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Illumina Reports Full Financial Results for Third Quarter of Fiscal Year 2016
San Diego -- (BUSINESS WIRE) - November 1, 2016 - Illumina, Inc. (NASDAQ:ILMN) today announced its full financial results for the third quarter of fiscal year 2016.
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).
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 stock compensation expense, 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 core 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 contains projections, information about our financial outlook, earnings guidance, and other forward-looking statements that involve risks and uncertainties. These forward-looking statements are based on our expectations as of the date of this release and may differ materially from actual future events or results. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are (i) our ability to further develop and commercialize our instruments and consumables and to deploy new products, services and applications, and expand the markets for our technology platforms; (ii) our ability to manufacture robust instrumentation and consumables; (iii) our ability to successfully identify and integrate acquired technologies, products or businesses; (iv) the future conduct and growth of the business and the markets in which we operate; (v) challenges inherent in developing, manufacturing, and launching new products and services; and (vi) 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.
Investors:
Rebecca Chambers
858.255.5243
ir@illumina.com
or
Media:
Eric Endicott
858.882.6822
pr@illumina.com
Illumina, Inc. | |||||||
Condensed Consolidated Balance Sheets | |||||||
(In thousands) | |||||||
October 2, 2016 | January 3, 2016 | ||||||
ASSETS | (unaudited) | ||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 794,697 | $ | 768,770 | |||
Short-term investments | 741,569 | 617,450 | |||||
Accounts receivable, net | 381,632 | 385,529 | |||||
Inventory | 312,242 | 270,777 | |||||
Prepaid expenses and other current assets | 47,696 | 54,297 | |||||
Total current assets | 2,277,836 | 2,096,823 | |||||
Property and equipment, net | 633,856 | 342,694 | |||||
Goodwill | 775,995 | 752,629 | |||||
Intangible assets, net | 255,560 | 273,621 | |||||
Deferred tax assets | 182,122 | 134,515 | |||||
Other assets | 102,458 | 87,465 | |||||
Total assets | $ | 4,227,827 | $ | 3,687,747 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 134,090 | $ | 139,226 | |||
Accrued liabilities | 315,204 | 386,844 | |||||
Build-to-suit lease liability | 178,311 | 9,495 | |||||
Long-term debt, current portion | 1,250 | 74,929 | |||||
Total current liabilities | 628,855 | 610,494 | |||||
Long-term debt | 1,040,765 | 1,015,649 | |||||
Other long-term liabilities | 204,273 | 180,505 | |||||
Redeemable noncontrolling interests | 34,257 | 32,546 | |||||
Stockholders’ equity | 2,319,677 | 1,848,553 | |||||
Total liabilities and stockholders’ equity | $ | 4,227,827 | $ | 3,687,747 | |||
Illumina, Inc. | |||||||||||||||
Condensed Consolidated Statements of Income | |||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Revenue: | |||||||||||||||
Product revenue | $ | 513,744 | $ | 470,824 | $ | 1,506,416 | $ | 1,392,711 | |||||||
Service and other revenue | 93,395 | 79,447 | 272,610 | 235,503 | |||||||||||
Total revenue | 607,139 | 550,271 | 1,779,026 | 1,628,214 | |||||||||||
Cost of revenue: | |||||||||||||||
Cost of product revenue (a) | 132,423 | 120,954 | 382,856 | 360,037 | |||||||||||
Cost of service and other revenue (a) | 37,606 | 29,590 | 117,156 | 94,289 | |||||||||||
Amortization of acquired intangible assets | 10,960 | 12,188 | 32,005 | 34,957 | |||||||||||
Total cost of revenue | 180,989 | 162,732 | 532,017 | 489,283 | |||||||||||
Gross profit | 426,150 | 387,539 | 1,247,009 | 1,138,931 | |||||||||||
Operating expense: | |||||||||||||||
Research and development (a) | 125,917 | 99,226 | 374,500 | 287,180 | |||||||||||
Selling, general and administrative (a) | 139,146 | 136,648 | 436,914 | 377,406 | |||||||||||
Legal contingencies | — | 15,000 | (9,490 | ) | 15,000 | ||||||||||
Headquarter relocation | 385 | (5,226 | ) | 1,069 | (3,047 | ) | |||||||||
Acquisition related expense (gain), net | — | 1,109 | — | (6,449 | ) | ||||||||||
