Illumina, Inc. (NASDAQ: ILMN) today announced its financial
results for the first quarter of fiscal year 2021.
First quarter results reflect record revenue:
- Revenue of $1,093 million, a 27% increase compared to the prior
year period
- GAAP net income for the quarter of $147 million, or $1.00 per
diluted share, compared to $173 million, or $1.17 per diluted
share, for the prior year period
- Non-GAAP net income for the quarter of $278 million, or $1.89
per diluted share, compared to $243 million, or $1.64 per diluted
share, for the prior year period. Non-GAAP net income excludes
acquisition-related expenses, primarily the Continuation Payments
paid to GRAIL (see the “Reconciliation Between GAAP and Non-GAAP
Net Income” table for a reconciliation of these GAAP and non-GAAP
financial measures)
- Cash flow from operations of $282 million compared to $281
million in the prior year period
- Free cash flow (cash flow from operations less capital
expenditures) of $240 million for the quarter compared to $241
million in the prior year period
“Illumina achieved its first billion-dollar revenue quarter in
company history and delivered a very strong start to 2021,
exceeding our expectations,” said Francis deSouza, Chief Executive
Officer. “Orders during the first quarter of 2021 reached an
all-time high demonstrating strength in our core business across
all regions, reflecting growth in both clinical and research
customers. We are seeing tremendous progress in clinical market
access and reimbursement for genomic applications increasing access
to genomic testing for patients worldwide. We are proud of the
significant contributions our customers, partners, and employees
are making to the creation of a genomic epidemiology infrastructure
to combat COVID-19, as well as monitor for future pathogen
outbreaks for the benefit of global public health.”
Gross margin in the first quarter of 2021 was 69.9% compared to
72.1% in the prior year period. Excluding amortization of acquired
intangible assets and expenses related to COVID-19, non-GAAP gross
margin was 70.5% for the first quarter of 2021 compared to 73.0% in
the prior year period.
Research and development (R&D) expenses for the first
quarter of 2021 were $197 million compared to $156 million in the
prior year period. Non-GAAP R&D expenses as a percentage of
revenue were 18.0% compared to 18.3% in the prior year period.
Selling, general and administrative (SG&A) expenses for the
first quarter of 2021 were $374 million compared to $274 million in
the prior year period. Excluding acquisition-related expenses and
expenses and income related to COVID-19, non-GAAP SG&A expenses
as a percentage of revenue were 20.4% compared to 21.1% in the
prior year period.
Depreciation and amortization expenses were $48 million and
capital expenditures for free cash flow purposes were $42 million
during the first quarter of 2021. At the close of the quarter, the
company held $4.6 billion in cash, cash equivalents and short-term
investments, compared to $3.5 billion as of January 3, 2021.
Updates since our last earnings release:
- Announced TSO 500 partnership with Kartos Therapeutics to
advance comprehensive genomic profiling for blood cancers
- Published positive economic study results in partnership with
Harvard Pilgrim Health Care demonstrating the cost-effectiveness of
offering non-invasive prenatal testing (NIPT) to all pregnant
women
- Illumina was selected among the top 100 influential global
companies by Time magazine
- Published our second annual Corporate Social Responsibility
report that highlights our commitment to society, our employees and
the environment
- Completed a senior unsecured investment grade bond offering for
an aggregate principal amount of $1 billion and finalized a $750
million 5-year unsecured revolving credit facility
- Announced Jay Flatley will step down from the Board of
Directors and John W. Thompson will be appointed as the new Chair
of the Board effective May 26, 2021
- Received medical device registration in Russia for NextSeq
550Dx and associated reagent kits
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 2021, the company expects year-over-year revenue
growth in the range of 25% to 28%, and now expects GAAP earnings
per diluted share of $4.72 to $4.97 and non-GAAP earnings per
diluted share of $5.80 to $6.05. Except for acquisition-related
expenses and bridge facility fees incurred during Q1 2021, this
guidance excludes the potential impact from the pending acquisition
of GRAIL, which we expect to close in the second half of 2021.
Conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm
Eastern Time) on Tuesday, April 27, 2021. Interested parties may
access the live teleconference through the Investor Info section of
Illumina’s website under the “Company” tab at www.illumina.com.
Alternatively, individuals can access the call by dialing 1 (866)
211-4597 or 1 (647) 689-6853 outside North America, both using
conference ID 4359912.
A replay of the conference call will be posted on Illumina’s
website after the event and will be available for at least 30 days
following.
