | |||||||||||||||
| Provision for income taxes | 24 | 155 | |||||||||||||||
| Consolidated net income | 197 | 348 | |||||||||||||||
| Add: Net loss attributable to noncontrolling interests | 11 | 19 | |||||||||||||||
| Net income attributable to Illumina stockholders | $ | 208 | $ | 367 | |||||||||||||
| Net income attributable to Illumina stockholders for earnings per share (b) | $ | 208 | $ | 366 | |||||||||||||
| Earnings per share attributable to Illumina stockholders: | |||||||||||||||||
| Basic | $ | 1.42 | $ | 2.50 | |||||||||||||
| Diluted | $ | 1.41 | $ | 2.48 | |||||||||||||
| Shares used in computing earnings per common share: | |||||||||||||||||
| Basic | 147 | 146 | |||||||||||||||
| Diluted | 148 | 147 | |||||||||||||||
(a) Includes stock-based compensation expense for stock-based awards:
| Three Months Ended | |||||||||||||||||
| April 1, 2018 | April 2, 2017 | ||||||||||||||||
| Cost of product revenue | $ | 4 | $ | 3 | |||||||||||||
| Cost of service and other revenue | 1 | — | |||||||||||||||
| Research and development | 15 | 14 | |||||||||||||||
| Selling, general and administrative | 28 | 33 | |||||||||||||||
| Stock-based compensation expense before taxes (1) | $ | 48 | $ | 50 | |||||||||||||
(1) Includes stock-based compensation of
(b) Amount reflects the additional losses attributable to the common shareholders of GRAIL and Helix for earnings per share purposes.
| Illumina, Inc. | ||||||||||||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||||||||||||
| (In millions) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| April 1, 2018 | April 2, 2017 | |||||||||||||||||
| Net cash provided by operating activities | $ | 255 | $ | 168 | ||||||||||||||
| Net cash provided by investing activities | 12 | 163 | ||||||||||||||||
| Net cash provided by (used in) financing activities | 67 | (86 | ) | |||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 1 | 1 | ||||||||||||||||
| Net increase in cash and cash equivalents | 335 | 246 | ||||||||||||||||
| Cash and cash equivalents, beginning of period | 1,225 | 735 | ||||||||||||||||
| Cash and cash equivalents, end of period | $ | 1,560 | $ | 981 | ||||||||||||||
| Calculation of free cash flow: | ||||||||||||||||||
| Net cash provided by operating activities | $ | 255 | $ | 168 | ||||||||||||||
| Purchases of property and equipment | (90 | ) | (83 | ) | ||||||||||||||
| Free cash flow (a) | $ | 165 | $ | 85 | ||||||||||||||
(a) Free cash flow, which is a non-GAAP financial measure, is calculated as net cash provided by operating activities reduced by purchases of property and equipment. Free cash flow is useful to management as it is one of the metrics used to evaluate our performance and to compare us with other companies in our industry. However, our calculation of free cash flow may not be comparable to similar measures used by other companies.
