On November 1, 2016 Illumina, Inc. (NASDAQ:ILMN) reported its full financial results for the third quarter of fiscal year 2016 (Filing, Q3, Illumina, 2016, NOV 1, 2016, View Source [SID1234516299]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Third quarter 2016 results:
•
As previously announced on October 10, 2016, revenue of $607 million, a 10% increase compared to $550 million in the third quarter of 2015
•
GAAP net income attributable to Illumina stockholders for the quarter of $129 million, or $0.87 per diluted share, compared to $118 million, or $0.79 per diluted share, for the third quarter of 2015
•
Non-GAAP net income attributable to Illumina stockholders for the quarter of $144 million, or $0.97 per diluted share, compared to $120 million, or $0.80 per diluted share, for the third quarter of 2015 (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 $150 million and free cash flow of $93 million for the quarter, compared to $181 million and $152 million in the prior year period
Gross margin in the third quarter of 2016 was 70.2% compared to 70.4% 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 72.5% for the third quarter of 2016 compared to 73.2% in the prior year period.
Research and development (R&D) expenses for the third quarter of 2016 were $125.9 million, or 20.7% of revenue, compared to $99.2 million, or 18.1% of revenue, in the prior year period. R&D expenses included $11.5 million and $9.1 million of non-cash stock compensation expense in the third quarters of 2016 and 2015, respectively. Excluding these charges and contingent compensation, R&D expenses as a percentage of revenue were 18.8%, including 2.4% attributable to GRAIL and Helix. This compares to 16.4% in the prior year period.
Selling, general and administrative (SG&A) expenses for the third quarter of 2016 were $139.1 million, or 22.9% of revenue, compared to $136.6 million, or 24.8% of revenue, in the prior year period. SG&A expenses included $20.0 million and $20.1 million of non-cash stock compensation expense in the third 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 19.3%, including 1.5% attributable to GRAIL and Helix. This compares to 20.9% in the prior year period, including 0.9% attributable to Helix.
Depreciation and amortization expenses were $35.9 million and capital expenditures for free cash flow purposes were $57.1 million during the third quarter of 2016, which excludes an increase of $83.9 million in property and equipment recorded under build-to-suit lease accounting since such expenses were paid for by the landlord.
At the close of the quarter, the company held $1.54 billion in cash, cash equivalents and short-term investments, compared to $1.39 billion as of January 3, 2016.
"While sequencing sample volume growth remains robust, our lowered revenue outlook reflects our updated expectations for HiSeq 2500, HiSeq 4000 and HiSeq X instrument purchases, as well as HiSeq 2500 reagent sales," stated Francis deSouza, President and CEO. "Over the last few weeks it has become clear that certain academic funding practices were modified in the third quarter, limiting our customers’ ability to make HiSeq X capital commitments. Further, HiSeq 2500 and 4000 demand has been impacted by a migration to NextSeq, for enhanced workflow flexibility and HiSeq X, given its beneficial pricing for whole genome sequencing."
Updates since our last earnings release:
•
Announced a partnership with FlowJo, LLC to develop and co-market analysis software for single cell next-generation sequencing data
•
Received orders for an additional 2 million samples of the Infinium Global Screening Array, for a total of more than 5 million samples ordered to date
•
Appointed Philip W. Schiller to the company’s Board of Directors
•
Announced that Christian Henry, Executive Vice President and Chief Commercial Officer, will be leaving the company. Appointed Mark van Oene, currently Senior Vice President and General Manager, Americas, as Interim Chief Commercial Officer
•
Announced that Illumina’s Board of Directors has authorized the company to repurchase up to $250 million of outstanding common shares in the open market or in privately negotiated transactions, subject to market conditions and other factors. The company repurchased $13 million of common stock under this new stock authorization
Financial outlook and guidance
The non-GAAP financial guidance discussed below reflects certain pro forma adjustments to assist in analyzing and assessing our 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.
The company continues to project fourth quarter revenue to be flat to slightly up compared to the third quarter. For fiscal 2016, non-GAAP earnings per diluted share attributable to Illumina stockholders is forecasted to be $3.27 to $3.32.
Quarterly conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Tuesday, November 1, 2016. Interested parties may listen to the call by dialing 888.771.4371 (passcode: 43579048), or if outside North America
by dialing +1.847.585.4405 (passcode: 43579048). 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 4:30 pm Pacific Time (7:30 pm Eastern Time) on November 1, 2016 through November 8, 2016 by dialing 888.843.7419 (passcode: 43579048), or if outside North America by dialing +1.630.652.3042 (passcode: 43579048).