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 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 operating performance. Additionally, non-GAAP net
income and diluted earnings per share 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 may contain forward-looking statements that involve
risks and uncertainties. Among the important factors to which our
business is subject that could cause actual results to differ
materially from those in any forward-looking statements are: (i)
the impact to our business and operating results of the COVID-19
pandemic; (ii) changes in the rate of growth in the markets we
serve; (iii) the volume, timing and mix of customer orders among
our products and services; (iv) our ability to adjust our operating
expenses to align with our revenue expectations; (v) the outcome of
the pending acquisition of GRAIL, Inc.; (vi) our ability to
manufacture robust instrumentation and consumables; (vii) the
success of products and services competitive with our own; (viii)
challenges inherent in developing, manufacturing, and launching new
products and services, including expanding or modifying
manufacturing operations and reliance on third-party suppliers for
critical components; (ix) the impact of recently launched or
pre-announced products and services on existing products and
services; (x) our ability to further develop and commercialize our
instruments and consumables, to deploy new products, services, and
applications, and to expand the markets for our technology
platforms; (xi) our ability to obtain regulatory clearance for our
products from government agencies; (xii) our ability to
successfully partner with other companies and organizations to
develop new products, expand markets, and grow our business; (xiii)
our ability to successfully identify and integrate acquired
technologies, products, or businesses; and (xiv) 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 connect with us on Twitter,
Facebook, LinkedIn, Instagram, and YouTube.
Illumina, Inc.
Condensed Consolidated Balance
Sheets
(In millions)
April 4, 2021
January 3, 2021
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
4,433
$
1,810
Short-term investments
197
1,662
Accounts receivable, net
517
487
Inventory
364
372
Prepaid expenses and other current
assets
131
152
Total current assets
5,642
4,483
Property and equipment, net
915
922
Operating lease right-of-use assets
529
532
Goodwill
897
897
Intangible assets, net
134
142
Other assets
638
609
Total assets
$
8,755
$
7,585
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
178
$
192
Accrued liabilities
602
541
Convertible senior notes, current
portion
488
511
Total current liabilities
1,268
1,244
Operating lease liabilities
664
671
Term notes
992
—
Convertible senior notes
680
673
Other long-term liabilities
229
303
Stockholders’ equity
4,922
4,694
Total liabilities and stockholders’
equity
$
8,755
$
7,585
Illumina, Inc.
Condensed Consolidated
Statements of Income
(In millions, except per share
amounts)
(unaudited)
Three Months Ended
April 4, 2021
March 29, 2020
Revenue:
Product revenue
$
953
$
701
Service and other revenue
140
158
Total revenue
1,093
859
Cost of revenue:
Cost of product revenue (a)
265
174
Cost of service and other revenue
(a)
58
59
Amortization of acquired intangible
assets
6
7
Total cost of revenue
329
240
Gross profit
764
619
Operating expense:
Research and development (a)
197
156
Selling, general and administrative
(a)
374
274
Total operating expense
571
430
Income from operations
193
189
Other expense, net
(24
)
(11
)
Income before income taxes
169
178
Provision for income taxes
22
5
Net income
$
147
$
173
Earnings per share:
Basic
$
1.01
$
1.18
Diluted
$
1.00
$
1.17
Shares used in computing earnings per
common share:
Basic
146
147
Diluted
147
148
(a) Includes stock-based compensation expense for
stock-based awards:
Three Months Ended
April 4, 2021
March 29, 2020
Cost of product revenue
$
7
$
5
Cost of service and other revenue
1
1
Research and development
24
15
Selling, general and administrative
35
18
Stock-based compensation expense before
taxes
$
67
$
39
Illumina, Inc.
