--- ticker: ILMN company: ILMN filing_type: 10-K year_current: 2025 year_prior: 2024 risks_added: 38 risks_removed: 22 risks_modified: 89 risks_unchanged: 74 source: SEC EDGAR url: https://riskdiff.com/ilmn/2025-vs-2024/ markdown_url: https://riskdiff.com/ilmn/2025-vs-2024/index.md generated: 2026-06-01 --- # ILMN: 10-K Risk Factor Changes 2025 vs 2024 > Source: U.S. Securities and Exchange Commission (EDGAR) > Generated: 2026-06-01 > All data extracted directly from official filings. No hallucinated content. ## Summary | Status | Count | |--------|-------| | New risks added | 38 | | Risks removed | 22 | | Risks modified | 89 | | Unchanged | 74 | --- ## New in Current Filing: RISK FACTORS This report and other documents we file with the SEC contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about us, our future performance, our business, our beliefs and our management's assumptions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. You should carefully consider the risks and uncertainties our business faces. The risks described below are not the only ones we face. Our business is also subject to the risks that affect many other companies, such as employment relations, general economic conditions, geopolitical events and international operations. Further, additional risks not currently known to us or that we currently believe are immaterial may in the future materially and adversely affect our business, operations, liquidity and stock price. Risks Relating to Our Sales of Products and Services, Marketing and Research and Development --- ## New in Current Filing: China's Ministry of Commerce has added Illumina to its List of Unreliable Entities, which could result in fines or restrictions on our ability to do business in China and could have a material adverse effect on our revenue and results of operations. On February 4, 2025, China's Ministry of Commerce (MOFCOM) announced that it had added Illumina to its List of Unreliable Entities under the Provisions of the List of Unreliable Entities (the UEL Provisions). Under the UEL Provisions, potential penalties for companies placed on the List of Unreliable Entities can include monetary fines, restrictions or prohibitions on the sale of goods in China, engaging in import and export activities related to China, making investments in, or extracting investments from, China, denial of entry of our relevant personnel into China, restrictions or revocation of work permits, stay or residence status of our relevant personnel in China, or other measures. MOFCOM has not announced what penalties will be imposed on us and we cannot currently predict the duration of our inclusion on the List of Unreliable Entities or any actions that may ultimately be taken by MOFCOM. The decision to place us on the List of Unreliable Entities and any future decision to take action to impose and enforce penalties or restrictions against us could have a material adverse effect on our revenue and results of operations. Furthermore, if, as a result of any such penalties or restrictions, we were to cease entirely or curtail operations in China, we could incur material impairment charges related to any such exit or disposal activities. Our revenue from the Greater China region, which includes China, Taiwan, and Hong Kong, was $308 million in 2024. See note 3. Revenue. --- ## New in Current Filing: Uncertainties with respect to the development, deployment, and use of artificial intelligence in our business and products may result in harm to our business and reputation. We have incorporated, and expect to continue to incorporate, artificial intelligence (AI) into our business activities and our product and service offerings. As with many innovations, AI presents risks and challenges that could adversely impact our business. The development, adoption, and use of AI technologies are still in their early stages and ineffective or inadequate AI development or deployment practices could result in unintended consequences. For example, AI algorithms may be flawed or may be based on datasets that are biased or insufficient. In addition, any disruption or failure in the AI functionality we incorporate into our business activities, products or services could adversely impact our business or result in delays or errors in our offerings. Conversely, any failure to successfully develop and deploy AI in our business activities, products and services could adversely affect our competitiveness (particularly if our competitors successfully deploy AI in their businesses, products, and services), and the development and deployment of AI will require additional investment and increase our costs. There also may be real or perceived social harm, unfairness, or other outcomes that undermine public confidence in the use and deployment of AI. Any of the foregoing may result in decreased demand for our products or harm to our reputation, business, financial condition, or results of operations. The legal and regulatory landscape surrounding AI technologies is rapidly evolving and uncertain, including in the areas of intellectual property, cybersecurity, and privacy and data protection. Compliance with new or changing laws, regulations or industry standards relating to AI may impose significant costs and may limit our ability to develop, deploy, or use AI technologies. Failure to appropriately respond to this evolving landscape may result in legal liability, regulatory action, or brand and reputational harm. Risks Relating to Supply Chain, Manufacturing, and Quality --- ## New in Current Filing: On June 24, 2024, we completed the separation of GRAIL into a separate, independent publicly traded company. As of September 6, 2024, all previously disclosed regulatory proceedings in the United States and European Union related to our acquisition of GRAIL (the Acquisition) have come to an end. Litigation, regulation, and other proceedings related to or resulting from the Acquisition have resulted in operational restrictions and increased costs and could result in similar additional future consequences or further result in loss of revenues. As previously disclosed, the Acquisition was subject to various legal challenges, including by the FTC and European Commission. As a result, we have been a party to a number of regulatory and administrative proceedings regarding the Acquisition. On June 24, 2024, we completed the separation (the Spin-Off) of GRAIL into a separate, independent publicly traded company as described in note 2. GRAIL Spin-Off within the Consolidated Financial Statements. We incurred significant costs to complete the Spin-Off, including significant legal, financial advisory, regulatory and other professional services fees and additional expenses, and assumed certain liabilities in connection therewith. The Spin-Off also may result in loss of revenue and other adverse effects on our business, financial condition and results of operations. In addition, we have experienced and might continue to experience negative impacts on our stock price. We cannot predict what other adverse consequences to, among other things, our reputation, our relationships with governmental or regulatory authorities, or our ability to successfully complete future transactions, our ability to attract, retain and motivate customers, key personnel and those with whom we conduct business may result. Furthermore, we have and may continue to become subject to stockholder inspection demands under Delaware law, investigations initiated by regulators and law firms, and derivative or other similar litigation that can be expensive, divert management attention and human and financial capital to less productive uses and result in potential reputational damage. The GRAIL acquisition and subsequent litigation resulted in (i) the announcement of an investigation by the SEC and others by law firms of possible securities law violations; (ii) stockholder inspection demands seeking to investigate possible breaches of fiduciary duties, corporate wrongdoing or a lack of independence of the members of the Board, including a complaint filed in the Delaware Court of Chancery seeking to inspect books and records captioned Pavers and Road Builders Benefit Funds v. Illumina, Inc.; (iii) the filing of securities class actions in the United States District Court for the Southern District of California: Kangas v. Illumina, Inc. et al., Roy v. Illumina, Inc. et al., and Louisiana Sheriffs' Pension & Relief Fund v. Illumina, Inc. et al.; (iv) the filing of a stockholder derivative complaint in the United States District Court for the Southern District of California captioned Warner v. deSouza et al.; (v) the filing of a stockholder derivative complaint in the United States District Court for the District of Delaware captioned Wang v. deSouza et al.; (vi) the filing of two securities class actions in the Superior Court of the State of California, County of San Mateo: Loren Scott Mar v. Illumina, et al. and Scott Zerzanek v. Illumina, Inc. et al.; (vii) the filing of a stockholder derivative and class action complaint captioned Icahn Partners LP, et al. v. deSouza, et al.; (viii) the filing of a stockholder derivative complaint captioned City of Omaha Police and Firefighters Retirement System v. deSouza, et al.; (ix) the filing of a stockholder derivative complaint captioned City of Roseville General Employees Retirement System, et al. v. deSouza, et al.; and (x) the filing of a stockholder derivative complaint captioned Thomas P. DiNapoli v. John Thompson et al.; and (xi) the filing of a stockholder derivative complaint captioned Pavers and Road Builders Benefit Funds v. John Thompson et al. See note 9. Legal Proceedings within the Consolidated Financial Statements for further details. In the event that any of the matters described above 21 21 21 result in one or more adverse judgments or settlements, we may experience an adverse impact on our financial condition, results of operations or stock price. --- ## New in Current Filing: The Spin-Off could result in substantial tax liability. We received a private letter ruling from the Internal Revenue Service (the IRS) and a written opinion of tax counsel substantially to the effect that, for U.S. federal income tax purposes, the Spin-Off and certain related transactions qualified for non-recognition of gain and loss under Sections 355 and 368 of the U.S. Internal Revenue Code of 1986, as amended. If the factual assumptions or representations made in the request for the private letter ruling prove to have been inaccurate or incomplete in any material respect, then we will not be able to rely on the ruling. Furthermore, the IRS does not rule on whether a distribution such as the Spin-Off satisfies certain requirements necessary to obtain tax-free treatment under Section 355 of the Code. The private letter ruling was based on representations by us and GRAIL that those requirements were satisfied, and any inaccuracy in those representations could invalidate the ruling. Additionally, the opinion of tax counsel relied on, among other things, the continuing validity of the private letter ruling and various assumptions and representations as to factual matters made by GRAIL and us which, if inaccurate or incomplete in any material respect, would jeopardize the conclusions reached by such counsel in its opinion. The opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS or the courts would not challenge the conclusions stated in the opinion or that any such challenge would not prevail. If, notwithstanding the private letter ruling and opinion of tax counsel, the IRS determines that the Spin-Off and certain related transactions did not qualify for tax-free treatment for U.S. federal income tax purposes, the resulting tax liability to the Company and its shareholders could be substantial. --- ## New in Current Filing: Following the Spin-Off, we remain the obligor on the contingent value rights (the CVRs) we issued in connection with the GRAIL Acquisition. Following the Spin-Off, we remain the obligor on the CVRs and, accordingly, continue to be required to record in our financial statements