Illumina, Inc. (NASDAQ: ILMN) today announced its financial
results for the second quarter of fiscal year 2020.
Second quarter 2020 results reflect the impact of the global
COVID-19 pandemic:
- Revenue of $633 million, a 25% decrease compared to $838
million in the second quarter of 2019
- GAAP net income attributable to Illumina stockholders for the
quarter of $47 million, or $0.32 per diluted share, compared to
$296 million, or $1.99 per diluted share, for the second quarter of
2019
- Non-GAAP net income attributable to Illumina stockholders for
the quarter of $92 million, or $0.62 per diluted share, compared to
$200 million, or $1.35 per diluted share, for the second quarter of
2019. Non-GAAP net income excludes discrete tax expenses and net
gains from mark-to-market adjustments on our strategic investments,
primarily from our marketable equity securities (see the
“Reconciliation Between GAAP and Non-GAAP Net Income Attributable
to Illumina Stockholders” table for a reconciliation of these GAAP
and non-GAAP financial measures)
- Cash flow from operations of $240 million compared to $143
million in the second quarter of 2019. Cash flow from operations
for the second quarter of 2019 included an $84 million payment of
the accreted debt discount related to the conversion of our 2019
Notes
- Free cash flow (cash flow from operations less capital
expenditures) of $202 million for the quarter compared to $96
million in the second quarter of 2019. Free cash flow for the
second quarter of 2019 included the convertible notes payment,
referenced above
Gross margin in the second quarter of 2020 was 67.7% compared to
68.4% in the prior year period. Excluding amortization of acquired
intangible assets and the net impact from payroll credits and
expenses related to COVID-19, non-GAAP gross margin was 68.6% for
the second quarter of 2020 compared to 69.5% in the prior year
period.
Research and development (R&D) expenses for the second
quarter of 2020 were $155 million compared to $166 million in the
prior year period. Excluding payroll credits related to COVID-19,
non-GAAP R&D expenses as a percentage of revenue were 24.7%
compared to 19.8% in the prior year period.
Selling, general and administrative (SG&A) expenses for the
second quarter of 2020 were $177 million compared to $202 million
in the prior year period. Excluding acquisition-related expenses,
restructuring charges, and the net impact from payroll credits and
expenses related to COVID-19, non-GAAP SG&A expenses as a
percentage of revenue were 28.1% compared to 23.1% in the prior
year period.
Depreciation and amortization expenses were $46 million and
capital expenditures for free cash flow purposes were $38 million
during the second quarter of 2020. At the close of the quarter, the
company held $3.3 billion in cash, cash equivalents and short-term
investments, compared to $3.4 billion as of December 29, 2019.
“As expected, the second quarter was significantly impacted by
pandemic-related disruption in our customers’ operations and was
particularly challenging for many of our research customers who
remain closed or operating at limited scale,” said Francis deSouza,
President and CEO. “It is clear that the role of genomics in
infectious disease will continue to grow through and beyond this
pandemic.”
Updates since our last earnings release:
- Launched TruSight™ software to accelerate the identification of
rare genetic diseases through whole genome sequencing
- Received an Emergency Use Authorization from the US FDA for
COVIDSeq™, the first sequencing-based COVID-19 diagnostic test
- Acquired BlueBee and Enancio to lower data storage costs and
accelerate data interpretation
- Accepted seven genomic startups to Illumina Accelerator’s first
global cohort, with 3 in Cambridge, UK and 4 in San Francisco, to
build breakthrough genomic technologies
- Repurchased approximately $143 million of common stock in the
second quarter and $420 million remains available for repurchase
under our current plan
- Welcomed Dr. Alex Aravanis to lead research and development
efforts as CTO and appointed Mostafa Ronaghi to lead
entrepreneurial development
Financial outlook and guidance
As previously announced, Illumina has withdrawn its fiscal 2020
full year revenue and earnings per share guidance due to the
uncertainties around the severity and duration of the COVID-19
pandemic.