Condensed Consolidated
Statements of Cash Flows
(In millions)
(unaudited)
Three Months Ended
April 4, 2021
March 29, 2020
Net cash provided by operating
activities
$
282
$
281
Net cash provided by (used in) investing
activities
1,376
(135
)
Net cash provided by (used in) financing
activities
968
(191
)
Effect of exchange rate changes on cash
and cash equivalents
(3
)
(6
)
Net increase (decrease) in cash and cash
equivalents
2,623
(51
)
Cash and cash equivalents, beginning of
period
1,810
2,042
Cash and cash equivalents, end of
period
$
4,433
$
1,991
Calculation of free cash flow:
Net cash provided by operating
activities
$
282
$
281
Purchases of property and equipment
(42
)
(40
)
Free cash flow (a)
$
240
$
241
(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 millions, except per share
amounts)
(unaudited)
RECONCILIATION BETWEEN GAAP AND
NON-GAAP EARNINGS PER SHARE:
Three Months Ended
April 4, 2021
March 29, 2020
GAAP earnings per share -
diluted
$
1.00
$
1.17
Cost of revenue (b)
0.05
0.06
Research and development costs
(b)
—
(0.01
)
Selling, general and administrative costs
(b)
1.03
0.62
Other expense, net (b)
0.14
0.08
Incremental non-GAAP tax expense
(c)
(0.30
)
(0.19
)
Income tax benefit (d)
(0.03
)
(0.09
)
Non-GAAP earnings per share - diluted
(a)
$
1.89
$
1.64
RECONCILIATION BETWEEN GAAP AND
NON-GAAP NET INCOME:
Three Months Ended
April 4, 2021
March 29, 2020
GAAP net income
$
147
$
173
Cost of revenue (b)
7
9
Research and development costs
(b)
—
(1
)
Selling, general and administrative costs
(b)
151
92
Other expense, net (b)
21
12
Incremental non-GAAP tax expense
(c)
(44
)
(29
)
Income tax benefit (d)
(4
)
(13
)
Non-GAAP net income (a)
$
278
$
243
All amounts in tables are rounded to the nearest millions,
except as otherwise noted. As a result, certain amounts may not
recalculate using the rounded amounts provided.
(a) Non-GAAP net income and diluted earnings per share
exclude the effect of the pro forma adjustments as detailed above.
Non-GAAP net income and diluted earnings per share 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. (b) Refer to our
“Itemized Reconciliation between GAAP and Non-GAAP Results of
Operations as a Percent of Revenue,” below, for the components of
these amounts. (c) Incremental non-GAAP tax expense reflects
the tax impact of the non-GAAP adjustments listed. (d)
Amounts represent tax deductions taken in excess of stock
compensation cost.
Illumina, Inc.
Results of Operations -
Non-GAAP (continued)
(Dollars in millions)
(unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP
AND NON-GAAP RESULTS OF OPERATIONS AS A PERCENT OF REVENUE:
Three Months Ended
April 4, 2021
March 29, 2020
GAAP gross profit (b)
$
764
69.9
%
$
619
72.1
%
Amortization of acquired intangible
assets
6
0.5
%
7
0.8
%
Expenses related to COVID-19
(c)
1
0.1
%
1
0.1
%
Income related to COVID-19 (d)
—
—
(1
)
(0.1
)
%
Restructuring (e)
—
—
2
0.1
%
Non-GAAP gross profit (a)
$
771
70.5
%
$
628
73.0
%
GAAP research and development
expense
$
197
18.0
%
$
156
18.2
%
Income related to COVID-19 (d)
—
—
1
0.1
%
Non-GAAP research and development
expense
$
197
18.0
%
$
157
18.3
%
GAAP selling, general and
administrative expense
$
374
34.2
%
$
274
31.9
%
Acquisition-related expenses
(f)
(150
)
(13.7
)
%
(92
)
(10.8
)
%
Expenses related to COVID-19
(c)
(2
)
(0.2
)
%
—
—
Income related to COVID-19 (d)
1
0.1
%
—
—
Non-GAAP selling, general and
administrative expense
$
223
20.4
%
$
182
21.1
%
GAAP operating profit
$
193
17.7
%
$
189
22.0
%
Cost of revenue
7
0.6
%
9
0.9
%
Research and development costs
—
—
(1
)
(0.1
)
%
Selling, general and administrative
costs
151
13.8
%
92
10.8
%
Non-GAAP operating profit (a)
$
351
32.1
%
$
289
33.6
%
GAAP other expense, net
$
(24
)
(2.2
)
%
$
(11
)
(1.3
)
%
Non-cash interest expense (g)
11
1.0
%
10
1.2
%
Strategic investment related loss (gain),
net (h)
39
3.6
%
(5
)
(0.6
)
%
(Gain) loss on derivative assets
(i)
(26
)
(2.3
)
%
4
0.5
%
Bridge facility fees (j)
7
0.6
%
—
—
(Gain) loss on contingent value right
(k)
(10
)
(0.9
)
%
3
0.3
%
Non-GAAP other (expense) income, net
(a)
$
(3
)
(0.2
)
%
$
1
0.1
%
All amounts in tables are rounded to the nearest millions,
except as otherwise noted. As a result, certain amounts may not
recalculate using the rounded amounts provided.