the estimated future liabilities associated with the CVRs. Since we no longer own GRAIL, it may be more difficult for us to estimate these future liabilities. We also may have difficulty complying with our obligations with respect to the CVRs if we are unable to obtain timely and accurate information from GRAIL. --- ## New in Current Filing: The Spin-Off could adversely affect the market value of the CVRs. The business of GRAIL may be adversely affected by the Spin-Off, which could adversely affect the market value of the CVRs. Risks Relating to Litigation --- ## New in Current Filing: Changes in, or failure to comply with, competition laws could adversely affect our business, financial condition, or results of operations. Governments are actively enforcing competition laws and regulations, and some jurisdictions also allow competitors or consumers to assert claims of anti-competitive conduct. U.S. and foreign antitrust authorities have previously brought enforcement actions and may continue to scrutinize our business (see note 9. Legal Proceedings). Regulators have been asserting expansive and sometimes novel interpretations of the scope of existing competition laws, which reduces predictability with respect to compliance. Further, any new requirements or restrictions, or proposed requirements or restrictions, could result in adverse publicity or fines, whether or not valid or subject to appeal. Governmental agencies and regulators may, among other things, prohibit future acquisitions, divestitures, or combinations we seek to make, impose significant fines or penalties, require divestiture of certain assets, or impose other restrictions that limit or require us to modify our operations, including limitations on our contractual relationships with customers or restrictions on our pricing policies. Such rulings or uncertainty regarding regulatory interpretations of industry business practices may alter the way in which we do business and, therefore, may continue to increase our costs or liabilities or reduce demand for our products, which could adversely affect our business, financial condition, or results of operations. Antitrust enforcement agencies (including the U.S. Department of Justice (DOJ) and the FTC and their non-U.S. equivalents) may continue to closely scrutinize pricing policies or merger activity, with a particular focus on the healthcare sector, and there can be no assurance that our pricing policies or proposed, completed, or future mergers, acquisitions, and divestitures will not be the subject of an investigation or enforcement action by the DOJ, the FTC, or another antitrust enforcement agency. Changes in antitrust laws globally, or in their interpretation, administration, or enforcement, may limit our future acquisitions, divestitures, operations, and growth. --- ## New in Current Filing: Purchases of Equity Securities by the Issuer 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. We did not repurchase any shares under the prior program during 2024. Shares repurchased in open market transactions pursuant to the new program during 2024 were as follows: In thousands, except price per share Total Number of SharesPurchased Average PricePaid per Share(1)Total Number ofShares Purchased as Part of PubliclyAnnounced ProgramApproximate DollarValue of Sharesthat May Yet BePurchased Underthe ProgramThird Quarter770 $127.71 770 $1,401,684 Fourth Quarter (1)134 $129.02 134 $1,384,404 Total904 $127.90 904 $1,384,404 _____________ --- ## New in Current Filing: the Program Fourth Quarter (1) (1)Average price paid per share excludes the excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022. (1) Repurchases during the fourth quarter of 2024 were as follows: In thousands, except price per share Total Number of SharesPurchased Average PricePaid per Share(1)Total Number ofShares Purchased as Part of PubliclyAnnounced ProgramApproximate DollarValue of Sharesthat May Yet BePurchased Underthe ProgramSeptember 30, 2024 - October 27, 2024101 $128.72 101 $1,388,718 October 28, 2024 - November 24, 202433 $129.91 33 $1,384,404 November 25, 2024 - December 29, 2024 - $ - - $1,384,404 Total134 $129.02 134 $1,384,404 _____________ --- ## New in Current Filing: the Program Fourth Quarter (1) (1)Average price paid per share excludes the excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022. (1) Repurchases during the fourth quarter of 2024 were as follows: In thousands, except price per share Total Number of SharesPurchased Average PricePaid per Share(1)Total Number ofShares Purchased as Part of PubliclyAnnounced ProgramApproximate DollarValue of Sharesthat May Yet BePurchased Underthe ProgramSeptember 30, 2024 - October 27, 2024101 $128.72 101 $1,388,718 October 28, 2024 - November 24, 202433 $129.91 33 $1,384,404 November 25, 2024 - December 29, 2024 - $ - - $1,384,404 Total134 $129.02 134 $1,384,404 _____________ --- ## New in Current Filing: (Accumulated Deficit) Cumulative-effect adjustment from adoption of ASU 2020-06, net of deferred tax --- ## New in Current Filing: 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIESBusiness Overview We are a provider of sequencing- and array-based solutions, serving customers in the research, clinical and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. Our customers include leading genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies. On June 24, 2024, we completed the separation (the Spin-Off) of GRAIL into a new public company through the distribution of 26,547,021 shares of GRAIL common stock to Illumina stockholders on a pro rata basis. The distribution reflected approximately 85.5% of the outstanding common stock of GRAIL as of 5:00 p.m. New York time on June 13, 2024, the record date for the distribution (the Record Date). We retained approximately 14.5% of the shares of GRAIL common stock immediately following the Spin-Off. The disposition of GRAIL did not meet the criteria to be reported as a discontinued operation and accordingly, GRAIL's assets, liabilities, results of operations and cash flows have not been reclassified. Refer to note 2. GRAIL Spin-Off for additional details. --- ## New in Current Filing: Accounting Pronouncements Adopted in 2024 In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the CODM. The standard does not change how an entity identifies its operating segments. The standard was effective for us beginning in fiscal year 2024 and interim periods within fiscal year 2025. We adopted the standard on its effective date in fiscal year 2024 and applied the amendments retrospectively to all prior periods presented in the consolidated financial statements. See note 12. Segment and Geographic Information for additional details. --- ## New in Current Filing: Revenue Recognition Our revenue is generated from the sale of products and services. Product revenue consists of sales of instruments and consumables used in genetic analysis. Service and other revenue consists of revenue generated from genotyping and sequencing services, instrument service contracts, development and licensing agreements, and, prior to the Spin-Off of GRAIL on June 24, 2024, cancer detection testing services related to the GRAIL business. We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon customer acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business prior to the Spin-Off, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: Derivative Financial Instruments We are exposed to foreign exchange rate risks in the normal course of business and use derivative financial instruments to partially offset this exposure. We do not use derivative financial instruments for speculative or trading purposes. Foreign exchange contracts are carried at fair value in other current assets, other assets, accrued liabilities, or other long-term liabilities, as appropriate, on the consolidated balance sheets. The cash flows associated with such foreign exchange contracts, or derivative financial instruments, are classified as cash flows from operating activities in the consolidated statements of cash flows, which is the same category as the hedged transaction. We use foreign exchange forward contracts to manage foreign currency risks related to monetary assets and liabilities denominated in currencies other than the U.S. dollar. These derivative financial instruments have terms of one month or less and are not designated as hedging instruments. Changes in fair value of these derivatives are recognized in other expense, net, along with the re-measurement gain or loss on the foreign currency denominated assets or liabilities. As of December 29, 2024, we had foreign exchange forward contracts in place to hedge exposures in the euro, Japanese yen, Australian dollar, Canadian dollar, Singapore dollar, Chinese Yuan Renminbi, and British pound. As of December 29, 2024 and December 31, 2023, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases were $477 million and $926 million, respectively. In September 2024, as a result of the European Commission withdrawing its previously imposed fine, the related forward contracts we previously entered into for a total notional amount of €432 million were terminated. 62 62 62 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: Revenue by Source 202420232022In millionsSequencingMicroarrayTotalSequencingMicroarrayTotalSequencingMicroarrayTotalConsumables$2,858 $297 $3,155 $2,790 $293 $3,083 $2,919 $306 $3,225 Instruments484 17 501 685 19 704 709 19 728 Total product revenue3,342 314 3,656 3,475 312 3,787 3,628 325 3,953 Service and other revenue651 65 716 637 80 717 543 88 631 Total revenue$3,993 $379 $4,372 $4,112 $392 $4,504 $4,171 $413 $4,584 --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: 5. GOODWILL, INTANGIBLE ASSETS, AND ACQUISITIONSGoodwill Goodwill In millionsBalance as of January 1, 2023(1)$3,239 Impairment(712)Acquisition18 Balance as of December 31, 20232,545 Impairment(1,466)Acquisition34 Balance as of December 29, 2024$1,113 Balance as of January 1, 2023(1) _____________ (1) The balance as of January 1, 2023 includes accumulated impairment of $3,914 million related to our GRAIL reporting unit. --- ## New in Current Filing: 2024 Impairment of Goodwill Goodwill is reviewed for impairment annually, during the second quarter of our fiscal year, or more frequently if an event occurs indicating the potential for impairment. In May 2024, we performed our annual goodwill impairment test for our two reporting units: Core Illumina and GRAIL. We performed a quantitative test for both reporting units. GRAIL's carrying value exceeded its fair value, estimated as $580 million, and we recorded a goodwill impairment of $1,466 million in Q2 2024. There was no impairment for Core Illumina, as its fair value exceeded its carrying value. 70 70 70 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: 2023 Impairment of Goodwill In Q3 2023, we concluded that the sustained decrease in the Company's stock price and overall market capitalization during the quarter was a triggering event indicating the fair values of our reporting units might be less than their carrying amounts and that an interim impairment test was required. Based on our analysis, we concluded GRAIL's carrying value exceeded its fair value and recorded a goodwill impairment of $712 million, primarily due to the decrease in the Company's consolidated market capitalization and a higher discount rate selected for the fair value calculation of GRAIL. There was no impairment for Core Illumina, as its fair value exceeded its carrying value. 