First quarter 2014 results:
- Revenue of
$421 million , a 27% increase compared to$331 million in the first quarter of 2013 - GAAP net income for the quarter of
$60 million , or$0.40 per diluted share, compared to net loss of$23 million , or$0.18 per diluted share, for the first quarter of 2013 - Non-GAAP net income for the quarter of
$80 million , or$0.53 per diluted share, compared to$63 million , or$0.46 per diluted share, for the first quarter of 2013 (see the table entitled “Itemized Reconciliation Between GAAP and Non-GAAP Net Income (Loss)” for a reconciliation of these GAAP and non-GAAP financial measures) - Cash flow from operations of
$37 million and free cash flow of$18 million for the quarter
Gross margin in the first quarter of 2014 was 66.1% compared to 66.3% in the prior year period. Excluding the effect of non-cash charges associated with stock compensation, amortization of acquired intangible assets, legal contingencies, and inventory revaluation adjustments, non-GAAP gross margin was 70.4% for the first quarter of 2014 compared to 69.2% in the prior year period.
Research and development (R&D) expenses for the first quarter of 2014 were
Selling, general and administrative (SG&A) expenses for the first quarter of 2014 were
Depreciation and amortization expenses were
“Our first quarter results have set the stage for a strong 2014,” stated Jay Flatley, CEO. “We are experiencing an exciting uptake of our new products, including the NextSeq™ 500 and HiSeq X™ Ten, while demand for the overall product portfolio remains robust. We continue to innovate across the entire spectrum of the sequencing workflow to more broadly enable the adoption of genomics.”
Updates since our last earnings release:
- Introduced new products to support oncology clinical research and discovery including the TruSeq® RNA Access Library Prep Kit, and the TruSight™
Myeloid Sequencing Panel and several new BaseSpace Core Apps - Announced that Novogene,
Human Longevity, Inc. , and WuXi Genome Center have purchased HiSeq X Ten sequencing systems - Published results in the
New England Journal of Medicine that demonstrate that the verifi® Prenatal Test performs consistently well in pregnant women regardless of their risk level for fetal aneuploidy - Announced that Science for
Life Laboratory (SciLifeLab) inSweden has joined the Illumina Genome Network (IGN) - Launched the Illumina Accelerator Program, the world’s first business accelerator focused solely on creating an innovation ecosystem for the genomics industry
- Repurchased
$130 million of common stock under our previously announced share repurchase programs
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 2014 the Company has increased projections to approximately 21% to 23% revenue growth and non-GAAP earnings per fully diluted share of
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 related to stock compensation expense, legal contingencies, amortization of acquired intangible assets, non-cash interest expense associated with the Company’s convertible debt instruments that may be settled in cash, acquisition related expense, 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 the double dilution associated with the accounting treatment of the Company’s 0.625% convertible senior notes outstanding at the beginning of the period 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 30, 2014 | December 29, 2013 | ||||||
| ASSETS | (unaudited) | ||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 518,513 | $ | 711,637 | |||
| Short-term investments | 573,289 | 453,966 | |||||
| Accounts receivable, net | 293,045 | 238,946 | |||||
| Inventory | 164,231 | 154,099 | |||||
| Deferred tax assets, current portion | 40,349 | 36,076 | |||||
| Prepaid expenses and other current assets | 42,516 | 22,811 | |||||
