01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Illumina, Inc. reported total revenue of $902.7 milliona for the fiscal year ended January 2, 2011, up from $666.3 million in 2009 (a 52-week year versus a 53-week year for 2009).
Product revenue was $842.5 millionb, with instruments at $324.6 million and consumables at $505.0 million. Income from operations was $211.7 million and net income was $124.9 million, or $0.87 per diluted share, compared with $72.3 million in the prior year. Gross margin was 66.6%, down from 68.1%, which management attributed to discounts on HiSeq 2000 sales tied to promotional and Genome Analyzer trade-in programs, along with lower margins on newer products.
Management expects gross margin to improve during 2011 as the trade-in program completes and consumables become a larger share of revenue. The company ended the year with $894.3 millionc in cash and short-term investments and total assets of $1.84 billion. Its $390.0 million of 0.625% convertible senior notes due 2014 are classified as current because of their convertibility.
Between January 3 and February 28, 2011, noteholders elected to convert $251.1 milliond of principal, and the company expects to record a likely loss on conversion in the first quarter of 2011. Management also expects significant income tax payments in 2011 and beyond as it uses net operating loss carryforwards, and it expects research and development expense to increase in 2011. The filing describes a company that is growing quickly, with 2,100 employees and a new San Diego headquarters lease commencing in late 2011.
Risks highlighted include intense competition, dependence on single-source suppliers, manufacturing capacity constraints, and reliance on government and academic research funding, including the American Recovery and Reinvestment Act. The company also reported that it had approximately $70.4 million in 2010 orders directly related to Recovery Act grants.
02—Key points
Key Highlights
- Total revenue rose to $902.7 million in 2010 from $666.3 million in 2009; product revenue was $842.5 million and service and other revenue was $60.2 million.
- Instrument revenue increased to $324.6 million (up $98.9 million, or 44%), driven by HiSeq 2000 and HiScanSQ launches; consumable revenue reached $505.0 million (up 29%).
- Gross margin declined to 66.6% from 68.1%, primarily due to HiSeq 2000 promotional discounts and the Genome Analyzer trade-in program.
- Net income was $124.9 million, or $0.87 per diluted share, versus $72.3 million, or $0.53 per diluted share, in 2009.
- Cash, cash equivalents and short-term investments totaled $894.3 million at January 2, 2011.
- Convertible notes holders elected to convert $251.1 million of the $390.0 million outstanding principal between January 3 and February 28, 2011, with a likely loss on conversion expected in Q1 2011.
- Backlog was $299.0 million at January 2, 2011, up from $227.6 million, with an estimated 90% expected to ship within fiscal 2011.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Illumina kept $0.14.
- Revenue$902.7M100.0%
- Cost of revenue−$301.2M33.4%
- Gross profit$601.5M66.6%
- Operating costs−$389.9M43.2%
- Operating income$211.7M23.4%
- Interest, other & tax−$86.8M9.6%
- Net income$124.9M13.8%
Where FY2011 revenue went
$902.7M- Cost of revenue: $301.2M, 33% of revenue
- SG&A: $220.5M, 24% of revenue
- R&D: $177.9M, 20% of revenue
- Net income: $124.9M, 14% of revenue
- Interest, other & tax: $86.8M, 9.6% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $902.74M$666.32M | +35.5% |
| Cost of Revenue | $301.20M$212.45M | +41.8% |
| Gross Profit | $601.54M$453.88M | +32.5% |
| R&D Expenses | $177.95M$140.62M | +26.5% |
| SG&A Expenses | $220.45M$176.34M | +25.0% |
| Operating Expenses | $389.89M$328.28M | +18.8% |
| Operating Income | $211.65M$125.60M | +68.5% |
| Interest Expense | $24.60M$23.72M | +3.7% |
| Net Income | $124.89M$72.28M | +72.8% |
| EPS (Basic) | $1.01$0.59 | +71.2% |
| EPS (Diluted) | $0.87$0.53 | +64.2% |
| Shares Outstanding (Basic) | 123.58M123.15M | +0.3% |
| Shares Outstanding (Diluted) | 143.43M137.10M | +4.6% |
05—Questions
Frequently Asked Questions
How did Illumina's revenue and profitability change in 2010?
Total revenue increased to $902.7 million from $666.3 million in 2009. Income from operations rose to $211.7 million from $125.6 million, and net income increased to $124.9 million from $72.3 million. Diluted earnings per share were $0.87, compared with $0.53 in 2009. The 2010 fiscal year had 52 weeks, while 2009 had 53 weeks.
Why did gross margin decline in 2010?
Gross margin fell to 66.6% from 68.1%. The filing attributes the decline mainly to discounts on HiSeq 2000 sales tied to promotional programs, including the Genome Analyzer trade-in program, and to lower margins on newer products such as the HiSeq 2000. Management expects gross margin to improve in 2011 as the trade-in program ends and consumables grow as a share of revenue.
What is the status of the convertible notes and how might they affect results?
The company had $390.0 million of 0.625% convertible senior notes due February 2014. Between January 3 and February 28, 2011, noteholders elected to convert $251.1 million of principal. The company expects to repay principal and deliver shares based on the in-the-money amount, and it expects to exercise its convertible note hedge. Because the expected interest rate at conversion is likely lower than the notes' implied rate of 8.27%, the company expects to record a loss in the first quarter of 2011.
What are the main risks identified in the filing?
Key risks include intense competition from larger companies, dependence on single-source suppliers for customized components, the need to rapidly expand manufacturing capacity, and reliance on research and government funding, including the American Recovery and Reinvestment Act. The filing also notes international operating risks, since 45% of 2010 revenue came from outside the United States, and regulatory uncertainty if products are used for diagnosis.
What growth initiatives did Illumina highlight for 2011?
Management highlighted the launch of the MiSeq Personal Sequencing System, with volume shipments expected in Q4 2011, and a microarray with approximately five million markers per sample, with shipments expected in mid-2011. The company also acquired Epicentre Technologies in January 2011 and plans to increase research and development spending. It expects to relocate most San Diego operations to a new headquarters beginning in late 2011.
06—Continue