71 71 71 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## New in Current Filing: 4.650% Term Notes due 2026 (2026 Term Notes) On September 9, 2024, we issued $500 million aggregate principal amount of 2026 Term Notes. After deducting discounts and issuance costs, 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 at make-whole premium redemption prices as defined in the form of the notes. --- ## New in Current Filing: Delayed Draw Term Loan due 2025 On June 17, 2024, we entered into a 364-day delayed draw credit agreement (the Delayed Draw Credit Agreement), which provided us with a senior unsecured term loan credit facility in an aggregate principal amount of up to $750 million (the Delayed Draw Credit Facility). On June 20, 2024, we borrowed $750 million on the credit facility in order to provide a portion of the Disposal Funding to GRAIL as part of the Spin-Off. The delayed draw term loan incurred interest at a rate of 6.7%. On September 9, 2024, we repaid the full principal outstanding on the Delayed Draw Credit Facility, as well as accrued interest, in an aggregate amount of $761 million and terminated the Delayed Draw Credit Agreement. We recognized a loss on debt extinguishment of $5 million in 2024, included in interest expense in the consolidated statements of operations, related to the write-off of unamortized debt issuance costs. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: Books and Records Action On February 14, 2024, a stockholder filed a complaint in the Delaware Court of Chancery captioned Pavers and Road Builders Benefit Funds v. Illumina, Inc. seeking to inspect certain books and records related to the GRAIL transaction, including certain materials and minutes from meetings of our Board of Directors, which have been withheld because the Company contends they are non-responsive to the request or subject to the attorney-client privilege. Illumina previously provided documents to the stockholder in response to a demand made by letter under Delaware law, but the stockholder seeks additional and unredacted materials through this action. On March 11, 2024, Illumina filed an answer to the complaint, denying that the stockholder was entitled to inspection. We deny that the stockholder is entitled to review the documents and intend to vigorously defend the litigation. The trial took place on June 7, 2024. On July 16, 2024, the Court issued a decision requiring the Company to produce certain additional documents to plaintiff. On July 26, 2024, the stockholder filed a motion seeking in camera review of certain documents that the Company maintains are not subject to the Court's July 16, 2024 order to produce documents. The Court granted the motion on August 19, 2024, and the Company filed the documents for in camera review on August 29, 2024. On October 7, 2024, the Court ruled that the Company need not produce the documents subject to the motion for in camera review because they are privileged under the attorney opinion work product doctrine. On December 11, 2024, the Court entered its final order and judgment. On December 23, 2024, the plaintiff in this action filed a derivative complaint, described above. --- ## New in Current Filing: 12. SEGMENT AND GEOGRAPHIC INFORMATIONReportable Segment Information As of December 29, 2024, we have one reportable segment, Core Illumina. Prior to the Spin-Off of GRAIL, on June 24, 2024, our reportable segments included both Core Illumina and GRAIL. See note 2. GRAIL Spin-Off for details. We continue to disclose certain historical information for GRAIL prior to the Spin-Off. Segment information is consistent with how our Chief Operating Decision Maker (CODM), who is our Chief Executive Officer, reviews financial information, makes operating decisions, allocates resources, and assesses performance. We also consider the way budgets and forecasts are prepared and reviewed and the basis on which executive compensation is determined. Core Illumina: Core Illumina's products and services serve customers in the research, clinical and applied markets, and enable the adoption of a variety of genomic solutions. Core Illumina sells products and provides services to GRAIL, and vice versa, in accordance with contractual agreements between the entities. GRAIL: GRAIL is a healthcare company focused on early detection of multiple cancers. Prior to the Spin-Off of GRAIL into a separate, independent public company, GRAIL was required to be held and operated separately and independently from Illumina pursuant to the transitional measures ordered by the European Commission. Our CODM allocates resources and evaluates business performance based on revenues and net income (loss). Net income (loss) is used in the annual budgeting and monthly forecasting processes and to monitor and assess budgeted/forecasted versus actual results. Our CODM does not evaluate segments using asset information. The accounting policies for segments are the same as those described in the summary of significant accounting policies. 92 92 92 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## New in Current Filing: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## New in Current Filing: Supplemental Information No Annual Report to stockholders or proxy materials has been furnished to stockholders as of the date of this report. The Annual Report to stockholders and proxy material will be furnished to our stockholders after the filing of this Annual Report on Form 10-K and we will furnish such material to the SEC at that time. 104 104 104 Table of Contents Table of Contents FORM 10-K CROSS-REFERENCE INDEX PagePART IItem 1Business5Item 1ARisk Factors14Item 1BUnresolved Staff CommentsNoneItem 1CCybersecurity11Item 2Properties11Item 3Legal Proceedings28Item 4Mine Safety DisclosuresNot Applicable PART IIItem 5Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities28;30Item 7Management's Discussion and Analysis of Financial Condition and Results of Operations31Item 7AQuantitative and Qualitative Disclosures About Market Risk45Item 8Financial Statements and Supplementary Data47Item 9Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNoneItem 9AControls and Procedures95Item 9BOther Information97Item 9CDisclosure Regarding Foreign Jurisdictions that Prevent InspectionsNot Applicable PART IIIItem 10Directors, Executive Officers and Corporate Governance98Item 11Executive Compensation98Item 12Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters98Item 13Certain Relationships and Related Transactions, and Director Independence99Item 14Principal Accountant Fees and Services99 PART IVItem 15Exhibits, Financial Statement Schedules99Signatures106 Item 1 Business 5 Item 1A Risk Factors 14 Item 1C Cybersecurity 11 Item 2 Properties 11 Item 3 Legal Proceedings 28 Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28;30 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A Quantitative and Qualitative Disclosures About Market Risk 45 Item 8 Financial Statements and Supplementary Data 47 Item 9A Controls and Procedures 95 Item 9B Other Information 97 Item 10 Directors, Executive Officers and Corporate Governance 98 Item 11 Executive Compensation 98 Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 98 Item 13 Certain Relationships and Related Transactions, and Director Independence 99 Item 14 Principal Accountant Fees and Services 99 Item 15 Exhibits, Financial Statement Schedules 99 Signatures 106 105 105 105 Table of Contents Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 12, 2025. ILLUMINA, INC. By: /s/ JACOB THAYSENJacob ThaysenChief Executive Officer ILLUMINA, INC. By: 106 106 106 Table of Contents Table of Contents February 12, 2025 --- ## New in Current Filing: POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Jacob Thaysen and Ankur Dhingra, and each or any one of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, his, or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ JACOB THAYSENChief Executive Officer, Director(Principal Executive Officer)February 12, 2025Jacob Thaysen/s/ ANKUR DHINGRAChief Financial Officer(Principal Financial Officer)February 12, 2025Ankur Dhingra/s/ SCOTT ERICKSENVice President and Chief Accounting Officer (Principal Accounting Officer)February 12, 2025Scott Ericksen/s/ STEPHEN P. MACMILLANIndependent Chair of the Board of Directors February 12, 2025Stephen P. MacMillan/s/ FRANCES ARNOLDDirectorFebruary 12, 2025Frances Arnold, Ph.D./s/ CAROLINE DORSADirectorFebruary 12, 2025Caroline Dorsa/s/ ROBERT S. EPSTEINDirectorFebruary 12, 2025Robert S. Epstein, M.D./s/ SCOTT GOTTLIEBDirectorFebruary 12, 2025Scott Gottlieb, M.D./s/ GARY S. GUTHARTDirectorFebruary 12, 2025Gary S. Guthart, Ph.D./s/ PHILIP SCHILLERDirectorFebruary 12, 2025Philip Schiller/s/ SUSAN SIEGELDirectorFebruary 12, 2025Susan Siegel/s/ ANNA RICHODirectorFebruary 12, 2025Anna Richo/s/ SCOTT B. ULLEMDirectorFebruary 12, 2025Scott B. Ullem --- ## No Match in Current: RISK FACTORS *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* Our business is subject to various risks, including those described below. In addition to the other information included in this report, the following issues could adversely affect our operating results or our stock price. Risks Relating to Research, Development, Marketing, and Sales of Products and Services --- ## No Match in Current: We are subject to various uncertainties and restrictions while the Acquisition remains subject to ongoing regulatory and legal review and proceedings related thereto, including the EC Divestment Decision, that could adversely affect our business, financial condition and results of operations. *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* During the period in which the Acquisition remains subject to ongoing regulatory and legal review and proceedings related thereto, it is possible that customers, suppliers, commercial partners and/or other persons with whom we have a business relationship may elect to delay or defer certain business decisions or decide to seek to terminate, change or renegotiate their relationships with us because of the Acquisition or the various uncertainties related to the ongoing review of the Acquisition, other legal and regulatory proceedings, and/or the hold separate arrangement required by the EC Divestment Decision, which could significantly reduce the expected benefits of the Acquisition and/or negatively affect our revenues, earnings and cash flows, and the market price of our common stock, regardless of the ultimate outcome of such review and proceedings. Uncertainty about the effects of the Acquisition (and about the related regulatory and judicial review process) on employees may impair our ability to attract, retain and motivate key personnel while the Acquisition remains subject to ongoing regulatory and legal review and proceedings, and for a period of time thereafter. If key employees depart because of these or other issues, we and GRAIL may have to incur additional and significant costs in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent. Matters relating to the Acquisition (including the regulatory and legal review and proceedings related thereto and the hold separate arrangement required by the EC Divestment Decision) require substantial commitments of time and resources by Illumina management and personnel and will continue in the future, which otherwise would have been devoted to day-to-day operations and other opportunities that may have been 23 23 23 beneficial to us. We will also incur significant costs related to the ongoing review and proceedings related to the Acquisition (including to comply with the hold separate obligations required by the EC Divestment Decision). These costs are substantial and include financial advisory, legal, monitoring trustee, and accounting costs. --- ## No Match in Current: The market price of our common stock may decline as a result of the Acquisition and the final outcomes of the regulatory and judicial reviews thereof. *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* The market price of our common stock may decline as a result of the Acquisition and the final outcomes of the regulatory and judicial reviews thereof, and holders of our common stock could see a decrease in the value of their investment in our common stock, if, among other things, we are unable to achieve the expected growth in earnings, or if the anticipated benefits, including synergies, cost savings, innovation and operational efficiencies, from the Acquisition are not realized, or if the Acquisition and integration-related costs related to the Acquisition are greater than expected, or if, as a result of unfavorable outcomes of regulatory and judicial proceedings, we are subject to fines, penalties, restrictions or remedies, including divestiture remedies. The market price of our common stock may also decline if we do not achieve the anticipated benefits of the Acquisition as rapidly or to the extent expected by financial or industry analysts or if the effects of the Acquisition on our financial position, results of operations or cash flows are not otherwise consistent with the expectations of financial or industry analysts. In addition, some former GRAIL stockholders may decide not to continue to hold the shares of our common stock they receive as a result of the Acquisition, and any such sales of our common stock could have the effect of depressing their market price. Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, our common stock, regardless of our actual operating performance. Risks Relating to Our Strategic Collaborations --- ## No Match in Current: Purchases of Equity Securities by the Issuer *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* There were no purchases of equity securities in 2023. --- ## No Match in Current: Business Overview *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* We are a provider of sequencing- and array-based solutions, serving customers in the research, clinical and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. Our customers include leading genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies. On August 18, 2021, we acquired GRAIL, a healthcare company focused on early detection of multiple cancers. The acquisition is subject to ongoing legal proceedings, and, currently, GRAIL must be held and operated separately and independently from Illumina pursuant to the transitional measures ordered by the European Commission in the EC Divestment Decision, following the prohibition of our acquisition of GRAIL on September 6, 2022. Refer to note "8. Legal Proceedings" for additional details. We have included the financial results of GRAIL in our consolidated financial statements from the date of acquisition. On December 17, 2023, we announced that we will divest GRAIL. --- ## No Match in Current: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## No Match in Current: Cash Equivalents *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* Cash equivalents are comprised of short-term, highly-liquid investments with maturities of 90 days or less at the date of purchase. --- ## No Match in Current: Business Combinations *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on estimates and assumptions determined by management. These valuations require us to make estimates and assumptions, especially with respect to intangible assets. We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill. Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as they are incurred. In connection with certain acquisitions, contingent consideration can be earned by the sellers upon completion of certain future performance milestones. In these cases, a liability is recorded on the acquisition date, as a component of accrued liabilities and/or other long-term liabilities, for an estimate of the acquisition-date fair value of the contingent consideration. We generally use a Monte Carlo simulation or an income approach to estimate the fair value of contingent consideration. Estimates and assumptions used in a Monte Carlo simulation include forecasted revenues, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. An income approach utilizes inputs such as anticipated future cash flows, risk-free adjusted discount rates, and nonperformance risk, as well as management judgment regarding the probability of achieving certain future milestones. Future changes in our estimates could result in expenses or gains. Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in selling, general and administrative expense in our consolidated statements of operations. We typically use the discounted cash flow method to value our acquired intangible assets. This method requires management judgment to forecast future operating results and establish residual growth rates and discount factors. The estimates we use to value and amortize intangible assets are consistent with the plans and estimates that we use to manage our business and are based on available historical information and industry estimates and averages. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expense could be accelerated or extended. We capitalize in-process research and development (IPR&D), which is considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon reaching the end of the relevant research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life. If the relevant research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment. 41 41 41 If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period (not to exceed a year from the date of acquisition), we report provisional amounts in our financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. We record these adjustments to the provisional amounts with a corresponding offset to goodwill. Any adjustments identified after the measurement period are recorded in the consolidated statements of operations. --- ## No Match in Current: Acquisition of GRAIL, Inc. *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* On August 18, 2021, we completed our acquisition of GRAIL, a healthcare company focused on early detection of multiple cancers. The acquisition is subject to ongoing legal proceedings and, currently, GRAIL must be held and operated separately and independently from Illumina pursuant to the transitional measures ordered by the European Commission in the EC Divestment Decision, following the prohibition of our acquisition of GRAIL on September 6, 2022. Refer to note "8. Legal Proceedings" for further details. As a result of the acquisition, GRAIL stockholders received as consideration (i) cash, (ii) shares of Illumina common stock and (iii) at their election, either a contingent value right or additional shares of Illumina common stock. We issued 9.8 million common shares as part of the consideration. GRAIL is a separate reportable segment. We have included the financial results of GRAIL in the consolidated financial statements from the date of acquisition. On December 17, 2023, we announced that we will divest GRAIL. The total purchase price consisted of the following: In millionsAs AdjustedCash$2,862 Fair value of common stock issued4,975 Fair value of contingent consideration757 Fair value of previously held investment1,149 Settlement of preexisting relationships2 Total purchase price$9,745 Prior to the acquisition, we owned a 12% interest in GRAIL. Authoritative guidance on accounting for business combinations requires that an acquirer remeasure its previously held equity investment in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss in earnings. We remeasured our previously held equity investment to its fair value, as of the date of acquisition, based on the fair value of total consideration transferred and a discount for lack of control. Estimates and assumptions used in the remeasurement represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring the fair value. As a result of the remeasurement, we valued our previously held equity investment in GRAIL at $1.1 billion and recognized a gain of $899 million, included in other (expense) income, net, in 2021. In connection with the acquisition, we accelerated the vesting of certain outstanding and unvested equity awards of GRAIL employees. Approximately $69 million was included in the purchase price related to the fair value of accelerated equity awards attributable to the pre-combination period, with the fair value attributable to the post-combination period of $615 million included in share-based compensation expense in 2021. In addition, we issued Illumina equity awards to GRAIL employees in exchange for any of their remaining outstanding and unvested GRAIL equity awards (the "replacement awards") at acquisition. The replacement awards consist of restricted stock units and performance stock options. The terms of the replacement awards are substantially similar to the former GRAIL equity awards for which they were exchanged. The fair value of the replacement awards was $48 million, all of which is attributable to post-combination service, and will be recognized as share-based compensation expense over the remaining vesting period subsequent to the acquisition. The weighted-average acquisition-date fair value of the replacement performance stock options was determined using the Black-Scholes option pricing model. Refer to note "6. Stockholders' Equity" for more information. 69 69 69 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## No Match in Current: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## No Match in Current: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## No Match in Current: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## No Match in Current: 0% Convertible Senior Notes due 2023 (2023 Convertible Notes) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* In August 2018, we issued $750 million aggregate principal amount of 2023 Convertible Notes. The notes were convertible into cash, shares of common stock or a combination of cash and shares of common stock, at our election, based on conversion rates as defined in the indenture. The 2023 Convertible Notes matured on August 15, 2023, at which time the principal was repaid in cash. We did not issue any shares of common stock. 74 74 74 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## No Match in Current: Purchase Obligations *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* In the normal course of business, we enter into agreements to purchase goods or services that are not cancelable without penalty, primarily related to licensing and supply arrangements. For those agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities or pricing as of the reporting date. Licensing agreements under which we commit to minimum royalty payments, some of which are subject to adjustment, may be terminated prior to the expiration of underlying intellectual property under certain circumstances. Annual minimum payments for noncancelable purchase obligations as of December 31, 2023 totaled $290 million, less than half of which are due within the next twelve months. --- ## No Match in Current: Employee Separation Costs (1) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* Amount recorded in accrued liabilities as of YTD 2023 Estimated total restructuring costs to still be incurred _____________ (1)It is expected that substantially all of the employee separation related restructuring charges will be incurred and paid by the end of Q1 2024. (1) --- ## No Match in Current: Other (Expense) Income, Net *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* In millions202320222021Gain on previously held investment in GRAIL$ - $ - $899 Gain on exchange of GRAIL contingent value rights - - 86 Gain (loss) on Helix contingent value right10 (7)30 Gain on derivative assets related to terminated acquisition - - 26 (Losses) gains on strategic investments, net(40)(122)18 Other1 (13)9 Other (expense) income, net$(29)$(142)$1,068 --- ## No Match in Current: Acquisition of GRAIL *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* Our acquisition of GRAIL remains subject to ongoing legal and regulatory proceedings in the United States and in the European Union. On March 30, 2021, the U.S. Federal Trade Commission (the FTC) filed an administrative complaint and a motion for a preliminary injunction in the United States District Court for the District of Columbia. In both actions, the FTC alleged that our acquisition of GRAIL would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. We filed an answer to the FTC's complaint in federal district court on April 6, 2021, and in the administrative court on April 13, 2021. On April 20, 2021, the United States District Court for the District of Columbia granted our motion to transfer venue to the United States District Court for the Southern District of California. On May 28, 2021, the district court granted the FTC's motion to dismiss the complaint without prejudice. The administrative trial commenced on August 24, 2021. On September 1, 2022, the administrative law judge (the ALJ) ruled in favor of Illumina and found that the acquisition of GRAIL did not violate Section 7 of the Clayton Act. In the decision, the ALJ found that the FTC's 83 83 83 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## No Match in Current: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## No Match in Current: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## No Match in Current: Reportable Segment Information *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* We have two reportable segments, Core Illumina and GRAIL. We do not allocate expenses between segments. Additionally, our CODM does not evaluate our operating segments using discrete asset information. On August 18, 2021, we acquired GRAIL and it operates as a separate reportable segment. We have included the results of operations of GRAIL in our consolidated statements of operations from the date of acquisition. Core Illumina sells products and provides services to GRAIL, and vice versa, in accordance with contractual agreements between the entities. --- ## No Match in Current: Core Illumina: *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* Core Illumina's products and services serve customers in the research, clinical and applied markets, and enable the adoption of a variety of genomic solutions. Core Illumina includes all of our operations, excluding the results of GRAIL. GRAIL: GRAIL is a healthcare company focused on early detection of multiple cancers. 