| Total current assets | 1,631,943 | 1,617,535 | |||||
| Property and equipment, net | 210,372 | 202,666 | |||||
| Goodwill | 723,259 | 723,061 | |||||
| Intangible assets, net | 316,984 | 331,173 | |||||
| Deferred tax assets, long-term portion | 101,336 | 88,480 | |||||
| Other assets | 69,676 | 56,091 | |||||
| Total assets | $ | 3,053,570 | $ | 3,019,006 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 86,471 | $ | 73,655 | |||
| Accrued liabilities | 215,292 | 219,120 | |||||
| Long-term debt, current portion | 848,016 | 29,288 | |||||
| Total current liabilities | 1,149,779 | 322,063 | |||||
| Long-term debt | — | 839,305 | |||||
| Long-term legal contingencies | 138,780 | 132,933 | |||||
| Other long-term liabilities | 191,398 | 191,221 | |||||
| Conversion option subject to cash settlement | — | 282 | |||||
| Stockholders’ equity | 1,573,613 | 1,533,202 | |||||
| Total liabilities and stockholders’ equity | $ | 3,053,570 | $ | 3,019,006 | |||
| Illumina, Inc. | |||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||
| (In thousands, except per share amounts) | |||||||||||
| (unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| March 30, 2014 | March 31, 2013 | ||||||||||
| Revenue: | |||||||||||
| Product revenue | $ | 362,211 | $ | 296,170 | |||||||
| Service and other revenue | 58,570 | 34,788 | |||||||||
| Total revenue | 420,781 | 330,958 | |||||||||
| Cost of revenue: | |||||||||||
| Cost of product revenue (a) | 111,441 | 89,978 | |||||||||
| Cost of service and other revenue (a) | 21,513 | 15,138 | |||||||||
| Amortization of acquired intangible assets | 9,535 | 6,550 | |||||||||
| Total cost of revenue | 142,489 | 111,666 | |||||||||
| Gross profit | 278,292 | 219,292 | |||||||||
| Operating expense: | |||||||||||
| Research and development (a) | 77,041 | 61,450 | |||||||||
| Selling, general and administrative (a) | 109,573 | 85,074 | |||||||||
| Acquisition related (gain) expense, net | (1,013 | ) | 3,821 | ||||||||
| Headquarter relocation | 595 | 757 | |||||||||
| Legal contingencies | — | 105,853 | |||||||||
| Unsolicited tender offer related expense | — | 7,484 | |||||||||
| Total operating expense | 186,196 | 264,439 | |||||||||
| Income (loss) from operations | 92,096 | (45,147 | ) | ||||||||
| Other expense, net | (8,308 | ) | (2,415 | ) | |||||||
| Income (loss) before income taxes | 83,788 | (47,562 | ) | ||||||||
| Provision for (benefit from) income taxes | 23,811 | (24,975 | ) | ||||||||
| Net income (loss) | $ | 59,977 | $ | (22,587 | ) | ||||||
| Net income (loss) per basic share | $ | 0.47 | $ | (0.18 | ) | ||||||
| Net income (loss) per diluted share | $ | 0.40 | $ | (0.18 | ) | ||||||
| Shares used in calculating basic net income (loss) per share | 128,146 | 123,768 | |||||||||
| Shares used in calculating diluted net income (loss) per share | 150,619 | 123,768 | |||||||||
| (a) Includes total stock-based compensation expense for stock-based awards: | |||||||||||
| Three Months Ended | |||||||||||
| March 30, 2014 | March 31, 2013 | ||||||||||
| Cost of product revenue | $ | 2,095 | $ | 1,442 | |||||||
| Cost of service and other revenue | 285 | 154 | |||||||||
| Research and development | 11,669 | 8,006 | |||||||||
| Selling, general and administrative | 19,375 | 14,617 | |||||||||
| Stock-based compensation expense before taxes | $ | 33,424 | $ | 24,219 | |||||||
| Illumina, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (In thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 30, 2014 | March 31, 2013 | |||||||
| Net cash provided by operating activities (a) | $ | 37,087 | $ | 87,840 | ||||
| Net cash used in investing activities | (144,387 | ) | (65,021 | ) | ||||
| Net cash used in financing activities (a) | (85,924 | ) | (13,006 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 100 | (712 | ) | |||||
