Illumina Reports Financial Results for First Quarter 2007.Revenue Increases 148% Over Prior Year SAN DIEGO San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. -- Illumina, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :ILMN) announced today its financial results for the first quarter of 2007. For the first quarter of 2007, Illumina reported revenue of $72.2 million, a 148% increase over the $29.1 million reported in the first quarter of 2006. This represents the Company's 23rd consecutive quarter of revenue growth. On a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, the Company reported a net loss of $298.1 million, or $5.58 per basic and diluted share, for the first quarter of 2007, compared to net loss of $0.1 million, or $0.00 per basic and diluted share, in the comparable period of 2006. The net loss for the first quarter includes a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $303.4 million related to in-process research and development associated with the Company's acquisition of Solexa, Inc. which was completed on January 26, 2007. Additionally, net loss includes charges of $0.4 million associated with the amortization of acquired intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. , $0.8 million related to the amortization of the increase in value of Solexa's inventory as required under the purchase accounting rules and $7.7 million in non-cash stock compensation expense associated with SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123R. Excluding the impact of these items, Illumina's net income on a non-GAAP basis would have been $12.7 million, or $0.22 per diluted share, for the first quarter of 2007. Combined gross margin for products and services in the first quarter of 2007 was 65.1%, compared to 67.4% in the comparable period of 2006. For the first quarter of 2007, excluding the effect of non-cash stock compensation expense and the amortization of the increase in inventory valuation recorded in purchase accounting related to the Solexa acquisition, the combined gross margin of product and services would have been 67.3%. Research and development expenses for the first quarter of 2007 were $16.0 million, compared to $8.2 million in the first quarter of 2006. Research and development expenses include $1.9 million and $1.0 million in non-cash stock compensation expense in the first quarter of 2007 and 2006, respectively. Selling, general and administrative expenses for the quarter were $23.6 million, compared to $12.1 million for the first quarter of 2006. Selling, general and administrative expenses include $4.8 million and $1.9 million of non-cash stock compensation expense in the first quarter of 2007 and 2006, respectively. During the quarter, the Company repurchased approximately 7.4 million shares of its outstanding common stock for a total of approximately $250.9 million. The Company generated $14.6 million in cash from operations during the first quarter of 2007, compared to $2.4 million in the comparable quarter of 2006. Depreciation and amortization was $3.9 million and capital expenditures were $3.2 million during the quarter. The Company ended the quarter with $326.8 million in cash and short-term investments, compared to $130.8 million as of December 31, 2006. This increase in cash was primarily attributable to approximately $390.7 million of net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). related to the issuance of Convertible Senior Notes, $92.4 million of proceeds from the sale of warrants issued in conjunction with the Convertible Senior Notes and the $76.7 million in net cash acquired as part of the Solexa acquisition. These proceeds were partially offset by the share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. mentioned above and the $139.0 million cost of the convertible note hedge transactions entered into as part of the Convertible Senior Notes issuance. Events since our last earnings release: * Launched the BeadXpress[TM] System based on Illumina's proprietary VeraCode[TM] digital microbead technology, which represents a significant step forward for research and clinical development applications. * Launched the HumanCNV370-Duo. Developed in collaborations with deCODE genetics deCODE genetics, Inc. (Íslensk erfðagreining in Icelandic) NASDAQ: DCGN is a biopharmaceutical company based in Reykjavík, Iceland. The company was founded in 1996 to identify human genes associated with common diseases using population studies, and apply the , the product is the world's first microarray See micro array. microarray - A technique for performing many DNA experiments in parallel. Nothing to do with computers. designed to specifically target novel regions of the genome that show copy number variation (CNV CNV Choroidal Neovascularization (eye disorder) CNV Christelijk Nationaal Vakverbond CNV Copy Number Variation CNV Conveyor CNV Chief of Navy CNV Continuous Normal Voltage CNV Crypto Net Variable CNV Could Not Verify ). * Announced key technical advances of the Illumina Genome Analyzer system, which included improved methods to routinely generate over a billion bases of high quality raw data per flow cell, as well as methods to achieve high levels of sample multiplexing multiplexing, in communication, technique whereby two or more independent messages, or information-bearing signals, are carried by a single common medium, or channel. in a single channel. The Company also simplified methods for generating high quality paired-end reads and demonstrated increased read-lengths to over 50 bases. * Closed a $400 million principal amount of 0.625% Convertible Senior Notes due 2014. The offering generated net proceeds to Illumina of approximately $390.7 million, of which approximately $201.6 million were used to repurchase approximately 5.8 million shares of common stock. * Announced the initiation of a Rule 10b5-1 trading plan to purchase up to $75 million of Illumina's outstanding common stock over a period of six months. Through April 1, 2007, the Company had used $49.3 million of the funds available under the plan to purchase approximately 1.6 million shares of its outstanding common stock. * Announced that researchers have made a breakthrough discovery in type-2 diabetes using Illumina's HumanHap300 and Human-1 BeadChips. Using these products, scientists have uncovered four important gene variations that increase the risk of developing type-2 diabetes, the most common form of the disease. These results were published in the journal, Nature, and are believed to explain up to 70 percent of the genetic background of type-2 diabetes. * Announced that scientists, using the HumanHap300 and HumanHap240s BeadChips, have