Viernes 15 de Diciembre 2017

Illumina Reports Financial Results for First Quarter of Fiscal Year 2017

Guía de Regalos

Successful NovaSeq™ launch, with more than 135 instruments ordered
in the first quarter

SAN DIEGO–(BUSINESS WIRE)–Illumina, Inc. (NASDAQ: ILMN) today announced its financial results for
the first quarter of fiscal year 2017.

First quarter 2017 results:

  • Revenue of $598 million, a 5% increase compared to $572 million in the
    first quarter of 2016
  • GAAP net income attributable to Illumina stockholders for the quarter
    of $373 million, or $2.52 per diluted share, including the impact of a
    pre-tax gain of $453 million as a result of the GRAIL repurchase of
    shares from Illumina, compared to $90 million, or $0.60 per diluted
    share, for the first quarter of 2016
  • Non-GAAP net income attributable to Illumina stockholders for the
    quarter of $94 million, or $0.64 per diluted share, compared to $106
    million, or $0.71 per diluted share, for the first 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 $168 million and free cash flow of $85
    million for the quarter, compared to $99 million and $46 million,
    respectively, in the first quarter of 2016

Gross margin in the first quarter of 2017 was 61.5% compared to 69.4% in
the prior year period. Excluding impairment and amortization of acquired
intangible assets, but including stock-based compensation expense,
non-GAAP gross margin was 66.4% for the first quarter of 2017 compared
to 71.3% in the prior year period. Non-GAAP gross margin compared to the
prior year period was impacted by the NovaSeq introduction, higher array
services revenue and product mix within sequencing consumables.

Research and development (R&D) expenses for the first quarter of 2017
were $145 million compared to $124 million in the prior year period.
Excluding an impairment of in-process R&D, but including stock-based
compensation expense, R&D expenses as a percentage of revenue were
23.3%, including 2.1% attributable to GRAIL and Helix. This compares to
21.7% in the prior year period, including 0.9% attributable to GRAIL and
Helix.

Selling, general and administrative (SG&A) expenses for the first
quarter of 2017 were $163 million compared to $150 million in the prior
year period. Excluding the effect of performance-based compensation
related to the GRAIL Series B financing, acquisition related gain,
amortization of acquired intangible assets, and contingent compensation,
but including stock-based compensation expense, SG&A expenses as a
percentage of revenue were 25.6%, including 1.5% attributable to GRAIL
and Helix. This compares to 25.7% in the prior year period, including
0.6% attributable to GRAIL and Helix.

Depreciation and amortization expenses were $38 million and capital
expenditures for free cash flow purposes were $83 million during the
first quarter of 2017. At the close of the quarter, the company held
$1.8 billion in cash, cash equivalents and short-term investments,
compared to $1.6 billion as of January 1, 2017.

“We are pleased with our first quarter results,” said Francis deSouza,
President and CEO. “We are witnessing an exciting uptake of the NovaSeq
platform with more than 135 orders placed in Q1, and look forward to the
advancements in genomics this instrument will enable for years to come.”

Updates since our last earnings release:

  • Launched the VeriSeq™ NIPT Solution in Europe, a CE-IVD marked
    next-generation sequencing based approach to noninvasive prenatal
    testing
  • Contributed more than 8,000 associations of somatic genetic
    alterations to the Clinical Interpretation of Variants in Cancer
    (CIViC) database
  • Announced the iHope Network, a consortium of institutions who have
    committed to providing clinical whole genome sequencing to underserved
    families
  • Announced that GRAIL raised over $900 million in the first close of
    its Series B financing and that Illumina’s stake is now less than 20
    percent of GRAIL
  • Announced that John W. Thompson will join the company’s Board of
    Directors
  • Repurchased $101 million of common stock under the previously
    announced share repurchase program thereby completing the authorization

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 is projecting 10% to 12% revenue growth,
GAAP earnings per diluted share attributable to Illumina stockholders
of $5.26 to $5.36 and non-GAAP earnings per diluted share attributable
to Illumina stockholders of $3.60 to $3.70. Our annual guidance assumes
second quarter revenue growth of approximately 7% versus the prior year,
GAAP earnings per diluted share attributable to Illumina stockholders of
$0.56 to $0.61 and non-GAAP earnings per diluted share attributable to
Illumina stockholders of $0.65 to $0.70.