| Net (decrease) increase in cash and cash equivalents | (193,124 | ) | 9,101 | |||||
| Cash and cash equivalents, beginning of period | 711,637 | 433,981 | ||||||
| Cash and cash equivalents, end of period | $ | 518,513 | $ | 443,082 | ||||
| Calculation of free cash flow: | ||||||||
| Net cash provided by operating activities (a) | $ | 37,087 | $ | 87,840 | ||||
| Purchases of property and equipment | (19,012 | ) | (21,441 | ) | ||||
| Free cash flow (b) | $ | 18,075 | $ | 66,399 | ||||
______________________________________________________________________________________________________
(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 (LOSS) PER SHARE: | ||||||||
| Three Months Ended | ||||||||
| March 30, 2014 | March 31, 2013 | |||||||
| GAAP net income (loss) per share - diluted | $ | 0.40 | $ | (0.18 | ) | |||
| Pro forma impact of weighted average shares (a) | — | — | ||||||
| Adjustments to net income (loss): | ||||||||
| Amortization of acquired intangible assets | 0.09 | 0.06 | ||||||
| Non-cash interest expense (b) | 0.06 | 0.07 | ||||||
| Legal contingencies (c) | 0.04 | 0.79 | ||||||
| Contingent compensation expense (d) | 0.02 | 0.03 | ||||||
| Acquisition related (gain) expense, net (e) | (0.01 | ) | 0.03 | |||||
| Headquarter relocation | — | 0.01 | ||||||
| Unsolicited tender offer related expense | — | 0.06 | ||||||
| Cost-method investment related gain | — | (0.05 | ) | |||||
| Inventory revaluation adjustment | — | — | ||||||
| Incremental non-GAAP tax expense (f) | (0.07 | ) | (0.36 | ) | ||||
| Non-GAAP net income per share - diluted (g) | $ | 0.53 | $ | 0.46 | ||||
| Shares used in calculating non-GAAP diluted net income per share | 149,971 | 134,850 | ||||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME (LOSS): | ||||||||
| GAAP net income (loss) | $ | 59,977 | $ | (22,587 | ) | |||
| Amortization of acquired intangible assets | 13,191 | 8,131 | ||||||
| Non-cash interest expense (b) | 9,022 | 9,052 | ||||||
| Legal contingencies (c) | 5,846 | 106,922 | ||||||
| Contingent compensation expense (d) | 2,840 | 3,418 | ||||||
| Acquisition related (gain) expense, net (e) | (1,013 | ) | 3,821 | |||||
| Headquarter relocation | 595 | 757 | ||||||
| Unsolicited tender offer related expense | — | 7,484 | ||||||
| Cost-method investment related gain | — | (6,113 | ) | |||||
| Inventory revaluation adjustment | — | 458 | ||||||
| Incremental non-GAAP tax expense (f) | (10,411 | ) | (48,724 | ) | ||||
| Non-GAAP net income (g) | $ | 80,047 | $ | 62,619 | ||||
| ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER OF SHARES: | ||||||||
| Weighted average shares used in calculation of GAAP diluted net income (loss) per share | 150,619 | 123,768 | ||||||
| Weighted average dilutive potential common shares issuable of redeemable convertible senior notes (a) | (648 | ) | (1,062 | ) | ||||
| Weighted average potential common shares excluded due to anti-dilutive effect (a) | — | 12,144 | ||||||
| Weighted average shares used in calculation of non-GAAP diluted net income per share | 149,971 | 134,850 | ||||||
______________________________________________________________________________________________________
(a) Pro forma impact of weighted average shares includes the impact of: (1) double dilution associated with the accounting treatment of the Company’s outstanding convertible debt and the corresponding call option overlay; and (2) weighted average shares excluded from calculation of GAAP diluted net loss per share for Q1 2013 due to anti-dilutive effect on GAAP net loss.
(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) Legal contingencies primarily represented charges recorded based on a judgment associated with the patent litigation brought by
(d) Contingent compensation expense relates to contingent payments for post-combination services associated with acquisitions.
