First quarter 2015 results:
- Revenue of
$539 million , a 28% increase compared to$421 million in the first quarter of 2014, and an increase of 33% on a constant currency basis - GAAP net income for the quarter of
$137 million , or$0.92 per diluted share, compared to$60 million , or$0.40 per diluted share, for the first quarter of 2014 - Non-GAAP net income for the quarter of
$135 million , or$0.91 per diluted share, compared to$80 million , or$0.53 per diluted share, for the first quarter of 2014 (see the table entitled “Itemized Reconciliation Between GAAP and Non-GAAP Net Income” for a reconciliation of these GAAP and non-GAAP financial measures) - Cash flow from operations of
$67 million and free cash flow of$30 million for the quarter
Gross margin in the first quarter of 2015 was 69.6% compared to 66.1% in the prior year period. Excluding the effect of non-cash stock compensation expense, amortization of acquired intangible assets and legal contingencies, non-GAAP gross margin was 72.2% for the first quarter of 2015 compared to 70.4% in the prior year period.
Research and development (R&D) expenses for the first quarter of 2015 were
Selling, general and administrative (SG&A) expenses for the first quarter of 2015 were
Depreciation and amortization expenses were
“In the first quarter we delivered significant earnings growth as a result of strong demand for products across our sequencing portfolio,” stated
Updates since our last earnings release:
- Launched TruSight® HLA, a complete, end-to-end solution that produces a comprehensive view of the HLA region for accurate HLA typing
- Launched the NeoPrep™ Library Prep System, which greatly simplifies library preparation and delivers high-quality sequencing-ready libraries for next-generation sequencing
- Announced that Berry Genomics has received premarket clearance from the Chinese Food and Drug Administration for the NextSeq CN500, a high throughput sequencing instrument based on the NextSeq® 500, as well as premarket clearance for its non-invasive prenatal testing detection kit for trisomies 13, 18 and 21
- Entered into a strategic collaboration with Merck Serono to develop a universal NGS-based oncology diagnostic
- Announced that the new
Illumina Accelerator Boost Capital had secured an initial capital commitment of$40 million from Viking Global Investors, a privately owned, global investment firm - Repurchased
$35 million of common stock under our previously announced share repurchase program
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 2015, the Company continues to project approximately 20% total revenue growth, which now includes a 3% negative impact from foreign exchange assuming current currency exchange rates. The Company has increased its projections for non-GAAP earnings per diluted share to $3.36 to $3.42. These projections assume a pro forma tax rate of approximately 27%.
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 stock compensation expense, 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. Per share amounts also include, through the first quarter of 2014, the double dilution associated with the accounting treatment of the Company’s 0.625% convertible senior notes and the corresponding call option overlay. Management believes that presentation of operating results that excludes these items and per share double dilution provides useful supplemental information to investors and facilitates the analysis of the Company’s core operating results and comparison of operating results across reporting periods. Management also believes that this supplemental non-GAAP information is therefore useful to investors in analyzing and assessing the Company’s past and future operating performance.
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 projections, information about our financial outlook, earnings guidance, and other forward-looking statements that involve risks and uncertainties. These forward-looking statements are based on our expectations as of the date of this release and may differ materially from actual future events or results. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are (i) 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; (ii) our ability to manufacture robust instrumentation and consumables; (iii) our ability to successfully identify and integrate acquired technologies, products, or businesses; (iv) our expectations and beliefs regarding future conduct and growth of the business and the markets in which we operate; (v) challenges inherent in developing, manufacturing, and launching new products and services; and (vi) our ability to maintain our revenue levels and profitability during periods of research funding reduction or uncertainty and adverse economic and business conditions, together with other factors detailed in our filings with the