(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 our products and services. Non-GAAP operating
profit, and non-GAAP other (expense) 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 operating
performance. (b) Reconciling amounts are recorded in cost of
revenue. (c) Amounts consist of direct and incremental
expenses incurred due to the COVID-19 pandemic, primarily expenses
related to employee testing and incremental cleaning in Q1 2021,
and premium pay for onsite essential workers in Q1 2020. (d)
Amounts consist of direct and incremental income due to the
COVID-19 pandemic, primarily payroll-related credits earned in the
US and Canada in Q1 2021, and payroll-related credits earned in
Singapore in Q1 2020. (e) Amount consists primarily of
employee costs related to restructuring in Q1 2020. (f)
Amount for Q1 2021 consists primarily of expenses related to the
pending acquisition of GRAIL, including $105 million in
Continuation Payments. Amount for Q1 2020 consists primarily of
expenses related to the Continuation Advances and Reverse
Termination Fee paid to Pacific Biosciences related to the
terminated acquisition. (g) Non-cash interest expense is
calculated in accordance with the authoritative accounting guidance
for convertible debt instruments that may be settled in cash.
(h) Amounts consist primarily of mark-to-market adjustments
and impairments from our strategic investments. (i) Amount
for Q1 2021 consists of a gain recorded on our derivative assets
related to the terminated acquisition with Pacific Biosciences as a
result of Pacific Biosciences repaying to us $52 million in
Continuation Advances. Amount for Q1 2020 consists of fair value
adjustments recorded on our derivative assets. (j) Amount
consists of expenses related to the bridge facility commitment
obtained in advance of the pending acquisition of GRAIL. We
terminated the bridge facility commitment in March 2021, in
conjunction with our issuance of term notes. (k) Amounts
consist of fair value adjustments related to our contingent value
right received from Helix.
Illumina, Inc.
Reconciliation of Non-GAAP
Financial Guidance
(unaudited)
Our 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 our financial results are stated
above in this press release. More information on potential factors
that could affect our financial results is included from time to
time in the public reports filed with the Securities and Exchange
Commission, including Form 10-K for the fiscal year ended January
3, 2021 filed with the SEC on February 17, 2021. We assume no
obligation to update any forward-looking statements or
information.
Fiscal Year
2021
GAAP diluted earnings per share
(a)
$4.72 - $4.97
Amortization of acquired intangible
assets
0.18
Non-cash interest expense (b)
0.24
Strategic investment related loss, net
(c)
0.26
Acquisition-related expenses
(d)
1.02
Bridge facility fees (e)
0.05
COVID-19 expense, net (f)
0.01
Gain on derivative assets (g)
(0.18)
Gain on contingent value right
(h)
(0.07)
Incremental non-GAAP tax expense
(i)
(0.40)
Excess tax benefits from share-based
compensation (j)
(0.03)
Non-GAAP diluted earnings per share
(a)
$5.80 - $6.05
(a) Except for acquisition-related expenses and bridge
facility fees incurred during Q1 2021, this guidance excludes the
potential impact of the pending acquisition of GRAIL, which is
expected to close in the second half of 2021. (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 consists primarily of
mark-to-market adjustments and impairments from our strategic
investments. (d) Amount consists primarily of
acquisition-related expenses related to the pending acquisition of
GRAIL. (e) Amount consists of expenses related to the bridge
facility commitment obtained in advance of the pending acquisition
of GRAIL. We terminated the bridge facility commitment in March
2021, in conjunction with our issuance of term notes. (f)
Amount consists of direct and incremental expenses incurred due to
the COVID-19 pandemic, primarily expenses related to employee
testing and incremental cleaning, partially offset by direct and
incremental income due to the COVID-19 pandemic, primarily
payroll-related credits earned in the US and Canada. (g)
Amount consists of gain recorded on our derivative assets related
to the terminated acquisition with Pacific Biosciences as a result
of Pacific Biosciences repaying to us $52 million in Continuation
Advances. (h) Amount consists of fair value adjustments
related to our contingent value right received from Helix.
(i) Incremental non-GAAP tax expense reflects the tax impact
related to the non-GAAP adjustments listed. (j) Amount
represents tax deductions taken in excess of stock compensation
cost.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210427006012/en/
Investors: Juliet Cunningham +1.858.200.6583 ir@illumina.com
Media: Dr. Karen Birmingham +1.646.355.2111
kbirmingham@illumina.com
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