Illumina reports financial results for second quarter of fiscal year 2020

Illumina, Inc. (NASDAQ: ILMN) today announced its financial results for the second quarter of fiscal year 2020.

econd quarter 2020 results reflect the impact of the global COVID-19 pandemic:

• Revenue of $633 million, a 25% decrease compared to $838 million in the second quarter of 2019
• GAAP net income attributable to Illumina stockholders for the quarter of $47 million, or $0.32 per diluted share, compared to $296 million, or $1.99 per diluted share, for the second quarter of 2019
• Non-GAAP net income attributable to Illumina stockholders for the quarter of $92 million, or $0.62 per diluted share, compared to $200 million, or $1.35 per diluted share, for the second quarter of 2019. Non-GAAP net income excludes discrete tax expenses and net gains from mark-to-market adjustments on our strategic investments, primarily from our marketable equity securities (see the “Reconciliation Between GAAP and Non-GAAP Net Income Attributable to Illumina Stockholders” table for a reconciliation of these GAAP and non-GAAP financial measures)
• Cash flow from operations of $240 million compared to $143 million in the second quarter of 2019. Cash flow from operations for the second quarter of 2019 included an $84 million payment of the accreted debt discount related to the conversion of our 2019 Notes
• Free cash flow (cash flow from operations less capital expenditures) of $202 million for the quarter compared to $96 million in the second quarter of 2019. Free cash flow for the second quarter of 2019 included the convertible notes payment, referenced above

Gross margin in the second quarter of 2020 was 67.7% compared to 68.4% in the prior year period. Excluding amortization of acquired intangible assets and the net impact from payroll credits and expenses related to COVID-19, non-GAAP gross margin was 68.6% for the second quarter of 2020 compared to 69.5% in the prior year period.

Research and development (R&D) expenses for the second quarter of 2020 were $155 million compared to $166 million in the prior year period. Excluding payroll credits related to COVID-19, non-GAAP R&D expenses as a percentage of revenue were 24.7% compared to 19.8% in the prior year period.

Selling, general and administrative (SG&A) expenses for the second quarter of 2020 were $177 million compared to $202 million in the prior year period. Excluding acquisition-related expenses, restructuring charges, and the net impact from payroll credits and expenses related to COVID-19, non-GAAP SG&A expenses as a percentage of revenue were 28.1% compared to 23.1% in the prior year period.

Depreciation and amortization expenses were $46 million and capital expenditures for free cash flow purposes were $38 million during the second quarter of 2020. At the close of the quarter, the company held $3.3 billion in cash, cash equivalents and short-term investments, compared to $3.4 billion as of December 29, 2019.

“As expected, the second quarter was significantly impacted by pandemic-related disruption in our customers’ operations and was particularly challenging for many of our research customers who remain closed or operating at limited scale,” said Francis deSouza, President and CEO. “It is clear that the role of genomics in infectious disease will continue to grow through and beyond this pandemic.”

Updates since our last earnings release:

• Launched TruSight™ software to accelerate the identification of rare genetic diseases through whole genome sequencing
• Received an Emergency Use Authorization from the US FDA for COVIDSeq™, the first sequencing-based COVID-19 diagnostic test
• Acquired BlueBee and Enancio to lower data storage costs and accelerate data interpretation
• Accepted seven genomic startups to Illumina Accelerator’s first global cohort, with 3 in Cambridge, UK and 4 in San Francisco, to build breakthrough genomic technologies
• Repurchased approximately $143 million of common stock in the second quarter and $420 million remains available for repurchase under our current plan
• Welcomed Dr. Alex Aravanis to lead research and development efforts as CTO and appointed Mostafa Ronaghi to lead entrepreneurial development

Financial outlook and guidance

As previously announced, Illumina has withdrawn its fiscal 2020 full year revenue and earnings per share guidance due to the uncertainties around the severity and duration of the COVID-19 pandemic.

Quarterly conference call information

The conference call will begin at 2:00 pm Pacific Time (5:00 pm Eastern Time) on Thursday, August 6, 2020. Interested parties may access the live teleconference through the Investor Info section of Illumina’s website under the “Company” tab at www.illumina.com. Alternatively, individuals can access the call by dialing 1 (866) 211-4597 or 1 (647) 689-6853 outside North America, both with conference ID 4194447.

A replay of the conference call will be posted on Illumina’s website after the event and will be available for at least 30 days following.

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 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 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 may contain forward-looking statements that involve risks and uncertainties. Among the important factors to which our business is subject that could cause actual results to differ materially from those in any forward-looking statements are: (i) the impact to our business and operating results of the COVID-19 pandemic; (ii) changes in the rate of growth in the markets we serve; (iii) the volume, timing and mix of customer orders among our products and services; (iv) our ability to adjust our operating expenses to align with our revenue expectations; (v) our ability to manufacture robust instrumentation and consumables; (vi) the success of products and services competitive with our own; (vii) challenges inherent in developing, manufacturing, and launching new products and services, including expanding or modifying manufacturing operations and reliance on third-party suppliers for critical components; (viii) the impact of recently launched or pre-announced products and services on existing products and services; (ix) our ability to further develop and commercialize our instruments and consumables, to deploy new products, services, and applications, and to expand the markets for our technology platforms; (x) our ability to obtain regulatory clearance for our products from government agencies; (xi) our ability to successfully partner with other companies and organizations to develop new products, expand markets, and grow our business; (xii) our ability to successfully identify and integrate acquired technologies, products, or businesses; and (xiii) 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. –Businesswire