Total operating expense | 265,448 | 246,757 | 802,993 | 670,090 | |||||||||||
Income from operations | 160,702 | 140,782 | 444,016 | 468,841 | |||||||||||
Other expense, net | (6,338 | ) | (11,865 | ) | (17,081 | ) | (20,706 | ) | |||||||
Income before income taxes | 154,364 | 128,917 | 426,935 | 448,135 | |||||||||||
Provision for income taxes | 37,429 | 13,296 | 106,387 | 93,609 | |||||||||||
Consolidated net income | 116,935 | 115,621 | 320,548 | 354,526 | |||||||||||
Add: Net loss attributable to noncontrolling interests | 11,953 | 2,556 | 18,339 | 2,556 | |||||||||||
Net income attributable to Illumina stockholders | $ | 128,888 | $ | 118,177 | $ | 338,887 | $ | 357,082 | |||||||
Net income attributable to Illumina stockholders for earnings per share (b) | $ | 128,682 | $ | 118,128 | $ | 335,597 | $ | 357,033 | |||||||
Earnings per share attributable to Illumina stockholders: | |||||||||||||||
Basic | $ | 0.88 | $ | 0.81 | $ | 2.29 | $ | 2.47 | |||||||
Diluted | $ | 0.87 | $ | 0.79 | $ | 2.27 | $ | 2.39 | |||||||
Shares used in computing earnings per common share: | |||||||||||||||
Basic | 146,705 | 145,349 | 146,783 | 144,447 | |||||||||||
Diluted | 147,901 | 149,672 | 148,049 | 149,108 | |||||||||||
(a) Includes stock-based compensation expense for stock-based awards: | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||
Cost of product revenue | $ | 1,799 | $ | 2,567 | $ | 5,949 | $ | 7,012 | |||||||
Cost of service and other revenue | 1,261 | 498 | 2,114 | 1,243 | |||||||||||
Research and development (1) | 11,515 | 9,098 | 32,889 | 31,152 | |||||||||||
Selling, general and administrative (2) | 20,008 | 20,066 | 60,893 | 57,697 | |||||||||||
Stock-based compensation expense before taxes | $ | 34,583 | $ | 32,229 | $ | 101,845 | $ | 97,104 | |||||||
(1) Includes stock-based compensation from GRAIL and Helix of $0.2 million and $0.5 million for the three and nine months ended October 2, 2016, respectively.
(2) Includes stock-based compensation from GRAIL and Helix of $0.4 million and $1.4 million for the three and nine months ended October 2, 2016, respectively.
_____________________________________________________________________________________________________
(b) Amount reflects the additional losses attributable to the common shareholders of GRAIL and Helix for earnings per share purposes. For the nine months ended October 2, 2016, the additional losses were partially offset by the net impact of a deemed dividend from the company’s common to preferred share exchange with GRAIL.
Illumina, Inc. | ||||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
(In thousands) | ||||||||||||||||
(unaudited) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | |||||||||||||
Net cash provided by operating activities (a) | $ | 150,300 | $ | 180,994 | $ | 407,085 | $ | 419,218 | ||||||||
Net cash used in investing activities | (341,231 | ) | (38,927 | ) | (341,247 | ) | (335,544 | ) | ||||||||
Net cash provided by (used in) financing activities (a) | 34,473 | (180,897 | ) | (41,221 | ) | (165,621 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (507 | ) | (698 | ) | 1,310 | (2,678 | ) | |||||||||
Net (decrease) increase in cash and cash equivalents | (156,965 | ) | (39,528 | ) | 25,927 | (84,625 | ) | |||||||||
Cash and cash equivalents, beginning of period | 951,662 | 591,057 | 768,770 | 636,154 | ||||||||||||
Cash and cash equivalents, end of period | $ | 794,697 | $ | 551,529 | $ | 794,697 | $ | 551,529 | ||||||||
Calculation of free cash flow: | ||||||||||||||||
Net cash provided by operating activities (a) | $ | 150,300 | $ | 180,994 | $ | 407,085 | $ | 419,218 | ||||||||
Purchases of property and equipment (b) | (57,122 | ) | (29,459 | ) | (178,353 | ) | (107,361 | ) | ||||||||
Free cash flow (c) | $ | 93,178 | $ | 151,535 | $ | 228,732 | $ | 311,857 | ||||||||
______________________________________________________________________________________________________
(a) Net cash provided by operating activities excludes excess tax benefit related to stock-based compensation of $109.9 million in the first three quarters of 2016, of which $25.7 million was recorded in Q3, and $121.7 million in the first three quarters of 2015, of which $15.5 million was recorded in Q3. Net cash used in financing activities reflects the excess tax benefit as a corresponding in-flow in the respective periods.
