GAAP

Non-GAAP (a)

Dollars in millions, except per share amounts

Q1 2024

Q1 2023

Q1 2024

Q1 2023

Revenue

$  1,076

$  1,087

$  1,076

$  1,087

Gross margin

62.0 %

60.3 %

66.5 %

64.7 %

Research and development ("R&D") expense

$     339

$     341

$     335

$     339

Selling, general and administrative ("SG&A") expense

$     439

$     378

$     349

$     343

Operating (loss) profit

$   (111)

$     (64)

$       33

$       21

Operating margin

(10.3) %

(5.7) %

3.1 %

1.9 %

Tax provision (benefit)

$       17

$     (81)

$       13

$         5

Tax rate

(15.3) %

103.9 %

46.4 %

27.3 %

Net (loss) income

$   (126)

$         3

$       14

$       13

Diluted (loss) earnings per share

$   (0.79)

$    0.02

$    0.09

$    0.08

(a) See the tables included in the "Results of Operations - Non-GAAP" section below for reconciliations of these GAAP and non-GAAP financial measures.

GAAP

Non-GAAP (a)

Dollars in millions

Q1 2024

Q1 2023

Q1 2024

Q1 2023

Revenue (b)

$  1,056

$  1,076

$  1,056

$  1,076

Gross margin (c)

65.7 %

63.8 %

67.1 %

65.2 %

R&D expense

$     241

$     259

$     237

$     257

SG&A expense

$     336

$     286

$     254

$     257

Operating profit

$     116

$     142

$     218

$     187

Operating margin

11.0 %

13.2 %

20.6 %

17.4 %

(a) See Table 3 included in the "Results of Operations - Non-GAAP" section below for reconciliations of these GAAP and non-GAAP financial measures.

(b) Core Illumina revenue for Q1 2024 was down 2% as compared to Q1 2023 and down 2% on a constant currency basis. Amounts for Q1 2024 and Q1 2023 included intercompany revenue of $7 million and $9 million, respectively, which is eliminated in consolidation.

(c) The year-over-year increase in gross margin was primarily driven by a more favorable mix of sequencing consumables and execution of our operational excellence priorities that delivered cost savings, including freight and improved productivity. This was partially offset by certain strategic partnership revenue that is lower margin and increased warranty and field service costs.

GAAP

Non-GAAP (a)

In millions

Q1 2024

Q1 2023

Q1 2024

Q1 2023

Revenue

$       27

$          20

$       27

$          20

Gross (loss) profit

$     (22)

$        (25)

$       12

$            9

R&D expense

$     101

$          86

$     101

$          86

SG&A expense

$     104

$          93

$       96

$          87

Operating loss

$   (227)

$      (204)

$   (185)

$      (164)

(a) See Table 3 included in the "Results of Operations - Non-GAAP" section below for reconciliations of these GAAP and non-GAAP financial measures.

Illumina, Inc.

Condensed Consolidated Balance Sheets

(In millions)

March 31,
2024

December 31,
2023

ASSETS

(unaudited)

Current assets:

Cash and cash equivalents

$         1,108

$         1,048

Accounts receivable, net

635

734

Inventory, net

584

587

Prepaid expenses and other current assets

256

240

Total current assets

2,583

2,609

Property and equipment, net

964

1,007

Operating lease right-of-use assets

550

544

Goodwill

2,545

2,545

Intangible assets, net

2,940

2,993

Other assets

458

413

Total assets

$       10,040

$       10,111

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$            201

$            245

Accrued liabilities

1,273

1,325

Total current liabilities

1,474

1,570

Operating lease liabilities

700

687

Term notes

1,490

1,489

Other long-term liabilities

642

620

Stockholders' equity

5,734

5,745

Total liabilities and stockholders' equity

$       10,040

$       10,111

Illumina, Inc.

Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

(unaudited)

Three Months Ended

March 31,
2024

April 2,
2023

Revenue:

Product revenue

$            876

$            922

Service and other revenue

200

165

Total revenue

1,076

1,087

Cost of revenue:

Cost of product revenue (a)

255

285

Cost of service and other revenue (a)

106

99

Amortization of acquired intangible assets

48

48

Total cost of revenue

409

432

Gross profit

667

655

Operating expense:

Research and development (a)

339

341

Selling, general and administrative (a)

439

378

Total operating expense

778

719

Loss from operations

(111)

(64)

Other income (expense), net

2

(14)

Loss before income taxes

(109)

(78)

Provision (benefit) for income taxes

17

(81)

Net (loss) income

$          (126)

$                3

(Loss) earnings per share:

Basic

$         (0.79)

$           0.02

Diluted

$         (0.79)

$           0.02

Shares used in computing (loss) earnings per share:

Basic

159

158

Diluted

159

158

(a) Includes stock-based compensation expense for stock-based awards:

Three Months Ended

March 31,
2024

April 2,
2023

Cost of product revenue

$                5

$                6

Cost of service and other revenue

2

1

Research and development

39

38

Selling, general and administrative

50

48

Stock-based compensation expense before taxes

$              96

$              93

Illumina, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

(unaudited)

Three Months Ended

March 31,
2024

April 2,
2023

Net cash provided by operating activities

$              77

$              10

Net cash used in investing activities

(48)

(56)

Net cash provided by (used in) financing activities

35

(473)

Effect of exchange rate changes on cash and cash equivalents

(4)

2

Net increase (decrease) in cash and cash equivalents

60

(517)

Cash and cash equivalents, beginning of period

1,048

2,011

Cash and cash equivalents, end of period

$         1,108

$         1,494

Calculation of free cash flow:

Net cash provided by operating activities

$              77

$              10

Purchases of property and equipment

(36)

(52)

Free cash flow (a)

$              41

$            (42)

(a) Free cash flow, which is a non-GAAP financial measure, is calculated as net cash provided by operating activities reduced by purchases of property and equipment. Free cash flow is useful to management as it is one of the metrics used to evaluate our performance and to compare us with other companies in our industry. However, our calculation of free cash flow may not be comparable to similar measures used by other companies.

Illumina, Inc.

Results of Operations - Revenue by Segment

(Dollars in millions)

(unaudited)

Three Months Ended

March 31,
2024

April 2,
2023

% Change

Consolidated revenue

$         1,076

$         1,087

(1) %

Less: Hedge gains

3

2

Consolidated revenue, excluding hedge effect

1,073

1,085

Less: Exchange rate effect

(1)

—

Consolidated constant currency revenue (a)

$         1,074

$         1,085

(1) %

Core Illumina revenue

$         1,056

$         1,076

(2) %

Less: Hedge gains

3

2

Core Illumina revenue, excluding hedge effect

1,053

1,074

Less: Exchange rate effect

(1)

—

Core Illumina constant currency revenue (a)

$         1,054

$         1,074

(2) %

(a) Constant currency revenue growth, which is a non-GAAP financial measure, is calculated using comparative prior period foreign exchange rates to translate current period revenue, net of the effects of hedges.

Three Months Ended

March 31,
2024

April 2,
2023

GAAP (loss) earnings per share - diluted

$         (0.79)

$           0.02

Cost of revenue (b)

0.31

0.30

R&D expense (b)

0.03

0.01

SG&A expense (b)

0.57

0.22

Other (income) expense, net (b)

(0.05)

0.08

GILTI, U.S. foreign tax credits, and global minimum top-up tax (c)

0.10

(0.28)

Incremental non-GAAP tax expense (d)

(0.08)

(0.32)

Income tax provision (e)

—

0.05

Non-GAAP earnings per share - diluted (a)

$           0.09

$           0.08

Three Months Ended

March 31,
2024

April 2,
2023

GAAP net (loss) income

$          (126)

$                3

Cost of revenue (b)

49

48

R&D expense (b)

4

2

SG&A expense (b)

91

35

Other (income) expense, net (b)

(8)

11

GILTI, U.S. foreign tax credits, and global minimum top-up tax (c)

17

(44)

Incremental non-GAAP tax expense (d)

(13)

(50)

Income tax provision (e)

—

8

Non-GAAP net income (a)

$             14

$              13

All amounts in tables are rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided.

(a) Non-GAAP net income and diluted earnings per share exclude the effects of the pro forma adjustments as detailed above. Non-GAAP net income and diluted earnings per share are key components of the financial metrics utilized by the company's board of directors to measure, in part, management's performance and determine significant elements of management's compensation. Management has excluded the effects of these items in these measures to assist investors in analyzing and assessing our past and future operating performance.

