Illumina, Inc. (NASDAQ:ILMN) today announced its financial
results for the first quarter of 2010.
First quarter 2010 results:
- Revenue of $192.1 million, a 16%
increase over the $165.8 million reported in the first quarter of
2009.
- GAAP net income for the quarter
of $21.2 million, or $0.16 per diluted share, compared to net
income of $18.8 million, or $0.14 per diluted share in the
comparable period of 2009. Net income for the first quarter of 2010
included $5.1 million in non-cash interest expense and other items
listed in the table entitled “An Itemized Reconciliation Between
GAAP and Non-GAAP Net Income.”
- Non-GAAP net income for the
first quarter of 2010 of $26.6 million, or $0.21 per diluted share,
compared to $25.4 million, or $0.20 per diluted share, for the
first quarter of 2009.
Gross margin in the first quarter of 2010 was 68.8% compared to
66.4% in the comparable period of 2009. Excluding the effect of
non-cash charges associated with stock compensation and the
amortization of intangibles, non-GAAP gross margin was 70.3% for
the first quarter of 2010 compared to 68.3% in the prior year
period.
Research and development (R&D) expenses for the first
quarter of 2010 were $43.7 million compared to $32.7 million in the
first quarter of 2009. R&D expenses include $5.9 million and
$4.6 million of non-cash stock compensation expense in the first
quarter of 2010 and 2009, respectively. R&D expenses in both
periods also include $0.9 million of accrued contingent
compensation. Excluding these charges and $2.0 million of acquired
R&D expense in the first quarter of 2009, R&D expenses as a
percentage of revenues were 19.2% compared to 15.2% in the prior
year period.
Selling, general, and administrative (SG&A) expenses for the
first quarter of 2010 were $50.3 million compared to $42.8 million
for the first quarter of 2009. SG&A expenses include $9.8
million and $8.8 million of non-cash stock compensation expense in
the first quarter of 2010 and 2009, respectively. Excluding these
charges, SG&A expenses as a percentage of revenues were 21.1%
compared to 20.5% in the prior year period.
The company generated $55.4 million in cash flow from operations
during the first quarter of 2010 compared to $50.7 million in the
prior year period. Depreciation and amortization expenses were $9.0
million and capital expenditures were $10.4 million during the
first quarter. The company ended the first quarter with $748.0
million in cash and investments compared to $693.5 million as of
January 3, 2010.
Highlights since our last earnings release:
- Launched the HumanOmniEpxress+,
an eight sample BeadChip with over 700,000 variants per sample and
the option for customers to add up to 200,000 custom variants.
- Launched the VeraCode® ADME Core
Panel designed to help researchers study genetic predispositions
for differential drug response and adverse events. The panel
contains 184 biomarkers in 34 genes and provides comprehensive
coverage of the most biologically relevant biomarkers spanning
complex regions of the genome.
- Shipped first HiScan™SQ , the
only instrument capable of performing next-generation sequencing
and microarray applications on one integrated system.
- Appointed Christian Henry to the
role of General Manager of Life Sciences.
- Sequenced the first publicly
named female and publicly named family of four through the
company’s personal genome sequencing service.
Quarterly Conference Call Information
The conference call will begin at 2:00pm Pacific Time (5:00pm
Eastern Time) on Wednesday, April 28, 2010. Interested parties may
listen to the call by dialing 866.578.5801 (passcode: 41726099), or
if outside North America, by dialing +617.213.8058 (passcode:
41726099). Individuals may access the live teleconference under the
"Corporate/Investor Information" tab of Illumina's web site at
www.illumina.com.
A replay of the conference call will be available from 5:00pm
Pacific Time (8:00pm Eastern Time) on April 28, 2010 through May 5,
2010 by dialing 888.286.8010, or if outside North America, by
dialing +1.617.801.6888 (passcode: 52772593).
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 margins, 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 results under GAAP include substantial
non-cash charges related to stock compensation expense, incremental
interest expense and gain on debt extinguishment, amortization
expense related to intangible assets, compensation expense related
to contingent consideration, and expense related to acquired
research and development. Per share amounts also include the double
dilution associated with the accounting treatment of the company’s
convertible debt outstanding and the corresponding call option
overlay. Management believes that presentation of operating results
that excludes these non-cash charges 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 may contain forward-looking statements that involve
risks and uncertainties. These forward-looking statements are made
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 develop and commercialize further our BeadArray™,
VeraCode®, and Solexa® technologies and to deploy new sequencing,
gene expression, and genotyping products and applications for our
technology platforms, (ii) our ability to manufacture robust
instrumentation and reagents technology, and (iii) reductions in
the funding levels to our primary customers, including as a result
of the timing and amount of funding provided by the American
Recovery and Reinvestment Act of 2009, 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 any forward-looking
statements, to review or confirm analysts’ expectations, or to
provide interim reports or updates on the progress of the current
financial quarter.
