Illumina Reports Financial Results for First Quarter of Fiscal Year 2022

GAAP

Non-GAAP (a)

Dollars in millions, except per share amounts

Q1 2022 (b)

Q1 2021

Q1 2022 (b)

Revenue

$  1,223

$  1,093

Gross margin

66.6  %

69.9  %

69.9  %

70.5  %

Research and development expense

$    323

$    197

$    323

$    197

Selling, general and administrative expense

$    308

$    374

$    320

$    223

Operating profit

$    184

$    193

$    212

$    351

Operating margin

15.0  %

17.7  %

17.3  %

32.1  %

Net income

$      86

$    147

$    169

$    278

Diluted EPS

$   0.55

$   1.00

$   1.07

$   1.89

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

(b) Consolidated financial results for GRAIL are included in Q1 2022, but not in Q1 2021, as GRAIL was acquired
on August 18, 2021.

GAAP

Non-GAAP (a)

Dollars in millions

Q1 2022

Q1 2021

Q1 2022

Q1 2021

Revenue (b)

$  1,221

$  1,093

Gross margin

69.7 %

69.9 %

70.2 %

70.5 %

Research and development expense

$    238

$    197

$    238

$    197

Selling, general and administrative expense

$    251

$    374

$    267

$    223

Operating profit

$    362

$    193

$    352

$    351

Operating margin

29.6 %

17.7 %

28.8 %

32.1 %

(a) See Table 4 included in "Results of Operations - Non-GAAP" section below for reconciliations of these GAAP
and non-GAAP financial measures.

(b) Amount for Q1 2022 includes intercompany revenue of $8 million, which is eliminated in consolidation.

GAAP

Non-GAAP (a)

In millions

Q1 2022

Q1 2021

Q1 2022

Q1 2021

Revenue

$      10

—

Gross (loss) profit

$     (29)

—

$        5

—

Research and development expense

$      85

—

$      85

—

Selling, general and administrative expense

$      58

—

$      54

—

Operating loss

$   (172)

—

$   (134)

—

(a) See Table 5 included in "Results of Operations - Non-GAAP" section below for a reconciliation of these GAAP
and non-GAAP financial measures.

Illumina, Inc.

Condensed Consolidated Balance Sheets

(In millions)

April 3,
2022

January 2,
2022

ASSETS

(unaudited)

Current assets:

     Cash and cash equivalents

$         1,351

$         1,232

     Short-term investments

65

107

     Accounts receivable, net

614

648

     Inventory, net

465

431

     Prepaid expenses and other current assets

260

295

          Total current assets

2,755

2,713

Property and equipment, net

1,034

1,024

Operating lease right-of-use assets

706

672

Goodwill

7,113

7,113

Intangible assets, net

3,209

3,250

Other assets

457

445

          Total assets

$       15,274

$       15,217

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Accounts payable

$            291

$            332

     Accrued liabilities

700

761

     Term notes, current portion

499

—

          Total current liabilities

1,490

1,093

Operating lease liabilities

803

774

Term notes

495

993

Convertible senior notes

746

702

Other long-term liabilities

845

915

Stockholders' equity

10,895

10,740

          Total liabilities and stockholders' equity

$       15,274

$       15,217

Illumina, Inc.

Condensed Consolidated Statements of Income

(In millions, except per share amounts)

(unaudited)

Three Months Ended

April 3,
2022

April 4,
2021

Revenue:

     Product revenue

$         1,070

$            953

Service and other revenue

153

140

     Total revenue

1,223

1,093

Cost of revenue:

     Cost of product revenue (a)

299

265

     Cost of service and other revenue (a)

69

58

     Amortization of acquired intangible assets

40

6

          Total cost of revenue

408

329

               Gross profit

815

764

Operating expense:

     Research and development (a)

323

197

     Selling, general and administrative (a)

308

374

          Total operating expense

631

571

Income from operations

184

193

     Other expense, net

(44)

(24)

Income before income taxes

140

169

     Provision for income taxes

54

22

Net income

$              86

$            147

Earnings per share:

     Basic

$           0.55

$           1.01

     Diluted

$           0.55

$           1.00

Shares used in computing earnings per common share:

     Basic

157

146

     Diluted

159

147

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

Three Months Ended

April 3,
2022

April 4,
2021

Cost of product revenue

$                6

$                7

Cost of service and other revenue

1

1

Research and development

36

24

Selling, general and administrative

49

35

     Stock-based compensation expense before taxes

$              92

$              67

Illumina, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

(unaudited)

Three Months Ended

April 3,
2022

April 4,
2021

Net cash provided by operating activities

$            172

$            282

Net cash (used in) provided by investing activities

(74)

1,376

Net cash provided by financing activities

21

968

Effect of exchange rate changes on cash and cash equivalents

—

(3)

