01—Abstract
Summary
Summary of the 10-K filed February 14, 2017. Cited figures are marked; the original filing is the authoritative source.
Illumina, Inc. reported fiscal 2016 (52 weeks ended January 1, 2017) total revenue of $2,398.4 milliona, up 8% from $2,219.8 million in 2015.
Product revenue was $2,031,997 thousandb and service and other revenue was $366,376 thousand. Consumables revenue rose 21% to $1,543.5 million, while instrument revenue fell 21% to $469.5 million, primarily due to lower shipments of high-throughput platforms. Gross margin edged down to 69.5% from 69.8%, and income from operations was $587.0 million, or 24.5% of revenue, versus 27.6% in 2015.
Research and development expense rose 26% to $504.4 millionc, and the filing states that management expects R&D and SG&A expense to keep growing. Net income attributable to Illumina stockholders was $462.6 million, with diluted earnings per share of $3.07, compared with $3.10 in 2015. The effective tax rate rose to 23.7% from 21.6%.
The company ended the year with $1.56 billiond in cash, cash equivalents and short-term investments, and operating cash flow was $687.2 million. Capital expenditures were $259.9 million, and the company repurchased $249.3 million of common stock during the year. The filing highlights two consolidated variable interest entities, GRAIL and Helix, which became material enough to report as a separate segment.
The Consolidated VIEs segment posted an operating loss of $81.1 million. The filing also notes that GRAIL expects to close a Series B financing of approximately $1 billion before the end of March 2017, after which Illumina's voting interest would fall below 20% and its remaining stake would be accounted for as a cost-method investment. Total convertible notes outstanding were $1.15 billion principal, consisting of $632.5 million due 2019 and $517.5 million due 2021.
02—Key points
Key Highlights
- Total revenue grew 8% to $2,398.4 million, driven by consumables growth of 21% to $1,543.5 million, partly offset by a 21% decline in instrument revenue to $469.5 million.
- Gross margin declined to 69.5% from 69.8%, and operating margin fell to 24.5% from 27.6% as R&D expense rose 26% to $504.4 million.
- Net income attributable to Illumina stockholders was $462.6 million, and diluted EPS was $3.07 versus $3.10 in 2015.
- Cash, cash equivalents and short-term investments totaled $1,558.7 million at year-end, against $1,848.6 million... total stockholders' equity was $2,197.2 million attributable to Illumina.
- Operating cash flow was $687.2 million, and $249.3 million was used to repurchase common stock, with $100.7 million remaining under the authorization.
- Consolidated VIEs (GRAIL and Helix) produced an operating loss of $81.1 million, and GRAIL's planned roughly $1 billion Series B financing would reduce Illumina's voting interest below 20%.
- Outside the United States, revenue was $1,104.2 million, or 46% of total revenue in fiscal 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Illumina kept $0.26.
- Revenue$2.75B100.0%
- Cost of revenue−$926.0M33.6%
- Gross profit$1.83B66.4%
- Operating costs−$1.22B44.3%
- Operating income$606.0M22.0%
- Interest, other & tax$120.0M4.4%
- Net income$726.0M26.4%
Where FY2017 revenue went
$2.75B- Cost of revenue: $926.0M, 34% of revenue
- SG&A: $674.0M, 24% of revenue
- Operating income: $606.0M, 22% of revenue
- R&D: $546.0M, 20% of revenue
Kept 22% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 14, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $2.75B$2.22B | +24.0% |
| Cost of Revenue | $926.00M$671.00M | +38.0% |
| Gross Profit | $1.83B$1.55B | +17.9% |
| R&D Expenses | $546.00M$401.00M | +36.2% |
| SG&A Expenses | $674.00M$516.00M | +30.6% |
| Operating Expenses | $1.22B$936.00M | +30.3% |
| Operating Income | $606.00M$613.00M | −1.1% |
| Interest Expense | $37.00M$43.00M | −14.0% |
| Net Income | $726.00M$462.00M | +57.1% |
| EPS (Basic) | $4.96$3.19 | +55.5% |
| EPS (Diluted) | $4.92$3.10 | +58.7% |
| Shares Outstanding (Basic) | 146.00M145.00M | +0.7% |
| Shares Outstanding (Diluted) | 148.00M149.00M | −0.7% |
05—Questions
Frequently Asked Questions
How did Illumina's revenue and profitability trend in fiscal 2016?
Total revenue rose 8% to $2,398.4 million. Gross margin slipped to 69.5% from 69.8%, and income from operations was $587.0 million, or 24.5% of revenue, down from 27.6% in 2015, mainly because research and development and SG&A expenses grew faster than revenue. Net income attributable to Illumina stockholders was $462.6 million.
What drove the growth in consumables and the decline in instruments?
Consumables revenue increased 21% to $1,543.5 million, driven by growth in the sequencing instrument installed base. Instrument revenue fell 21% to $469.5 million, primarily due to lower shipments of high-throughput platforms.
What is the impact of GRAIL and Helix on Illumina's financial statements?
GRAIL and Helix are consolidated variable interest entities reported as a separate segment. The segment recorded an operating loss of $81.1 million in 2016, and research and development expense increased by $43.0 million from these entities. The company expects GRAIL's planned Series B financing, targeted to close before the end of March 2017, to lower its voting interest below 20%, after which its remaining stake would be treated as a cost-method investment.
How much debt does Illumina have, and when does it mature?
At January 1, 2017, the company had $632.5 million of 0% convertible senior notes due June 15, 2019, and $517.5 million of 0.5% convertible senior notes due June 15, 2021. The filing states that neither series was convertible as of January 1, 2017, and that the company intends to settle conversions through combination settlement.
Does Illumina's cash position support its planned spending?
The company stated that its cash, cash equivalents and short-term investments, together with operating cash flow, are sufficient to fund its near-term capital and operating needs for at least the next 12 months. It ended 2016 with $1.56 billion in cash, cash equivalents and short-term investments, of which about $749.7 million was held by foreign subsidiaries.
06—Continue