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While shares of Illumina Inc. (NASDAQ: ILMN) are still down by a double-digit percentage year to date, the genomic-sequencing leader's stock began a rally earlier in July. Illumina announced its second-quarter financial results after the market closed on Tuesday. Were those results good enough to keep the recent momentum going? Here are the highlights.
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Illumina results: The raw numbers
YOY = year over year. Data source: Illumina.
What happened with Illumina this quarter?
Illumina beat expectations on both the top and bottom lines in the second quarter. Product revenue from its sequencing arrays increased by 10.2% year over year to $509.9 million. Even stronger growth came from services and other revenue, including consumables. The company reported second-quarter revenue of $90.2 million in this category, up 17.7% from the prior-year period.
Non-GAAP earnings comparisons to the second quarter of 2015 didn't look quite as impressive. Illumina reported non-GAAP earnings of $127 million, or$0.86per diluted share, compared with $120 million, or$0.80per diluted share, for the second quarter of 2015.However, the year-over-year comparisons were skewed by an $11.5 million reversal of expenses related to the settlement of patent litigation in the second quarter of this year.
The company's cash flow improved considerably, with second-quarter cash flow from operations of $217 million versus $171 million in the prior year period. Illumina reported free cash flow in the second quarter of $149 million, up from $130 million posted in the same quarter of 2015.
Other highlights from Illumina's second quarter included:
- The company received over 3 million orders of samples for its new Infinium Global Screening Array, which is used to screen large populations.
- South Korea's regulatory agency approved the MiSeqDx instrument and universal kit.
- Francis deSouza assumed the role of president and CEOfrom Jay Flatley, who is now executive chairman of the board of directors.
What management had to say
Francis deSouza liked what he saw from his first quarter at the helm. DeSouza said:
Illumina still forecasts revenue growth in fiscal 2016 of 12%. The company expects revenue in the third quarter to be between$625 million and $630 million. Non-GAAP earnings are anticipated to come in between$3.48and $3.58 per diluted share.
In the first quarter, Illumina's revenue was dampened by sluggish European sales.At least one major rival, Thermo Fisher Scientific (NYSE: TMO), experienced similar weakness in Europe. But Illumina made some personnel changes to help improve its efforts across the Atlantic.
The company's Infinium Global Screening Array could also help in Europe. Illumina announced 12 initial customers for the new product in June. Several of those customers were from Europe, including Iceland's deCODE Genetics,Centre National de Genotypagein France, Erasmus MC in the Netherlands, and Germany's Life and Brain GmbH.
Illumina will have to fight to keep up its winning ways. Thermo Fisher Scientific bought a key rival, Life Technologies, back in 2013. More recently, Thermo Fisher scooped up DNA microarray company Affymetrix. Look for the larger company and other smaller competitors to battle Illumina in the U.S., Europe, and Asia.
Still, though, Illumina retains a leadership position in the industry. The company bumped its research-and-development spending by nearly 30% in the second quarter compared with the prior-year period. Illumina doesn't seem likely to rest on its laurels.
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Keith Speights has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Illumina. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.