Illumina Reports Financial Results for First Quarter of Fiscal Year 2021

Rhea-AI Summary

Illumina reported a strong first quarter of 2021, achieving record revenue of $1,093 million, a 27% increase year-over-year. GAAP net income was $147 million or $1.00 per diluted share, down from $173 million or $1.17 per diluted share in the previous year. Non-GAAP net income was $278 million or $1.89 per diluted share, up from $243 million or $1.64 per diluted share. The company projects 2021 revenue growth of 25% to 28% and GAAP EPS guidance of $4.72 to $4.97. Gross margin decreased to 69.9% from 72.1% last year, while R&D and SG&A expenses rose significantly.

Positive

• Record revenue of $1,093 million, a 27% year-over-year increase.
• Non-GAAP net income increased to $278 million from $243 million year-over-year.
• Strong demand indicated by all-time high orders.
• Cash reserves increased to $4.6 billion from $3.5 billion quarter-over-quarter.
• 2021 revenue growth guidance of 25% to 28%.

Negative

• GAAP net income decreased to $147 million from $173 million year-over-year.
• Gross margin down to 69.9% from 72.1% in the prior year.
• Significant increases in R&D expenses (to $197 million) and SG&A expenses (to $374 million).

Illumina, Inc. (NASDAQ: ILMN) today announced its financial results for the first quarter of fiscal year 2021.

First quarter results reflect record revenue:

• Revenue of $1,093 million, a 27% increase compared to the prior year period
• GAAP net income for the quarter of $147 million, or $1.00 per diluted share, compared to $173 million, or $1.17 per diluted share, for the prior year period
• Non-GAAP net income for the quarter of $278 million, or $1.89 per diluted share, compared to $243 million, or $1.64 per diluted share, for the prior year period. Non-GAAP net income excludes acquisition-related expenses, primarily the Continuation Payments paid to GRAIL (see the “Reconciliation Between GAAP and Non-GAAP Net Income” table for a reconciliation of these GAAP and non-GAAP financial measures)
• Cash flow from operations of $282 million compared to $281 million in the prior year period
• Free cash flow (cash flow from operations less capital expenditures) of $240 million for the quarter compared to $241 million in the prior year period

“Illumina achieved its first billion-dollar revenue quarter in company history and delivered a very strong start to 2021, exceeding our expectations,” said Francis deSouza, Chief Executive Officer. “Orders during the first quarter of 2021 reached an all-time high demonstrating strength in our core business across all regions, reflecting growth in both clinical and research customers. We are seeing tremendous progress in clinical market access and reimbursement for genomic applications increasing access to genomic testing for patients worldwide. We are proud of the significant contributions our customers, partners, and employees are making to the creation of a genomic epidemiology infrastructure to combat COVID-19, as well as monitor for future pathogen outbreaks for the benefit of global public health.”

Gross margin in the first quarter of 2021 was 69.9% compared to 72.1% in the prior year period. Excluding amortization of acquired intangible assets and expenses related to COVID-19, non-GAAP gross margin was 70.5% for the first quarter of 2021 compared to 73.0% in the prior year period.

Research and development (R&D) expenses for the first quarter of 2021 were $197 million compared to $156 million in the prior year period. Non-GAAP R&D expenses as a percentage of revenue were 18.0% compared to 18.3% in the prior year period.

Selling, general and administrative (SG&A) expenses for the first quarter of 2021 were $374 million compared to $274 million in the prior year period. Excluding acquisition-related expenses and expenses and income related to COVID-19, non-GAAP SG&A expenses as a percentage of revenue were 20.4% compared to 21.1% in the prior year period.

Depreciation and amortization expenses were $48 million and capital expenditures for free cash flow purposes were $42 million during the first quarter of 2021. At the close of the quarter, the company held $4.6 billion in cash, cash equivalents and short-term investments, compared to $3.5 billion as of January 3, 2021.