90 90 90 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## No Match in Current: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Fiscal Year **Key changes:** - Reworded sentence: "References to 2024, 2023, and 2022 refer to fiscal years ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively, which were all 52 weeks." **Prior (2024):** Our fiscal year is the 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, September 30, and December 31. References to 2023, 2022, and 2021 refer to fiscal years ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively. Fiscal years 2023, 2022, and 2021 were all 52 weeks. 55 55 55 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Our fiscal year is the 52 or 53 weeks ending the Sunday closest to December 31, with quarters of 13 or 14 weeks ending the Sunday closest to March 31, June 30, September 30, and December 31. References to 2024, 2023, and 2022 refer to fiscal years ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively, which were all 52 weeks. 55 55 55 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Concentrations of Risk **Key changes:** - Reworded sentence: "A significant change in current research funding, particularly with respect to funding of the U.S." - Reworded sentence: "Shipments to customers outside the United States comprised 48%, 48%, and 50% of total consolidated revenue in 2024, 2023, and 2022, respectively." **Prior (2024):** Customers We operate in markets that are highly competitive and rapidly changing. Significant technological changes, shifting customer needs, the emergence of competitive products or services with new capabilities, and other factors could negatively impact our operating results. A portion of our customers consist of university and research institutions that management believes are, to some degree, directly or indirectly supported by the United States Government. A significant change in current research funding, particularly with respect to the U.S. National Institutes of Health, could have an adverse impact on future revenues and results of operations. International sales entail a variety of risks, including currency exchange fluctuations, longer payment cycles, and greater difficulty in accounts receivable collection. We are also subject to general geopolitical risks, such as political, social and economic instability, and changes in diplomatic and trade relations. The risks of international sales are mitigated in part by the extent to which sales are geographically distributed. Shipments to customers outside the United States comprised 48%, 50%, and 52% of total revenue in 2023, 2022, and 2021, respectively. Customers outside the United States represented 55% and 54% of our gross trade accounts receivable balance as of December 31, 2023 and January 1, 2023, respectively. We had no customers that provided more than 10% of total revenue in 2023, 2022, and 2021. We perform regular reviews of customer activity and associated credit risks and do not require collateral or enter into netting arrangements. Historically, we have not experienced significant credit losses from accounts receivable. **Current (2025):** Customers We operate in markets that are highly competitive and rapidly changing. Significant technological changes, shifting customer needs, the emergence of competitive products or services with new capabilities, and other factors could negatively impact our operating results. A portion of our customers consist of university and research institutions that management believes are, to some degree, directly or indirectly supported by the United States Government. A significant change in current research funding, particularly with respect to funding of the U.S. National Institutes of Health or targeted cancellations by the U.S. federal government of certain grants or contracts, could have an adverse impact on future revenues and results of operations. International sales entail a variety of risks, including currency exchange fluctuations, longer payment cycles, and greater difficulty in accounts receivable collection. We are also subject to general geopolitical risks, such as political, social and economic instability, and changes in diplomatic and trade relations. The risks of international sales are mitigated in part by the extent to which sales are geographically distributed. Shipments to customers outside the United States comprised 48%, 48%, and 50% of total consolidated revenue in 2024, 2023, and 2022, respectively. Customers outside the United States represented 53% and 55% of our gross trade accounts receivable balance as of December 29, 2024 and December 31, 2023, respectively. We had no customers that provided more than 10% of total consolidated revenue in 2024, 2023, and 2022. We perform regular reviews of customer activity and associated credit risks and do not require collateral or enter into netting arrangements. Historically, we have not experienced significant credit losses from accounts receivable. --- ## Modified: Revenue by Geographic Area **Key changes:** - Reworded sentence: "Based on region of destination (in millions)202420232022(1)Americas(2)$2,441 $2,521 $2,479 Europe1,185 1,140 1,089 Greater China(3)308 384 472 Asia-Pacific, Middle East and Africa(4)438 459 544 Total revenue$4,372 $4,504 $4,584 2022(1) Americas(2) Greater China(3) Asia-Pacific, Middle East and Africa(4) _____________ (1)We implemented a new global commercial structure in Q1 2023 to improve operating efficiencies and better align with local markets." - Reworded sentence: "Beginning in Q1 2023, and going forward, we report regional results for the following regions: Americas, Europe, Greater China, and Asia-Pacific, Middle East and Africa (AMEA)." - Reworded sentence: "(2)Americas revenue included United States revenue of $2,288 million, $2,359 million, and $2,290 million in 2024, 2023 and 2022, respectively." **Prior (2024):** Based on region of destination (in millions)20232022 (1)2021 (1)Americas (2)$2,521 $2,479 $2,358 Europe1,140 1,089 1,149 Greater China (3)384 472 502 Asia-Pacific, Middle East and Africa (4)459 544 517 Total revenue$4,504 $4,584 $4,526 2022 (1) 2021 (1) Americas (2) Greater China (3) Asia-Pacific, Middle East and Africa (4) _____________ (1)We implemented a new global commercial structure in Q1 2023 to improve operating efficiencies and better align with local markets. We integrated Asia-Pacific and Japan with emerging markets across the Middle East, Africa, Turkey, and Commonwealth of Independent States (CIS). Beginning in Q1 2023, and going forward, we will report regional results for the following regions: Americas, Europe, Greater China, and Asia-Pacific, Middle East and Africa (AMEA). Prior period amounts have been reclassified to conform to this new presentation. (2)Americas revenue included United States revenue of $2,359 million, $2,290 million, and $2,195 million in 2023, 2022, and 2021, respectively. (3)Region includes revenue from China, Taiwan, and Hong Kong. (4)Region includes revenue from Russia and Turkey. **Current (2025):** Based on region of destination (in millions)202420232022(1)Americas(2)$2,441 $2,521 $2,479 Europe1,185 1,140 1,089 Greater China(3)308 384 472 Asia-Pacific, Middle East and Africa(4)438 459 544 Total revenue$4,372 $4,504 $4,584 2022(1) Americas(2) Greater China(3) Asia-Pacific, Middle East and Africa(4) _____________ (1)We implemented a new global commercial structure in Q1 2023 to improve operating efficiencies and better align with local markets. We integrated Asia-Pacific and Japan with emerging markets across the Middle East, Africa, Turkey, and Commonwealth of Independent States (CIS). Beginning in Q1 2023, and going forward, we report regional results for the following regions: Americas, Europe, Greater China, and Asia-Pacific, Middle East and Africa (AMEA). Prior period amounts have been reclassified to conform to this new presentation. (2)Americas revenue included United States revenue of $2,288 million, $2,359 million, and $2,290 million in 2024, 2023 and 2022, respectively. (3)Region includes revenue from China, Taiwan, and Hong Kong. (4)Region includes revenue from Russia and Turkey. --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "Changes in the reserve for product warranties were as follows: In millionsBalance as of January 2, 2022$22 Additions charged to cost of product revenue23 Repairs and replacements(27)Balance as of January 1, 202318 Additions charged to cost of product revenue42 Repairs and replacements(39)Balance as of December 31, 202321 Additions charged to cost of product revenue42 Repairs and replacements(45)Balance as of December 29, 2024$18" **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Opinion on the Financial Statements **Key changes:** - Reworded sentence: "(the Company) as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 29, 2024, and the related notes (collectively referred to as the "consolidated financial statements")." - Reworded sentence: "We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 12, 2025 expressed an unqualified opinion thereon." **Prior (2024):** We have audited the accompanying consolidated balance sheets of Illumina, Inc. (the Company) as of December 31, 2023 and January 1, 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and January 1, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 16, 2024 expressed an unqualified opinion thereon. **Current (2025):** We have audited the accompanying consolidated balance sheets of Illumina, Inc. (the Company) as of December 29, 2024 and December 31, 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 29, 2024, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 29, 2024 and December 31, 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 29, 2024, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 12, 2025 expressed an unqualified opinion thereon. --- ## Modified: Performance Obligations **Key changes:** - Reworded sentence: "As of December 29, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $657 million, of which approximately 78% is expected to be converted to revenue in 2025, approximately 10% in the following twelve months, and the remainder thereafter." **Prior (2024):** We regularly enter into contracts with multiple performance obligations. These contracts are believed to be firm as of the balance sheet date. However, we may allow customers to make product substitutions as we launch new products. The timing of shipments depends on several factors, including