About Illumina
Illumina (www.illumina.com) is a leading developer,
manufacturer, and marketer of next-generation life-science tools
and integrated systems for the analysis of genetic variation and
biological function. Using our proprietary technologies, we provide
a comprehensive line of products and services that currently serve
the sequencing, genotyping, and gene expression markets, and we
expect to enter the market for molecular diagnostics. Our customers
include leading genomic research centers, pharmaceutical companies,
academic institutions, clinical research organizations, and
biotechnology companies. Our tools provide researchers around the
world with the performance, throughput, cost effectiveness, and
flexibility necessary to perform the billions of genetic tests
needed to extract valuable medical information from advances in
genomics and proteomics. We believe this information will enable
researchers to correlate genetic variation and biological function,
which will enhance drug discovery and clinical research, allow
diseases to be detected earlier, and permit better choices of drugs
for individual patients.
Illumina, Inc. Condensed Consolidated Balance Sheets
(In thousands) April
4, 2010 January 3, 2010 ASSETS (unaudited)
Current assets: Cash and cash equivalents $ 213,225 $ 144,633
Short-term investments 534,755 548,894 Accounts receivable, net
156,030 157,751 Inventory, net 100,623 92,776 Deferred tax assets,
current portion 19,084 20,021 Prepaid expenses and other current
assets 16,797 17,515 Total current assets 1,040,514
981,590 Property and equipment, net 118,014 117,188 Goodwill
213,452 213,452 Intangible assets, net 42,063 43,788 Deferred tax
assets, long-term portion 47,486 47,371 Other assets 43,682
26,548 Total assets $ 1,505,211 $ 1,429,937
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 47,550 $ 52,781 Accrued liabilities 102,886
98,253 Long-term debt, current portion 295,404
290,202 Total current liabilities 445,840 441,236 Other long-term
liabilities 22,979 24,656 Conversion option subject to cash
settlement 94,595 99,797 Stockholders’ equity 941,797
864,248 Total liabilities and stockholders’ equity $ 1,505,211 $
1,429,937
Illumina, Inc. Condensed Consolidated
Statements of Operations (In thousands, except per share
amounts) (unaudited)
Three Months Ended April 4,
2010
March 29,
2009
Revenue: Product revenue $ 173,679 $ 156,199 Service and other
revenue 18,452 9,558 Total revenue
192,131 165,757 Cost of Revenue: Cost
of product revenue
(a) 52,939 50,707 Cost of service and
other revenue
(a) 5,394 3,315 Amortization of intangible
assets 1,620 1,670 Total cost of
revenue 59,953 55,692 Gross profit
132,178 110,065 Operating Expenses:
Research and development
(a) 43,675 32,726 Selling, general
and administrative
(a) 50,278 42,831
Total operating expense 93,953 75,557
Income from operations 38,225 34,508 Other income (expense),
net: Interest income 2,204 2,916 Interest expense (5,955 ) (5,684 )
Other expense, net (1,113 ) (2,389 ) Total other
expense, net (4,864 ) (5,157 ) Income before income taxes 33,361
29,351 Provision for income taxes 12,153
10,540 Net income $ 21,208 $ 18,811 Net income
per basic share $ 0.18 $ 0.15 Net income per diluted
share $ 0.16 $ 0.14 Shares used in calculating basic
net income per share 120,668 121,746
Shares used in calculating diluted net income per share
136,407 132,967
(a) Includes total
stock-based compensation expense for employee stock options and
stock purchases:
Three Months Ended April 4,
2010
March 29,
2009
Cost of product revenue $ 1,209 $ 1,274 Cost of service and other
revenue 111 141 Research and development 5,898 4,622 Selling,
general and administrative 9,781 8,823
Stock-based compensation expense before taxes $ 16,999 $
14,860
Illumina, Inc. Condensed Consolidated Statements
of Cash Flows (In thousands) (unaudited)
Three Months Ended April 4,
2010
March 29,
2009
Net cash provided by operating activities $ 55,364 $ 50,748
Net cash used in investing activities (23,931 ) (39,818 ) Net cash
provided by financing activities 34,306 7,813 Effect of exchange