(b) Refer to the Itemized Reconciliations between GAAP and Non-GAAP Results of Operations for the components of these amounts.

(c) Amounts represent the impact of GRAIL pre-acquisition net operating losses on GILTI, the utilization of U.S. foreign tax credits, and the Pillar Two global minimum top-up tax, which became effective in Q1 2024.

(d) Incremental non-GAAP tax expense reflects the tax impact of the non-GAAP adjustments listed.

(e) Amounts represent the difference between book and tax accounting related to stock-based compensation cost.

Three Months Ended

March 31, 2024

Core Illumina

GRAIL

Eliminations

Consolidated

GAAP gross profit (loss) (b)

$   693

65.7 %

$           (22)

$              (4)

$    667

62.0 %

Amortization of acquired intangible assets

15

1.4 %

34

—

49

4.5 %

Non-GAAP gross profit (a)

$   708

67.1 %

$             12

$              (4)

$    716

66.5 %

GAAP R&D expense

$   241

22.8 %

$           101

$              (3)

$    339

31.5 %

Restructuring (g)

(1)

(0.1) %

—

—

(1)

(0.1) %

IPR&D impairment (i)

(3)

(0.3) %

—

—

(3)

(0.3) %

Non-GAAP R&D expense

$   237

22.4 %

$           101

$              (3)

$    335

31.1 %

GAAP SG&A expense

$   336

31.9 %

$           104

$              (1)

$    439

40.8 %

Amortization of acquired intangible assets

—

—

(1)

—

(1)

(0.1) %

Contingent consideration liabilities (c)

(16)

(1.5) %

—

—

(16)

(1.4) %

Acquisition-related expenses (d)

(25)

(2.4) %

(6)

—

(31)

(2.9) %

Restructuring (g)

(34)

(3.3) %

(1)

—

(35)

(3.3) %

Accrued interest on EC fine (h)

(7)

(0.7) %

—

—

(7)

(0.7) %

Non-GAAP SG&A expense

$   254

24.0 %

$             96

$              (1)

$    349

32.4 %

GAAP operating profit (loss)

$   116

11.0 %

$         (227)

$              —

$   (111)

(10.3) %

Cost of revenue

15

1.4 %

34

—

49

4.5 %

R&D costs

4

0.4 %

—

—

4

0.4 %

SG&A costs

83

7.8 %

8

—

91

8.5 %

Non-GAAP operating profit (loss) (a)

$   218

20.6 %

$         (185)

$              —

$      33

3.1 %

GAAP other (expense) income, net

$      (1)

(0.1) %

$               3

$              —

$        2

0.2 %

Strategic investment related gain, net (e)

(6)

(0.6) %

—

—

(6)

(0.6) %

Gain on Helix contingent value right (f)

(3)

(0.3) %

—

—

(3)

(0.3) %

Unrealized foreign currency loss on EC fine (j)

1

0.1 %

—

—

1

0.1 %

Non-GAAP other (expense) income, net (a)

$      (9)

(0.9) %

$               3

$              —

$       (6)

(0.6) %

Three Months Ended

April 2, 2023

Core Illumina

GRAIL

Eliminations

Consolidated

GAAP gross profit (loss) (b)

$   687

63.8 %

$       (25)

$              (7)

$    655

60.3 %

Amortization of acquired intangible assets

14

1.4 %

34

—

48

4.4 %

Non-GAAP gross profit (a)

$   701

65.2 %

$          9

$              (7)

$    703

64.7 %

GAAP R&D expense

$   259

24.1 %

$        86

$              (4)

$    341

31.4 %

Acquisition-related expenses (d)

(1)

(0.1) %

—

—

(1)

(0.1) %

Restructuring (g)

(1)

(0.1) %

—

—

(1)

(0.1) %

Non-GAAP R&D expense

$   257

23.9 %

$        86

$              (4)

$    339

31.2 %

GAAP SG&A expense

$   286

26.6 %

$        93

$              (1)

$    378

34.8 %

Amortization of acquired intangible assets

—

—

(1)

—

(1)

(0.1) %

Acquisition-related expenses (d)

(20)

(1.8) %

(5)

—

(25)

(2.3) %

Restructuring (g)

(1)