Quarterly conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm
Eastern Time) on Thursday, August 6, 2020. 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 with
conference ID 4194447.
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 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 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) our ability to
manufacture robust instrumentation and consumables; (vi) the
success of products and services competitive with our own; (vii)
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; (viii) the impact of recently launched or
pre-announced products and services on existing products and
services; (ix) 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; (x) our ability to obtain regulatory clearance for our
products from government agencies; (xi) our ability to successfully
partner with other companies and organizations to develop new
products, expand markets, and grow our business; (xii) our ability
to successfully identify and integrate acquired technologies,
products, or businesses; and (xiii) 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)
June 28, 2020
December 29,
2019
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
1,770
$
2,042
Short-term investments
1,498
1,372
Accounts receivable, net
385
573
Inventory
435
359
Prepaid expenses and other current
assets
106
105
Total current assets
4,194
4,451
Property and equipment, net
890
889
Operating lease right-of-use assets
549
555
Goodwill
894
824
Intangible assets, net
156
145
Deferred tax assets, net
13
64
Other assets
552
388
Total assets
$
7,248
$
7,316
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
135
$
149
Accrued liabilities
477
516
Long-term debt, current portion
503
—
Total current liabilities
1,115
665
Operating lease liabilities
681
695
Long-term debt
659
1,141
Other long-term liabilities
230
202
Stockholders’ equity
4,563
4,613
Total liabilities and stockholders’
equity
$
7,248
$
7,316
Illumina, Inc.
Condensed Consolidated
Statements of Income
(In millions, except per share
amounts)
(unaudited)
Three Months Ended
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Revenue:
Product revenue
$
527
$
704
$
1,228
$
1,372
Service and other revenue
106
134
264
312
Total revenue
633
838
1,492
1,684
Cost of revenue:
Cost of product revenue (a)
152
196
326
378
Cost of service and other revenue
(a)
46
59
105
130
Amortization of acquired intangible
assets
7
10
14
19
Total cost of revenue
205
265
445
527
Gross profit
428
573
1,047
1,157
Operating expense:
Research and development (a)
155
166
311
335
Selling, general and administrative
(a)
177
202
451
412
Total operating expense
332
368
762
747
Income from operations
96
205
285
410
Other income, net
69
141
57
170
Income before income taxes
165
346
342
580
Provision for income taxes
118
53
122
63
Consolidated net income
47
293
220
517
Add: Net loss attributable to
noncontrolling interests
—
3
—
12
Net income attributable to Illumina
stockholders
$
47
$
296
$
220
$
529
Earnings per share attributable to
Illumina stockholders:
Basic
$
0.32
$
2.01
$
1.50
$
3.60
Diluted
$
0.32
$
1.99
$
1.49
$
3.56
Shares used in computing earnings per
common share:
Basic
147
147
147
147
Diluted
148
149
148
149
(a) Includes stock-based compensation expense for
stock-based awards:
Three Months Ended
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Cost of product revenue
$
3
$
5
$
7
$
10
Cost of service and other revenue
1
1
2
2
Research and development
12
16
27
34
Selling, general and administrative
1
26
19
53
Stock-based compensation expense before
taxes (1)
$
17
$
48
$
55
$
99
(1) Includes stock-based compensation of $0.4 million and
$1.5 million for Helix for Q2 2019 and YTD 2019, respectively.
Illumina, Inc.