Net increase in cash and cash equivalents

119

2,623

Cash and cash equivalents, beginning of period

1,232

1,810

Cash and cash equivalents, end of period

$         1,351

$         4,433

Calculation of free cash flow:

Net cash provided by operating activities

$            172

$            282

Purchases of property and equipment

(61)

(42)

Free cash flow (a)

$            111

$            240

(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 - Non-GAAP

(In millions, except per share amounts)

(unaudited)

TABLE 1: CONSOLIDATED RECONCILIATION BETWEEN GAAP AND NON-GAAP EARNINGS PER SHARE:

Three Months Ended

April 3,
2022

April 4,
2021

GAAP earnings per share - diluted

$           0.55

$           1.00

Cost of revenue (b)

0.25

0.05

Selling, general and administrative costs (b)

(0.08)

1.03

Other expense, net (b)

0.24

0.14

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

0.15

—

Incremental non-GAAP tax expense (d)

(0.07)

(0.30)

Income tax provision (benefit) (e)

0.03

(0.03)

Non-GAAP earnings per share - diluted (a)

$           1.07

$           1.89

TABLE 2: CONSOLIDATED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME:

Three Months Ended

April 3,
2022

April 4,
2021

GAAP net income

$             86

$            147

Cost of revenue (b)

40

7

Selling, general and administrative costs (b)

(12)

151

Other expense, net (b)

38

21

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

24

—

Incremental non-GAAP tax expense (d)

(11)

(44)

Income tax provision (benefit) (e)

4

(4)

Non-GAAP net income (a)

$            169

$            278

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

(a) Non-GAAP net income and earnings per diluted share exclude the effects of the pro forma adjustments as detailed
above. Non-GAAP net income and earnings per diluted 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 our Itemized Reconciliations between GAAP and Non-GAAP Results of Operations below for the
components of these amounts.

(c) Amount represents the impact of GRAIL pre-acquisition net operating losses on GILTI and the utilization of U.S.
foreign tax credits.

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

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

Illumina, Inc.

Results of Operations - Non-GAAP (continued)

(Dollars in millions)

(unaudited)

TABLE 3: CONSOLIDATED ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF
OPERATIONS AS A PERCENT OF REVENUE:

Three Months Ended

April 3,
2022

April 4,
2021

GAAP gross profit

$    815

66.6 %

$    764

69.9  %

Core Illumina cost of revenue

6

0.5 %

7

0.6 %

GRAIL cost of revenue

34

2.8 %

—

—

Non-GAAP gross profit (a)

$    855

69.9 %

$    771

70.5 %

GAAP selling, general and administrative expense

$    308

25.2 %

$    374

34.2 %

Core Illumina selling, general and administrative costs

16

1.3 %

(151)

(13.8)%

GRAIL selling, general and administrative costs

(0.3)%

—

—

Non-GAAP selling, general and administrative expense

$    320

26.2 %

$    223

20.4 %

GAAP operating profit

$    184

15.0 %

$    193

17.7 %

Core Illumina adjustments

(10)

(0.8) %

158

14.4 %

GRAIL adjustments

38

3.1 %

—

—

Non-GAAP operating profit (a)

$    212

17.3 %

$    351

32.1 %

GAAP other expense, net

$     (44)

(3.6)%

$     (24)

(2.2)%

Core Illumina adjustments

38

3.0 %

21

2.0 %

Non-GAAP other expense, net (a)

$      (6)

(0.5)%

$      (3)

(0.2)%

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

Illumina, Inc.

Results of Operations - Non-GAAP (continued)

(Dollars in millions)

(unaudited)

TABLE 4: CORE ILLUMINA ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF
OPERATIONS AS A PERCENT OF REVENUE:

Three Months Ended

April 3,
2022

April 4,
2021

GAAP gross profit - Core Illumina (b)

$    851

69.7 %

$    764

69.9 %

Amortization of acquired intangible assets

6

0.5 %

6

0.5 %

Expenses related to COVID-19 (c)

—

—

1

0.1 %

Non-GAAP gross profit - Core Illumina (a)

$    857

70.2 %

$    771

70.5 %

GAAP selling, general and administrative expense - Core Illumina

$    251

20.6 %

$    374

34.2 %

Contingent consideration liability (d)

49

4.0 %

—

—

Acquisition-related expenses (e)

(33)

(2.7)%

(150)

(13.7)%

Expenses related to COVID-19 (c)

—

—

(2)

(0.2)%

Income related to COVID-19 (f)

—

—

1

0.1 %

Non-GAAP selling, general and administrative expense - Core Illumina

$    267

21.9 %

$    223

20.4 %

GAAP operating profit - Core Illumina

$    362

29.6 %

$    193

17.7 %

Cost of revenue

6

0.5 %

7

0.6 %

Selling, general and administrative costs

(16)

(1.3)%

151

13.8 %

Non-GAAP operating profit - Core Illumina (a)

$    352

28.8 %

$    351

32.1 %

GAAP other expense, net - Core Illumina

$     (44)

(3.6)%

$     (24)

(2.2)%

Strategic investment related loss, net (g)

43

3.5 %

39

3.6 %

Gain on Helix contingent value right (h)

(5)

(0.4)%

(10)

(0.9)%

Non-cash interest expense (i)

—

—

11

1.0 %

Gain on derivative assets (j)

—

—

(26)

(2.3)%

Bridge facility fees (k)

—

—

7

0.6 %

Non-GAAP other expense, net - Core Illumina (a)

$      (6)

(0.5)%

$      (3)

(0.2)%

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

Illumina, Inc.

