Illumina, Inc 10-Q for FY2020 Q1

Illumina, Inc. (ILMN)

10-Q 2020-05-01 For: 2020-03-29

Added on April 12, 2026

About this 10-Q

Illumina, Inc filed this 10-Q on May 1, 2020, covering the quarter ended March 29, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 29, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $859M; up 1.5% from $846M a year earlier
Net income: $173M; down 25.8% from net income of $233M a year earlier
Diluted EPS: $1.17; down 25.5% from $1.57 a year earlier

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Delaware		33-0804655
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	ILMN	The NASDAQ Global Select Market



Large accelerated filer	þ	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐
				(Do not check if a smaller reporting company)



CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	PAGE
Condensed Consolidated Balance Sheets	5
Condensed Consolidated Statements of Income	6
Condensed Consolidated Statements of Comprehensive Income	7
Condensed Consolidated Statement of Stockholders’ Equity	8
Condensed Consolidated Statements of Cash Flows	9
Notes to Condensed Consolidated Financial Statements	10
1. Organization and Significant Accounting Policies	10
2. Revenue	12
3. Investments and Fair Value Measurements	13
4. Debt	16
5. Stockholders’ Equity	17
6. Supplemental Balance Sheet Details	19
7. Legal Proceedings	20
8. Income Taxes	20
9. Segment Information	20

MANAGEMENT’S DISCUSSION & ANALYSIS
Management’s Overview and Outlook	22
Results of Operations	22
Liquidity and Capital Resources	25
Critical Accounting Policies and Estimates	27
Recent Accounting Pronouncements	27
Off-Balance Sheet Arrangements	27
Quantitative and Qualitative Disclosures About Market Risk	27

OTHER KEY INFORMATION
Controls and Procedures	27
Legal Proceedings	29
Risk Factors	29
Share Repurchases and Sales	29
Exhibits	30
Form 10-Q Cross-Reference Index	31



	March 29, 2020			December 29, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,991		$	2,042
Short-term investments	1,341			1,372
Accounts receivable, net	472			573
Inventory	384			359
Prepaid expenses and other current assets	136			105
Total current assets	4,324			4,451
Property and equipment, net	890			889
Operating lease right-of-use assets	559			555
Goodwill	824			824
Intangible assets, net	138			145
Deferred tax assets, net	91			64
Other assets	435			388
Total assets	$	7,261		$	7,316

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	130		$	149
Accrued liabilities	425			516
Long-term debt, current portion	499			—
Total current liabilities	1,054			665
Operating lease liabilities	696			695
Long-term debt	652			1,141
Other long-term liabilities	224			202
Stockholders’ equity:
Common stock	2			2
Additional paid-in capital	3,631			3,560
Accumulated other comprehensive income	6			5
Retained earnings	4,240			4,067
Treasury stock, at cost	(3,244		)	(3,021		)
Total stockholders’ equity	4,635			4,613
Total liabilities and stockholders’ equity	$	7,261		$	7,316



☑	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


•	our expectations as to our future financial performance, results of operations, or other operational results or metrics;


•	our expectations regarding the launch of new products or services;


•	the benefits that we expect will result from our business activities and certain transactions we have completed, such as product introductions, increased revenue, decreased expenses, and avoided expenses and expenditures;


•	our expectations of the effect on our financial condition of claims, litigation, contingent liabilities, and governmental investigations, proceedings, and regulations;


•	our strategies or expectations for product development, market position, financial results, and reserves;


•	our expectations regarding the integration of any acquired technologies with our existing technology; and


•	other expectations, beliefs, plans, strategies, anticipated developments, and other matters that are not historical facts.


•	the impact to our business and operating results caused by the COVID-19 pandemic;


•	challenges inherent in developing, manufacturing, and launching new products and services, including expanding manufacturing operations and reliance on third-party suppliers for critical components;


•	our ability to develop and commercialize our instruments and consumables, to deploy new products, services, and applications, and to expand the markets for our technology platforms;


•	our ability to manufacture robust instrumentation and consumables;


•	our ability to identify and integrate acquired technologies, products, or businesses successfully;


•	our expectations and beliefs regarding prospects and growth for our business and the markets in which we operate;


•	the timing and mix of customer orders among our products and services;


•	the impact of recently launched or pre-announced products and services on existing products and services;


•	the assumptions underlying our critical accounting policies and estimates;


•	our assessments and estimates that determine our effective tax rate;


•	our assessments and beliefs regarding the outcome of pending legal proceedings and any liability, that we may incur as a result of those proceedings;


•	uncertainty, or adverse economic and business conditions, including as a result of slowing or uncertain economic growth in the United States or worldwide; and


•	other factors detailed in our filings with the SEC, including the risks, uncertainties, and assumptions described in “Risk Factors” within the Business and Market Information section of our Annual Report on Form 10-K for the fiscal year ended December 29, 2019, or in information disclosed in public conference calls, the date and time of which are released beforehand.