Condensed Consolidated
Statements of Cash Flows
(In millions)
(unaudited)
Three Months Ended
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
Net cash provided by operating
activities
$
240
$
143
$
521
$
341
Net cash (used in) provided by investing
activities
(320
)
79
(455
)
1,067
Net cash used in financing activities
(143
)
(549
)
(334
)
(609
)
Effect of exchange rate changes on cash
and cash equivalents
2
—
(4
)
—
Net (decrease) increase in cash and cash
equivalents
(221
)
(327
)
(272
)
799
Cash and cash equivalents, beginning of
period
1,991
2,270
2,042
1,144
Cash and cash equivalents, end of
period
$
1,770
$
1,943
$
1,770
$
1,943
Calculation of free cash flow:
Net cash provided by operating activities
(b)
$
240
$
143
$
521
$
341
Purchases of property and equipment
(38
)
(47
)
(79
)
(103
)
Free cash flow (a)
$
202
$
96
$
442
$
238
(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. (b)
Net cash provided by operating activities in Q2 2019 and the first
half of 2019 included an $84 million payment of the accreted debt
discount related to the conversions of our 2019 Notes.
Illumina, Inc.
Results of Operations -
Non-GAAP
(In millions, except per share
amounts)
(unaudited)
RECONCILIATION BETWEEN GAAP AND
NON-GAAP EARNINGS PER SHARE ATTRIBUTABLE TO ILLUMINA
STOCKHOLDERS:
Three Months Ended
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
GAAP earnings per share attributable to
Illumina stockholders - diluted
$
0.32
$
1.99
$
1.49
$
3.56
Cost of revenue (b)
0.04
0.07
0.09
0.13
Research and development costs
(b)
(0.01
)
—
(0.02
)
—
Selling, general and administrative costs
(b)
(0.01
)
0.05
0.62
0.16
Other income, net (b)
(0.38
)
(0.84
)
(0.29
)
(0.90
)
Incremental non-GAAP tax expense
(c)
0.07
0.11
(0.13
)
0.08
Tax expense related to increase in
valuation allowance (d)
0.42
—
0.42
—
Tax expense related to cost-sharing
arrangement (e)
0.19
—
0.19
—
Income tax benefit (f)
(0.02
)
(0.03
)
(0.11
)
(0.09
)
Non-GAAP earnings per share attributable
to Illumina stockholders - diluted (a)
$
0.62
$
1.35
$
2.26
$
2.94
RECONCILIATION BETWEEN GAAP AND
NON-GAAP NET INCOME ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS:
Three Months Ended
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
GAAP net income attributable to
Illumina stockholders
$
47
$
296
$
220
$
529
Cost of revenue (b)
6
10
14
19
Research and development costs
(b)
(1
)
—
(2
)
—
Selling, general and administrative costs
(b)
(1
)
8
92
24
Other income, net (b)
(56
)
(125
)
(43
)
(134
)
Incremental non-GAAP tax expense
(c)
10
16
(19
)
12
Tax expense related to increase in
valuation allowance (d)
62
—
62
—
Tax expense related to cost-sharing
arrangement (e)
28
—
28
—
Income tax benefit (f)
(3
)
(5
)
(17
)
(13
)
Non-GAAP net income attributable to
Illumina stockholders (a)
$
92
$
200
$
335
$
437
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 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.
(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 discrete tax expense related
to the valuation allowance established against the deferred tax
asset for California research and development credits. (e)
Amounts represent discrete tax expense related to the finalization
of the Altera court case which determined stock-based compensation
must be included in intercompany cost sharing payments. (f)
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
Six Months Ended
June 28, 2020
June 30, 2019
June 28, 2020
June 30, 2019
GAAP gross profit (b)
$
428
67.7
%
$
573
68.4
%
$
1,047
70.2
%
$
1,157
68.7
%
