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Share Name | Share Symbol | Market | Type |
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Illumina Inc | NASDAQ:ILMN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 118.98 | 118.54 | 119.60 | 20 | 09:10:40 |
Illumina, Inc. (NASDAQ:ILMN) today announced its financial results for the second quarter of fiscal year 2016.
Second quarter 2016 results:
Gross margin in the second quarter of 2016 was 70.6% compared to 69.8% 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 72.8% for the second quarter of 2016 compared to 72.4% in the prior year period.
Research and development (R&D) expenses for the second quarter of 2016 were $124.6 million compared to $96.2 million in the prior year period. R&D expenses included $10.7 million of non-cash stock compensation expense in the second quarters of 2016 and 2015. Excluding these charges and contingent compensation, R&D expenses as a percentage of revenue were 19.0%, including 1.4% attributable to GRAIL and Helix. This compares to 15.8% in the prior year period.
Selling, general and administrative (SG&A) expenses for the second quarter of 2016 were $148.5 million compared to $124.4 million in the prior year period. SG&A expenses included $18.9 million and $19.6 million of non-cash stock compensation expense in the second 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 21.2%, including 1.1% attributable to GRAIL and Helix. This compares to 19.2% in the prior year period.
Depreciation and amortization expenses were $34.4 million and capital expenditures for free cash flow purposes were $67.8 million during the second quarter of 2016, which excludes a $75.4 million increase in property & equipment recorded under build-to-suit lease accounting since such expenses were paid for by the landlord. The company repurchased $100.0 million of common stock under the previously announced discretionary program. At the close of the quarter, the company held $1.43 billion in cash, cash equivalents and short-term investments, compared to $1.39 billion as of January 3, 2016.
“We delivered solid second quarter financial results with notable strength across our sequencing consumable and array portfolios,” stated Francis deSouza, President and CEO. “We will continue to focus on our execution to deliver the sequential growth we are forecasting in the second half of the year. I would like to thank Jay Flatley for his leadership and strategic vision as CEO for the past 17 years and I look forward to his continued contribution in his new role as Executive Chairman of the Board of Directors.”
Updates since our last earnings release:
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 continues to project approximately 12% revenue growth and non-GAAP earnings per diluted share attributable to Illumina stockholders of $3.48 to $3.58. For the third quarter 2016, the company is projecting revenue of $625 million to $630 million.
Quarterly conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Tuesday, July 26, 2016. Interested parties may listen to the call by dialing 844.647.5490 (passcode: 45971090), or if outside North America by dialing +1.615.247.0295 (passcode: 45971090). Individuals may access the live teleconference in the Investor Relations section of Illumina’s web site under the “company” tab at www.illumina.com.
A replay of the conference call will be available from 5:00 pm Pacific Time (8:00 pm Eastern Time) on July 26, 2016 through August 2, 2016 by dialing 855.859.2056 (passcode: 45971090), or if outside North America by dialing +1.404.537.3406 (passcode: 45971090).
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. Management has excluded the effects of these items in non-GAAP measures to assist investors in analyzing and assessing past and future core operating performance. Additionally, non-GAAP net income attributable to Illumina stockholders and diluted earnings per share attributable to Illumina stockholders are key components of the financial metrics utilized by the company’s board of directors to measure, in part, management’s performance and determine significant elements of management’s compensation. 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) the 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) 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 Securities and Exchange Commission, including our most recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current quarter.
About Illumina
Illumina is improving human health by unlocking the power of the genome. Our focus on innovation has established us as the global leader in DNA sequencing and array-based technologies, serving customers in the research, clinical and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. To learn more, visit www.illumina.com and follow @illumina.