	Three Months Ended
	March 29, 2020			March 31, 2019
Revenue:
Product revenue	$	701		$	667
Service and other revenue	158			179
Total revenue	859			846
Cost of revenue:
Cost of product revenue	174			182
Cost of service and other revenue	59			71
Amortization of acquired intangible assets	7			9
Total cost of revenue	240			262
Gross profit	619			584
Operating expense:
Research and development	156			169
Selling, general and administrative	274			211
Total operating expense	430			380
Income from operations	189			204
Other income (expense):
Interest income	14			23
Interest expense	(11		)	(15		)
Other (expense) income, net	(14		)	21
Total other (expense) income, net	(11		)	29
Income before income taxes	178			233
Provision for income taxes	5			9
Consolidated net income	173			224
Add: Net loss attributable to noncontrolling interests	—			9
Net income attributable to Illumina stockholders	$	173		$	233
Earnings per share attributable to Illumina stockholders:
Basic	$	1.18		$	1.58
Diluted	$	1.17		$	1.57
Shares used in computing earnings per share:
Basic	147			147
Diluted	148			149



	Illumina Stockholders
				Additional			Accumulated Other														Total
	Common Stock			Paid-In			Comprehensive			Retained			Treasury Stock					Noncontrolling			Stockholders’
	Shares	Amount		Capital			(Loss) Income			Earnings			Shares		Amount			Interests			Equity
Balance as of December 30, 2018	192	$	2	$	3,290		$	(1	)	$	3,083		(45	)	$	(2,616	)	$	87		$	3,845
Net income (loss)	—	—		—			—			233			—		—			(2		)	231
Unrealized gain on available-for-sale debt securities, net of deferred tax	—	—		—			3			—			—		—			—			3
Issuance of common stock, net of repurchases	—	—		27			—			—			—		(86		)	—			(59		)
Share-based compensation	—	—		51			—			—			—		—			—			51
Cumulative-effect adjustment from adoption of ASU 2016-02, net of deferred tax	—	—		—			—			(18		)	—		—			—			(18		)
Vesting of redeemable equity awards	—	—		(1		)	—			—			—		—			—			(1		)
Adjustment to the carrying value of redeemable noncontrolling interests	—	—		18			—			—			—		—			—			18
Balance as of March 31, 2019	192	2		3,385			2			3,298			(45	)	(2,702		)	85			4,070
Net income (loss)	—	—		—			—			296			—		—			(1		)	295
Unrealized gain on available-for-sale debt securities, net of deferred tax	—	—		—			3			—			—		—			—			3
Issuance of common stock, net of repurchases	1	—		3			—			—			—		(3		)	—			—
Share-based compensation	—	—		48			—			—			—		—			—			48
Adjustment to the carrying value of redeemable noncontrolling interests	—	—		(2		)	—			—			—		—			—			(2		)
Deconsolidation of Helix	—	—		2			—			—			—		—			(84		)	(82		)
Balance as of June 30, 2019	193	2		3,436			5			3,594			(45	)	(2,705		)	—			4,332
Net income	—	—		—			—			234			—		—			—			234
Issuance of common stock, net of repurchases	—	—		29			—			—			(1	)	(201		)	—			(172		)
Share-based compensation	—	—		45			—			—			—		—			—			45
Balance as of September 29, 2019	193	2		3,510			5			3,828			(46	)	(2,906		)	—			4,439
Net income	—	—		—			—			239			—		—			—			239
Issuance of common stock, net of repurchases	1	—		—			—			—			(1	)	(115		)	—			(115		)
Share-based compensation	—	—		50			—			—			—		—			—			50
Balance as of December 29, 2019	194	2		3,560			5			4,067			(47	)	(3,021		)	—			4,613
Net income	—	—		—			—			173			—		—			—			173
Unrealized gain on available-for-sale debt securities, net of deferred tax	—	—		—			1			—			—		—			—			1
Issuance of common stock, net of repurchases	—	—		32			—			—			—		(223		)	—			(191		)
Share-based compensation	—	—		39			—			—			—		—			—			39
Balance as of March 29, 2020	194	$	2	$	3,631		$	6		$	4,240		(47	)	$	(3,244	)	$	—		$	4,635



In millions	Q1 2020	Q1 2019
Weighted average shares outstanding	147	147
Effect of potentially dilutive common shares from:
Equity awards	1	1
Convertible senior notes	—	1
Weighted average shares used in calculating diluted earnings per share	148	149
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	1	1



Based on region of destination (in millions)	Q1 2020		Q1 2019
Americas	$	477	$	473
Europe, Middle East, and Africa	221		210
Greater China (1)	84		88
Asia-Pacific	77		75
Total revenue	$	859	$	846



	March 29, 2020									December 29, 2019
In millions	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Estimated Fair Value
Debt securities in government-sponsored entities	$	21	$	—	$	—		$	21	$	18	$	—	$	18
Corporate debt securities	613		2		(5		)	610		627		3		630
U.S. Treasury securities	591		10		—			601		616		2		618
Total	$	1,225	$	12	$	(5	)	$	1,232	$	1,261	$	5	$	1,266



In millions	Estimated Fair Value
Due within one year	$	450
After one but within five years	782
Total	$	1,232



	Restricted Stock Units (RSU)		Performance Stock Units (PSU)(1)		Weighted-Average Grant Date Fair Value per Share
Units in thousands	Restricted Stock Units (RSU)		Performance Stock Units (PSU)(1)		RSU		PSU
Outstanding at December 29, 2019	1,700		271		$	271.49	$	258.66
Awarded	82		55		$	300.29	$	348.46
Vested	(26	)	—		$	198.43	—
Cancelled	(70	)	(30	)	$	260.73	$	254.81
Outstanding at March 29, 2020	1,686		296		$	274.46	$	275.65


(1)	The number of units reflect the estimated number of shares to be issued at the end of the performance period.



	Options (in thousands)		Weighted-Average Exercise Price
Outstanding at December 29, 2019	58		$	56.65
Exercised	(17	)	$	36.62
Outstanding and exercisable at March 29, 2020	41		$	64.63



	Employee Stock Purchase Rights
Risk-free interest rate	1.46% - 2.56%
Expected volatility	30% - 37%
Expected term	0.5 - 1.0 year
Expected dividends	0		%
Weighted-average grant-date fair value per share	$	77.19


•	Management’s Overview and Outlook. High level discussion of our operating results and significant known trends that affect our business.


•	Results of Operations. Detailed discussion of our revenues and expenses.