(0.1) %

—

—

(1)

(0.1) %

Legal settlement (k)

(2)

(0.2) %

—

—

(2)

(0.2) %

Proxy contest

(6)

(0.6) %

—

—

(6)

(0.6) %

Non-GAAP SG&A expense

$   257

23.9 %

$        87

$              (1)

$    343

31.5 %

GAAP operating profit (loss)

$   142

13.2 %

$     (204)

$              (2)

$     (64)

(5.7) %

Cost of revenue

14

1.3 %

34

—

48

4.4 %

R&D costs

2

0.2 %

—

—

2

0.2 %

SG&A costs

29

2.7 %

6

—

35

3.0 %

Non-GAAP operating profit (loss) (a)

$   187

17.4 %

$     (164)

$              (2)

$      21

1.9 %

GAAP other (expense) income, net

$    (17)

(1.6) %

$          2

$              —

$     (14)

(1.3) %

Strategic investment related loss, net (e)

15

1.4 %

—

—

14

1.3 %

Gain on Helix contingent value right (f)

(3)

(0.3) %

—

—

(3)

(0.3) %

Non-GAAP other (expense) income, net (a)

$      (5)

(0.5) %

$          2

$              —

$       (3)

(0.3) %

All amounts in tables are rounded to the nearest millions, except as otherwise noted. As a result, certain amounts may not recalculate using the rounded amounts provided. Percentages of revenue are calculated based on the revenue of the respective segment.

(a) Non-GAAP gross profit, included within non-GAAP operating profit (loss), is a key measure of the effectiveness and efficiency of manufacturing processes, product mix and the average selling prices of our products and services. Non-GAAP operating profit (loss) and non-GAAP other (expense) income, net exclude the effects of the pro forma adjustments as detailed above. Non-GAAP operating margin is a key component of the financial metrics utilized by the company's board of directors to measure, in part, management's performance and determine significant elements of management's compensation. Management has excluded the effects of these items in these measures to assist investors in analyzing and assessing past and future operating performance, including in the non-GAAP measures related to our Core Illumina and GRAIL segments.

(b) Reconciling amounts are recorded in cost of revenue.

(c) Amount consists of fair value adjustments for our contingent consideration liability related to GRAIL.

(d) Amounts consist primarily of legal and other expenses related to the planned divestiture of GRAIL.

(e) Amounts consist primarily of mark-to-market adjustments and impairments from our strategic investments.

(f) Amounts consist of fair value adjustments related to our Helix contingent value right.

(g) Amounts for Q1 2024 consist primarily of lease and other asset impairments related to restructuring activities. Amounts for Q1 2023 consist primarily of employee severance costs related to restructuring activities.

(h) Amount consists of accrued interest on the fine imposed by the European Commission.

(i) Amount for Q1 2024 consists of an IPR&D intangible asset impairment related to our Core Illumina segment.

(j) Amount consists of unrealized gains/losses related to foreign currency balance sheet remeasurement of the EC fine liability and unrealized mark-to-market gains/losses on the hedge associated with the EC fine.

(k) Amount consists of a loss related to a patent litigation settlement.

Three Months Ended

March 31,
2024

GAAP tax provision

(15.3) %

Incremental non-GAAP tax expense (b)

13

GILTI, U.S. foreign tax credits, and global minimum top-up tax (d)

(17)

Non-GAAP tax provision (a)

$         13

46.4 %

Three Months Ended

April 2,
2023

GAAP tax benefit

$       (81)

103.9 %

Incremental non-GAAP tax expense (b)

50

Income tax provision (c)

(8)

GILTI and U.S. foreign tax credits (d)

44

Non-GAAP tax provision (a)

$           5

27.3 %

(a) Non-GAAP tax provision excludes the effects of the pro forma adjustments as detailed above. Management has excluded the effects of these items in this measure to assist investors in analyzing and assessing past and future operating performance.

(b) Incremental non-GAAP tax expense reflects the tax impact of the non-GAAP adjustments listed in Table 2.

(c) Amounts represent the difference between book and tax accounting related to stock-based compensation cost.

(d) Amounts represent the impact of GRAIL pre-acquisition net operating losses on GILTI, the utilization of U.S. foreign tax credits, and the Pillar Two global minimum top-up tax, which became effective in Q1 2024.