agreed upon shipping schedules, which may span multiple quarters. Most performance obligations are generally satisfied within a short time frame, approximately three to six months, after the contract execution date. As of December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $653 million, of which approximately 82% is expected to be converted to revenue in 2024, approximately 13% in the following twelve months, and the remainder thereafter. three **Current (2025):** We regularly enter into contracts with multiple performance obligations. These contracts are believed to be firm as of the balance sheet date. However, we may allow customers to make product substitutions as we launch new products. The timing of shipments depends on several factors, including agreed upon shipping schedules, which may span multiple quarters. Most performance obligations are generally satisfied within a short time frame, approximately three to six months, after the contract execution date. As of December 29, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $657 million, of which approximately 78% is expected to be converted to revenue in 2025, approximately 10% in the following twelve months, and the remainder thereafter. three 66 66 66 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Retirement Plan **Key changes:** - Reworded sentence: "During 2024, 2023, and 2022, we made matching contributions of $34 million, $36 million, and $30 million, respectively." **Prior (2024):** We have a 401(k) savings plan covering substantially all of our employees in the United States. Our contributions to the plan are discretionary. During 2023, 2022, and 2021, we made matching contributions of $36 million, $30 million, and $26 million, respectively. **Current (2025):** We have a 401(k) savings plan covering substantially all of our employees in the United States. Our contributions to the plan are discretionary. During 2024, 2023, and 2022, we made matching contributions of $34 million, $36 million, and $30 million, respectively. --- ## Modified: Research and Development **Key changes:** - Removed sentence: "63 63 63 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents" **Prior (2024):** Research and development expenses include personnel expenses, contractor fees, facilities-related costs, material costs, and license fees. Expenditures relating to research and development are expensed in the period incurred. 63 63 63 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Research and development expenses include personnel expenses, contractor fees, facilities-related costs, material costs, and license fees. Expenditures relating to research and development are expensed in the period incurred. --- ## Modified: Accounting Pronouncements Adopted in 2022 **Key changes:** - Reworded sentence: "As a result of the adoption of ASU 2020-06, we increased retained earnings and decreased additional paid-in capital by $61 million and $93 million, respectively." **Prior (2024):** In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). The new standard reduces the number of accounting models for convertible debt instruments, amends the accounting for certain contracts in an entity's own equity, and modifies how certain convertible instruments and contracts that may be settled in cash or shares impact the calculation of diluted earnings per share. Specifically, the guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments and requires the use of the if-converted method to calculate diluted earnings per share. We adopted the standard on its effective date in the first quarter of 2022 using a modified retrospective approach by recognizing a cumulative-effect adjustment to retained earnings on January 3, 2022. We did not restate prior periods. As a result of the adoption, we increased our convertible senior notes and retained earnings, on January 3, 2022, by $43 million and $61 million, respectively, and decreased our deferred tax liabilities, included in other long-term liabilities on the consolidated balance sheets, and additional paid-in capital by $11 million and $93 million, respectively. Interest expense recognized post-adoption has decreased as a result of accounting for our convertible senior notes as a single liability measured at amortized cost. See note "5. Debt and Other Commitments" for additional details on the adoption of ASU 2020-06. **Current (2025):** In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). The new standard reduces the number of accounting models for convertible debt instruments, amends the accounting for certain contracts in an entity's own equity, and modifies how certain convertible instruments and contracts that may be settled in cash or shares impact the calculation of diluted earnings per share. Specifically, the guidance removes certain accounting models that separate the embedded conversion features from the host contract for convertible instruments and requires the use of the if-converted method to calculate diluted earnings per share. We adopted the standard on its effective date in the first quarter of 2022 using a modified retrospective approach by recognizing a cumulative-effect adjustment to retained earnings on January 3, 2022. As a result of the adoption of ASU 2020-06, we increased retained earnings and decreased additional paid-in capital by $61 million and $93 million, respectively. --- ## Modified: Provision for Income Taxes **Key changes:** - Reworded sentence: "2024-2023Dollars in millions20242023Change% ChangeLoss before income taxes$(1,179)$(1,117)$(62)6 %Provision for income taxes4444 - - Net loss$(1,223)$(1,161)$(62)5 %Effective tax rate(3.8)%(3.9)% In 2024, the variance from the U.S." - Reworded sentence: "Our future effective tax rate may vary from the U.S." **Prior (2024):** 2023-2022Dollars in millions20232022Change% ChangeLoss before income taxes$(1,117)$(4,336)$3,219 (74)%Provision for income taxes44 68 (24)(35)Net loss$(1,161)$(4,404)$3,243 (74)%Effective tax rate(3.9)%(1.6)% In 2023, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the $149 million income tax expense impact from the impairment of goodwill, which is nondeductible for tax purposes, the $86 million income tax expense impact of capitalizing research and development expense for tax purposes, and the $61 million income tax expense impact of GRAIL pre-acquisition net operating losses on GILTI and the utilization of the U.S. foreign tax credits. The income tax expense in 2023 was also favorably impacted by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore. In 2022, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the $822 million income tax expense impact from the impairment of goodwill and the $96 million income tax expense impact from the European Commission fine related to the GRAIL acquisition, both of which are nondeductible for tax purposes, the $87 million income tax expense impact of capitalizing research and development expense for tax purposes beginning in 2022, in accordance with the 2017 Tax Cuts and Jobs Act, and the $60 million income tax expense impact of GRAIL pre-acquisition net operating losses on GILTI and the utilization of the U.S. foreign tax credits. The income tax expense in 2022 was also favorably impacted by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore and the United Kingdom. 36 36 36 **Current (2025):** 2024-2023Dollars in millions20242023Change% ChangeLoss before income taxes$(1,179)$(1,117)$(62)6 %Provision for income taxes4444 - - Net loss$(1,223)$(1,161)$(62)5 %Effective tax rate(3.8)%(3.9)% In 2024, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the $308 million income tax expense impact from the impairment of goodwill, which is nondeductible for tax purposes, $90 million income tax expense 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, and the $52 million income tax expense impact of capitalizing research and development expenses for tax purposes. The income tax rate in 2024 was favorably impacted by the $99 million income tax expense impact of the reversal of the European Commission fine related to the GRAIL acquisition, which is excluded from taxable income, and by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore. In 2023, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the $149 million income tax expense impact from the impairment of goodwill, which is nondeductible for tax purposes, the $86 million income tax expense impact of capitalizing research and development expense for tax purposes, and the $61 million income tax expense impact of GRAIL pre-acquisition net operating losses on GILTI and the utilization of the U.S. foreign tax credits. The income tax expense in 2023 was also favorably impacted by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore. Our future effective tax rate may vary from the U.S. federal statutory tax rate due to the mix of earnings in tax jurisdictions with different statutory tax rates and the other factors discussed in the risk factor "We are subject to risks related to taxation in multiple jurisdictions" in Risk Factors within the Business & Market Information section of this report, including future tax legislation that changes existing tax policies, laws, regulations, or rates. 37 37 37 --- ## Modified: Our products, if used for the diagnosis of disease, could be subject to government regulation, and the regulatory approval and maintenance process for such products may be expensive, time-consuming, and uncertain both in timing and in outcome. Since our strategy includes an emphasis on increasing our participation in clinical markets, we will be increasingly exposed to these risks. **Key changes:** - Reworded sentence: "However, as we implement our strategy to increase our participation in clinical markets by expanding our product line to encompass products that are intended to be used for the diagnosis of disease, such as our FDA-regulated MiSeqDx and NextSeq550Dx, certain of our products will become subject to regulation by the FDA, or comparable international agencies, including requirements for regulatory clearance or approval of such products before they can be marketed." - Reworded sentence: "In addition, if our products labeled as "For Research Use Only." **Prior (2024):** Our products are not subject to FDA clearance or approval if they are not intended to be used for the diagnosis, treatment or prevention of disease. However, as we expand our product line to encompass products that are intended to be used for the diagnosis of disease, such as our FDA-regulated MiSeqDx, certain of our products will become subject to regulation by the FDA, or comparable international agencies, including requirements for regulatory clearance or approval of such products before they can be marketed. Such regulatory approval processes or clearances may be expensive, time-consuming, and uncertain, and our failure to obtain or comply with such approvals and clearances could have an adverse effect on our business, financial condition, or operating results. In addition, changes to the current regulatory framework, including the imposition of additional or new regulations, could arise at any time during the development or marketing of our products, which may negatively affect our ability to obtain or maintain FDA or comparable regulatory approval of our products, if required. Diagnostic products are regulated as medical devices by the FDA and comparable international agencies and may require either clearance from the FDA following the 510(k) pre-market notification process or pre-market approval from the FDA, in each case prior to marketing. Obtaining the requisite regulatory approvals can be expensive and may involve considerable delay. If we fail to obtain, or experience significant delays in obtaining, regulatory approvals for diagnostic products that we develop, we may not be able to launch or successfully commercialize such products in a timely manner, or at all. 25 25 25 In addition, if our products labeled as "For Research Use Only. Not for use in diagnostic procedures," or RUO, are used, or could be used, for the diagnosis of disease, the regulatory requirements