) first-quarter 2013 adjusted earnings of 46 cents per share beat
the Zacks Consensus Estimate by 21%. Adjusted earnings grew
almost 28% over the prior-year quarter driven by strong sales.
However, including some one-time litigation expenses, its
reported loss stood at 18 cents against a net income of 20 cents
in the prior-year quarter.
Revenue increased a robust 21% year over year to $331 million
during the quarter, also beating the Zacks Consensus Estimate of
$310 million. Top-line growth was driven by a strong performance
of the sequencing business, especially the sequencing
consumables. Organic revenue increased 18% year over year, owing
to strong demand for instrumental sales, genome sequencing
services and sequencing consumables.
The company generates 89.5% of its total revenue from
products, while the remaining comes from services. Product
revenues are primarily attributed to the sale of Microarrays and
DNA Sequencing products. Product revenues consist of sales
proceeds from the Consumables and Instruments segment. Services
and other revenues comprise genotyping and sequencing services as
well as instrument maintenance contracts.
During the quarter, product revenue increased 15.9% year over
year to $296.2 million, while, services revenue surged 203% year
over year to $34.8 million. Growth in service revenues is
attributable to the February acquisition of Verinata Health Inc.
A higher number of instrument maintenance contracts, strong
demand for genotyping and sequencing also drove the service
revenue in the quarter.
Consumable revenue (61.9% of the company's total revenue) was
$205 million, up 19% year over year, driven by strong demand for
Sample Prep and sequencing consumables and the addition of
BlueGnome (acquired in Sept 2012). Instruments revenues increased
11% year over year to $88 million in the reported quarter. Growth
in this segment was attributable to strong year over year demand
in array instruments and HiSeq products.
The company's adjusted gross margin stood at 69.2% in the
reported quarter, up 20 basis points (bps) year over year.
Adjusted operating margin during the quarter was 33.3% compared
with 35.1% in the year-ago quarter, down 180 bps as higher
research & development margin and selling, general &
administrative margin was offset by relatively low expansion in
the gross margin.
Illumina exited the quarter with cash and cash equivalents and
short-term investment of $1.06 billion compared with $1.35
billion at the end of fiscal 2012. The company generated $88
million in cash flow from operations in the first quarter versus
$65 million in the prior-year period.
Based on its solid cash balance, Illumina repurchased shares
of $25 million in the quarter under its earlier announced share
Illumina reiterated its previously provided fiscal 2013
outlook for revenue growth of 15% and earnings per share in the
range of $1.55 - $1.62.
However, the company cautiously mentioned that it will take
into account the Verinata dilution, operating expense increases
and normalized tax rates when updating its 2013 guidance. The
company is confident it should perform well in 2013 as it has a
strong pipeline, impressive product development, investments and
California-based Illumina develops, manufactures and markets
life science tools and integrated systems for the analysis of
genetic variation and function at a broader scale. The company
derives product revenues from the sale of microarrays and DNA
sequencing products. As a life sciences tools company, Illumina
has a track record of innovation and operational excellence.
Currently, Illumina retains a Zacks Rank #3 (Hold).
Other Stocks to Consider
While we prefer to remain on the sidelines with Illumina,
other medical device stocks worth a look are
), all of which carry a Zacks Rank #1 (Strong Buy).
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