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Illumina Reports Financial Results for Second Quarter 2011
News

Illumina Reports Financial Results for Second Quarter 2011

Illumina Reports Financial Results for Second Quarter 2011
News

Illumina Reports Financial Results for Second Quarter 2011

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Illumina, Inc. has announced its financial results for the second quarter of 2011.

Second quarter 2011 results include:

• Revenue of $287.5 million, a 36% increase over the $212.0 million reported in the second quarter of 2010.

• GAAP net income of $30.6 million, or $0.22 per diluted share, compared to net income of $29.8 million, or $0.21 per diluted share, for the second quarter of 2010. This represents a 4% increase to GAAP earnings per diluted share.

• Non-GAAP net income of $52.5 million, or $0.38 per diluted share, compared to $34.0 million, or $0.26 per diluted share, for the second quarter of 2010 (see the table entitled "Itemized Reconciliation Between GAAP and Non-GAAP Net Income"). This represents a 46% increase to non-GAAP earnings per diluted share.

Gross margin in the second quarter of 2011 was 67.3% compared to 68.9% in the prior year period. Excluding the effect of non-cash charges associated with stock compensation and the amortization of acquired intangibles, non-GAAP gross margin was 69.0% for the second quarter of 2011 compared to 70.3% in the prior year period.

Research and development (R&D) expenses for the second quarter of 2011 were $50.8 million compared to $43.7 million in the second quarter of 2010. R&D expenses included $8.5 million and $6.0 million of non-cash stock compensation expense in the second quarters of 2011 and 2010, respectively. Excluding these charges and contingent compensation expense, R&D expenses as a percentage of revenue were 14.1% compared to 17.3% in the prior year period.

Selling, general and administrative (SG&A) expenses for the second quarter of 2011 were $69.2 million compared to $53.1 million for the second quarter of 2010. SG&A expenses included $13.3 million and $9.4 million of non-cash stock compensation expense in the second quarters of 2011 and 2010, respectively.

SG&A expenses also included contingent compensation expense and amortization of acquired intangibles in the second quarter of 2011. Excluding these charges, SG&A expenses as a percentage of revenue were 19.1% compared to 20.6% in the prior year period.

The company generated $71.2 million in cash flow from operations during the second quarter of 2011 compared to $77.2 million in the prior year period. Depreciation and amortization expenses were $16.5 million and capital expenditures were $16.2 million during the second quarter. The company ended the second quarter with $1.2 billion in cash and short-term investments compared to $894.3 million as of January 2, 2011.

Highlights since our last earnings release

• Commenced early access shipments of MiSeq, a low-cost personal sequencing system that provides individual researchers a platform with rapid turnaround time, unmatched accuracy, and radically improved ease of use.

• Commenced commercial shipments of our TruSeq SBS Kit V3, delivering a three-fold improvement to approximately 600G of output per run and improving accuracy.

• Commenced shipment of the HumanOmni5-Quad BeadChip, a four-sample microarray that can genotype up to 5 million markers per sample.

• Announced the University of Washington Department of Genome Sciences joined the IGN and reduced the price for sequencing whole human genomes through the Illumina Genome Network (IGN) to $5,000 per genome for projects of ten samples or more, and $4,000 for projects of 50 samples or more.

• Adjusted the price of our Individual Genome Sequencing (IGS) service to $9,500 for consumers, $7,500 for patients with a life-threatening illness, and $10,000 for cancer patients requiring a tumor-normal pair.

• Announced the availability of new TruSeq Custom Enrichment kits, which enable researchers to economically design and target genomic regions of interest.

• Announced the company has been selected as a preferred service provider for Cancer Research UK, the world's leading cancer charity, to sequence up to 1,500 whole human genome samples.

Financial outlook and guidance

The non-GAAP financial guidance discussed below excludes the following items (see the table entitled "Reconciliation of Non-GAAP Financial Guidance" for a reconciliation of these GAAP and non-GAAP financial measures):

• Charges associated with relocating the company's corporate headquarters.

• Loss on the extinguishment of debt.

• Non-cash interest expense and the double dilution associated with the accounting treatment of the company's outstanding convertible debt and the corresponding call option overlay.

• Amortization of acquired intangible assets.

• Contingent compensation expense.

• Acquisition related expenses.

As a result of the Company's financial performance in the first half of the year we are updating our financial guidance. We now expect:

• Revenue growth for fiscal 2011 of 24 - 26% from fiscal 2010 revenue of $902.7 million.

• For the year, gross margin is expected to range from 69.0 - 70.0%.

• Non-GAAP earnings per diluted share to grow 33 - 36% from 2010 non-GAAP earnings per diluted share of $1.06.

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