Illumina, Inc. Condensed Consolidated Balance Sheets (In thousands) July 3, January 3, 2016 2016 ASSETS (unaudited) Current assets: Cash and cash equivalents $ 951,662 $ 768,770 Short-term investments 473,594 617,450 Accounts receivable, net 372,480 385,529 Inventory 311,364 270,777 Prepaid expenses and other current assets 33,921 54,297 Total current assets 2,143,021 2,096,823 Property and equipment, net 511,354 342,694 Goodwill 775,995 752,629 Intangible assets, net 268,469 273,621 Deferred tax assets 186,462 134,515 Other assets 99,789 87,465 Total assets $ 3,985,090 $ 3,687,747 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 250,670 $ 148,721 Accrued liabilities 330,326 386,844 Long-term debt, current portion 511 74,929 Total current liabilities 581,507 610,494 Long-term debt 1,031,370 1,015,649 Other long-term liabilities 198,568 180,505 Redeemable noncontrolling interests 33,733 32,546 Stockholders’ equity 2,139,912 1,848,553 Total liabilities and stockholders’ equity $ 3,985,090 $ 3,687,747 Illumina, Inc. Condensed Consolidated Statements of Income (In thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended July 3, June 28, July 3, June 28, 2016 2015 2016 2015 Revenue: Product revenue $ 509,922 $ 462,760 $ 992,672 $ 921,887 Service and other revenue 90,202 76,618 179,215 156,056 Total revenue 600,124 539,378 1,171,887 1,077,943 Cost of revenue: Cost of product revenue (a) 125,107 119,459 250,433 239,083 Cost of service and other revenue (a) 40,663 32,170 79,550 64,699 Amortization of acquired intangible assets 10,549 11,384 21,045 22,769 Total cost of revenue 176,319 163,013 351,028 326,551 Gross profit 423,805 376,365 820,859 751,392 Operating expense: Research and development (a) 124,589 96,182 248,583 187,954 Selling, general and administrative (a) 148,535 124,441 297,768 240,758 Legal contingencies (11,490 ) — (9,490 ) — Headquarter relocation 302 1,480 684 2,179 Acquisition related expense (gain), net — 2,329 — (7,558 ) Total operating expense 261,936 224,432 537,545 423,333 Income from operations 161,869 151,933 283,314 328,059 Other expense, net (4,894 ) (10,761 ) (10,743 ) (8,841 ) Income before income taxes 156,975 141,172 272,571 319,218 Provision for income taxes 40,581 38,925 68,958 80,313 Consolidated net income 116,394 102,247 203,613 238,905 Add: Net loss attributable to noncontrolling interests 4,018 — 6,386 — Net income attributable to Illumina stockholders $ 120,412 $ 102,247 $ 209,999 $ 238,905 Net income attributable to Illumina stockholders for earnings per share (b) $ 121,971 $ 102,247 $ 211,558 $ 238,905 Earnings per share attributable to Illumina stockholders: Basic $ 0.83 $ 0.71 $ 1.44 $ 1.66 Diluted $ 0.82 $ 0.69 $ 1.43 $ 1.61 Shares used in computing earnings per common share: Basic 146,778 144,220 146,822 143,996 Diluted 147,889 148,969 148,123 148,826(a) Includes stock-based compensation expense for stock-based awards:
Three Months Ended
Six Months Ended
July 3,
June 28,
July 3,
June 28,
2016
2015
2016
2015
Cost of product revenue
$
1,958
$
2,113
$
4,150
$
4,445
Cost of service and other revenue
421
466
853
745
Research and development
10,693
10,747
21,374
22,054
Selling, general and administrative
18,898
19,631
40,885
37,631
Stock-based compensation expense before taxes
$
31,970
$
32,957
$
67,262
$
64,875
(b) Amount reflects the net impact of a deemed dividend from the company’s common to preferred share exchange with GRAIL offset by resulting additional losses attributable to the common shareholders of GRAIL for earnings per share purposes.
Illumina, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) Three Months Ended Six Months Ended July 3, June 28, July 3, June 28, 2016 2015 2016 2015 Net cash provided by operating activities (a) $ 217,047 $ 171,445 $ 256,785 $ 238,224 Net cash used in investing activities 43,537 (142,470 ) (16 ) (296,617 ) Net cash (used in) provided by financing activities (a) (63,345 ) 27,810 (75,694 ) 15,276 Effect of exchange rate changes on cash and cash equivalents (487 ) 735 1,817 (1,980 ) Net (decrease) increase in cash and cash equivalents 196,752 57,520 182,892 (45,097 ) Cash and cash equivalents, beginning of period 754,910 533,537 768,770 636,154 Cash and cash equivalents, end of period $ 951,662 $ 591,057 $ 951,662 $ 591,057 Calculation of free cash flow: Net cash provided by operating activities (a) $ 217,047 $ 171,445 $ 256,785 $ 238,224 Purchases of property and equipment (b) (67,813 ) (41,351 ) (121,231 ) (77,902 ) Free cash flow (c) $ 149,234 $ 130,094 $ 135,554 $ 160,322
(a) Net cash provided by operating activities excludes excess tax benefit related to stock-based compensation of $84.2 million in the first half of 2016, of which $25.2 million was recorded in Q2, and $106.2 million in the first half of 2015, of which $29.8 million was recorded in Q2. Net cash used in financing activities reflects the excess tax benefit as a corresponding in-flow in the respective periods.