About
| Illumina, Inc. | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (In thousands) | |||||||
| March 29, 2015 | December 28, 2014 | ||||||
| ASSETS | (unaudited) | ||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 533,537 | $ | 636,154 | |||
| Short-term investments | 832,952 | 702,217 | |||||
| Accounts receivable, net | 350,044 | 289,458 | |||||
| Inventory | 205,184 | 191,144 | |||||
| Deferred tax assets, current portion | 49,105 | 40,786 | |||||
| Prepaid expenses and other current assets | 89,459 | 29,844 | |||||
| Total current assets | 2,060,281 | 1,889,603 | |||||
| Property and equipment, net | 280,628 | 265,264 | |||||
| Goodwill | 724,904 | 724,904 | |||||
| Intangible assets, net | 301,302 | 314,500 | |||||
| Deferred tax assets, long-term portion | 63,122 | 49,848 | |||||
| Other assets | 68,856 | 95,521 | |||||
| Total assets | $ | 3,499,093 | $ | 3,339,640 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 106,674 | $ | 82,626 | |||
| Accrued liabilities | 296,150 | 335,276 | |||||
| Long-term debt, current portion | 307,427 | 304,256 | |||||
| Total current liabilities | 710,251 | 722,158 | |||||
| Long-term debt | 993,777 | 986,780 | |||||
| Other long-term liabilities | 171,739 | 167,904 | |||||
| Stockholders’ equity | 1,623,326 | 1,462,798 | |||||
| Total liabilities and stockholders’ equity | $ | 3,499,093 | $ | 3,339,640 | |||
| Illumina, Inc. | |||||||||||
| Condensed Consolidated Statements of Income | |||||||||||
| (In thousands, except per share amounts) | |||||||||||
| (unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| March 29, 2015 | March 30, 2014 | ||||||||||
| Revenue: | |||||||||||
| Product revenue | $ | 459,127 | $ | 362,211 | |||||||
| Service and other revenue | 79,438 | 58,570 | |||||||||
| Total revenue | 538,565 | 420,781 | |||||||||
| Cost of revenue: | |||||||||||
| Cost of product revenue (a) | 119,624 | 111,441 | |||||||||
| Cost of service and other revenue (a) | 32,529 | 21,513 | |||||||||
| Amortization of acquired intangible assets | 11,385 | 9,535 | |||||||||
| Total cost of revenue | 163,538 | 142,489 | |||||||||
| Gross profit | 375,027 | 278,292 | |||||||||
| Operating expense: | |||||||||||
| Research and development (a) | 91,772 | 77,041 | |||||||||
| Selling, general and administrative (a) | 116,317 | 109,573 | |||||||||
| Acquisition related gain, net | (9,887 | ) | (1,013 | ) | |||||||
| Headquarter relocation | 699 | 595 | |||||||||
| Total operating expense | 198,901 | 186,196 | |||||||||
| Income from operations | 176,126 | 92,096 | |||||||||
| Other income (expense), net | 1,920 | (8,308 | ) | ||||||||
| Income before income taxes | 178,046 | 83,788 | |||||||||
| Provision for income taxes | 41,388 | 23,811 | |||||||||
| Net income | $ | 136,658 | $ | 59,977 | |||||||
| Net income per basic share | $ | 0.95 | $ | 0.47 | |||||||
| Net income per diluted share | $ | 0.92 | $ | 0.40 | |||||||
| Shares used in calculating basic net income per share | 143,771 | 128,146 | |||||||||
| Shares used in calculating diluted net income per share | 148,683 | 150,619 | |||||||||
| (a) Includes total stock-based compensation expense for stock-based awards: | |||||||||||
| Three Months Ended | |||||||||||
| March 29, 2015 | March 30, 2014 | ||||||||||
| Cost of product revenue | $ | 2,332 | $ | 2,095 | |||||||
| Cost of service and other revenue | 279 | 285 | |||||||||
| Research and development | 11,307 | 11,669 | |||||||||
| Selling, general and administrative | 18,000 | 19,375 | |||||||||
| Stock-based compensation expense before taxes | $ | 31,918 | $ | 33,424 | |||||||
| Illumina, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 29, 2015 | March 30, 2014 | |||||||
| Net cash provided by operating activities (a) | $ | 66,779 | $ | 37,087 | ||||
| Net cash used in investing activities | (154,147 | ) | (144,387 | ) | ||||
