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Illumina's Q4 2016 Revenues Rise 5 Percent

This article has been updated from a previous version to include commentary from Illumina's earnings call.

NEW YORK (GenomeWeb) – Illumina's fourth quarter 2016 revenues grew 5 percent year over year while fiscal year 2016 revenues grew 8 percent over 2015 revenues, the company reported after the close of the market on Tuesday.

The San Diego, California-based genomic technology company reported $619 million in Q4 2016 revenues compared to $592 million in Q4 2015. Its reported revenue was in line with an estimate it gave earlier this month and beat analysts' average estimate of $616.4 million.

Its Q4 revenues included $525.6 million in product revenue and $93.8 million in service and other revenue. During a conference call discussing the company's performance, CEO Francis deSouza said that sequencing consumables and microarrays drove the growth in Q4 revenues, while sales of sequencing instruments, especially high-throughput instruments, declined.

The company had a record quarter for its microarray business, with revenues growing 14 percent to $100 million in Q4. On the sequencing side, consumables revenue grew 20 percent to $331 million while sequencing instrument revenue declined 23 percent to $111 million.

In the coming year, Illumina expects that consumable revenue for its HiSeq instruments will start to decline as customers opt to purchase the newly launched NovaSeq instrument. DeSouza said that over time the firm expects most of its 800 HiSeq customers to convert to the NovaSeq. In addition, deSouza said on the call that the company decided to discontinue its NeoPrep instrument for "more promising investment opportunities." Illumina launched the microfluidics-based sample prep box in 2015.

Illumina reported net income attributable to stockholders for the purpose of calculating earnings per share of $123.9 million, or $.84 per share, compared to $104.5 million, or $.70 per share in Q4 2015. Non-GAAP net income attributable to stockholders for the purpose of calculating EPS was $126 million in Q4 2016, or $.85 per share, compared to $121 million, or $.81 per share in Q4 2015. The Q4 EPS reflects additional losses attributable to the common shareholders of Grail and Helix for EPS purposes, Illumina noted. In addition, it reported a net loss attributable to noncontrolling interests of $16.2 million. Illumina beat Wall Street's average EPS estimate of $.82 per share.

During the fourth quarter of 2016, Illumina's R&D expenses climbed to $129.9 million, from $114.3 million in Q4 2015, while SG&A expenses fell to $146.1 million from $147.3 million. About 2.5 percent of the firm's R&D expenses and 1.6 percent of its SG&A expenses were attributable to Grail and Helix.

For the full year 2016, Illumina recognized $2.40 billion in revenue, up 8 percent from $2.22 billion in 2015. Net income attributable to stockholders for the purpose of calculating earnings per share was $454.1 million, or $3.07 per share, down from $461.5 million, or $3.10 per share in the prior year. Non-GAAP EPS was $3.33 per share in 2016 compared to $3.32 per share in 2015 and shy of analysts' average expectation of $3.34 per share. EPS guidance takes into account the consolidated results of Grail in the first quarter 2017, with the exception of one-time items associated with the closing of Grail's Series B financing round.

The firm's full year R&D expenses were $504.4 million, up from $401.5 million in 2015. SG&A expenses during the year were also up, to $583.0 million from $524.7 million in 2015.

"We ended 2016 on a stronger note than we anticipated, with robust performance across sequencing consumables and microarrays, Illumina CEO Francis deSouza said in a statement.

In 2017, Illumina projects that its revenues will grow between 10 percent and 12 percent, with first quarter 2017 revenues of $580 million to $595 million. It anticipates its 2017 GAAP EPS will be between $3.25 and $3.35 while non-GAAP EPS is anticipated to be $3.60 to $3.70.

Illumina ended 2016 with $1.56 billion in cash, cash equivalents, and short-term investments.