Image source: Illumina.

Things weren't looking great for Illumina (ILMN 0.48%) as the second month of 2016 began. Shares of the genomic sequencing company were down 17% year to date. Investors were hoping for good news from the company's fourth-quarter results, announced after the market closed on Tuesday. Did they get what they wanted? Here are the highlights.

Illumina results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)


$592 million

$512 million


Non-GAAP Net Income From Continuing Operations

$121 million

$129 million


Adjusted EPS




Data source: Illumina. 

What happened with Illumina this quarter?
Illumina reported solid sales growth but declining year-over-year adjusted earnings. Why the disconnect? One big factor was a 7% higher cost of revenue, including stock-based compensation.

Despite the lackluster earnings results, Illumina did chalk up several key accomplishments during the fourth quarter. These included:

  • Product launches of the MiniSeq benchtop sequencing system, the new genotyping array Infinium XT, and the EpiSeq service for epidemiological monitoring and control of healthcare-associated infections 
  • Partnering with Bio-Rad Laboratories on single-cell analysis and with Novogene on reproductive health and cancer research
  • Starting GRAIL, a new company focused on developing a simple cancer test for patients not yet showing any symptoms
  • Previewing Project Firefly, an initiative to minimize hands-on time for library preparation and sequencing

Additionally, Illumina appears to have turned the corner with its benchtop sales. Sales had been disappointing for MiSeq and NextSeq in prior quarters. However, the company reported solid demand for these systems in the fourth quarter. 

Illumina also provided guidance for fiscal 2016. The company expects revenue growth of around 16%. Non-GAAP earnings are projected to be between $3.55 and $3.65 per share. 

What management had to say
CEO Jay Flatley stayed optimistic about his company's direction. Flatley said, "We closed 2015 with strong momentum as fourth quarter orders and revenue exceeded our expectations." He added, "Our recent product announcements of MiniSeq and Infinium XT further enhance the most extensive genomics portfolio available. This portfolio, combined with our investments in Project Firefly, Helix, and GRAIL, will position us for long-term growth as we enable our continued penetration of the enormous markets ahead."

Looking forward
Illumina faces several significant interrelated challenges in the months ahead. One is stiffer competition. Thermo-Fisher Scientific (TMO 1.08%) is acquiring Affymetrix (AFFY) for $1.3 billion. Thermo-Fisher bought Illumina's main competitor Life Technologies in 2013. The addition of Affymetrix could intensify the rivalry with Illumina.

Asia has also been a concern for Illumina. While sluggish Japanese demand is the primary issue, Illumina could also experience difficulties effectively competing against Thermo-Fisher's larger presence in China.

On the other hand, Illumina should have good opportunities in non-invasive prenatal testing (NIPT), especially if more insurers relax their reimbursement policies. Its higher-end HiSeq systems continue to experience strong demand. The company's GRAIL initiative also could have great long-term potential.