| Net cash used in financing activities (a) | (12,534 | ) | (85,924 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (2,715 | ) | 100 | |||||
| Net decrease in cash and cash equivalents | (102,617 | ) | (193,124 | ) | ||||
| Cash and cash equivalents, beginning of period | 636,154 | 711,637 | ||||||
| Cash and cash equivalents, end of period | $ | 533,537 | $ | 518,513 | ||||
| Calculation of free cash flow: | ||||||||
| Net cash provided by operating activities (a) | $ | 66,779 | $ | 37,087 | ||||
| Purchases of property and equipment | (36,551 | ) | (19,012 | ) | ||||
| Free cash flow (b) | $ | 30,228 | $ | 18,075 | ||||
______________________________________________________________________________________________________
(a) Net cash provided by operating activities excludes excess tax benefit related to stock-based compensation of
(b) 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 thousands, except per share amounts) | ||||||||
| (unaudited) | ||||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME PER SHARE: | ||||||||
| Three Months Ended | ||||||||
| March 29, 2015 | March 30, 2014 | |||||||
| GAAP net income per share - diluted | $ | 0.92 | $ | 0.40 | ||||
| Pro forma impact of weighted average shares (a) | — | — | ||||||
| Adjustments to net income: | ||||||||
| Amortization of acquired intangible assets | 0.09 | 0.09 | ||||||
| Cost-method investment gain, net (b) | (0.08 | ) | — | |||||
| Non-cash interest expense (c) | 0.07 | 0.06 | ||||||
| Acquisition related gain, net (d) | (0.07 | ) | (0.01 | ) | ||||
| Headquarter relocation | — | — | ||||||
| Legal contingencies | — | 0.04 | ||||||
| Contingent compensation expense (e) | — | 0.02 | ||||||
| Incremental non-GAAP tax expense (f) | (0.02 | ) | (0.07 | ) | ||||
| Non-GAAP net income per share - diluted (g) | $ | 0.91 | $ | 0.53 | ||||
| Shares used in calculating non-GAAP diluted net income per share | 148,683 | 149,971 | ||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME: | ||||||||
| GAAP net income | $ | 136,658 | $ | 59,977 | ||||
| Amortization of acquired intangible assets | 12,887 | 13,191 | ||||||
| Cost-method investment gain, net (b) | (12,582 | ) | — | |||||
| Non-cash interest expense (c) | 10,188 | 9,022 | ||||||
| Acquisition related gain, net (d) | (9,887 | ) | (1,013 | ) | ||||
| Headquarter relocation | 699 | 595 | ||||||
| Legal contingencies | — | 5,846 | ||||||
| Contingent compensation expense (e) | — | 2,840 | ||||||
| Incremental non-GAAP tax expense (f) | (2,587 | ) | (10,411 | ) | ||||
| Non-GAAP net income (g) | $ | 135,376 | $ | 80,047 | ||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER OF SHARES: | ||||||||
| Weighted average shares used in calculation of GAAP diluted net income per share | 148,683 | 150,619 | ||||||
| Weighted average dilutive potential common shares issuable of redeemable convertible senior notes (a) | — | (648 | ) | |||||
| Weighted average shares used in calculation of non-GAAP diluted net income per share | 148,683 | 149,971 | ||||||
______________________________________________________________________________________________________
(a) Pro forma impact of weighted-average shares includes the impact of double dilution associated with the accounting treatment of the Company’s outstanding convertible debt and the corresponding call option overlay.
(b) Cost-method investment gain, net consists primarily of a gain on the sale of an investment partially offset by impairment charges on other investments.
(c) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(d) Acquisition related gain, net consists primarily of net gains from changes in fair value of contingent consideration.
(e) Contingent compensation expense relates to contingent payments for post-combination services associated with prior period acquisitions.
(f) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above.
(g) Non-GAAP net income and diluted net income per share exclude the effect of the pro forma adjustments as detailed above. Non-GAAP net income and diluted net income per share are key drivers of the Company’s core operating performance and major factors in management’s bonus compensation each year. Management has excluded the effects of these items in these measures to assist investors in analyzing and assessing our past and future core operating performance.
