ILLUMINA INC

As of September 29, 2024, we had $869 million in cash and cash equivalents, of which $464 million was held by our foreign subsidiaries. Cash and cash equivalents decreased by $179 million from December 31, 2023 due to factors described in the “Cash Flow Summary” below. In connection with the Spin-Off, we derecognized GRAIL’s cash and cash equivalents of $968 million, which included the required Disposal Funding (see note 2. GRAIL Spin-Off). 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. During YTD 2024, we received net proceeds from the issuance of our 2026 Term Notes of $497 million and repaid our delayed draw term loan of $750 million. Our ability to generate cash from operations, supplemented with the issuance of debt and/or liquidation of our short-term investments, provides us with the financial flexibility we need to meet operating, investing, and financing needs. As of September 29, 2024, we had $70 million in short-term investments, comprised of marketable equity securities.

In September 2024, the European Commission withdrew its previously imposed fine of €432 million. Accordingly, we reversed the related accrual and recognized a net gain of $481 million in Q3 2024. The guarantees we provided in October 2023 to satisfy the obligation in lieu of cash payment while we appealed the European Commission’s jurisdictional and fine decisions are no longer outstanding. Refer to note 8. Legal Proceedings for additional details.

In June 2024, we entered into a 364-day Delayed Draw Credit Facility, which provided 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 incurred interest at a rate of 6.7%. On September 9, 2024, we repaid the full principal amount outstanding under the Delayed Draw Credit Facility, including accrued interest, of $761 million and terminated the Delayed Draw Credit Agreement.

On September 9, 2024, we issued $500 million aggregate principal amount of 2026 Term Notes. We received net proceeds of $497 million, which were used to repay a portion of the outstanding debt under the Delayed Draw Credit Agreement. The 2026 Term Notes, which mature on September 9, 2026, accrue interest at a rate of 4.650% per annum, payable semi-annually on March 9 and September 9 of each year, beginning on March 9, 2025. We may redeem for cash all or any portion of the 2026 Term Notes, at our option, at any time prior to maturity.

In December 2022, we issued $500 million aggregate principal amount of 2025 Term Notes and $500 million aggregate principal amount of 2027 Term Notes. 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. In March 2021, we issued $500 million aggregate principal amount of 2031 Term Notes, which mature on March 23, 2031, and 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 2025, 2027, or 2031 Term Notes, at our option, at any time prior to maturity.

In January 2023, we entered into the Revolving Credit Agreement, 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 credit facility matures, and all amounts outstanding become due and payable in full, on January 4, 2028, subject to two one-year extensions at our option and consent of the extending lenders and certain other conditions. As of September 29, 2024, there were no outstanding borrowings.

As of September 29, 2024, the fair value of our contingent consideration liability related to GRAIL was $82 million, of which $81 million was included in other long-term liabilities. The contingent value rights 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 through August 2033. This reflects a 2.5% payment right to the first $1 billion of revenue each year for 12 years. Revenue above $1 billion each year is subject to a 9% contingent payment right during this same period. In YTD 2024, we paid $836,000 in aggregate Covered Revenue Payments related to Covered Revenues for the period Q4 2023 through Q2 2024 of $89 million in aggregate.

In August 2024, our Board of Directors authorized a new share repurchase program, which cancels and supersedes all prior and available repurchase authorizations, to repurchase up to $1.5 billion of our outstanding common stock. The repurchases may be completed through open market purchases, pursuant to Rule 10b5-1 or Rule 10b-18, or through an accelerated share repurchase program. Authorizations to repurchase up to $1.4 billion of our outstanding common stock remained available as of September 29, 2024.

We had $3 million (plus recallable distributions of approximately $10 million), $49 million, and $47 million, respectively, remaining in our capital commitments to three venture capital investment funds as of September 29, 2024 that are callable through April 2026, July 2029, and December 2034, respectively.

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;

•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 $1,410 million, plus net adjustments of $2,368 million, less net changes in operating assets and liabilities of $485 million. The primary adjustments to net loss included goodwill and intangible impairment of $1,889 million, net loss on strategic investments of $342 million, share-based compensation expense of $291 million, depreciation and amortization expense of $283 million, and property and equipment and right-of-use asset impairment of $32 million, offset by change in fair value of contingent consideration liabilities of $304 million and deferred income taxes of $161 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by decreases in accrued liabilities and accounts payable.

Investing Activities

Net cash used in investing activities totaled $130 million in YTD 2024. We invested $99 million in capital expenditures, primarily associated with investments in facilities, paid $81 million for an acquisition, net of cash acquired, and other intangible assets, and purchased strategic investments, net of distributions, of $33 million. This was offset by the receipt of $83 million related to the settlement of our Helix contingent value right.

Financing Activities

Net cash used in financing activities totaled $523 million in YTD 2024. We deconsolidated cash and cash equivalents of $968 million, as a result of the GRAIL Spin-Off, repaid our delayed draw term loan of $750 million, and used $99 million to repurchase our common stock. This was offset by net borrowings on the Delayed Draw Credit Facility of $744 million, net proceeds received from the issuance of our 2026 Term Notes of $497 million, and proceeds received from the sale of shares under our employee stock purchase plan of $56 million.