) reported fourth-quarter 2013 adjusted earnings per share (EPS)
of 45 cents, beating the Zacks Consensus Estimate by a penny.
Earnings also exceeded the year-ago quarter figure by 7.1%.
For full year 2013, adjusted EPS was $1.80, which exceeded the
Zacks Consensus Estimate of $1.78 and was up 13.2% year over
year. The full year EPS surpassed the upper limit of the
Illumina's guided range of $1.75-$1.77.
On a reported basis, ILMN posted EPS of 56 cents, up from 53
cents reported in fourth-quarter 2012. However, for full year
2013, reported EPS fell 20.4% to 90 cents from the prior
Revenue in Details
In the reported quarter, revenues climbed 25.2% to $387.3
million, surpassing the Zacks Consensus Estimate of $380 million.
For the full year, total revenue was $1.42 billion, up 23.5% year
over year, outpacing Illuminas' expected growth of 22%.
The top-line growth was driven by strong worldwide demand for
products and solid contributions from the sequencing business.
Organic revenues registered an increase of 22% year over year.
The fourth quarter was also the second highest in the company's
history in terms of orders placed, with record orders booked for
HiSeq 2500 and whole genome services, and near-record orders for
On a geographic basis, revenues in the Americas rose 31% from
the year-ago quarter, while revenues from Europe shot up 19% year
over year. ILMN also posted robust growth in Japan and
experienced increased demand from clinical research
Revenues by Business Categories
business (86.9% of its total revenue), Illumina's revenues surged
20.6% year over year to $336.4 million. For the full year,
revenues grew 18.9% to $1.3 billion. In this business, revenues
from consumables went up 11% while the same from the instruments
sales rose 25% year over year for the quarter.
The improvement in consumables and instrument revenues can be
primarily attributed to the increased demand for sequencing
instruments, sequencing consumables as well as Sample Prep along
with expanded installed base.
Service and Other
business (13.1%), revenues soared 67.9% year over year to $50.9
million. For the full year, revenues from the business improved
68.8% to $156.5 million. The marked improvement in service
revenues was mainly driven by continued growth in extended
sequencing maintenance contracts, an increase in genomes
processed year over year, revenues from verify services and
increased demand for genotyping services.
ILMN's adjusted gross margin was 71.4% in the reported
quarter, up 290 basis points (bps) year over year, due to higher
sequencing instrument margins, a higher mix of sequencing
consumables, and improved warranty costs. For 2013, adjusted
gross margin was up 40 bps to 70.1%.
Adjusted operating margin was 32.3% in the quarter, down 80
bps from the year-ago quarter owing to high selling, general
& administrative (SG&A) expenses coupled with increased
investment in research and development (R&D) to support
long-term growth and due to acquisitions. For 2013, the
adjusted operating margin was down 250 bps to 32.5%.
Adjusted R&D expenses rose 37.7% to $65.7 million or 17%
of revenues, compared with $47.7 million or 15.4% of revenues in
the fourth quarter of fiscal 2012. R&D expenses rose 8.2%
quarter-over-quarter from $61 million or 17.2% of revenues. The
sequential increase was mainly due to the impact of head-count
additions, accrued bonuses and the acquisition of NextBio, as
well as other items related to the offshore investments in new
products. For year 2013, adjusted R&D expenseswere up 36.2%
to $238.8 million.
Adjusted SG&A expenses for the quarter rose 22.6% to $85.8
million or 22.2% of revenues compared with $70 million or 19.9%
of revenues in the fourth quarter of fiscal 2012.
SG&A expenses also increased 15.9% from $74 million or
20.6% of revenues reported in the last sequential quarter, due to
commission and bonus payments arising from the year-end
performance, the additional head count to support the planned
commercial growth and the acquisition of NextBio. For 2013,
adjusted SG&A expensesrose 32.2% to $295.5 million.
Illumina exited the quarter with cash and cash equivalents and
short-term investment of $1.17 billion compared with $1.03
billion at the end of the same quarter previous year. The total
long term debt increased 3% year over year to $868.6 million.
ILMN generated $126.8 million in cash flow from operations in
the fourth quarter, marking an increase of 60.7% from the
prior-year period. The capital expenditure increased 59.6% year
over year to $27.3 million. The company rendered free cash flow
of $99.5 million in the reported quarter, up 61% from the prior
In 2013, Illumina generated $386.4 m
llion in cash flow from operations, up 32.4% year over year. The
capital expenditure increased 15.1% year over year to $79.2
million. Free cash flow for the year came in at $307.2
million, up 37.7% year over year.
Following a strong fourth quarter, Illumina revised its outlook
for full year 2014. ILMN now expects revenue growth in the range
of 15-17% compared with 22% estimated earlier. Moreover, Illumina
anticipates adjusted earnings per share in the range of $2.00 to
$2.06 compared with the prior outlook of $1.75-$1.77.
The revised guidance validates ILMN's expectation of EPS
growth to be slower than revenue growth in the first half of
2014, as it will, during that time, fully absorb the investments
made in 2013, including acquisitions, and the higher share count
due to the increase in stock price. However, in the second half
of the year, Illumina expects the EPS growth to exceed the
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ILMN carried forward its impressive performance in the fourth
quarter. We are encouraged by Illumina's consistent top-line
growth and a strong global demand for its products.
Currently, Illumina carries a Zacks Rank #3 (Hold). Some
better-placed stocks that are worth a look in the Biomedical
Emergent BioSolutions, Inc.
), each sporting a Zacks Rank #1 (Strong Buy).