01—Abstract
Summary
Summary of the 10-K filed March 2, 2016. Cited figures are marked; the original filing is the authoritative source.
Illumina, Inc. (ILMN) reported fiscal 2015 results for the 53-week year ended January 3, 2016.
Total revenue rose to $2,219.8 milliona from $1,861.4 million in 2014, an increase the filing describes as 19%. Product revenue was $1,890.6 million and service and other revenue was $329.1 million. Gross margin was 69.8% versus 69.7% in 2014, driven by a shift in product mix toward sequencing consumables.
Income from operations was $612.8 millionb, and consolidated net income was $457.4 million, with net income attributable to Illumina stockholders of $461.6 million. Diluted EPS was $3.10, compared with $2.37 in 2014. The effective tax rate was 21.6%, including a $24.8 million discrete tax benefit tied to a tax court opinion that the filing notes could be reversed.
Liquidity remained strong. Cash, cash equivalents and short-term investments totaled $1.39 billionc at year-end, and operating cash flow was $659.6 million. The company repurchased $274.3 million of stock during 2015 and had $256.1 million remaining under its authorizations.
Convertible notes outstanding totaled $1,225.5 milliond in principal, including $75.5 million of 2016 notes due March 15, 2016. Backlog was approximately $560 million, including $130 million related to the Genomics England sequencing services project. Management expects research and development expense to increase in 2016.
The filing also describes new ventures. GRAIL, Inc., majority owned by Illumina, was formed in early 2016 to develop a pan-cancer screening test, and Illumina invested $40 million in its Series A round. Helix, a consumer genomics marketplace in which Illumina holds a 50% voting interest, is consolidated, and certain noncontrolling investors may require redemption of their interests after January 1, 2021.
02—Key points
Key Highlights
- Total revenue of $2,219.8 million in fiscal 2015, up 19% from $1,861.4 million in 2014, with consumables revenue of $1,279.9 million and instrument revenue of $594.7 million.
- Gross margin of 69.8% in 2015 versus 69.7% in 2014, attributed to a positive product mix shift toward sequencing consumables.
- Income from operations of $612.8 million and diluted EPS of $3.10, compared with $514.7 million and $2.37 in 2014.
- Effective tax rate of 21.6%, which includes a $24.8 million discrete tax benefit that would reverse if a recent tax court opinion is overturned.
- Cash, cash equivalents and short-term investments of $1.39 billion, with operating cash flow of $659.6 million and $274.3 million used for share repurchases.
- Convertible notes totaling $1,225.5 million in principal, including $75.5 million of 2016 notes maturing March 15, 2016.
- Backlog of approximately $560 million at January 3, 2016, with $130 million tied to the Genomics England sequencing services project.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Illumina kept $0.21.
- Revenue$2.22B100.0%
- Cost of revenue−$671.0M30.2%
- Gross profit$1.55B69.8%
- Operating costs−$936.0M42.2%
- Operating income$613.0M27.6%
- Interest, other & tax−$151.0M6.8%
- Net income$462.0M20.8%
Where FY2016 revenue went
$2.22B- Cost of revenue: $671.0M, 30% of revenue
- SG&A: $516.0M, 23% of revenue
- Net income: $462.0M, 21% of revenue
- R&D: $401.0M, 18% of revenue
- Other operating costs: $19.0M, 0.9% of revenue
- Interest, other & tax: $151.0M, 6.8% of revenue
Kept 21% as net incomeOther operating costs $19.0M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed March 2, 2016Financial Statements
| Revenue | $2.22B |
| Cost of Revenue | $671.00M |
| Gross Profit | $1.55B |
| R&D Expenses | $401.00M |
| SG&A Expenses | $516.00M |
| Operating Expenses | $936.00M |
| Operating Income | $613.00M |
| Interest Expense | $43.00M |
| Net Income | $462.00M |
| EPS (Basic) | $3.19 |
| EPS (Diluted) | $3.10 |
| Shares Outstanding (Basic) | 145.00M |
| Shares Outstanding (Diluted) | 149.00M |
05—Questions
Frequently Asked Questions
How did Illumina's revenue and profitability change in fiscal 2015?
Total revenue increased 19% to $2,219.8 million, driven by consumables growth of 23% and service and other revenue growth of 36%. Income from operations rose to $612.8 million from $514.7 million, and net income attributable to Illumina stockholders increased to $461.6 million from $353.4 million. The filing notes that foreign exchange fluctuations reduced reported growth, and that revenue would have grown 23% on a constant currency basis.
What drove the change in gross margin?
Gross margin rose slightly to 69.8% from 69.7%, primarily due to a positive shift in product mix toward sequencing consumables. The 2014 margin also benefited from a $10.4 million reversal of cost of sales tied to the Syntrix litigation settlement.
What are the main liquidity and capital allocation points?
The company ended the year with $1.39 billion in cash, cash equivalents and short-term investments and generated $659.6 million in operating cash flow. It used $274.3 million to repurchase stock, leaving $256.1 million under authorized programs, and it expects its current resources to fund operations for at least the next 12 months. Principal of $75.5 million on the 2016 convertible notes is due March 15, 2016.
What new business arrangements did Illumina disclose?
Illumina formed GRAIL, Inc. in early 2016, majority owned by Illumina, to develop a pan-cancer screening test, and invested $40 million in its Series A preferred stock financing. Illumina also consolidates Helix, a consumer genomics marketplace in which it holds a 50% voting interest, and the filing notes that certain Helix noncontrolling investors may require cash redemption after January 1, 2021.
What risks did the filing highlight?
Key risks include intense competition, dependence on government and academic research funding, reimbursement uncertainty for diagnostic tests, single-source suppliers, potential FDA regulation of laboratory developed tests, intellectual property litigation, and the possibility that the tax court opinion supporting the $24.8 million discrete tax benefit is overturned. The filing also notes that it is currently unable to predict the outcome of pending litigation.
06—Continue