Quarterly conference call information

The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern
Time) on Tuesday, April 25, 2017. Interested parties may listen to the
call by dialing 888.771.4371 (passcode: 44658255), or if outside North
America by dialing +1.847.585.4405 (passcode: 44658255). 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 4:30 pm Pacific
Time (7:30 pm Eastern Time) on April 25, 2017 through May 2, 2017 by
dialing 888.843.7419 (passcode: 44658255), or if outside North
America by dialing +1.630.652.3042 (passcode: 44658255).

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
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 forward-looking statements that involve risks and
uncertainties, such as Illumina’s expectations regarding the launch of
any products and the future cost of genome sequencing. 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, including the timing of customer orders and impact on existing
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 millions)
 
April 2,
2017
January 1,
2017
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 981 $ 735
Short-term investments 797 824
Accounts receivable, net 368 381
Inventory 299 300
Prepaid expenses and other current assets 72   78
Total current assets 2,517 2,318
Property and equipment, net 734 713
Goodwill 771 776
Intangible assets, net 207 243
Deferred tax assets 83 123
Other assets 286   108
Total assets $ 4,598   $ 4,281
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 142 $ 138
Accrued liabilities 380 343
Build-to-suit lease liability 192 223
Long-term debt, current portion 1   1
Total current liabilities 715 705
Long-term debt 1,055 1,048
Other long-term liabilities 212 214
Redeemable noncontrolling interests 59 44
Stockholders’ equity 2,557   2,270
Total liabilities and stockholders’ equity $ 4,598   $ 4,281
 
Illumina, Inc.
Condensed Consolidated Statements of Income
(In millions, except per share amounts)
(unaudited)
 
Three Months Ended
April 2,
2017
  April 3,
2016
Revenue:
Product revenue $ 491 $ 483
Service and other revenue 107   89  
Total revenue 598   572  
Cost of revenue:
Cost of product revenue (a) 166 125
Cost of service and other revenue (a) 53 39
Amortization of acquired intangible assets 11   11  
Total cost of revenue 230   175  
Gross profit 368   397  
Operating expense:
Research and development (a) 145 124
Selling, general and administrative (a) (b) 163 150
Legal contingencies   2  
Total operating expense 308   276  
Income from operations 60 121
Other income (expense), net 451   (5 )
Income before income taxes 511 116
Provision for income taxes 157   28  
Consolidated net income 354 88
Add: Net loss attributable to noncontrolling interests 19   2  
Net income attributable to Illumina stockholders $ 373   $ 90  
Net income attributable to Illumina stockholders for earnings per
share (c)
$ 372   $ 90  
Earnings per share attributable to Illumina stockholders:
Basic $ 2.54 $ 0.61
Diluted $ 2.52 $ 0.60
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 2,
2017
April 3,
2016
Cost of product revenue $ 3 $ 2
Research and development 14 11
Selling, general and administrative 33   22  
Stock-based compensation expense before taxes (1) $ 50   $ 35  
 

(1) Includes stock-based compensation from GRAIL and Helix
of $10 million and $0.3 million for the three months ended April
2, 2017, respectively, and stock-based compensation from GRAIL and
Helix of $1 million and $0.2 million for the three months ended
April 3, 2016, respectively.

 

(b) Headquarter relocation expense of $0.4 million was
reclassified to selling, general and administrative expense for
the three months ended April 3, 2016 to conform to the current
period presentation.

 

(c) Amount reflects the additional losses attributable to
the common shareholders of GRAIL and Helix for earnings per share
purposes.

 
Illumina, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(unaudited)
 
Three Months Ended
April 2,
2017
April 3,
2016
Net cash provided by operating activities (a) $ 168 $ 99
Net cash provided by (used in) investing activities 163 (44 )
Net cash used in financing activities (a) (86 ) (71 )
Effect of exchange rate changes on cash and cash equivalents 1   2  
Net increase (decrease) in cash and cash equivalents 246 (14 )
Cash and cash equivalents, beginning of period 735   769  
Cash and cash equivalents, end of period $ 981   $ 755  
 
Calculation of free cash flow:
Net cash provided by operating activities (a) $ 168 $ 99
Purchases of property and equipment (b) (83 ) (53 )
Free cash flow (c) $ 85   $ 46  
               

(a) Excess tax benefit related to stock-based compensation
of $59 million for Q1 2016 was reclassified from cash used in
financing activities to cash provided by operating activities as a
result of the Company’s retrospective application of ASU 2016-09
adopted in Q1 2017.

