On April 24, 2018 Illumina, Inc. (NASDAQ:ILMN) reported its financial results for the first quarter of fiscal year 2018 (Press release, Illumina, APR 24, 2018, View Source [SID1234525639]).
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First quarter 2018 results:
Revenue of $782 million, a 31% increase compared to $598 million in the first quarter of 2017
GAAP net income attributable to Illumina stockholders for the quarter of $208 million, or $1.41 per diluted share, compared to $367 million, or $2.48 per diluted share, for the first quarter of 2017; the prior year period included the impact of a pre-tax gain of $453 million as a result of the GRAIL repurchase of shares from Illumina
Non-GAAP net income attributable to Illumina stockholders for the quarter of $214 million, or $1.45 per diluted share, compared to $94 million, or $0.64 per diluted share, for the first quarter of 2017 (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 $255 million compared to $168 million in the first quarter of 2017
Free cash flow (cash flow from operations less capital expenditures) of $165 million for the quarter, compared to $85 million in the first quarter of 2017
Gross margin in the first quarter of 2018 was 68.8% compared to 61.5% in the prior year period. Excluding amortization of acquired intangible assets, non-GAAP gross margin was 69.8% for the first quarter of 2018 compared to 66.4% in the prior year period.
Research and development (R&D) expenses for the first quarter of 2018 were $137 million compared to $145 million in the prior year period. Non-GAAP R&D expenses as a percentage of revenue were 17.5%, including 0.8% attributable to Helix. This compares to non-GAAP R&D expenses as a percentage of revenue of 23.3% in the prior year period, including 2.1% attributable to GRAIL and Helix.
Selling, general and administrative (SG&A) expenses for the first quarter of 2018 were $183 million compared to $171 million in the prior year period. Excluding restructuring and amortization of acquired intangible assets, SG&A expenses as a percentage of revenue were 22.9%, including 1.1% attributable to Helix. This compares to 25.6% in the prior year period, including 1.5% attributable to GRAIL and Helix.
Depreciation and amortization expenses were $39 million and capital expenditures for free cash flow purposes were $90 million during the first quarter of 2018. At the close of the quarter, the company held $2.4 billion in cash, cash equivalents and short-term investments, compared to $2.1 billion as of December 31, 2017.
"Our strong first quarter, with momentum across both our sequencing and microarray businesses, was driven by the growing adoption of applications spanning oncology, clinical and non-clinical research, population genomics and personal genomics," said Francis deSouza, President and CEO. "Genomic information is more valuable and actionable than ever before and we believe that we are in the earliest stages of a genomics revolution."
Updates since our last earnings release:
Released the NovaSeq S1 flow cell-reagent kit for the NovaSeq 6000 System
Received a product approval certificate for the NextSeq 550Dx instrument with the Ministry of Food and Drug Safety (MFDS) in South Korea
Announced a collaboration with Bristol-Myers Squibb to utilize Illumina’s next-generation sequencing (NGS) technology to develop and globally commercialize in-vitro diagnostic (IVD) assays in support of Bristol-Myers Squibb’s oncology portfolio
Announced a partnership with Loxo Oncology to develop and commercialize a multi-gene panel for broad tumor profiling, targeting a distributable, NGS-based companion diagnostic (CDx) with a pan-cancer indication
Launched a study with Harvard Pilgrim Health Care, a not-for-profit health services company, designed to gather data intended to support wider average-risk patient access and reimbursement of NGS for non-invasive prenatal testing
Appointed Dr. Phil Febbo to the position of Senior Vice President and Chief Medical Officer
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 2018, the company now projects 15% to 16% revenue growth, GAAP earnings per diluted share attributable to Illumina stockholders of $4.45 to $4.55 and non-GAAP earnings per diluted share attributable to Illumina stockholders of $4.75 to $4.85.
Quarterly conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Tuesday, April 24, 2018. Interested parties may access the live teleconference through the Investor Relations section of Illumina’s web site under the "company" tab at www.illumina.com. Alternatively, individuals can access the call by dialing 800-708-4539, or 1-847-619-6396 outside North America, both with passcode 46755682.
A replay of the conference call will be available from 4:30 pm Pacific Time (7:30 pm Eastern Time) on April 24, 2018 through May 1, 2018 by dialing 888-843-7419, or 1-630-652-3042 outside North America, both with passcode 46755682.
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, including our financial outlook and guidance for fiscal 2018 and expectations regarding the development and commercialization of new products. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are: (i) challenges inherent in developing, manufacturing, and launching new products and services, including expanding manufacturing operations and reliance on third-party suppliers for critical components; (ii) the timing and mix of customer orders among our products and services; (iii) the impact of recently launched or pre-announced products and services on existing products and services; (iv) 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; (v) our ability to manufacture robust instrumentation and consumables; (vi) the success of products and services competitive with our own; (vii) our ability to successfully identify and integrate acquired technologies, products, or businesses; (viii) our expectations and beliefs regarding future conduct and growth of the business and the markets in which we operate; and (ix) 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.