| Illumina, Inc. | ||||||||||||||||||
| Results of Operations — Non-GAAP | ||||||||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP EARNINGS PER SHARE ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS: | ||||||||||||||||||
| Three Months Ended | ||||||||||||||||||
| April 1, 2018 | April 2, 2017 | |||||||||||||||||
| GAAP earnings per share attributable to Illumina stockholders — diluted | $ | 1.41 | $ | 2.48 | ||||||||||||||
| Amortization of acquired intangible assets | 0.06 | 0.09 | ||||||||||||||||
| Non-cash interest expense (a) | 0.05 | 0.05 | ||||||||||||||||
| Strategic investment related gains (b) | (0.05 | ) | (0.01 | ) | ||||||||||||||
| Restructuring (c) | 0.02 | — | ||||||||||||||||
| Gain on deconsolidation of GRAIL (d) | — | (3.07 | ) | |||||||||||||||
| Impairments (e) | — | 0.15 | ||||||||||||||||
| Legal contingencies (f) | — | 0.05 | ||||||||||||||||
| Performance-based compensation related to GRAIL Series B financing (g) | — | 0.03 | ||||||||||||||||
| Acquisition related gain (h) | — | (0.01 | ) | |||||||||||||||
| Incremental non-GAAP tax expense (i) | (0.02 | ) | 0.93 | |||||||||||||||
| Excess tax benefit from share-based compensation (j) | (0.02 | ) | (0.05 | ) | ||||||||||||||
| Non-GAAP earnings per share attributable to Illumina stockholders — diluted (k) | $ | 1.45 | $ | 0.64 | ||||||||||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS: | ||||||||||||||||||
| GAAP net income attributable to Illumina stockholders | $ | 208 | $ | 367 | ||||||||||||||
| Amortization of acquired intangible assets | 9 | 13 | ||||||||||||||||
| Non-cash interest expense (a) | 8 | 7 | ||||||||||||||||
| Strategic investment related gains (b) | (8 | ) | (2 | ) | ||||||||||||||
| Restructuring (c) | 3 | — | ||||||||||||||||
| Gain on deconsolidation of GRAIL (d) | — | (453 | ) | |||||||||||||||
| Impairments (e) | — | 23 | ||||||||||||||||
| Legal contingencies (f) | — | 8 | ||||||||||||||||
| Performance-based compensation related to GRAIL Series B financing (g) | — | 4 | ||||||||||||||||
| Acquisition related gain (h) | — | (1 | ) | |||||||||||||||
| Incremental non-GAAP tax expense (i) | (3 | ) | 136 | |||||||||||||||
| Excess tax benefit from share-based compensation (j) | (3 | ) | (8 | ) | ||||||||||||||
| Non-GAAP net income attributable to Illumina stockholders (k) | $ | 214 | $ | 94 | ||||||||||||||
All amounts in tables are rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided.
(a) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(b) Amount consists primarily of mark-to-market adjustments from our strategic investments.
(c) Amount consists primarily of employee costs related to restructuring that occurred in Q1 2018 and Q4 2017.
(d) Amount represents the gain recognized as a result of the deconsolidation of GRAIL in Q1 2017. The
(e) Amount for 2017 represents impairment of an acquired intangible asset and in-process research and development of
(f) Legal contingencies for 2017 represent charges related to patent litigation.
(g) Amount represents performance-based stock which vested as a result of the financing in Q1 2017, net of attribution to noncontrolling interest.
(h) Acquisition related gain consists of change in fair value of contingent consideration.
(i) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above.
(j) Amount represents tax deductions taken in excess of stock compensation cost.
(k) Non-GAAP net income attributable to
| Illumina, Inc. | ||||||||||||||||||||||||
| Results of Operations — Non-GAAP (continued) | ||||||||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF OPERATIONS AS A PERCENT OF REVENUE: | ||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||||||
| April 1, 2018 | April 2, 2017 | |||||||||||||||||||||||
| GAAP gross profit | $ | 538 | 68.8 | % | $ | 368 | 61.5 | % | ||||||||||||||||
| Amortization of acquired intangible assets | 8 | 1.0 | % | 11 | 1.9 | % | ||||||||||||||||||
| Impairment (a) | — | — | 18 | 3.0 | % | |||||||||||||||||||
| Non-GAAP gross profit (b) | $ | 546 | 69.8 | % | $ | 397 | 66.4 | % | ||||||||||||||||
| GAAP research and development expense | $ | 137 | 17.5 | % | $ | 145 | 24.2 | % | ||||||||||||||||
| Impairment (a) | — | — | (5 | ) | (0.9 | )% | ||||||||||||||||||
| Non-GAAP research and development expense | $ | 137 | 17.5 | % | $ | 140 | 23.3 | % | ||||||||||||||||
| GAAP selling, general and administrative expense | $ | 183 | 23.5 | % | $ | 171 | 28.6 | % | ||||||||||||||||