 

(b) Excludes property and equipment recorded under
build-to-suit lease accounting, which are non-cash expenditures,
of $27 million in Q1 2017 and $10 million in Q1 2016.

 

(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 millions, except per share amounts)
(unaudited)
 
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP EARNINGS PER
SHARE ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS:
  Three Months Ended
April 2,
2017
  April 3,
2016

GAAP earnings per share attributable to Illumina stockholders –
diluted

$ 2.52 $ 0.60
Gain on deconsolidation of GRAIL (a) (3.07 )
Impairment of acquired intangible asset 0.12
Amortization of acquired intangible assets 0.09 0.09
Non-cash interest expense (b) 0.05 0.05
Impairment of in-process research and development 0.03
Performance-based compensation related to GRAIL Series B financing (c) 0.03
Equity-method investment gain (d) (0.01 )
Acquisition related gain (e) (0.01 )
Legal contingencies (f) 0.01
Incremental non-GAAP tax expense (g) 0.94 (0.04 )
Excess tax benefit from share-based compensation (h) (0.05 )  
Non-GAAP earnings per share attributable to Illumina stockholders –
diluted (i)
$ 0.64   $ 0.71  
 
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME
ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS:
GAAP net income attributable to Illumina stockholders (j) $ 373 $ 90
Gain on deconsolidation of GRAIL (a) (453 )
Impairment of acquired intangible asset 18
Amortization of acquired intangible assets 13 12
Non-cash interest expense (b) 7 8
Impairment of in-process research and development 5
Performance-based compensation related to GRAIL Series B financing (c) 4
Equity-method investment gain (d) (2 )
Acquisition related gain (e) (1 )
Legal contingencies (f) 2
Contingent compensation expense (k) 1
Incremental non-GAAP tax expense (g) 138 (7 )
Excess tax benefit from share-based compensation (h) (8 )  
Non-GAAP net income attributable to Illumina stockholders (i) $ 94   $ 106  
                 

(a) The company sold a portion of its interest in GRAIL,
resulting in the deconsolidation of GRAIL. The $150 million tax
effect of the gain is included in incremental non-GAAP tax
expense. Subsequent to the transaction, the company’s remaining
interest will be treated as a cost-method investment.

 

(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 represents performance-based stock which vested
as a result of the financing, net of attribution to noncontrolling
interest.

 

(d) Equity-method investment gain represents mark-to-market
adjustments from our investment in Illumina Innovations Fund I,
L.P.

 

(e) Acquisition related gain consists of change in fair
value of contingent consideration.

 

(f) Legal contingencies represent charges related to patent
litigation.

 

(g) Incremental non-GAAP tax expense reflects the tax
impact related to the non-GAAP adjustments listed above.

 

(h) Excess tax benefits from share-based compensation are
recorded as a discrete item within the provision for income taxes
on the consolidated statement of income pursuant to ASU 2016-09,
which was previously recognized in additional paid-in capital on
the consolidated statement of stockholders’ equity.

 

(i) 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.

 

(j) GAAP net income attributable to Illumina stockholders
excludes the additional losses attributable to common shareholders
of GRAIL and Helix for earnings per share purposes. These amounts
are included in GAAP net income attributable to Illumina
stockholders for earnings per share of $372 million for the three
months ended April 2, 2017.

 

(k) 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 millions)
(unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF
OPERATIONS AS A PERCENT OF REVENUE:
Three Months Ended
April 2,
2017
  April 3,
2016
GAAP gross profit $ 368   61.5 % $ 397   69.4 %
Impairment of acquired intangible asset 18 3.0 %
Amortization of acquired intangible asset 11   1.9 % 10   1.9 %
Non-GAAP gross profit (a) $ 397   66.4 % $ 407   71.3 %
 
GAAP research and development expense $ 145 24.2 % $ 124 21.7 %
Impairment of in-process research and development (5 ) (0.9 )%    
Non-GAAP research and development expense $ 140   23.3 % $ 124   21.7 %
 
