ILLUMINA INC

As of June 30, 2024, we had approximately $920 million in cash and cash equivalents, of which approximately $444 million was held by our foreign subsidiaries. Cash and cash equivalents decreased by $128 million from December 31, 2023 due primarily to the derecognition of GRAIL’s cash and cash equivalents of $968 million in connection with the Spin-Off, which included the required Disposal Funding, (see note 2. GRAIL Spin-Off), offset by the $744 million borrowing, net of issuance costs, on the Delayed Draw Credit Facility in Q2 2024, and other factors described in the “Cash Flow Summary” below. Our primary source of liquidity, other than our holdings of cash, cash equivalents, and investments, has been cash flows from operations and, from time to time, issuances of debt. Our ability to generate cash from operations provides us with the financial flexibility we need to meet operating, investing, and financing needs. Historically, we have liquidated our short-term investments and/or issued debt to finance our business needs as a supplement to cash provided by operating activities. As of June 30, 2024, we had $74 million in short-term investments, comprised of marketable equity securities.

On July 12, 2023, as a result of our decision to proceed with the completion of our acquisition of GRAIL during the pendency of the European Commission’s review, the European Commission imposed a €432 million fine on us, representing the maximum fine of 10% of our consolidated annual revenues for fiscal year 2022. As of June 30, 2024, we accrued $481 million, including related accrued interest and foreign currency fluctuations, included in accrued liabilities. We provided guarantees in October 2023 to satisfy the obligation in lieu of cash payment while we appeal the European Commission’s jurisdictional decision and fine decision. The fine is accruing interest at a rate of 5.5% per annum, beginning in October 2023, while it is outstanding. Refer to note 8. Legal Proceedings for additional details.

On June 17, 2024, we entered into a 364-day Delayed Draw Credit Facility, which provides us with a senior unsecured term loan credit facility in an aggregate principal amount of up to $750 million. On June 20, 2024, we borrowed $750 million on the Delayed Draw Credit Facility. The delayed draw term loan currently bears interest at a variable rate equal to the Term SOFR, plus an applicable rate that varies with the Company’s debt rating and a credit spread adjustment equal to 0.10% per annum. The current borrowing rate under the Delayed Draw Credit Facility is 6.7%. The Delayed Draw Credit Facility matures, and all amounts outstanding thereunder become due and payable in full, on June 19, 2025. We may prepay the delayed draw term loan at any time without premium or penalty (other than customary breakage costs) and we are not permitted to re-borrow once the term loan is repaid.

In December 2022, we issued term notes due 2025 with an aggregate principal amount of $500 million and term notes due 2027 with an aggregate principal amount of $500 million. The 2025 Term Notes, which mature on December 12, 2025, and the 2027 Term Notes, which mature on December 13, 2027, accrue interest at a rate of 5.800% and 5.750% per annum, respectively, payable semi-annually in June and December of each year. We may redeem for cash all or any portion of the 2025 or 2027 Term Notes, at our option, at any time prior to maturity.

In March 2021, we issued term notes due 2031 with an aggregate principal amount of $500 million. The 2031 Term Notes, which mature on March 23, 2031, accrue interest at a rate of 2.550% per annum, payable semi-annually in March and September of each year. We may redeem for cash all or any portion of the 2031 Term Notes, at our option, at any time prior to maturity.

On January 4, 2023, we obtained a new Revolving Credit Facility, which provides us with a $750 million senior unsecured five year revolving credit facility, including a $40 million sublimit for swingline borrowings and a $50 million sublimit for letters of credit. The Revolving Credit Facility matures, and all amounts outstanding thereunder become due and payable in full, on January 4, 2028, subject to two one-year extensions at our option and the consent of the extending lenders and certain other conditions. As of June 30, 2024, there were no borrowings outstanding under the Revolving Credit Facility; however, we may draw upon the facility in the future to manage cash flow or for other corporate purposes, including in connection with the payment of the €432 million European Commission fine. We provided guarantees in October 2023 to satisfy the obligation in lieu of cash payment while we appeal the European Commission’s jurisdictional decision and fine decision.

As of June 30, 2024, the fair value of our contingent consideration liability related to our acquisition of GRAIL was $131 million, of which $130 million was included in other long-term liabilities. The contingent value rights issued as part of the acquisition entitle the holders to receive future cash payments on a quarterly basis (Covered Revenue Payments) representing a pro rata portion of certain GRAIL-related revenues (Covered Revenues) each year for a 12-year period. This will reflect a 2.5% payment right to the first $1 billion of revenue each year for 12 years. Revenue above $1 billion each year will be subject to a 9% contingent payment right during this same period. In YTD 2024, we paid $535,000 in aggregate Covered Revenue Payments related to Covered Revenues for Q4 2023 and Q1 2024 of $57 million in aggregate.

We had $3 million (plus recallable distributions of approximately $10 million) and up to $52 million, respectively, remaining in our capital commitments to two venture capital investment funds as of June 30, 2024 that are callable through April 2026 and July 2029, respectively.

Authorizations to repurchase $15 million of our common stock remained available as of June 30, 2024 under the $750 million share repurchase program authorized by our Board of Directors on February 5, 2020. The repurchases may be completed under a 10b5-1 plan or at management’s discretion.

We anticipate that our current cash, cash equivalents, and short-term investments, together with cash provided by operating activities and available borrowing capacity under the Revolving Credit Facility, are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our primary short-term needs for capital, which are subject to change, may include:

•support of commercialization efforts related to our current and future products;

•acquisitions of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities;

•the continued advancement of research and development efforts;

•the payment of the European Commission fine related to our acquisition of GRAIL;

•potential strategic acquisitions and investments;

•repayment of debt obligations;

•repurchases of our outstanding common stock; and

•the evolving needs of our facilities, including costs of leasing and building out facilities.

We expect that our revenue and results of operations, as well as the status of each of our new product development programs, will significantly impact our cash management decisions.

Our future capital requirements and the adequacy of our available funds will depend on many factors, including:

•our ability to successfully commercialize and further develop our technologies and create innovative products in our markets;

•scientific progress in our research and development programs and the magnitude of those programs;

•competing technological and market developments; and

•the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings.

Cash Flow Summary

Operating Activities

Net cash provided by operating activities in YTD 2024 consisted of a net loss of $2,114 million, plus net adjustments of $2,215 million and net changes in operating assets and liabilities of $56 million. The primary adjustments to net loss included goodwill and intangible impairment of $1,889 million, net losses on strategic investments of $330 million, depreciation and amortization expense of $213 million, share-based compensation expense of $208 million, and property and equipment and right-of-use asset impairment of $32 million, partially offset by change in fair value of contingent consideration liabilities of $255 million and deferred income taxes of $180 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by an increase in accrued liabilities and a decrease in accounts receivable, partially offset by decreases in accounts payable and other long-term liabilities.

Investing Activities

Net cash used in investing activities totaled $89 million in YTD 2024. We invested $67 million in capital expenditures, primarily associated with investments in facilities, and purchased strategic investments of $22 million.

Financing Activities

Net cash used in financing activities totaled $191 million in YTD 2024. As a result of the GRAIL Spin-Off, we deconsolidated cash and cash equivalents of $968 million, partially offset by net borrowings on the Delayed Draw Credit Facility of $744 million. We received $36 million in proceeds from the sale of shares under our employee stock purchase plan.