| Restructuring (c) | (3 | ) | (0.5 | )% | — | — | ||||||||||||||||||
| Amortization of acquired intangible assets | (1 | ) | (0.1 | )% | (2 | ) | (0.2 | )% | ||||||||||||||||
| Performance-based compensation related to GRAIL Series B financing (d) | — | — | (10 | ) | (1.7 | )% | ||||||||||||||||||
| Legal contingencies (e) | — | — | (8 | ) | (1.3 | )% | ||||||||||||||||||
| Acquisition related gain (f) | — | — | 1 | 0.2 | % | |||||||||||||||||||
| Non-GAAP selling, general and administrative expense | $ | 179 | 22.9 | % | $ | 152 | 25.6 | % | ||||||||||||||||
| GAAP operating profit | $ | 218 | 27.8 | % | $ | 52 | 8.7 | % | ||||||||||||||||
| Amortization of acquired intangible assets | 9 | 1.2 | % | 13 | 2.1 | % | ||||||||||||||||||
| Restructuring (c) | 3 | 0.5 | % | — | — | |||||||||||||||||||
| Impairments (a) | — | — | 23 | 3.9 | % | |||||||||||||||||||
| Performance-based compensation related to GRAIL Series B financing (d) | — | — | 10 | 1.7 | % | |||||||||||||||||||
| Legal contingencies (e) | — | — | 8 | 1.3 | % | |||||||||||||||||||
| Acquisition related gain (f) | — | — | (1 | ) | (0.2 | )% | ||||||||||||||||||
| Non-GAAP operating profit (b) | $ | 230 | 29.5 | % | $ | 105 | 17.5 | % | ||||||||||||||||
| GAAP other income, net | $ | 3 | 0.4 | % | $ | 451 | 75.4 | % | ||||||||||||||||
| Non-cash interest expense (g) | 8 | 1.0 | % | 7 | 1.2 | % | ||||||||||||||||||
| Strategic investment related gains (h) | (8 | ) | (1.0 | )% | (2 | ) | (0.2 | )% | ||||||||||||||||
| Gain on deconsolidation of GRAIL (i) | — | — | (453 | ) | (75.9 | )% | ||||||||||||||||||
| Non-GAAP other income, net (b) | $ | 3 | 0.4 | % | $ | 3 | 0.5 | % | ||||||||||||||||
All amounts in tables are rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided.
(a) Impairments for 2017 include
(b) Non-GAAP gross profit, included within non-GAAP operating profit, is a key measure of the effectiveness and efficiency of manufacturing processes, product mix and the average selling prices of our products and services. Non-GAAP operating profit, and non-GAAP other income, net, exclude the effects of the pro forma adjustments as detailed above. Management has excluded the effects of these items in these measures to assist investors in analyzing and assessing past and future operating performance.
(c) Amount consists primarily of employee costs related to restructuring that occurred in Q1 2018 and Q4 2017.
(d) Amount represents performance-based stock which vested as a result of the financing in Q1 2017.
(e) Legal contingencies for 2017 represent charges related to patent litigation.
(f) Acquisition related gain consists of change in fair value of contingent consideration.
(g) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(h) Amount consists primarily of mark-to-market adjustments from our strategic investments.
(i) Amount represents the gain recognized as a result of the deconsolidation of GRAIL in Q1 2017.
Reconciliation of Non-GAAP Financial Guidance
Our future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect our financial results are stated above in this press release. More information on potential factors that could affect our financial results is included from time to time in the public reports filed with the
| Fiscal Year 2018 | ||||||||||||
| GAAP diluted earnings per share attributable to Illumina stockholders | $4.45 - $4.55 | |||||||||||
| Amortization of acquired intangible assets | 0.24 | |||||||||||
| Non-cash interest expense (a) | 0.21 | |||||||||||
| Strategic investment related gains (b) | (0.05) | |||||||||||
| Restructuring (c) | 0.03 | |||||||||||
| Incremental non-GAAP tax expense (d) | (0.11) | |||||||||||
| Excess tax benefits from share-based compensation (e) | (0.02) | |||||||||||
| Non-GAAP diluted earnings per share attributable to Illumina stockholders | $4.75 - $4.85 | |||||||||||
(a) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(b) Amount consists primarily of mark-to-market adjustments from our strategic investments.
(c) Amount consists primarily of employee severance and retention costs related to the restructuring that occurred in Q1 2018 and Q4 2017.
(d) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above.
(e) Amount represents tax deductions taken in excess of stock compensation cost.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180424006350/en/
Source:
Illumina, Inc.
Investors:
Jacquie Ross, CFA
858-882-2172
ir@illumina.com
or
Media:
Eric Endicott
858-882-6822
pr@illumina.com
