Company Update (NASDAQ:ILMN): Illumina, Inc. Reports Financial Results for Fourth Quarter and Fiscal Year 2015


Illumina, Inc. (NASDAQ:ILMN) announced its financial results for the fourth quarter and fiscal year 2015.

Fourth quarter 2015 results:

  • Revenue of $592 million, a 15% increase compared to $512 million in the fourth quarter of 2014, and an increase of 19% on a constant currency basis
  • GAAP net income attributable to Illumina stockholders for the quarter of $104 million, or $0.70 per diluted share, compared to $153 million, or $1.03 per diluted share, for the fourth quarter of 2014
  • Non-GAAP net income attributable to Illumina stockholders for the quarter of $121 million, or $0.81 per diluted share, compared to $129 million, or $0.87 per diluted share, for the fourth quarter of 2014 (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 $240 million and free cash flow of $205 million for the quarter

Gross margin in the fourth quarter of 2015 was 69.4% compared to 75.1% in the prior year period. Excluding the effect of non-cash stock compensation expense, amortization of acquired intangible assets, legal contingencies, and impairments, non-GAAP gross margin was 71.7% for the fourth quarter of 2015 compared to 72.3% in the prior year period.

Research and development (R&D) expenses for the fourth quarter of 2015 were $114.3 million compared to $142.9 million in the prior year period. R&D expenses included $10.8 million and $11.8 million of non-cash stock compensation expense in the fourth quarters of 2015 and 2014, respectively. Excluding these charges, contingent compensation, legal contingencies, and impairments, R&D expenses as a percentage of revenue were 17.5% compared to 15.7% in the prior year period.

Selling, general and administrative (SG&A) expenses for the fourth quarter of 2015 were $147.3 million compared to $122.2 million in the prior year period. SG&A expenses included $21.4 million and $23.7 million of non-cash stock compensation expense in the fourth quarters of 2015 and 2014, respectively. Excluding these charges, amortization of acquired intangible assets, and contingent compensation, SG&A expenses as a percentage of revenue were 20.9% compared to 18.9% in the prior year period.

Depreciation and amortization expenses were $32.8 million and capital expenditures were $35.5 million during the fourth quarter of 2015. The company settled $28.6 million of the 0.25% Convertible Senior Notes due 2016 and repurchased $202.0 million of common stock under the previously announced discretionary and 10b5-1 share repurchase programs. At the close of the quarter, the company held $1.39 billion in cash, cash equivalents and short-term investments, compared to $1.34 billion as of December 28, 2014.

Fiscal 2015 results:

  • Revenue of $2,220 million, a 19% increase compared to $1,861 million in fiscal 2014, and an increase of 23% on a constant currency basis
  • GAAP net income attributable to Illumina stockholders of $462 million, or $3.10 per diluted share, compared to $353 million, or $2.37 per diluted share, in fiscal 2014
  • Non-GAAP net income attributable to Illumina stockholders of $495 million, or $3.32 per diluted share, compared to $407 million, or$2.74 per diluted share, in fiscal 2014 (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 $660 million and free cash flow of $517 million for the fiscal year

Gross margin for fiscal 2015 was 69.8% compared to 69.7% in the prior year. Excluding the effect of non-cash stock compensation expense, amortization of acquired intangible assets, legal contingencies, and impairments, non-GAAP gross margin was 72.4% for fiscal 2015 compared to 71.7% in the prior year.

Research and development (R&D) expenses for fiscal 2015 were $401.5 million compared to $388.1 million in the prior year. R&D expenses included $42.0 million and $50.9 million of non-cash stock compensation expense in fiscal 2015 and 2014, respectively. Excluding these charges, contingent compensation, legal contingencies, and impairments, R&D expenses as a percentage of revenue were 16.2% compared to 15.3% in the prior year.

Selling, general and administrative (SG&A) expenses for fiscal 2015 were $524.7 million compared to $466.3 million in the prior year. SG&A expenses included $79.1 million and $91.0 million of non-cash stock compensation expense in fiscal 2015 and 2014, respectively. Excluding these charges, amortization of acquired intangible assets, and contingent compensation, SG&A expenses as a percentage of revenue were 19.8% compared to 19.5% in the prior year.

“We closed 2015 with strong momentum as fourth quarter orders and revenue exceeded our expectations,” stated Jay Flatley, CEO. “Our recent product announcements of MiniSeq™ and Infinium® XT further enhance the most extensive genomics portfolio available. This portfolio, combined with our investments in Project Firefly, Helix, and GRAIL, will position us for long-term growth as we enable our continued penetration of the enormous markets ahead.”

Updates since our last earnings release:

  • Announced the formation of GRAIL, a new company to enable asymptomatic cancer screening through the development of a pan-cancer screening test
  • Launched the MiniSeq System, a flexible benchtop sequencer priced at $49,500, and cost-efficient to run, which will allow virtually any laboratory to adopt next-generation sequencing (NGS), regardless of sample volume
  • Launched Infinium XT, a 96-sample BeadChip offering laboratories the ability to perform genotyping on larger numbers of samples
  • Previewed Project Firefly, a highly-reliable, easy-to-use NGS platform available in the second half of 2017 that will minimize hands-on time for both library preparation and sequencing
  • Launched EpiSeq™, an NGS service for epidemiological monitoring and control of healthcare-associated infections, in partnership with bioMérieux
  • Entered into partnership with Bio-Rad Laboratories, Inc. to develop an NGS workflow for single-cell analysis
  • Entered into a collaboration with Novogene to develop clinical applications in the fields of reproductive health and oncology based on Illumina’s NGS technology

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 2016, the Company is projecting approximately 16% revenue growth, assuming current exchange rates, and non-GAAP earnings per diluted share attributable to Illumina stockholders of $3.55 to $3.65. These projections assume full year non-GAAP gross margin of approximately 73% and a net loss attributable to non-controlling interests of approximately $30 million. Full-year weighted average diluted shares outstanding, for the measurement of pro forma amounts, is expected to be approximately 149 million shares. (Original Source)

Shares of Illumina closed today at $154.66, down $4.28 or -2.69%. ILMN has a 1-year high of $242.37 and a 1-year low of $130. The stock’s 50-day moving average is $175.98 and its 200-day moving average is $181.43.

On the ratings front, Illumina has been the subject of a number of recent research reports. In a report issued on January 12, Mizuho analyst Eric Criscuolo reiterated a Hold rating on ILMN, with a price target of $150, which represents a slight downside potential from current levels. Separately, on January 11, Deutsche Bank’s Shawn Bevec maintained a Hold rating on the stock and has a price target of $178.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Eric Criscuolo and Shawn Bevec have a total average return of -19.9% and 0.3% respectively. Criscuolo has a success rate of 16.7% and is ranked #3330 out of 3632 analysts, while Bevec has a success rate of 36.4% and is ranked #1977.

Overall, 3 research analysts have assigned a Hold rating and 2 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $175.00 which is 13.2% above where the stock opened today.

Illumina Inc provides sequencing-and array-based solutions for genetic analysis. Its products enabled researchers to explore DNA, helping them create the first map of gene variations associated with health, disease, and drug response.