identified a specific single nucleotide polymorphism Noun 1. single nucleotide polymorphism - (genetics) genetic variation in a DNA sequence that occurs when a single nucleotide in a genome is altered; SNPs are usually considered to be point mutations that have been evolutionarily successful enough to recur in a (SNP SNP Scottish National Party Noun 1. SNP - (genetics) genetic variation in a DNA sequence that occurs when a single nucleotide in a genome is altered; SNPs are usually considered to be point mutations that have been evolutionarily ) that strongly correlates to the development of prostate cancer prostate cancer, cancer originating in the prostate gland. Prostate cancer is the leading malignancy in men in the United States and is second only to lung cancer as a cause of cancer death in men. . Additionally, in a separate study using Illumina's technology, 34 unique variations in the human genetic code were identified that may explain the underlying factors that contribute to Amyotrophic Lateral Sclerosis amyotrophic lateral sclerosis (ALS) (ā'mīətrōf`ik, sklĭrō`sĭs) or motor neuron disease, (ALS Als (äls), Ger. Alsen, island, 121 sq mi (313 sq km), Sønderjylland co., S Denmark, in the Lille Bælt, separated from the mainland by the narrow Alensund. ). * Completed a negotiation to lease an additional 83,000 square feet of office and laboratory space on the Company's campus in San Diego, California “San Diego” redirects here. For other uses, see San Diego (disambiguation). San Diego is a coastal Southern California city located in the southwestern corner of the continental United States. As of 2006, the city has a population of 1,256,951. . Additionally, the Company announced the consolidation of its facility in Wallingford, Connecticut Wallingford is a town in New Haven County, Connecticut, United States. The population was 43,026 at the 2000 census. History Wallingford was established on October 10, 1667, when the Connecticut General Assembly authorized the "making of a village on the east river" to into its San Diego facilities over the course of 2007. Financial Outlook The non-GAAP financial guidance discussed below excludes the effect of non-cash stock compensation expense and non-cash charges related to the acquisition of Solexa, Inc. (see table which reconciles these non-GAAP financial measures to the related GAAP measure). The Company's revised financial guidance for fiscal 2007 is as follows: Revised Guidance for Fiscal 2007: * We expect fiscal 2007 revenue to be between $305 and $315 million. This represents an increase of $10 million above the low end of the guidance we provided on February 1, 2007. * Research and development expenses are expected to be between $57 and $67 million, consistent with our previous guidance. * Selling, general and administrative expenses are expected to be between $72 and $82 million, consistent with our previous guidance. * We expect non-GAAP net income to be between $55 and $62 million, or $0.89 to $1.00 per diluted share, assuming fully diluted weighted-average shares of 62 million. This represents an increase of $3 million above the low end of the guidance we provided in February. * We expect non-cash stock compensation expense related to SFAS No. 123R to be approximately $30 million, or $0.48 per diluted share. The increase of $5 million over the high end of our guidance provided in February is related to the value of stock options granted in the first quarter of 2007. Guidance for Q2 2007: * The Company expects second quarter total revenue to be between $74 and $78 million. Management expects non-GAAP net income to be between $12 and $14 million, or $0.19 and $0.23 per diluted share, assuming quarterly fully diluted weighted-average shares of 62 million. Conference Call Information A conference call has been scheduled for 2:00 p.m. Pacific Time today to discuss Illumina's first quarter results and updated 2007 guidance. Interested parties may listen to the call by dialing 866-383-8009 (passcode: 21594920) or if outside North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , by dialing +1 617-801-6888 (passcode: 72290676). Individuals may access the live webcast under the "Investors" tab of Illumina's website at www.illumina.com. About Illumina Illumina (www.illumina.com) is developing next-generation tools for the large-scale analysis of genetic variation and function. Statement Regarding Use of Non-GAAP Measures The Company has reported non-GAAP results for net income per share, net income, gross margins 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 results under GAAP include substantial non-cash charges related to stock compensation expense and its acquisition of Solexa, Inc. in January 2007. Management believes that presentation of operating results that exclude these non-cash charges provides useful supplemental information to investors that facilitates analysis of the Company's core operating results and comparison of operating results across reporting periods. Management believes that this supplemental non-GAAP information is therefore useful to investors in analyzing and assessing the Company's past and future operating performance. 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. "Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: this release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve risks and uncertainties. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are the costs and outcome of Illumina's litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. with Affymetrix and our ability (i) to integrate effectively our recent acquisition of Solexa, Inc., (ii) to develop and commercialize further our BeadArray[TM], VeraCode[TM] and Solexa[R] technologies and to deploy new gene expression and genotyping Genotyping refers to the process of determining the genotype of an individual with a biological assay. Current methods of doing this include PCR, DNA sequencing, and hybridization to DNA microarrays or beads. products and applications for our technology platforms, (iii) to manufacture robust micro arrays and Oligator[R] oligonucleotides, (iv) to integrate and scale our VeraCode technology, (v) to scale further oligo synthesis output and technology to satisfy market demand derived from our collaboration with Invitrogen, together with other factors detailed in our filings with the Securities and Exchange Commission including our 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 disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. any intent or obligation to update these forward-looking statements beyond the date of this release. 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