01—Abstract
Summary
Summary of the 10-K filed February 12, 2019. Cited figures are marked; the original filing is the authoritative source.
Illumina, Inc. (ILMN) reported fiscal 2018 total revenue of $3.33 billiona, up from $2.75 billion in 2017, with consumables sales of $2.16 billion and instruments of $569 million.
Income from operations rose to $883 millionb from $606 million, and net income attributable to Illumina stockholders was $826 million, or $5.56 per diluted share, compared with $726 million in 2017. The filing states that gross margin was 69.0% versus 66.4% in 2017, and operating margin was 26.5% versus 22.0%. The effective tax rate fell to 12.5% from 35.0%, aided by the reduction in the U.S. federal statutory rate to 21% and excess tax benefits from share-based compensation.
The 2017 results included a $453 millionc gain on the deconsolidation of GRAIL, which makes year-over-year net income comparisons less direct. The company ended 2018 with cash, cash equivalents and short-term investments of $3.51 billion, of which about $487 million was held by foreign subsidiaries. Total debt rose sharply: convertible senior notes principal stood at $1.9 billion across the 2019, 2021 and 2023 series, and $1.107 billion of debt is classified as current, largely the $633 million of 2019 notes maturing June 15, 2019.
Operating cash flow was $1.14 billiond. The company issued $750 million of 0% convertible notes due 2023 in August 2018 and announced on February 6, 2019 a new $550 million share repurchase authorization. The pending acquisition of Pacific Biosciences of California, Inc. for approximately $1.2 billion in cash ($8.00 per share) is a major item.
The FTC has issued a second request under the HSR Act, and the company expects the deal to close in mid-2019 if antitrust approvals are received. The filing also notes that backlog was $909 million as of December 30, 2018, with about 80% expected to ship in fiscal 2019, and that the company expects revenue and research and development expense to continue increasing in 2019.
02—Key points
Key Highlights
- Total revenue rose to $3.33 billion in 2018 from $2.75 billion in 2017, driven by consumables ($2.16 billion) and sequencing growth.
- Gross margin improved to 69.0% from 66.4%, and income from operations reached $883 million (26.5% of revenue) versus $606 million (22.0%).
- Effective tax rate was 12.5% in 2018 versus 35.0% in 2017, reflecting the U.S. federal statutory rate cut to 21% and other factors.
- Cash, cash equivalents and short-term investments totaled $3.51 billion at year-end, but total debt increased and $1.107 billion is classified as current, including the $633 million 2019 convertible notes.
- Pending acquisition of Pacific Biosciences for about $1.2 billion in cash is subject to an FTC second request, with closing expected in mid-2019.
- Backlog was $909 million at December 30, 2018, with approximately 80% expected to ship within fiscal 2019.
- A new $550 million share repurchase program was authorized on February 6, 2019, after $201 million of repurchases in 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Illumina kept $0.25.
- Revenue$3.33B100.0%
- Cost of revenue−$1.03B31.0%
- Gross profit$2.30B69.0%
- Operating costs−$1.42B42.5%
- Operating income$883.0M26.5%
- Interest, other & tax−$57.0M1.7%
- Net income$826.0M24.8%
Where FY2018 revenue went
$3.33B- Cost of revenue: $1.03B, 31% of revenue
- Net income: $826.0M, 25% of revenue
- SG&A: $794.0M, 24% of revenue
- R&D: $623.0M, 19% of revenue
- Interest, other & tax: $57.0M, 1.7% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 12, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $3.33B$2.75B | +21.1% |
| Cost of Revenue | $1.03B$926.00M | +11.6% |
| Gross Profit | $2.30B$1.83B | +26.0% |
| R&D Expenses | $623.00M$546.00M | +14.1% |
| SG&A Expenses | $794.00M$674.00M | +17.8% |
| Operating Expenses | $1.42B$1.22B | +16.1% |
| Operating Income | $883.00M$606.00M | +45.7% |
| Interest Expense | $57.00M$37.00M | +54.1% |
| Net Income | $826.00M$726.00M | +13.8% |
| EPS (Basic) | $5.63$4.96 | +13.5% |
| EPS (Diluted) | $5.56$4.92 | +13.0% |
| Shares Outstanding (Basic) | 147.00M146.00M | +0.7% |
| Shares Outstanding (Diluted) | 149.00M148.00M | +0.7% |
05—Questions
Frequently Asked Questions
How did Illumina's revenue and profitability change in 2018?
Total revenue increased to $3.33 billion from $2.75 billion, and income from operations rose to $883 million from $606 million. Net income attributable to Illumina stockholders was $826 million versus $726 million in 2017, although 2017 included a $453 million gain on the deconsolidation of GRAIL.
What is the status of the Pacific Biosciences acquisition?
Illumina agreed on November 1, 2018 to acquire Pacific Biosciences for an all-cash price of about $1.2 billion ($8.00 per share). The FTC has issued a second request, which extends the HSR waiting period, and the company currently anticipates closing in mid-2019 assuming receipt of required antitrust approvals.
How much debt does Illumina have and when does it come due?
Convertible senior notes principal totals $1.9 billion: $633 million due 2019, $517 million due 2021 and $750 million due 2023. Long-term debt was $890 million and current debt $1.107 billion at December 30, 2018, and the 2019 notes mature June 15, 2019.
Is Illumina's cash position sufficient for its obligations?
The company reported $3.51 billion of cash, cash equivalents and short-term investments at year-end and states that these, together with operating cash flow, are sufficient to fund near-term capital and operating needs for at least the next 12 months, including the PacBio purchase price.
What drove the lower effective tax rate?
The effective tax rate was 12.5% in 2018 versus 35.0% in 2017. The filing attributes this mainly to the reduction in the U.S. federal statutory rate from 35% to 21%, the mix of earnings in lower-tax jurisdictions such as Singapore and the United Kingdom, and excess tax benefits from share-based compensation, partly offset by an $11 million expense from updating prior-year U.S. Tax Reform estimates.
06—Continue