Illumina, Inc. (ILMN) Announces 2Q:17 Financial Results; Shares Rose 7%


Illumina, Inc. (NASDAQ:ILMN) announced its financial results for the second quarter of fiscal year 2017.

Second quarter 2017 results:

  • Revenue of $662 million, a 10% increase compared to $600 million in the second quarter of 2016
  • GAAP net income attributable to Illumina stockholders for the quarter of $128 million, or $0.87 per diluted share, compared to $120 million, or $0.82 per diluted share, for the second quarter of 2016
  • Non-GAAP net income attributable to Illumina stockholders for the quarter of $121 million, or $0.82 per diluted share, compared to $127 million, or $0.86 per diluted share, for the second quarter of 2016 (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 $178 million and free cash flow of $109 million for the quarter, compared to $242 million and $174 million, respectively, in the second quarter of 2016

Gross margin in the second quarter of 2017 was 65.5% compared to 70.6% in the prior year period. Excluding amortization of acquired intangible assets, non-GAAP gross margin was 67.0% for the second quarter of 2017 compared to 72.4% in the prior year period.

Research and development (R&D) expenses for the second quarter of 2017 were $130 million compared to $125 million in the prior year period. R&D expenses as a percentage of revenue were 19.7%, including 0.8% attributable to Helix. This compares to 20.7% in the prior year period, including 1.5% attributable to GRAIL and Helix.

Selling, general and administrative (SG&A) expenses for the second quarter of 2017 were $169 million compared to $148 million in the prior year period. Excluding the amortization of acquired intangible assets, SG&A expenses as a percentage of revenue were 25.2%, including 1.0% attributable to Helix. This compares to 24.4% in the prior year period, including 1.1% attributable to GRAIL and Helix.

Depreciation and amortization expenses were $38 million and capital expenditures for free cash flow purposes were $69 million during the second quarter of 2017. At the close of the quarter, the company held $1.9 billion in cash, cash equivalents and short-term investments, compared to $1.6 billion as of January 1, 2017.

“We are pleased with our strong Q2 results,” said Francis deSouza, President and CEO. “Interest in the NovaSeq platform exceeded our expectations during the quarter. As a result, we have updated our 2017 revenue growth projections to reflect the market demand for NovaSeq and our positive outlook for the rest of the business.”

Updates since our last earnings release:

  • Received FDA approval for the Extended RAS Panel, a companion diagnostic kit that helps identify colorectal cancer patients eligible for Amgen’s Vectibix®
  • Announced that Genomics England will be using Illumina’s variant interpretation and reporting software in the characterization of tumor and matched normal samples as part of the 100,000 Genomes Project
  • Announced that Helix has launched an online consumer marketplace of DNA-powered products
  • Appointed Mark Van Oene as Chief Commercial 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 2017, the company has updated its projections to approximately 12% revenue growth. GAAP earnings per diluted share attributable to Illumina stockholders is forecasted to be $5.36 to $5.46 and the company expects non-GAAP earnings per diluted share attributable to Illumina stockholders of $3.60 to $3.70.

Shares of Illumina are up nearly 7% to $184.62 in after-hours trading Tuesday. ILMN has a 1-year high of $189.48 and a 1-year low of $119.37. The stock’s 50-day moving average is $174.64 and its 200-day moving average is $171.82.

On the ratings front, ILMN has been the subject of a number of recent research reports. In a report issued on July 28, Deutsche Bank analyst Dan Leonard maintained a Hold rating on ILMN, with a price target of $175, which represents a slight upside potential from current levels. On July 24, Canaccord’s Mark Massaro reiterated a Hold rating on the stock and has a price target of $170.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Dan Leonard and Mark Massaro have a yearly average return of 2.8% and 13.7% respectively. Leonard has a success rate of 57% and is ranked #1834 out of 4627 analysts, while Massaro has a success rate of 62% and is ranked #158.

Overall, one research analyst has rated the stock with a Sell rating, 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 $168.33 which is -3.2% under 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.