GAAP selling, general and administrative expense $ 163 27.3 % $ 150 26.2 %
Performance-based compensation related to GRAIL Series B financing (b) (10 ) (1.7 )%
Acquisition related gain (c) 1 0.2 %
Amortization of acquired intangible assets (2 ) (0.2 )% (2 ) (0.3 )%
Contingent compensation expense (d)     (1 ) (0.2 )%
Non-GAAP selling, general and administrative expense $ 152   25.6 % $ 147   25.7 %
 
GAAP operating profit $ 60 10.0 % $ 121 21.2 %
Impairment of acquired intangible asset 18 3.0 %
Amortization of acquired intangible assets 13 2.1 % 12 2.2 %
Impairment of in-process research and development 5 0.9 %
Performance-based compensation related to GRAIL Series B financing (b) 10 1.7 %
Acquisition related gain (c) (1 ) (0.2 )%
Legal contingencies (e) 2 0.3 %
Contingent compensation expense (e)     1   0.2 %
Non-GAAP operating profit (a) $ 105   17.5 % $ 136   23.9 %
 
GAAP other income (expense), net $ 451 75.4 % $ (5 ) (1.0 )%
Gain on deconsolidation of GRAIL (f) (453 ) (75.9 )%
Non-cash interest expense (g) 7 1.2 % 8 1.3 %
Equity-method investment gain (h) (2 ) (0.2 )%    
Non-GAAP other income, net (a) $ 3   0.5 % $ 3   0.3 %
                           

(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 operating performance.

 

(b) Amount represents performance-based stock which vested
as a result of the financing.

 

(c) Acquisition related gain consists of change in fair
value of contingent consideration.

 

(d) Contingent compensation expense relates to contingent
payments for post-combination services associated with an
acquisition.

 

(e) Legal contingencies represent charges related to patent
litigation.

 

(f) The company sold a portion of its interest in GRAIL,
resulting in the deconsolidation of GRAIL. Subsequent to the
transaction, the company’s remaining interest will be treated as a
cost-method investment.

 

(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) Equity-method investment gain represents mark-to-market
adjustments from our investment in Illumina Innovations Fund I,
L.P.

 

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 1, 2017 filed with
the SEC on February 13, 2017. The company assumes no obligation to
update any forward-looking statements or information.

Fiscal Year 2017
GAAP diluted earnings per share attributable to Illumina
stockholders
$5.26 – $5.36
Gain on deconsolidation of GRAIL (a) (3.07)
Amortization of acquired intangible assets 0.30
Non-cash interest expense (b) 0.20
Impairment of acquired intangible asset 0.12
Impairment of in-process research and development 0.03
Performance-based compensation related to Series B financing (c) 0.03
Equity-method investment gain, net (d) (0.01)
Acquisition related gain (e) (0.01)
Incremental non-GAAP tax expense (f) 0.80
Excess tax benefits from share-based compensation (g) (0.05)
Non-GAAP diluted earnings per share attributable to Illumina
stockholders
$3.60 – $3.70
 
Q2 2017
GAAP diluted earnings per share attributable to Illumina
stockholders
$0.56 – $0.61
Amortization of acquired intangible assets 0.08
Non-cash interest expense (b) 0.05
Incremental non-GAAP tax expense (f) (0.04)
Non-GAAP diluted earnings per share attributable to Illumina
stockholders
$0.65 – $0.70
   

(a) The company sold a portion of its interest in GRAIL,
resulting in the deconsolidation of GRAIL. The $150 million tax
effect of the gain is included in incremental non-GAAP tax
expense. Subsequent to the transaction, the company’s remaining
interest will be treated as a cost-method investment.

 

(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 represents performance-based stock which vested
as a result of the financing, net of attribution to noncontrolling
interest.

 

(d) Equity-method investment gain represents mark-to-market
adjustments from our investment in Illumina Innovations Fund I,
L.P.

 

(e) Acquisition related gain consists of change in fair
value of contingent consideration.

 

(f) Incremental non-GAAP tax expense reflects the tax
impact related to the non-GAAP adjustments listed above.

 

(g) Excess tax benefits from share-based compensation are
recorded as a discrete item within the provision for income taxes
on the consolidated statement of income pursuant to ASU 2016-09,
which was previously recognized in additional paid-in capital on
the consolidated statement of stockholders’ equity.

Contacts

Illumina, Inc.
Investors:
Rebecca Chambers,
858.255.5243
ir@illumina.com
or
Media:
Eric
Endicott, 858.882.6822
pr@illumina.com

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