(e) Acquisition related (gain) expense, net Q1 2014 consisted primarily of
(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 our 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 30, 2014 | March 31, 2013 | ||||||||||||
| GAAP gross profit | $ | 278,292 | 66.1 | % | $ | 219,292 | 66.3 | % | |||||
| Stock-based compensation expense | 2,380 | 0.6 | % | 1,596 | 0.5 | % | |||||||
| Amortization of acquired intangible assets | 9,535 | 2.3 | % | 6,550 | 2.0 | % | |||||||
| Legal contingencies (a) | 5,846 | 1.4 | % | 1,069 | 0.3 | % | |||||||
| Inventory revaluation adjustment | — | — | 458 | 0.1 | % | ||||||||
| Non-GAAP gross profit (b) | $ | 296,053 | 70.4 | % | $ | 228,965 | 69.2 | % | |||||
| Research and development expense | $ | 77,041 | 18.3 | % | $ | 61,450 | 18.6 | % | |||||
| Stock-based compensation expense | (11,669 | ) | (2.8 | )% | (8,006 | ) | (2.5 | )% | |||||
| Contingent compensation expense (c) | (84 | ) | — | (489 | ) | (0.1 | )% | ||||||
| Non-GAAP research and development expense | $ | 65,288 | 15.5 | % | $ | 52,955 | 16.0 | % | |||||
| Selling, general and administrative expense | $ | 109,573 | 26.0 | % | $ | 85,074 | 25.7 | % | |||||
| Stock-based compensation expense | (19,375 | ) | (4.5 | )% | (14,617 | ) | (4.4 | )% | |||||
| Amortization of acquired intangible assets | (3,656 | ) | (0.9 | )% | (1,581 | ) | (0.5 | )% | |||||
| Contingent compensation expense (c) | (2,756 | ) | (0.7 | )% | (2,929 | ) | (0.9 | )% | |||||
| Non-GAAP selling, general and administrative expense | $ | 83,786 | 19.9 | % | $ | 65,947 | 19.9 | % | |||||
| GAAP operating profit (loss) | $ | 92,096 | 21.9 | % | $ | (45,147 | ) | (13.6 | )% | ||||
| Stock-based compensation expense | 33,424 | 7.9 | % | 24,219 | 7.3 | % | |||||||
| Amortization of acquired intangible assets | 13,191 | 3.2 | % | 8,131 | 2.5 | % | |||||||
| Legal contingencies (a) | 5,846 | 1.4 | % | 106,922 | 32.3 | % | |||||||
| Contingent compensation expense (c) | 2,840 | 0.7 | % | 3,418 | 1.0 | % | |||||||
| Acquisition related (gain) expense, net (d) | (1,013 | ) | (0.3 | )% | 3,821 | 1.2 | % | ||||||
| Headquarter relocation | 595 | 0.1 | % | 757 | 0.2 | % | |||||||
| Unsolicited tender offer related expense | — | — | 7,484 | 2.3 | % | ||||||||
| Inventory revaluation adjustment | — | — | 458 | 0.1 | % | ||||||||
| Non-GAAP operating profit (b) | $ | 146,979 | 34.9 | % | $ | 110,063 | 33.3 | % | |||||
| GAAP other expense, net | $ | (8,308 | ) | (2.0 | )% | $ | (2,415 | ) | (0.7 | )% | |||
| Non-cash interest expense (e) | 9,022 | 2.2 | % | 9,052 | 2.7 | % | |||||||
| Cost-method investment related gain | — | — | (6,113 | ) | (1.8 | )% | |||||||
| Non-GAAP other income, net (b) | $ | 714 | 0.2 | % | $ | 524 | 0.2 | % | |||||
______________________________________________________________________________________________________
(a) Legal contingencies during fiscal year 2013 primarily represented charges recorded based on a judgment associated with the patent litigation brought by
(b) Non-GAAP gross profit, included within the 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, 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.
(c) Contingent compensation expense relates to contingent payments for post-combination services associated with acquisitions.
(d) Acquisition related (gain) expense, net in Q1 2014 consisted primarily of
(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 2014 | |||
| Diluted net income per share | |||
| Non-GAAP diluted net income per share | $2.10 - $2.15 | ||
| Amortization of acquired intangible assets | (0.19) | ||
| Non-cash interest expense (a) | (0.16) | ||
| Legal contingencies (b) | (0.10) | ||
| Contingent compensation expense (c) | (0.02) | ||
| Headquarter relocation (d) | (0.01) | ||
| GAAP diluted net income per share | $1.62 - $1.67 | ||
______________________________________________________________________________________________________
(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 charges to be recorded based on a judgment associated with the patent litigation brought by
(c) Contingent compensation expense relates to contingent payments for post-combination services associated with acquisitions.
(d) 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