(b) Excludes $75 million increase in property & equipment recorded under build-to-suit lease accounting since such expenses were paid for by the landlord.
(c) 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 EARNINGS PER SHARE ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS: Three Months Ended Six Months Ended July 3, June 28, July 3, June 28, 2016 2015 2016 2015 GAAP earnings per share attributable to Illumina stockholders - diluted $ 0.82 $ 0.69 $ 1.43 $ 1.61 Amortization of acquired intangible assets 0.08 0.08 0.16 0.17 Legal contingencies (a) (0.07 ) — (0.06 ) — Non-cash interest expense (b) 0.05 0.07 0.10 0.14 Deemed dividend, net of tax (c) (0.01 ) — (0.01 ) — Headquarter relocation — 0.01 — 0.01 Acquisition related expense (gain), net (d) — 0.02 — (0.05 ) Cost-method investment gain, net (e) — — — (0.09 ) Incremental non-GAAP tax expense (f) (0.01 ) (0.07 ) (0.06 ) (0.08 ) Non-GAAP earnings per share attributable to Illumina stockholders - diluted (g) $ 0.86 $ 0.80 $ 1.56 $ 1.71 Shares used in calculating non-GAAP diluted earnings per share attributable to Illumina stockholders 147,889 148,969 148,123 148,826 ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS: GAAP net income attributable to Illumina stockholders (h) $ 120,412 $ 102,247 $ 209,999 $ 238,905 Amortization of acquired intangible assets 12,112 12,772 24,138 25,659 Legal contingencies (a) (11,490 ) — (9,490 ) — Non-cash interest expense (b) 7,290 10,227 15,036 20,415 Contingent compensation expense (i) 694 — 1,394 — Headquarter relocation 302 1,480 684 2,179 Loss on extinguishment of debt — 233 — 233 Acquisition related expense (gain), net (d) — 2,329 — (7,558 ) Cost-method investment gain, net (e) — — — (12,582 ) Incremental non-GAAP tax expense (f) (2,116 ) (9,617 ) (9,020 ) (12,204 ) Non-GAAP net income attributable to Illumina stockholders (g) $ 127,204 $ 119,671 $ 232,741 $ 255,047(a) Legal contingencies represent a reversal of previously recorded expense related to the settlement of patent litigation.
(b) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(c) Amount reflects the net impact of a deemed dividend from the company’s common to preferred share exchange with GRAIL offset by resulting additional losses attributable to the common shareholders of GRAIL for earnings per share purposes.
(d) Acquisition related expense (gain), net consists of changes in fair value of contingent consideration.
(e) Cost-method investment gain, net consists primarily of a gain on the sale of a cost-method investment.
(f) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above.
(g) Non-GAAP net income attributable to Illumina stockholders and diluted earnings per share attributable to Illumina stockholders exclude the effect of the pro forma adjustments as detailed above. Non-GAAP net income attributable to Illumina stockholders and diluted earnings per share attributable to Illumina stockholders are key components of the financial metrics utilized by the company’s board of directors to measure, in part, management’s performance and determine significant elements of management’s compensation. 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.
(h) GAAP net income attributable to Illumina stockholders excludes the net impact of the deemed dividend as detailed in (c) above, which is included in GAAP net income attributable to Illumina stockholders for earnings per share of $121,971 and $211,558 for the three and six months ended July 3, 2016, respectively. The net impact of the deemed dividend was recorded through equity.
(i) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition.
