On April 25, 2017 Illumina, Inc. (NASDAQ:ILMN) reported its financial results for the first quarter of fiscal year 2017 (Press release, Illumina, APR 25, 2017, View Source [SID1234518689]). Schedule your 30 min Free 1stOncology Demo! First quarter 2017 results:
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Revenue of $598 million, a 5% increase compared to $572 million in the first quarter of 2016
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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
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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)
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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:
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Launched the VeriSeq NIPT Solution in Europe, a CE-IVD marked next-generation sequencing based approach to noninvasive prenatal testing
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Contributed more than 8,000 associations of somatic genetic alterations to the Clinical Interpretation of Variants in Cancer (CIViC) database
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Announced the iHope Network, a consortium of institutions who have committed to providing clinical whole genome sequencing to underserved families
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Announced that GRAIL raised $900 million in the first close of its Series B financing and that Illumina’s stake is now less than 20 percent of GRAIL
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Announced that John W. Thompson will join the company’s Board of Directors
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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.