Illumina Q1 - Breaks $1b Revenue

Last week Illumina was caught up in the flurry of companies releasing numbers. If you haven't heard of them before, that's okay, most people haven't. Illumina is one of the companies leading the development and sale of DNA sequencing machines.

This is an emerging industry that we feel has huge potential. As such we have labelled Illumina as a 'future hero' stock. There is a lot of risk operating in an industry that is not fully established and where the landscape is constantly shifting. Due to this higher risk, Illumina is a fringe holding. Our clients only own $7 million worth, a far cry from the $50 million in Apple.

For the first quarter of the year, Illumina reported revenues of $1.09 billion, up 27% and the first time they have crossed the billion mark. The strong revenue number translated into good profits, they reported earnings per share of $1.89; analysts were only expecting $1.38.

Illumina has a brilliant business model, where around 80% of its revenue comes from servicing existing machines. Machine sales can be lumpy, but once a machine is sold, it creates annuity income for Illumina. To maintain its lead in this quickly changing industry, the company spends 18% of its revenue on R&D. That is a big number!

This is a hugely exciting industry. DNA analysis has a wide spectrum of applications across all ages. Here are two recent examples from my family. The first was a DNA test on my then unborn daughter. Second, my parents have had tests done to see if they are predisposed to certain diseases, to allow them to take preventative measures where possible. Information is power. Humanity still has a massive amount to learn about our DNA genome and Illumina machines will be a key tool in that journey.