(b) Excludes increase of $168.8 million in the first three quarters of 2016, of which $83.9 million was in Q3, in property and equipment recorded under build-to-suit lease accounting, which are non-cash expenditures.
(c) 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.
Illumina, Inc. | ||||||||||||||||
Results of Operations - Non-GAAP | ||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||
(unaudited) | ||||||||||||||||
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP EARNINGS PER SHARE ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS: | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | |||||||||||||
GAAP earnings per share attributable to Illumina stockholders - diluted | $ | 0.87 | $ | 0.79 | $ | 2.27 | $ | 2.39 | ||||||||
Amortization of acquired intangible assets | 0.08 | 0.09 | 0.25 | 0.26 | ||||||||||||
Non-cash interest expense (a) | 0.05 | 0.06 | 0.15 | 0.20 | ||||||||||||
Contingent compensation expense (b) | 0.01 | — | 0.01 | — | ||||||||||||
Legal contingencies (c) | — | 0.10 | (0.06 | ) | 0.10 | |||||||||||
Headquarter relocation | — | (0.03 | ) | 0.01 | (0.02 | ) | ||||||||||
Deemed dividend (d) | — | — | (0.01 | ) | — | |||||||||||
Loss on extinguishment of debt | — | 0.03 | — | 0.03 | ||||||||||||
Acquisition related expense (gain), net (e) | — | 0.01 | — | (0.04 | ) | |||||||||||
Cost-method investment gain, net (f) | — | (0.02 | ) | — | (0.10 | ) | ||||||||||
Tax benefit related to cost-sharing arrangement (g) | — | (0.17 | ) | — | (0.17 | ) | ||||||||||
Incremental non-GAAP tax expense (h) | (0.04 | ) | (0.06 | ) | (0.10 | ) | (0.14 | ) | ||||||||
Non-GAAP earnings per share attributable to Illumina stockholders - diluted (i) | $ | 0.97 | $ | 0.80 | $ | 2.52 | $ | 2.51 | ||||||||
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME ATTRIBUTABLE TO ILLUMINA STOCKHOLDERS: | ||||||||||||||||
GAAP net income attributable to Illumina stockholders (j) | $ | 128,888 | $ | 118,177 | $ | 338,887 | $ | 357,082 | ||||||||
Amortization of acquired intangible assets | 12,423 | 13,794 | 36,561 | 39,453 | ||||||||||||
Non-cash interest expense (a) | 7,346 | 9,469 | 22,382 | 29,884 | ||||||||||||
Contingent compensation expense (b) | 691 | 249 | 2,085 | 249 | ||||||||||||
Headquarter relocation | 385 | (5,226 | ) | 1,069 | (3,047 | ) | ||||||||||
Legal contingencies (c) | — | 15,000 | (9,490 | ) | 15,000 | |||||||||||
Loss on extinguishment of debt | — | 3,504 | — | 3,737 | ||||||||||||
Acquisition related expense (gain), net (e) | — | 1,109 | — | (6,449 | ) | |||||||||||
Cost-method investment gain, net (f) | — | (2,900 | ) | — | (15,482 | ) | ||||||||||
Tax benefit related to cost-sharing arrangement (g) | — | (24,757 | ) | — | (24,757 | ) | ||||||||||
Incremental non-GAAP tax expense (h) | (5,675 | ) | (8,833 | ) | (14,695 | ) | (21,037 | ) | ||||||||
Non-GAAP net income attributable to Illumina stockholders (i) | $ | 144,058 | $ | 119,586 | $ | 376,799 | $ | 374,633 | ||||||||
_____________________________________________________________________________________________________
(a) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(b) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition.
(c) Legal contingencies in 2016 represent a reversal of previously recorded expense related to the settlement of patent litigation. Legal contingencies in 2015 represent charges related to patent litigation.
(d) Amount represents the impact of a deemed dividend, net of Illumina’s portion of the losses incurred by GRAIL’s common shareholders resulting from the company’s common to preferred share exchange with GRAIL. The amount was added to net income attributable to Illumina stockholders for purposes of calculating Illumina’s consolidated earnings per share. The deemed dividend, net of tax, was recorded through equity.