Amortization of acquired intangible
assets
7
1.0
%
10
1.1
%
14
0.9
%
19
1.1
%
Restructuring (c)
—
—
—
—
1
0.1
%
—
—
Expenses related to COVID-19
(d)
1
0.2
%
—
—
2
0.1
%
—
—
Income related to COVID-19 (e)
(2
)
(0.3
)
%
—
—
(3
)
(0.2
)
%
—
—
Non-GAAP gross profit (a)
$
434
68.6
%
$
583
69.5
%
$
1,061
71.1
%
$
1,176
69.8
%
GAAP research and development
expense
$
155
24.5
%
$
166
19.8
%
$
311
20.8
%
$
335
19.9
%
Income related to COVID-19 (e)
1
0.2
%
—
—
2
0.1
%
—
—
Non-GAAP research and development
expense
$
156
24.7
%
$
166
19.8
%
$
313
20.9
%
$
335
19.9
%
GAAP selling, general and
administrative expense
$
177
28.0
%
$
202
24.1
%
$
451
30.3
%
$
412
24.5
%
Acquisition-related expenses
(f)
(1
)
(0.2
)
%
(8
)
(1.0
)
%
(93
)
(6.2
)
%
(23
)
(1.4
)
%
Amortization of acquired intangible
assets
—
—
—
—
(1
)
(0.1
)
%
(1
)
(0.1
)
%
Restructuring (c)
2
0.3
%
—
—
2
0.1
%
—
—
Expenses related to COVID-19
(d)
(2
)
(0.3
)
%
—
—
(2
)
(0.1
)
%
—
—
Income related to COVID-19 (e)
2
0.3
%
—
—
2
0.1
%
—
—
Non-GAAP selling, general and
administrative expense
$
178
28.1
%
$
194
23.1
%
$
359
24.1
%
$
388
23.0
%
GAAP operating profit
$
96
15.2
%
$
205
24.5
%
$
285
19.1
%
$
410
24.3
%
Cost of revenue
6
0.9
%
10
1.1
%
14
0.9
%
19
1.1
%
Research and development costs
(1
)
(0.2
)
%
—
—
(2
)
(0.1
)
%
—
—
Selling, general and administrative
costs
(1
)
(0.1
)
%
8
1.0
%
92
6.2
%
24
1.5
%
Non-GAAP operating profit (a)
$
100
15.8
%
$
223
26.6
%
$
389
26.1
%
$
453
26.9
%
GAAP other income, net
$
69
10.8
%
$
141
16.8
%
$
57
3.8
%
$
170
10.1
%
Non-cash interest expense (g)
10
1.7
%
14
1.7
%
21
1.4
%
28
1.7
%
Strategic investment related gain, net
(h)
(69
)
(10.8
)
%
(103
)
(12.3
)
%
(74
)
(5.0
)
%
(111
)
(6.6
)
%
Loss on derivative assets (i)
11
1.7
%
—
—
15
1.0
%
—
—
(Gain) loss on contingent value right
(j)
(8
)
(1.3
)
%
3
0.4
%
(5
)
(0.3
)
%
3
0.2
%
Gain on deconsolidation (k)
—
—
(39
)
(4.7
)
%
—
—
(54
)
(3.2
)
%
Non-GAAP other income, net (a)
$
13
2.1
%
$
16
1.9
%
$
14
0.9
%
$
36
2.2
%
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 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) Amount consists primarily of employee costs, net of
adjustments, related to restructuring. (d) Amounts consist
of direct and incremental expenses incurred due to the COVID-19
pandemic, primarily personal protective equipment and premium pay
for onsite essential workers. (e) Amounts consist of direct
and incremental income due to the COVID-19 pandemic, primarily
payroll-related credits earned in Singapore. (f) Amount for
Q2 2020 consists primarily of expenses related to the acquisition
of BlueBee. Amount for the first half of 2020 consists primarily of
expenses related to the Continuation Advances and Reverse
Termination Fee paid to PacBio. (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 consists of fair value adjustments
on our derivative assets related to the terminated acquisition with
PacBio. (j) Amount consists of fair value adjustments
related to our contingent value right received from Helix.
(k) Amount for Q2 2019 consists of the gain recognized as a
result of the Helix deconsolidation. Amount for the first half of
2019 also includes the $15 million gain recorded in Q1 2019 that
resulted from the settlement of a contingency related to the
deconsolidation of GRAIL in 2017.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806005926/en/
Investors: Jacquie Ross, CFA +1.858.882.2172 ir@illumina.com
Media: Dr. Karen Birmingham +44.7500.105665
kbirmingham@illumina.com
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