On October 24, 2019 Illumina, Inc. (NASDAQ: ILMN) reported its financial results for the third quarter of fiscal year 2019 (Press release, Illumina, OCT 24, 2019, View Source [SID1234542491]).
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Third quarter 2019 results:
•Revenue of $907 million, a 6% increase compared to $853 million in the third quarter of 2018
•GAAP net income attributable to Illumina stockholders for the quarter of $234 million, or $1.58 per diluted share, compared to $199 million, or $1.33 per diluted share, for the third quarter of 2018
•Non-GAAP net income attributable to Illumina stockholders for the quarter of $286 million, or $1.93 per diluted share, compared to $227 million, or $1.52 per diluted share, for the third quarter of 2018. Non-GAAP net income excludes an unrealized net loss of $43 million from mark-to-market adjustments on our strategic investments, primarily from our marketable equity securities (see the table entitled "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 $267 million compared to $292 million in the third quarter of 2018
•Free cash flow (cash flow from operations less capital expenditures) of $218 million for the quarter compared to $228 million in the third quarter of 2018
Gross margin in the third quarter of 2019 was 71.5% compared to 70.0% in the prior year period. Excluding amortization of acquired intangible assets, non-GAAP gross margin was 72.5% for the third quarter of 2019 compared to 71.1% in the prior year period.
Research and development (R&D) expenses for the third quarter of 2019 were $151 million compared to $159 million in the prior year period. Excluding restructuring charges, non-GAAP R&D expenses as a percentage of revenue were 16.4% compared to 18.6% in the prior year period.
Selling, general and administrative (SG&A) expenses for the third quarter of 2019 were $189 million compared to $197 million in the prior year period. Excluding acquisition-related expenses and restructuring charges, non-GAAP SG&A expenses as a percentage of revenue were 20.0% compared to 23.2% in the prior year period.
Depreciation and amortization expenses were $47 million and capital expenditures for free cash flow purposes were $49 million during the third quarter of 2019. At the close of the quarter, the company held $3.2 billion in cash, cash equivalents and short-term investments, compared to $3.5 billion as of December 30, 2018.
"This was a solid quarter for Illumina, with product revenue in-line with expectations, and a stronger than expected revenue contribution associated with partner collaborations to develop distributable clinical IVDs for Illumina sequencers," said Francis deSouza, President and CEO. "Third quarter NovaSeq system shipments represented the second highest since launch, and included capacity expansion to support the UK Biobank initiative to sequence 450,000 whole genomes over the next several years. Additionally, continued NovaSeq adoption resulted in the highest consumables pull-through quarter for the platform this year."
Updates since our last earnings release:
•Partnered with QIAGEN to develop and commercialize a portfolio of IVD test kits for use on Illumina Dx sequencing instruments, broadening clinical access to NGS-based IVD tests
•Partnered with Adaptive Biotechnologies to develop distributable IVD test kits for clonoSEQ and immunoSEQ Dx on Illumina’s NextSeq 550Dx system
•Announced a collaboration with the Broad Institute to co-develop open-source genomic secondary analysis tools that will broaden access to best-in-class variant calling algorithms
•Submitted the first module of the Premarket Approval (PMA) submission to the FDA for TruSight Comprehensive Assay, the IVD version of our RUO TruSight Oncology 500
•Extended the merger agreement with Pacific Biosciences to December 31, 2019 with an option to extend the deadline to March 31, 2020
•Repurchased $199 million of outstanding common stock in the third quarter under the previously announced share repurchase program, which has a remaining balance of approximately $289 million as of September 29, 2019
•Welcomed Joydeep Goswami as Senior Vice President of Corporate Development and Strategic Planning
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 2019, the company continues to expect year over year revenue growth of approximately 6%, and now expects GAAP earnings per diluted share attributable to Illumina stockholders of $6.55 to $6.60 and non-GAAP earnings per diluted share attributable to Illumina stockholders of $6.40 to $6.45.
Except for acquisition-related expenses incurred during the first three quarters of 2019 which are reflected in our GAAP guidance, this guidance excludes any impact from the pending acquisition of Pacific Biosciences.
Quarterly conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Thursday, October 24, 2019. 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 2388693.