(e) Acquisition related expense (gain), net consists of changes in fair value of contingent consideration.
(f) Cost-method investment gain, net consists primarily of a gain on the sale of a cost-method investment.
(g) Tax benefit related to cost-sharing arrangement refers to the exclusion of stock compensation from prior period cost-sharing charges as a result of a tax court ruling.
(h) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above.
(i) 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.
(j) GAAP net income attributable to Illumina stockholders excludes the net impact of the deemed dividend as detailed in (d) above and the additional losses attributable to common shareholders of GRAIL and Helix for earnings per share purposes. These amounts are included in GAAP net income attributable to Illumina stockholders for earnings per share of $128.7 million and $335.6 million for the three and nine months ended October 2, 2016, respectively and $118.1 million and $357.0 million for the three and nine months ended September 27, 2015, respectively.
Illumina, Inc. | |||||||||||||||||||||||||||
Results of Operations - Non-GAAP (continued) | |||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF OPERATIONS AS A PERCENT OF REVENUE: | |||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
October 2, 2016 | September 27, 2015 | October 2, 2016 | September 27, 2015 | ||||||||||||||||||||||||
GAAP gross profit | $ | 426,150 | 70.2 | % | $ | 387,539 | 70.4 | % | $ | 1,247,009 | 70.1 | % | $ | 1,138,931 | 69.9 | % | |||||||||||
Stock-based compensation expense | 3,060 | 0.5 | % | 3,065 | 0.6 | % | 8,063 | 0.4 | % | 8,255 | 0.5 | % | |||||||||||||||
Amortization of acquired intangible assets | 10,960 | 1.8 | % | 12,188 | 2.2 | % | 32,005 | 1.8 | % | 34,957 | 2.2 | % | |||||||||||||||
Non-GAAP gross profit (a) | $ | 440,170 | 72.5 | % | $ | 402,792 | 73.2 | % | $ | 1,287,077 | 72.3 | % | $ | 1,182,143 | 72.6 | % | |||||||||||
GAAP research and development expense | $ | 125,917 | 20.7 | % | $ | 99,226 | 18.1 | % | $ | 374,500 | 21.1 | % | $ | 287,180 | 17.6 | % | |||||||||||
Stock-based compensation expense | (11,515 | ) | (1.9 | )% | (9,098 | ) | (1.7 | )% | (32,889 | ) | (1.9 | )% | (31,152 | ) | (1.9 | )% | |||||||||||
Contingent compensation expense (b) | (108 | ) | — | (44 | ) | — | (325 | ) | — | (44 | ) | — | |||||||||||||||
Non-GAAP research and development expense | $ | 114,294 | 18.8 | % | $ | 90,084 | 16.4 | % | $ | 341,286 | 19.2 | % | $ | 255,984 | 15.7 | % | |||||||||||
GAAP selling, general and administrative expense | $ | 139,146 | 22.9 | % | $ | 136,648 | 24.8 | % | $ | 436,914 | 24.6 | % | $ | 377,406 | 23.2 | % | |||||||||||
Stock-based compensation expense | (20,008 | ) | (3.3 | )% | (20,066 | ) | (3.6 | )% | (60,893 | ) | (3.4 | )% | (57,697 | ) | (3.5 | )% | |||||||||||
Amortization of acquired intangible assets | (1,463 | ) | (0.2 | )% | (1,606 | ) | (0.3 | )% | (4,556 | ) | (0.3 | )% | (4,496 | ) | (0.4 | )% | |||||||||||
Contingent compensation expense (b) | (583 | ) | (0.1 | )% | (205 | ) | — | (1,760 | ) | (0.1 | )% | (205 | ) | — | |||||||||||||
Non-GAAP selling, general and administrative expense | $ | 117,092 | 19.3 | % | $ | 114,771 | 20.9 | % | $ | 369,705 | 20.8 | % | $ | 315,008 | 19.3 | % | |||||||||||
GAAP operating profit | $ | 160,702 | 26.5 | % | $ | 140,782 | 25.6 | % | $ | 444,016 | 25.0 | % | $ | 468,841 | 28.8 | % | |||||||||||
Stock-based compensation expense | 34,583 | 5.7 | % | 32,229 | 5.9 | % | 101,845 | 5.7 | % | 97,104 | 6.0 | % | |||||||||||||||
Amortization of acquired intangible assets | 12,423 | 2.0 | % | 13,794 | 2.5 | % | 36,561 | 2.1 | % | 39,453 | 2.4 | % | |||||||||||||||
Contingent compensation expense (b) | 691 | 0.1 | % | 249 | — | 2,085 | 0.1 | % | 249 | — | |||||||||||||||||
Headquarter relocation | 385 | 0.1 | % | (5,226 | ) | (0.9 | )% | 1,069 | 0.1 | % | (3,047 | ) | (0.2 | )% | |||||||||||||