related to marketing, selling, and supporting such products could change or be uncertain, even if such use by our customers is without our consent. If the FDA or other regulatory authorities assert that any of our RUO products are subject to regulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected. **Current (2025):** Our products are not subject to FDA clearance or approval if they are not intended to be used for the diagnosis, treatment or prevention of disease. However, as we implement our strategy to increase our participation in clinical markets by expanding our product line to encompass products that are intended to be used for the diagnosis of disease, such as our FDA-regulated MiSeqDx and NextSeq550Dx, certain of our products will become subject to regulation by the FDA, or comparable international agencies, including requirements for regulatory clearance or approval of such products before they can be marketed. Such regulatory approval processes or clearances may be expensive, time-consuming, and uncertain, and our failure to obtain or comply with such approvals and clearances 23 23 23 could have an adverse effect on our business, financial condition, or operating results. Our failure to obtain such clearance or approval in a timely manner, or our competitors' success in obtaining clearance or approval before we do for products that are competitive with our planned offerings, may result in material adverse business consequences because the investment and time required to seek and obtain clearance or approval for clinical products are substantial. In addition, changes to the current regulatory framework, including the imposition of additional or new regulations, could arise at any time during the development or marketing of our products, which may negatively affect our ability to obtain or maintain FDA or comparable regulatory approval of our products, if required. Diagnostic products are regulated as medical devices by the FDA and comparable international agencies and may require either clearance from the FDA following the 510(k) pre-market notification process or pre-market approval from the FDA, in each case prior to marketing. Obtaining the requisite regulatory approvals can be expensive and may involve considerable delay. If we fail to obtain, or experience significant delays in obtaining, regulatory approvals for diagnostic products that we develop, we may not be able to launch or successfully commercialize such products in a timely manner, or at all. In addition, if our products labeled as "For Research Use Only. Not for use in diagnostic procedures," or RUO, are used, or could be used, for the diagnosis of disease, the regulatory requirements related to marketing, selling, and supporting such products could change or be uncertain, even if such use by our customers is without our consent. If the FDA or other regulatory authorities assert that any of our RUO products are subject to regulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected. --- ## Modified: Stock Options **Key changes:** - Reworded sentence: "Stock option activity was as follows: Units in thousandsOptionsWeighted-AverageExercise PricePerformance Stock Options(1)Weighted-AverageExercise PriceOutstanding at January 2, 20228 $66.42 17 $85.54 Granted180 $330.25 - $ - Exercised(1)$6.55 - $ - Outstanding at January 1, 2023187 $319.72 17 $85.54 Exercised(8)$71.09 (1)$16.69 Cancelled(144)$330.25 - $ - Outstanding at December 31, 202335 $330.25 16 $87.74 Cancelled(35)$330.25 (16)$87.74 Outstanding at December 29, 2024 - $ - - $ - " **Prior (2024):** Stock option activity was as follows: Units in thousandsOptionsWeighted-AverageExercise PricePerformance Stock Options(1)Weighted-AverageExercise PriceOutstanding at January 3, 202110 $59.11 - $ - Granted - $ - 48 $86.73 Exercised(2)$20.06 (21)$86.72 Cancelled - $ - (10)$89.63 Outstanding at January 2, 20228 $66.42 17 $85.54 Granted180 $330.25 - $ - Exercised(1)$6.55 - $ - Outstanding at January 1, 2023187 $319.72 17 $85.54 Exercised(8)$71.09 (1)$16.69 Cancelled(144)$330.25 - $ - Outstanding at December 31, 202335 $330.25 16 $87.74 Exercisable at December 31, 20239 $330.25 - $ - **Current (2025):** Stock option activity was as follows: Units in thousandsOptionsWeighted-AverageExercise PricePerformance Stock Options(1)Weighted-AverageExercise PriceOutstanding at January 2, 20228 $66.42 17 $85.54 Granted180 $330.25 - $ - Exercised(1)$6.55 - $ - Outstanding at January 1, 2023187 $319.72 17 $85.54 Exercised(8)$71.09 (1)$16.69 Cancelled(144)$330.25 - $ - Outstanding at December 31, 202335 $330.25 16 $87.74 Cancelled(35)$330.25 (16)$87.74 Outstanding at December 29, 2024 - $ - - $ - --- ## Modified: Marketable Equity Securities **Key changes:** - Reworded sentence: "As of December 29, 2024 and December 31, 2023, the fair value of our marketable equity securities totaled $93 million and $6 million, respectively." **Prior (2024):** Our short-term investments consist of marketable equity securities. As of December 31, 2023 and January 1, 2023, the fair value of our marketable equity securities totaled $6 million and $26 million, respectively. Gains and losses recognized in other (expense) income, net on our marketable equity securities were as follows: In millions202320222021Net (losses) recognized during the period on marketable equity securities$(2)$(81)$(52)Less: Net (losses) recognized during the period on marketable equity securities sold during the period(2) - (89)Net unrealized (losses) gains recognized during the period on marketable equity securities still held at the reporting date$ - $(81)$37 **Current (2025):** Our short-term investments consist of marketable equity securities. As of December 29, 2024 and December 31, 2023, the fair value of our marketable equity securities totaled $93 million and $6 million, respectively. The increase in our marketable equity securities relates to the investment we retained in GRAIL subsequent to the Spin-Off, which was initially recorded as $397 million, representing 14.5% of GRAIL's net assets disposed of at Spin-Off. Refer to note 2. GRAIL Spin-Off for details. We recorded an unrealized loss of $309 million in 2024, subsequent to the Spin-Off, based on the fair value of our investment in GRAIL as of December 29, 2024. Gains and (losses) recognized in other expense, net on marketable equity securities were as follows: In millions202420232022Net (losses) recognized during the period on marketable equity securities$(310)$(2)$(81)Less: Net (losses) recognized during the period on marketable equity securities sold during the period - (2) - Net unrealized (losses) recognized during the period on marketable equity securities still held at the reporting date$(310)$ - $(81) Net (losses) recognized during the period on marketable equity securities Less: Net (losses) recognized during the period on marketable equity securities sold during the period Net unrealized (losses) recognized during the period on marketable equity securities still held at the reporting date --- ## Modified: Helix Contingent Value Right **Key changes:** - Reworded sentence: "In conjunction with the deconsolidation of Helix Holdings I, LLC (Helix) in April 2019, we received a contingent value right with a 7-year term that entitled us to consideration dependent upon the outcome of Helix's future financing and/or liquidity events." - Reworded sentence: "Changes in the estimated fair value are recognized in other expense, net." **Prior (2024):** In conjunction with the deconsolidation of Helix Holdings I, LLC (Helix) in April 2019, we received a contingent value right with a 7-year term that entitles us to consideration dependent upon the outcome of Helix's future financing and/or liquidity events. We elected the fair value option to measure the contingent value right received from Helix. The fair value of the contingent value right, included in other assets, is derived using a Monte Carlo simulation. Estimates and assumptions used in the Monte Carlo simulation include probabilities related to the timing and outcome of future financing and/or liquidity events, assumptions regarding collectability and volatility, and an estimated equity value of Helix. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Changes in the fair value of the Helix contingent value right, included in other (expense) income, net were as follows: In millionsBalance as of January 3, 2021$35 Change in estimated fair value30 Balance as of January 2, 202265 Change in estimated fair value(7)Balance as of January 1, 202358 Change in estimated fair value10 Balance as of December 31, 2023$68 67 67 67 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** In conjunction with the deconsolidation of Helix Holdings I, LLC (Helix) in April 2019, we received a contingent value right with a 7-year term that entitled us to consideration dependent upon the outcome of Helix's future financing and/or liquidity events. We elected the fair value option to measure the contingent value right received from Helix. Changes in the estimated fair value are recognized in other expense, net. We estimated the fair value of the contingent value right using a Monte Carlo simulation. Estimates and assumptions used in the Monte Carlo simulation included probabilities related to the timing and outcome of future financing and/or liquidity events, assumptions regarding collectability and volatility, and an estimated equity value of Helix. These unobservable inputs represented a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. On July 31, 2024, we received cash of $83 million to settle the contingent value right early. Changes in the Helix contingent value right were as follows: In millionsBalance as of January 2, 2022$65 Change in estimated fair value(7)Balance as of January 1, 202358 Change in estimated fair value10 Balance as of December 31, 202368 Change in estimated fair value15 Cash received to settle(83)Balance as of December 29, 2024$ - --- ## Modified: Contract Assets and Liabilities **Key changes:** - Reworded sentence: "Contract assets, which consist of revenue recognized and performance obligations satisfied or partially satisfied in advance of customer billing, as of December 29, 2024 and December 31, 2023, were $16 million and $18 million, respectively, all of which were short-term and recorded in prepaid expenses and other current assets." **Prior (2024):** Contract assets, which consist of revenue recognized and performance obligations satisfied or partially satisfied in advance of customer billing, as of December 31, 2023 and January 1, 2023 were $18 million and $17 million, respectively, all of which were short-term and recorded in prepaid expenses and other current assets. Contract liabilities, which consist of deferred revenue and customer deposits, as of December 31, 2023 and January 1, 2023 were $329 million and $308 million, respectively, of which the short-term portions of $252 million and $245 million, respectively, were recorded in accrued liabilities and the remaining long-term portions were recorded in other long-term liabilities. Revenue recorded in 2023 included $235 million of previously deferred revenue that was included in contract liabilities as of January 1, 2023. 