It's been a while since Illumina (ILMN +2.29%) disappointed investors with its quarterly results. The genomic-sequencing leader knocked the ball out of the park with its first-quarter numbers on the strength of NovaSeq system sales and solid consumables revenue growth.
Illumina provided an update on its second-quarter performance after the market closed on Monday. And the company yet again delivered terrific news for shareholders. Here are the highlights from Illumina's second-quarter results.
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Illumina results: The raw numbers
| Metric |
Q2 2018 |
Q2 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Sales | $830 million | $632 million |
31.3% |
|
Net income from continuing operations | $209 million | $128 million |
63.3% |
|
Adjusted earnings per share (EPS) | $1.43 | $0.82 |
74.4% |
Data Source: Illumina.
What happened with Illumina this quarter?
There were three key questions for Illumina as the company's second-quarter update approached:
- Did the company finally hit the "air pocket" in consumables revenue that Illumina management has warned could happen?
- Would microarray revenue hold up despite historic seasonality trends?
- Was there any impact -- positive or negative -- related to increased trade tensions between the U.S. and China?
The short answers to the first two questions were no and yes. Illumina's earnings announcement didn't provide enough information to fully answer the third question, but its results indicate that any impact from trade tensions wasn't problematic.
Illumina's year-over-year revenue growth surpassed the company's first-quarter performance. It's clear that NovaSeq isn't losing momentum. Illumina also reported strong growth in consumables revenue for both sequencing and arrays. The increase for array consumables indicates that the consumer genomics market continues to provide a nice tailwind for the company.
The impressive bottom-line growth wasn't the result of any smoke and mirrors. Illumina's revenue grew much more than its expenses did, enabling the company to post exceptional year-over-year earnings increases on both a GAAP and non-GAAP basis.
Another big improvement for Illumina was in generating cash flow. The company reported free cash flow in the second quarter of $218 million, double the amount announced in the prior-year period.
In addition to the great financial results, Illumina also completed several notable achievements since its last quarterly update, including:
- Announced the launch of the S4 200 cycle kit for NovaSeq (with availability in the fourth quarter of 2018) to enable sequencing on additional single-cell and exome sequencing applications
- Announced the NovaSeq S Prime (SP) flow cell (also available in the fourth quarter) for smaller run sizes and/or applications with lower sequencing throughput requirements
- Announced the acquisition of Edico Genome, a privately held company whose DRAGEN platform provides faster and more streamlined next-generation sequencing (NGS)
What management had to say
Illumina CEO Francis deSouza stated:
Driven by broad demand across applications, systems and geographies, revenue grew 25% from the second quarter of 2017, and we are now expecting revenue growth of approximately 20% for 2018. Sequencing consumables, array consumables, and lab and other services each grew more than 30% compared to the second quarter of 2017, highlighting the growing interest in genomic information and its application to research, clinical and consumer markets.
Looking forward
Illumina's impressive second-quarter results allowed the company to yet again up its full-year 2018 guidance. The company now expects revenue growth this year of around 20%, up from its previous projection of revenue growth between 15% and 16%.
In April, Illumina estimated that full-year GAAP EPS would be between $4.45 and $4.55, with non-GAAP adjusted EPS between $4.75 and $4.85. The company's revised outlook calls for 2018 GAAP EPS between $5.10 and $5.20, with non-GAAP adjusted EPS between $5.35 and $5.45.
It's possible that the consumables "lumpiness" that Illumina executives have cautioned about in the past could be felt in future quarters. Escalating trade tensions with China could also cause some problems for the company. For now, though, Illumina appears to continue to fire on all cylinders.
