Company Update (NASDAQ:ILMN): Illumina, Inc. Reports Financial Results for First Quarter of Fiscal Year 2016


Illumina, Inc. (NASDAQ:ILMN) announced its financial results for the first quarter of fiscal year 2016.

First quarter 2016 results:

  • Revenue of $572 million, a 6% increase compared to $539 million in the first quarter of 2015, and an increase of 7% on a constant currency basis
  • GAAP net income attributable to Illumina stockholders for the quarter of $90 million, or $0.60 per diluted share, compared to $137 million, or $0.92 per diluted share, for the first quarter of 2015
  • Non-GAAP net income attributable to Illumina stockholders for the quarter of $106 million, or $0.71 per diluted share, compared to $135 million, or $0.91 per diluted share, for the first quarter of 2015 (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 $40 million and free cash flow of negative $14 million for the quarter, compared to $67 million and positive$30 million in the prior year period. Increased operating expenses and higher capital expenditures contributed to the lower free cash flow.

Gross margin in the first quarter of 2016 was 69.4% compared to 69.6% in the prior year period. Excluding the effect of non-cash stock compensation expense and amortization of acquired intangible assets, non-GAAP gross margin was 71.7% for the first quarter of 2016 compared to 72.2% in the prior year period.

Research and development (R&D) expenses for the first quarter of 2016 were $124.0 million compared to $91.8 million in the prior year period. R&D expenses included $10.7 million and $11.3 million of non-cash stock compensation expense in the first quarters of 2016 and 2015, respectively. Excluding these charges and contingent compensation, R&D expenses as a percentage of revenue were 19.8%, including 0.9% attributable to GRAIL and Helix. This compares to 14.9% in the prior year period.

Selling, general and administrative (SG&A) expenses for the first quarter of 2016 were $149.2 million compared to $116.3 million in the prior year period. SG&A expenses included $22.0 million and $18.0 million of non-cash stock compensation expense in the first quarters of 2016 and 2015, respectively. Excluding these charges, amortization of acquired intangible assets, and contingent compensation, SG&A expenses as a percentage of revenue were 21.9%, including 0.6% attributable to GRAIL and Helix. This compares to 18.0% in the prior year period.

Depreciation and amortization expenses were $33.2 million and capital expenditures were $53.4 million during the first quarter of 2016. The company settled the remaining 0.25% Convertible Senior Notes of $75.5 million. At the close of the quarter, the company held $1.34 billion in cash, cash equivalents and short-term investments, compared to $1.39 billion as of January 3, 2016.

“As we have previously shared, Q1 was a slower start to the year than we expected,” stated Jay Flatley, Chairman and CEO. “Our view of the growth potential of the sequencing market remains unchanged, as the largest opportunities are in their earliest stages of development. In the near-term, we are focused on improving execution to restore the growth rate we believe our markets can support.”

Updates since our last earnings release:

  • Introduced BaseSpace® Informatics Suite, a complete set of genomics software tools and solutions to facilitate precision medicine and genomics research
  • Applied CE mark to VeriSeq™ NIPT Analysis Software for use in clinical laboratories
  • Announced partnerships to enable long read applications including co-marketing agreements with 10X Genomics and NRGene
  • Entered into a partnership with Genomics England to develop a platform and knowledge base to improve and automate genome interpretation
  • Committed $100 million to a new venture capital firm that will pursue early stage investments which are strategically aligned with Illumina’s vision
  • Announced that on July 5, 2016 Jay Flatley will assume the role of Executive Chairman of the Board of Directors and Francis deSouza will be appointed President and Chief Executive 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 2016, the company is projecting approximately 12% revenue growth and non-GAAP earnings per diluted share attributable to Illuminastockholders of $3.35 to $3.45. For the second quarter 2016, the company is projecting revenue of $590 million to $595 million and non-GAAP earnings per diluted share attributable to Illumina stockholders of $0.72 to $0.74. (Original Source)

Shares of Illumina are down nearly 5% to $127.50 in after-hours trading. ILMN has a 1-year high of $242.37 and a 1-year low of $130. The stock’s 50-day moving average is $155.45 and its 200-day moving average is $161.71.

On the ratings front, Illumina has been the subject of a number of recent research reports. In a report released today, Morgan Stanley analyst Steve Beuchaw reiterated a Hold rating on ILMN, with a price target of $130, which represents a slight downside potential from current levels. Separately, on the same day, UBS’s Jon Groberg reiterated a Buy rating on the stock and has a price target of $180.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Steve Beuchaw and Jon Groberg have a total average return of 1.5% and 4.0% respectively. Beuchaw has a success rate of 56.3% and is ranked #1896 out of 3838 analysts, while Groberg has a success rate of 65.0% and is ranked #1380.

Overall, 7 research analysts have assigned a Hold rating and 5 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 $178.75 which is 33.1% above where the stock opened today.

Illumina, Inc. develops, manufactures and markets integrated systems for the analysis of genetic variation and function. The company provides sequencing and array-based solutions for genetic analysis in addition to selling products, it provide genotyping, NIPT and whole-genome sequencing services. Its customers include leading genomic research centers, academic institutions, government laboratories, hospitals, and reference laboratories as well as pharmaceutical, biotechnology, agrigenomics, commercial molecular diagnostic, and consumer genomics companies.