Updates since our last earnings release:

• Announced TSO 500 partnership with Kartos Therapeutics to advance comprehensive genomic profiling for blood cancers
• Published positive economic study results in partnership with Harvard Pilgrim Health Care demonstrating the cost-effectiveness of offering non-invasive prenatal testing (NIPT) to all pregnant women
• Illumina was selected among the top 100 influential global companies by Time magazine
• Published our second annual Corporate Social Responsibility report that highlights our commitment to society, our employees and the environment
• Completed a senior unsecured investment grade bond offering for an aggregate principal amount of $1 billion and finalized a $750 million 5-year unsecured revolving credit facility
• Announced Jay Flatley will step down from the Board of Directors and John W. Thompson will be appointed as the new Chair of the Board effective May 26, 2021
• Received medical device registration in Russia for NextSeq 550Dx and associated reagent kits

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 2021, the company expects year-over-year revenue growth in the range of 25% to 28%, and now expects GAAP earnings per diluted share of $4.72 to $4.97 and non-GAAP earnings per diluted share of $5.80 to $6.05. Except for acquisition-related expenses and bridge facility fees incurred during Q1 2021, this guidance excludes the potential impact from the pending acquisition of GRAIL, which we expect to close in the second half of 2021.

Conference call information

The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Tuesday, April 27, 2021. 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 using conference ID 4359912.

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 and diluted earnings per share 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) the outcome of the pending acquisition of GRAIL, Inc.; (vi) our ability to manufacture robust instrumentation and consumables; (vii) the success of products and services competitive with our own; (viii) 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; (ix) the impact of recently launched or pre-announced products and services on existing products and services; (x) 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; (xi) our ability to obtain regulatory clearance for our products from government agencies; (xii) our ability to successfully partner with other companies and organizations to develop new products, expand markets, and grow our business; (xiii) our ability to successfully identify and integrate acquired technologies, products, or businesses; and (xiv) 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 connect with us on Twitter, Facebook, LinkedIn, Instagram, and YouTube.

Illumina, Inc. Condensed Consolidated Balance Sheets (In millions)
		April 4, 2021				January 3, 2021
ASSETS		(unaudited)
Current assets:
Cash and cash equivalents		$	4,433			$	1,810
Short-term investments		197				1,662
Accounts receivable, net		517				487
Inventory		364				372
Prepaid expenses and other current assets		131				152
Total current assets		5,642				4,483
Property and equipment, net		915				922
Operating lease right-of-use assets		529				532
Goodwill		897				897
Intangible assets, net		134				142
Other assets		638				609
Total assets		$	8,755			$	7,585
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	178			$	192
Accrued liabilities		602				541
Convertible senior notes, current portion		488				511
Total current liabilities		1,268				1,244
Operating lease liabilities		664				671
Term notes		992				—
Convertible senior notes		680				673
Other long-term liabilities		229				303
Stockholders’ equity		4,922				4,694
Total liabilities and stockholders’ equity		$	8,755			$	7,585

Illumina, Inc. Condensed Consolidated Statements of Income (In millions, except per share amounts) (unaudited)
		Three Months Ended
		April 4, 2021					March 29, 2020
Revenue:
Product revenue		$	953				$	701
Service and other revenue		140					158
Total revenue		1,093					859
Cost of revenue:
Cost of product revenue (a)		265					174
Cost of service and other revenue (a)		58					59
Amortization of acquired intangible assets		6					7
Total cost of revenue		329					240
Gross profit		764					619
Operating expense:
Research and development (a)		197					156
Selling, general and administrative (a)		374					274
Total operating expense		571					430
Income from operations		193					189

FAQ

What were Illumina's revenues in Q1 2021?

Illumina reported revenues of $1,093 million for Q1 2021.

What is Illumina's EPS guidance for fiscal 2021?

Illumina expects GAAP earnings per diluted share of $4.72 to $4.97 for fiscal 2021.

How did Illumina's gross margin change in Q1 2021?

Gross margin decreased to 69.9% in Q1 2021 from 72.1% in Q1 2020.

What is the non-GAAP net income reported by Illumina for Q1 2021?

Illumina reported a non-GAAP net income of $278 million for Q1 2021.

What is the revenue growth outlook for Illumina in 2021?

Illumina projects revenue growth of 25% to 28% for the fiscal year 2021.