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 Six Months Ended July 3, June 28, July 3, June 28, 2016 2015 2016 2015 GAAP gross profit $ 423,805 70.6 % $ 376,365 69.8 % $ 820,859 70.0 % $ 751,392 69.7 % Stock-based compensation expense 2,379 0.4 % 2,579 0.5 % 5,003 0.5 % 5,190 0.5 % Amortization of acquired intangible assets 10,549 1.8 % 11,384 2.1 % 21,045 1.8 % 22,769 2.1 % Non-GAAP gross profit (a) $ 436,733 72.8 % $ 390,328 72.4 % $ 846,907 72.3 % $ 779,351 72.3 % GAAP research and development expense $ 124,589 20.8 % $ 96,182 17.8 % $ 248,583 21.2 % $ 187,954 17.4 % Stock-based compensation expense (10,693 ) (1.8 )% (10,747 ) (2.0 )% (21,374 ) (1.8 )% (22,054 ) (2.0 )% Contingent compensation expense (b) (109 ) — — — (217 ) — — — Non-GAAP research and development expense $ 113,787 19.0 % $ 85,435 15.8 % $ 226,992 19.4 % $ 165,900 15.4 % GAAP selling, general and administrative expense $ 148,535 24.8 % $ 124,441 23.1 % $ 297,768 25.4 % $ 240,758 22.3 % Stock-based compensation expense (18,898 ) (3.2 )% (19,631 ) (3.6 )% (40,885 ) (3.4 )% (37,631 ) (3.5 )% Amortization of acquired intangible assets (1,563 ) (0.3 )% (1,388 ) (0.3 )% (3,093 ) (0.3 )% (2,890 ) (0.2 )% Contingent compensation expense (b) (585 ) (0.1 )% — — (1,177 ) (0.1 )% — — Non-GAAP selling, general and administrative expense $ 127,489 21.2 % $ 103,422 19.2 % $ 252,613 21.6 % $ 200,237 18.6 % GAAP operating profit $ 161,869 27.0 % $ 151,933 28.2 % $ 283,314 24.2 % $ 328,059 30.4 % Stock-based compensation expense 31,970 5.3 % 32,957 6.1 % 67,262 5.6 % 64,875 6.0 % Amortization of acquired intangible assets 12,112 2.0 % 12,772 2.4 % 24,138 2.1 % 25,659 2.4 % Legal contingencies (c) (11,490 ) (1.9 )% — — (9,490 ) (0.8 )% — — Contingent compensation expense (b) 694 0.1 % — — 1,394 0.1 % — — Headquarter relocation 302 0.1 % 1,480 0.3 % 684 0.1 % 2,179 0.2 % Acquisition related expense (gain), net (d) — — 2,329 0.4 % — — (7,558 ) (0.7 )% Non-GAAP operating profit (a) $ 195,457 32.6 % $ 201,471 37.4 % $ 367,302 31.3 % $ 413,214 38.3 % GAAP other expense, net $ (4,894 ) (0.8 )% $ (10,761 ) (2.0 )% $ (10,743 ) (0.9 )% $ (8,841 ) (0.8 )% Non-cash interest expense (e) 7,290 1.2 % 10,227 1.9 % 15,036 1.3 % 20,415 1.9 % Loss on extinguishment of debt — — 233 — — — 233 — Cost-method investment gain, net (f) — — — — — — (12,582 ) (1.2 )% Non-GAAP other income (expense), net (a) $ 2,396 0.4 % $ (301 ) (0.1 )% $ 4,293 0.4 % $ (775 ) (0.1 )%(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 income (expense), 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 an acquisition.
(c) Legal contingencies represent a reversal of previously recorded expense related to the settlement of patent litigation.
(d) Acquisition related expense (gain), net consists of changes in fair value of contingent consideration.
(e) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(f) Cost-method investment gain, net consists primarily of a gain on the sale of a cost-method investment.
Illumina, Inc.
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 Securities and Exchange Commission, including the company’s Form 10-K for the fiscal year ended January 3, 2016, and the company’s Form 10-Q for the fiscal quarter ended April 3, 2016. The company assumes no obligation to update any forward-looking statements or information.
Fiscal Year 2016 Diluted earnings per share attributable to Illumina stockholders Non-GAAP diluted earnings per share attributable to Illumina stockholders $3.48 - $3.58 Amortization of acquired intangible assets (0.33) Non-cash interest expense (a) (0.20) Legal contingencies (b) 0.06 Contingent compensation (c) (0.02) Headquarter relocation (0.01) Deemed dividend, net of tax (d) 0.01 Incremental non-GAAP tax expense (e) 0.14 GAAP diluted earnings per share attributable to Illumina stockholders $3.13 - $3.23(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) Legal contingencies represent a reversal of previously recorded expense related to the settlement of patent litigation.
(c) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition.
(d) Amount reflects the net impact of a deemed dividend from the company’s common to preferred share exchange with GRAIL offset by resulting additional losses attributable to the common shareholders of GRAIL for earnings per share purposes.
(e) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160726006492/en/
Illumina, Inc.Investors:Rebecca Chambers858.255.5243ir@illumina.comorMedia:Eric Endicott858.882.6822pr@illumina.com
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