rate changes on cash and cash equivalents 2,853
5,379 Net increase in cash and cash equivalents
68,592 24,122 Cash and cash equivalents, beginning of period
144,633 327,024 Cash and cash equivalents, end
of period $ 213,225 $ 351,146 Calculation of
free cash flow
(a): Net cash provided by operating
activities $ 55,364 $ 50,748 Purchases of property and equipment
(10,447 ) (12,569 ) Free cash flow $ 44,917 $
38,179
(a) 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)
AN ITEMIZED RECONCILIATION BETWEEN GAAP AND
NON-GAAP NET INCOME PER SHARE: Three Months Ended
April 4,
2010
March 29,
2009
GAAP net income per share - diluted $ 0.16
$ 0.14 Pro forma impact of weighted average shares
0.01 0.01 Adjustments to net income: Pro forma impact of non-cash
interest expense
(a) 0.02 0.02 Other pro forma adjustments
0.02 0.03 Non-GAAP net income per share
- diluted
(b) $ 0.21 $ 0.20 Shares used in
calculating non-GAAP diluted net income per share 128,960
127,546
AN ITEMIZED RECONCILIATION
BETWEEN GAAP AND NON-GAAP NET INCOME: GAAP net income
$ 21,208 $ 18,811 Non-cash interest
expense
(a) 5,055 4,718 Amortization of intangible assets
1,620 1,670 Compensation expense
(c) 919 919 Acquired
research and development - 2,000 Gain on extinguishment of debt -
(767 ) Pro forma impact on tax expense: Non-cash interest expense
(a) (1,980 ) (1,820 ) Other pro forma adjustments
(264 ) (108 ) Incremental non-GAAP tax expense
(d)
(2,244 ) (1,928 ) Non-GAAP net income
(b) $
26,558 $ 25,423
(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) Non-GAAP net income per share and net income exclude the
effect of the pro forma adjustments as detailed above. Non-GAAP
diluted net income per share and net income 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.
(c) Compensation expense represents contingent consideration
for post-combination services associated with a prior acquisition.
This expense is included within research and development on our
statements of operations.
(d) Incremental non-GAAP
tax expense reflects the increase to GAAP tax expense related to
the non-GAAP adjustments listed above.
Illumina, Inc.
Results of Operations - Non-GAAP (continued)
(unaudited) AN ITEMIZED RECONCILIATION BETWEEN
GAAP AND NON-GAAP RESULTS OF OPERATIONS AS A PERCENT OF
REVENUE: Three Months Ended April 4,
2010 March 29, 2009 GAAP gross
profit $ 132,178 68.8
% $ 110,065 66.4 %
Stock-based compensation expense 1,320 0.7 % 1,415 0.9 %
Amortization of intangible assets 1,620 0.8 %
1,670 1.0 % Non-GAAP gross profit $ 135,118 70.3 % $
113,150 68.3 %
Research and development
expense $ 43,675 22.7 % $
32,726 19.7 % Stock-based compensation expense
(5,898 ) (3.1 %) (4,622 ) (2.8 %) Compensation Expense
(a)
(919 ) (0.5 %) (919 ) (0.6 %) Acquired research and development
- - (2,000 ) (1.2 %) Non-GAAP research
and development expense $ 36,858 19.2 % $ 25,185 15.2
%
Selling, general and administrative expense
$ 50,278 26.2 % $ 42,831
25.8 % Stock-based compensation expense (9,781
) (5.1 %) (8,823 ) (5.3 %) Non-GAAP selling, general and
administrative expense $ 40,497 21.1 % $ 34,008 20.5
%
GAAP operating profit $ 38,225
19.9 % $ 34,508 20.8 %
Stock-based compensation expense 16,999 8.8 % 14,860 9.0 %
Amortization of intangible assets 1,620 0.8 % 1,670 1.0 %
Compensation expense
(a) 919 0.5 % 919 0.6 % Acquired
research and development - - 2,000
1.2 % Non-GAAP operating profit
(b) $ 57,763
30.1 % $ 53,957 32.6 %
(a)
Compensation expense represents contingent consideration for
post-combination services associated with a prior acquisition. This
expense is included within research and development on our
statements of operations.
(b) Non-GAAP operating
profit excludes the effect 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 our past
and future core operating performance. Non-GAAP gross profit,
included within the non-GAAP operating profit, is a key measure of
the effectiveness and efficiency of our manufacturing processes,
product mix and the average selling prices of our products and
services.
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