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Illumina Reports Financial Results for First Quarter of Fiscal Year 2016Illumina, Inc. (NASDAQ: ILMN) today announced its financial results for the first quarter of fiscal year 2016. First quarter 2016 results:
Gross margin in the first quarter of 2016 was 69.4% compared to 69.6% in the prior year period. Excluding the effect of non-cash stock compensation expense and amortization of acquired intangible assets, non-GAAP gross margin was 71.7% for the first quarter of 2016 compared to 72.2% in the prior year period. Research and development (R&D) expenses for the first quarter of 2016 were $124.0 million compared to $91.8 million in the prior year period. R&D expenses included $10.7 million and $11.3 million of non-cash stock compensation expense in the first quarters of 2016 and 2015, respectively. Excluding these charges and contingent compensation, R&D expenses as a percentage of revenue were 19.8%, including 0.9% attributable to GRAIL and Helix. This compares to 14.9% in the prior year period. Selling, general and administrative (SG&A) expenses for the first quarter of 2016 were $149.2 million compared to $116.3 million in the prior year period. SG&A expenses included $22.0 million and $18.0 million of non-cash stock compensation expense in the first quarters of 2016 and 2015, respectively. Excluding these charges, amortization of acquired intangible assets, and contingent compensation, SG&A expenses as a percentage of revenue were 21.9%, including 0.6% attributable to GRAIL and Helix. This compares to 18.0% in the prior year period. Depreciation and amortization expenses were $33.2 million and capital expenditures were $53.4 million during the first quarter of 2016. The company settled the remaining 0.25% Convertible Senior Notes of $75.5 million. At the close of the quarter, the company held $1.34 billion in cash, cash equivalents and short-term investments, compared to $1.39 billion as of January 3, 2016. "As we have previously shared, Q1 was a slower start to the year than we expected," stated Jay Flatley, Chairman and CEO. "Our view of the growth potential of the sequencing market remains unchanged, as the largest opportunities are in their earliest stages of development. In the near-term, we are focused on improving execution to restore the growth rate we believe our markets can support." Updates since our last earnings release:
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 2016, the company is projecting approximately 12% revenue growth and non-GAAP earnings per diluted share attributable to Illumina stockholders of $3.35 to $3.45. For the second quarter 2016, the company is projecting revenue of $590 million to $595 million and non-GAAP earnings per diluted share attributable to Illumina stockholders of $0.72 to $0.74. Quarterly conference call information The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Tuesday, May 3, 2016. Interested parties may listen to the call by dialing 888.687.3295 (passcode: 85797542), or if outside North America by dialing +1.503.406.4070 (passcode: 85797542). 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 5:00 pm Pacific Time (8:00 pm Eastern Time) on May 3, 2016 through May 10, 2016 by dialing 855.859.2056 (passcode: 85797542), or if outside North America by dialing +1.404.537.3406 (passcode: 85797542). 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 stock compensation expense, 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 believes that presentation of operating results that excludes these items 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 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 contains projections, information about our financial outlook, earnings guidance, and other forward-looking statements that involve risks and uncertainties. These forward-looking statements are 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 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; 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.
______________________________________________________________________________________________________ (a) Net cash provided by operating activities excludes excess tax benefit related to stock-based compensation of $59.0 million in Q1 2016 and $76.4 million in Q1 2015. Net cash used in financing activities reflects the excess tax benefit as a corresponding in-flow in the respective periods. (b) 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.
______________________________________________________________________________________________________ (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) Legal contingencies represent charges related to patent litigation. (c) Acquisition related gain, net consists of changes in fair value of contingent consideration. (d) Cost-method investment gain, net consists primarily of a gain on the sale of a cost-method investment. (e) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above. (f) 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 drivers of the company's 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. (g) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition.
______________________________________________________________________________________________________ (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 core operating performance. (b) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition. (c) Legal contingencies represent charges related to patent litigation. (d) Acquisition related gain, net consists of changes in fair value of contingent consideration. (e) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash. (f) Cost-method investment gain, net consists primarily of a gain on the sale of a cost-method investment. 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 3, 2016 filed with the SEC on March 2, 2016. The company assumes no obligation to update any forward-looking statements or information.
______________________________________________________________________________________________________ (a) Operating margin implied at the mid-point of guidance provided for non-GAAP diluted earnings per share. (b) Legal contingencies represent charges related to patent litigation. (c) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition. (d) Headquarter relocation represents accretion of interest expense on lease exit liability and changes in estimate of such liability. (e) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash. (f) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above. View source version on businesswire.com: http://www.businesswire.com/news/home/20160503006960/en/ |