Legal contingencies (c) | — | — | 15,000 | 2.7 | % | (9,490 | ) | (0.6 | )% | 15,000 | 0.9 | % | |||||||||||||||
Acquisition related expense (gain), net (d) | — | — | 1,109 | 0.2 | % | — | — | (6,449 | ) | (0.4 | )% | ||||||||||||||||
Non-GAAP operating profit (a) | $ | 208,784 | 34.4 | % | $ | 197,937 | 36.0 | % | $ | 576,086 | 32.4 | % | $ | 611,151 | 37.5 | % | |||||||||||
GAAP other expense, net | $ | (6,338 | ) | (1.0 | )% | $ | (11,865 | ) | (2.2 | )% | $ | (17,081 | ) | (1.0 | )% | $ | (20,706 | ) | (1.3 | )% | |||||||
Non-cash interest expense (e) | 7,346 | 1.2 | % | 9,469 | 1.7 | % | 22,382 | 1.3 | % | 29,884 | 1.8 | % | |||||||||||||||
Loss on extinguishment of debt | — | — | 3,504 | 0.6 | % | — | — | 3,737 | 0.2 | % | |||||||||||||||||
Cost-method investment gain, net (f) | — | — | (2,900 | ) | (0.4 | )% | — | — | (15,482 | ) | (0.9 | )% | |||||||||||||||
Non-GAAP other income (expense), net (a) | $ | 1,008 | 0.2 | % | $ | (1,792 | ) | (0.3 | )% | $ | 5,301 | 0.3 | % | $ | (2,567 | ) | (0.2 | )% | |||||||||
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(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 the company’s products and services. Non-GAAP operating profit, and non-GAAP other income (expense), 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) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition.
(c) Legal contingencies in 2016 represent a reversal of previously recorded expense related to the settlement of patent litigation. Legal contingencies in 2015 represent charges related to patent litigation.
(d) Acquisition related expense (gain), net consists of changes in fair value of contingent consideration.
(e) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(f) Cost-method investment gain, net consists primarily of a gain on the sale of a cost-method investment.
Illumina, Inc.
Reconciliation of Non-GAAP Financial Guidance
The company’s future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the company’s financial results are stated above in this press release. More information on potential factors that could affect the company’s financial results is included from time to time in the company’s public reports filed with the Securities and Exchange Commission, including the company’s Form 10-K for the fiscal year ended January 3, 2016, and the company’s Form 10-Q for the fiscal quarters ended April 3, 2016 and July 3, 2016. The company assumes no obligation to update any forward-looking statements or information.
Fiscal Year 2016 | |
Diluted earnings per share attributable to Illumina stockholders | |
GAAP diluted earnings per share attributable to Illumina stockholders | $2.92 - $2.97 |
Amortization of acquired intangible assets | 0.33 |
Non-cash interest expense (a) | 0.20 |
Legal contingencies (b) | (0.06) |
Contingent compensation (c) | 0.02 |
Headquarter relocation | 0.01 |
Deemed dividend (d) | (0.01) |
Incremental non-GAAP tax expense (e) | (0.14) |
Non-GAAP diluted earnings per share attributable to Illumina stockholders | $3.27 - $3.32 |
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(a) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.
(b) Legal contingencies represent a reversal of previously recorded expense related to the settlement of patent litigation.
(c) Contingent compensation expense relates to contingent payments for post-combination services associated with an acquisition.
(d) Amount represents the impact of a deemed dividend, net of Illumina’s portion of the losses incurred by GRAIL’s common shareholders resulting from the company’s common to preferred share exchange with GRAIL. The amount was added to net income attributable to Illumina stockholders for purposes of calculating Illumina’s consolidated earnings per share. The deemed dividend, net of tax, was recorded through equity.
(e) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed above.