| Illumina, Inc. | ||||||||||||||
| Results of Operations - Non-GAAP (continued) | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||
| (unaudited) | ||||||||||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF OPERATIONS AS A PERCENT OF REVENUE: | ||||||||||||||
| Three Months Ended | ||||||||||||||
| March 29, 2015 | March 30, 2014 | |||||||||||||
| GAAP gross profit | $ | 375,027 | 69.6 | % | $ | 278,292 | 66.1 | % | ||||||
| Stock-based compensation expense | 2,611 | 0.5 | % | 2,380 | 0.6 | % | ||||||||
| Amortization of acquired intangible assets | 11,385 | 2.1 | % | 9,535 | 2.3 | % | ||||||||
| Legal contingencies | — | — | 5,846 | 1.4 | % | |||||||||
| Non-GAAP gross profit (a) | $ | 389,023 | 72.2 | % | $ | 296,053 | 70.4 | % | ||||||
| Research and development expense | $ | 91,772 | 17.0 | % | $ | 77,041 | 18.3 | % | ||||||
| Stock-based compensation expense | (11,307 | ) | (2.1 | )% | (11,669 | ) | (2.8 | )% | ||||||
| Contingent compensation expense (b) | — | — | (84 | ) | — | |||||||||
| Non-GAAP research and development expense | $ | 80,465 | 14.9 | % | $ | 65,288 | 15.5 | % | ||||||
| Selling, general and administrative expense | $ | 116,317 | 21.6 | % | $ | 109,573 | 26.0 | % | ||||||
| Stock-based compensation expense | (18,000 | ) | (3.3 | )% | (19,375 | ) | (4.5 | )% | ||||||
| Amortization of acquired intangible assets | (1,502 | ) | (0.3 | )% | (3,656 | ) | (0.9 | )% | ||||||
| Contingent compensation expense (b) | — | — | (2,756 | ) | (0.7 | )% | ||||||||
| Non-GAAP selling, general and administrative expense | $ | 96,815 | 18.0 | % | $ | 83,786 | 19.9 | % | ||||||
| GAAP operating profit | $ | 176,126 | 32.7 | % | $ | 92,096 | 21.9 | % | ||||||
| Stock-based compensation expense | 31,918 | 5.9 | % | 33,424 | 7.9 | % | ||||||||
| Amortization of acquired intangible assets | 12,887 | 2.4 | % | 13,191 | 3.2 | % | ||||||||
| Acquisition related gain, net (c) | (9,887 | ) | (1.8 | )% | (1,013 | ) | (0.3 | )% | ||||||
| Headquarter relocation | 699 | 0.1 | % | 595 | 0.1 | % | ||||||||
| Legal contingencies | — | — | 5,846 | 1.4 | % | |||||||||
| Contingent compensation expense (b) | — | — | 2,840 | 0.7 | % | |||||||||
| Non-GAAP operating profit (a) | $ | 211,743 | 39.3 | % | $ | 146,979 | 34.9 | % | ||||||
| GAAP other income (expense), net | $ | 1,920 | 0.4 | % | $ | (8,308 | ) | (2.0 | )% | |||||
| Cost-method investment gain, net (d) | (12,582 | ) | (2.4 | )% | — | — | ||||||||
| Non-cash interest expense (e) | 10,188 | 1.9 | % | 9,022 | 2.2 | % | ||||||||
| Non-GAAP other (expense) income, net (a) | $ | (474 | ) | (0.1 | )% | $ | 714 | 0.2 | % | |||||
______________________________________________________________________________________________________
(a) 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 the Company’s products and services. Non-GAAP operating profit, and non-GAAP other (expense) 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 core operating performance.
(b) Contingent compensation expense relates to contingent payments for post-combination services associated with prior period acquisitions.
(c) Acquisition related gain, net consists primarily of net gains from changes in fair value of contingent consideration.
(d) Cost-method investment gain, net consists primarily of a gain on the sale of an investment partially offset by impairment charges on other investments.
(e) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
Reconciliation of Non-GAAP Financial Guidance
The Company’s 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 the Company’s financial results are stated above in this press release. More information on potential factors that could affect the Company’s financial results is included from time to time in the Company’s public reports filed with the
| Fiscal Year 2015 | ||||
| Diluted net income per share | ||||
| Non-GAAP diluted net income per share | $3.36 - $3.42 | |||
| Amortization of acquired intangible assets | (0.21) | |||
| Non-cash interest expense (a) | (0.17) | |||
| Cost-method investment gain, net (b) | 0.06 | |||
| Acquisition related gain, net | 0.04 | |||
| Headquarter relocation (c) | (0.01) | |||
| GAAP diluted net income per share | $3.07 - $3.13 |
______________________________________________________________________________________________________
(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) Cost-method investment gain, net consists primarily of a gain on the sale of an investment partially offset by impairment charges on other investments.
(c) Headquarter relocation represents accretion of interest expense on lease exit liability.
Source:
Illumina, Inc.
Investors:
Rebecca Chambers
858.255.5243
rchambers@illumina.com
or
Media:
Eric Endicott
858.882.6822
pr@illumina.com