Results of Operations - Non-GAAP (continued)

(In millions)

(unaudited)

TABLE 5: GRAIL ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF OPERATIONS:

Three Months Ended

April 3,
2022

April 4,
2021

GAAP gross loss - GRAIL (b)

$              (29)

—

Amortization of acquired intangible assets

34

—

Non-GAAP gross profit - GRAIL (a)

$                 5

—

GAAP selling, general and administrative expense - GRAIL

$               58

—

Acquisition-related expenses (e)

(3)

—

Amortization of acquired intangible assets

(1)

—

Non-GAAP selling, general and administrative expense - GRAIL

$               54

—

GAAP operating loss - GRAIL

$            (172)

—

Cost of revenue

34

—

Selling, general and administrative costs

4

—

Non-GAAP operating loss - GRAIL (a)

$            (134)

—

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

(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, net exclude the effects of the pro forma adjustments as
detailed above. 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) Amounts consist of direct and incremental expenses incurred due to the COVID-19 pandemic, primarily expenses
related to employee testing and incremental cleaning in Q1 2021. Such expenses were not excluded in Q1 2022.

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

(e) Amount for Q1 2022 consists primarily of legal expenses related to our acquisition of GRAIL. Amount for Q1 2021
consists primarily of expenses related to our acquisition of GRAIL, including $105 million in Continuation Payments.

(f) Amount consists of direct and incremental income due to the COVID-19 pandemic, primarily payroll-related credits
earned in the U.S. and Canada in Q1 2021. Such income was not excluded in Q1 2022.

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

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

(i) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt
instruments that may be settled in cash. We adopted ASU 2020-06, Debt - Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity's Own Equity (Subtopic 815-10), on January 3, 2022,
using the modified retrospective method. The adoption eliminates the non-cash interest expense related to the conversion
feature of our 2023 Convertible Notes beginning in the first quarter of 2022.

(j) Amount represents gain recorded on our derivative assets related to the terminated acquisition with Pacific Biosciences
as a result of Pacific Biosciences repaying to us $52 million in Continuation Advances.

(k) Amount consists of expenses related to the bridge facility commitment, which was terminated in March 2021 in
conjunction with our issuance of term notes.

Illumina, Inc.

Reconciliation of Consolidated Non-GAAP Financial Guidance

(unaudited)

Our future performance and financial results are subject to risks and uncertainties, and actual results could differ
materially from the guidance set forth below. Some of the factors that could affect our financial results are stated
above in this press release. More information on potential factors that could affect our financial results is included
from time to time in the public reports filed with the Securities and Exchange Commission, including Form 10-K for
the fiscal year ended January 2, 2022 filed with the SEC on February 18, 2022. We assume no obligation to update
any forward-looking statements or information.

TABLE 6: RECONCILIATION BETWEEN GAAP AND NON-GAAP EARNINGS PER DILUTED SHARE GUIDANCE:

Fiscal Year

2022

Consolidated GAAP earnings per diluted share

$2.33 - $2.53

Amortization of acquired intangible assets

1.03

Acquisition-related expenses (b)

0.23

Strategic investment related loss, net (c)

0.27

Gain on Helix contingent value right (d)

(0.03)

Contingent consideration liability (e)

(0.31)

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

0.69

Incremental non-GAAP tax expense (g)

(0.24)

Income tax provision (h)

Consolidated non-GAAP earnings per diluted share (a)

$4.00 - $4.20

(a) Non-GAAP earnings per diluted share exclude the effect of the pro forma adjustments as detailed above. Non-GAAP
earnings per diluted share 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 this measure to assist investors in analyzing and assessing our
past and future operating performance.

(b) Amount consists primarily of legal expenses related to our acquisition of GRAIL.

(c) Amount consists primarily of mark-to-market adjustments from our strategic investments.

(d) Amount consists of fair value adjustments related to our Helix contingent value right.

(e) Amount consists of fair value adjustment for our contingent consideration liability related to the GRAIL acquisition.

(f) Amount represents the impact of GRAIL pre-acquisition net operating losses on GILTI and the utilization of U.S.
foreign tax credits.

(g) Incremental non-GAAP tax expense reflects the tax impact related to the non-GAAP adjustments listed.

(h) Amount represents difference between book and tax accounting related to stock-based compensation cost.