Analyst Conference Summary


conference date: January 29, 2019 @ 2:00 PM Pacific Time
for quarter ending: December 31, 2018 (fourth quarter, Q4 2018)

Forward-looking statements

Overview: Continued strong revenue growth of 11% y/y. But non-GAAP EPS down y/y.

Basic data (GAAP):

Revenue was $867 million, up 2% sequentially from $853 million and up 11% from $778 million in the year-earlier quarter.

Net income was $210 million, up 6% sequentially from $199 million, and up 209% from $68 million year-earlier.

Diluted EPS was $1.41, up 6% sequentially from $1.33, and up 207% from $0.46 year-earlier.


For full year 2019, Illumina expects revenue growth in the range of 13% to 14%; GAAP EPS diluted of $6.07 to $6.17; and non-GAAP EPS diluted of $6.50 to $6.60. Excludes any impact from the pending acquisition of Pacific Biosciences. 2019 is expected to be more back-end loaded than 2018.

Q1 2019 revenue expected sequencially down on the usual seasonal decrease in sequencing instrument revenue.

Conference Highlights:

Francis deSouza, President and CEO, said "From the evolving regulatory environment for oncology diagnostics to progress in reimbursement for non-invasive prenatal and undiagnosed disease testing, genomics is accelerating on its path into clinical standard of care." NIPT (non-invasive prenatal test) continues to be a driver.

NovaSeq consumable revenue is ramping rapidly, leading to a decline in HiSeq consumables. NextSeq mid-throughput consumables had another record quarter. But about 75% of the HiSeq installed base has not taken even their first NovaSeq, so the cycle has years to go.

Sequencing instrument revenue was $159 million, and up 21%. $170 total instrument revenue (sequencing + array). Revenue was from consumables (including array) was $562 million, up 2% sequentially from $550 million, and up 9% from year-earlier.

iSeq ramp is going well.

$107 million microarray revenue, consisting of $96 million for consumables and $11 million for instruments. Array instrument growth is expected to slow in 2019.

Product revenue was $738 million, up 4% sequentially from $710 million, and up 12% y/y from $659 million.

Services and other revenue was $129 million, down 10% sequentially from $143 million, and up 8% y/y from $119 million.

Non-GAAP numbers: net income $197 million, down 13% sequentially from $227 million, and down 7% from $212 million year-earlier. Diluted EPS was $1.32, down 13% sequentially from $1.52, and down 8% from $1.44 year-earlier.

For the full year 2018 revenue was #3.33 billion, up 21% y/y. GAAP net income was $826 million for EPS diluted of $5.56. Non-GAAP net income was $850 million, EPS $5.72. Cash flow from operations was $1.1 billion.

69.1% non-GAAP gross margin, down from 70.9% year-earlier.

Cash, equivalents and investment balance was $3.5 billion. Long term debt was $1.1 billion. Cash flow from operations was $300 million. Free cash flow was $235 million. Capital expenditures were $65 million. Cash used to repurchase stock was $ million.

GAAP cost of revenue was $277 million, leaving gross profit of $590 million. Operating expenses were $393 million, consisting of: $176 million for research and development; $217 million for selling, general, and administrative. Leaving income from operations of $197 million. Other income was $13 million. Income tax provision $12 million. Net loss to noncontrolling interests $12 million.


Guidance for consumable growth? Growth is across the entire portfolio. Population genomics initiatives are ramping up. NIPT uptake will drive growth.

Did you hit guidance for NovaSeq in 2018? 285 in 2017, 600 by end 2018, so short of the 330 we predicted in 2018. Just a timing issue. But we expect to see smaller labs begin upgrades this year.

DTC genomics market and array guidance? We had spectacular growth in 2017, then in 2018. Dirct to consumer is expected to moderate this year by our customers, but should re-accelerate as health is added to geneology and international market builds.

Pacific Bio update? Process is going as expected, believe mid-year completion.

NovaSeq Q4 miss? Our guidance was driven by feedback from customers. There are a lot of customers in the pipeline. Fewer took their machines in Q4 than we expected, but they should come in the coming quarters. Smaller labs tend to have less quick access to capital, so we sold to the larger customers first. We believe smaller labs are getting ready, and also were waiting for some specific kits.

Many more questions about the upgrade cycle, with little being added.

Oncology market in 2019? We have engaged with the FDA for TrueSight assay; we have high priority for a breakthrough designated product. We are seeing more of a clinical story in oncology now that there are therapies dependent on genomic biomarkers. The reimbursement environment is becoming more favorable. So momentum overall has been building.

NIPT and risk guidance? ACOG withdrew, questioning the average risk of NIPT. They are expected to put a more favorable guideline in place, but the timeline is unknown. So we have not included that in our guidance.

At the high end we are not changing the pricing of S4.

ILMN main page

OpenIcon Analyst Conference Summaries Main Page



More Analyst Conference Pages:



Disclaimer: My analyst call summaries may include both condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. This is journalism, not advice.

Copyright 2019 William P. Meyers