65 65 65 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Contract assets, which consist of revenue recognized and performance obligations satisfied or partially satisfied in advance of customer billing, as of December 29, 2024 and December 31, 2023, were $16 million and $18 million, respectively, all of which were short-term and recorded in prepaid expenses and other current assets. Contract liabilities, which consist of deferred revenue and customer deposits, as of December 29, 2024 and December 31, 2023, were $327 million and $329 million, respectively, of which the short-term portions of $260 million and $252 million, respectively, were recorded in accrued liabilities and the remaining long-term portions were recorded in other long-term liabilities. Revenue recorded in 2024 included $245 million of previously deferred revenue that was included in contract liabilities as of December 31, 2023. --- ## Modified: Goodwill, Intangible Assets and Other Long-Lived Assets **Key changes:** - Removed sentence: "The IPR&D impairment test is performed by comparing the fair value of the asset to its carrying amount." - Removed sentence: "When testing indefinite-lived intangibles for impairment, we may assess qualitative factors to determine whether it is more likely than not that the asset is impaired." - Removed sentence: "Alternatively, we may bypass this qualitative assessment and perform a quantitative impairment test." - Removed sentence: "If the IPR&D asset is impaired, the carrying value of the IPR&D is written down to the revised fair value with the related impairment charge recognized in the period in which the impairment occurs." - Removed sentence: "Our identifiable intangible assets with a finite life are typically comprised of acquired developed technologies, licensed technologies, customer relationships, license agreements, and trade names." **Prior (2024):** Assets acquired, including intangible assets and capitalized in-process research and development (IPR&D), and liabilities assumed are measured at fair value as of the acquisition date. Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of the net assets acquired. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon reaching the end of the relevant research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life. If the relevant research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment. Goodwill and IPR&D are not amortized; however, they are reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. Goodwill and IPR&D are considered to be impaired if the carrying value of the reporting unit or IPR&D asset exceeds its respective fair value. We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting structure and availability of discrete financial information. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than the carrying amounts, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair values of our reporting units are less than the carrying amounts, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair values of the reporting units with the carrying values, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, we record an impairment loss based on the difference. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test. The IPR&D impairment test is performed by comparing the fair value of the asset to its carrying amount. When testing indefinite-lived intangibles for impairment, we may assess qualitative factors to determine whether it is more likely than not that the asset is impaired. Alternatively, we may bypass this qualitative assessment and perform a quantitative impairment test. If the IPR&D asset is impaired, the carrying value of the IPR&D is written down to the revised fair value with the related impairment charge recognized in the period in which the impairment occurs. Our identifiable intangible assets with a finite life are typically comprised of acquired developed technologies, licensed technologies, customer relationships, license agreements, and trade names. The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets' respective estimated useful lives. We perform regular reviews to determine if any event has occurred that may indicate that intangible assets with finite useful lives and other long-lived assets are potentially impaired. If indicators of impairment exist, an impairment test is performed to assess the recoverability of the affected assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows. If the affected assets are not recoverable, we estimate the fair value of the assets and record an impairment loss in an amount equal to the excess of the carrying value over the fair value. Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to the net book value, significant changes in the ability of a particular asset to generate positive cash flows for our strategic business objectives, and the pattern of utilization of a particular asset. 61 61 61 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Assets acquired, including intangible assets and capitalized in-process research and development (IPR&D), and liabilities assumed are measured at fair value as of the acquisition date. Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of the net assets acquired. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite lived until the completion or abandonment of the associated research and development efforts. Upon reaching the end of the relevant research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life. If the relevant research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment. Goodwill and IPR&D are not amortized; however, they are reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. Goodwill and IPR&D are considered to be impaired if the carrying value of the reporting unit or IPR&D asset exceeds its respective fair value. We perform our goodwill impairment analysis at the reporting unit level, which aligns with our reporting structure and availability of discrete financial information. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting units are less than the carrying amounts, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair values of our reporting units are less than the carrying amounts, then no additional assessment is deemed necessary. Otherwise, we proceed to compare the estimated fair values of the reporting units with the carrying values, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, we record an impairment loss based on the difference. We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test. 61 61 61 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Advertising Costs **Key changes:** - Reworded sentence: "Advertising costs are expensed as incurred and were $37 million, $36 million, and $53 million in 2024, 2023, and 2022, respectively." **Prior (2024):** Advertising costs are expensed as incurred. Advertising costs were $36 million, $53 million, and $48 million in 2023, 2022, and 2021, respectively. **Current (2025):** Advertising costs are expensed as incurred and were $37 million, $36 million, and $53 million in 2024, 2023, and 2022, respectively. --- ## Modified: In the past, defects have been discovered in our products, as a result of which we have incurred costs and our products have been subject to recalls. If defects are discovered in our products in the future, we may incur additional unforeseen costs, our products may be subject to recalls, customers may not purchase our products, our reputation may suffer, and ultimately our sales and operating earnings could be negatively impacted. **Key changes:** - Reworded sentence: "In the course of conducting our business, we must adequately address quality issues associated with our products and services, including defects in our engineering, software development, product cybersecurity, design, and manufacturing processes, as well as defects in third-party components included in our products." - Reworded sentence: "Defects or errors in our products have resulted in shipment holds, product recalls, negative publicity and adverse financial impacts in the past." - Reworded sentence: "Because our products are designed to be used to perform complex genomic analysis and our instruments can be, and often are, connected to the internet, which presents product cybersecurity risk, we expect that our customers will have an increased sensitivity to such defects." **Prior (2024):** Our products incorporate complex, precision-manufactured mechanical parts, electrical components, optical components, and fluidics, as well as computer software and complex surface chemistry, biochemistry and reagents, any of which may contain or result in errors or failures, especially when first introduced. In the course of conducting our business, we must adequately address quality issues associated with our products and services, including defects in our engineering, design, and manufacturing processes, as well as defects in third-party components included in our products. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after commercial shipment. Defects or errors in our products may discourage customers from purchasing our products. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating margins. Identifying the root cause of quality issues, particularly those affecting reagents and third-party components, may be difficult, which increases the time needed to address quality issues as they arise, and increases the risk that similar problems could recur. Because our products are designed to be used to perform complex genomic analysis, we expect that our customers will have an increased sensitivity to such defects. If we do not meet applicable regulatory or quality standards, our products may be subject to recall, and, under certain circumstances, we may be required to notify applicable regulatory authorities about a recall. If our products are subject to recall or shipment holds, our reputation, business, financial condition, or results of operations could be adversely affected. **Current (2025):** Our products incorporate complex, precision-manufactured mechanical parts, electrical components, optical components, and fluidics, as well as computer software and complex surface chemistry, biochemistry and reagents, any of which may contain or result in errors or failures, especially when first introduced. In the course of conducting our business, we must adequately address quality issues associated with our products and services, including defects in our engineering, software development, product cybersecurity, design, and manufacturing processes, as well as defects in third-party components included in our products. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after commercial shipment. Defects or errors in our products have resulted in shipment holds, product recalls, negative publicity and adverse financial impacts in the past. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating margins. Identifying the root cause of quality issues, particularly those affecting reagents and third-party components, may be difficult, which increases the time needed to address quality issues as they arise, and increases the risk that similar problems could recur. Because our products are designed to be used to perform complex genomic analysis and our instruments can be, and often are, connected to the internet, which presents product cybersecurity risk, we expect that our customers will have an increased sensitivity to such defects. If we do not meet applicable regulatory or quality standards, our products may be, and in the past have been, subject to recall, and, under certain circumstances, we may be required to, and have in the past been required to, notify applicable regulatory authorities about a recall. Quality issues may also result in, and have in the past resulted in, additional regulatory and governmental scrutiny. If our products are subject to recall or shipment holds, our reputation, business, financial condition, or results of operations could be adversely affected. --- ## Modified: GRAIL Contingent Consideration **Key changes:** - Reworded sentence: "As disclosed in Note 4 of the consolidated financial statements, the fair value of the contingent consideration liability as of December 29, 2024 is $71 million." - Reworded sentence: "We evaluated the reasonableness of projected revenue growth used within the valuation against industry trends, market trends, and other market information." - Reworded sentence: "How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the contingent consideration liability related to GRAIL." **Prior (2024):** In connection with the August 18, 2021 acquisition of GRAIL, the Company recognized a contingent consideration liability at the estimated fair value on the acquisition date. The Company uses a Monte Carlo simulation model to determine the fair value of the contingent consideration liability each reporting period. As disclosed in Note 3 of the consolidated financial statements, the fair value of the contingent consideration liability as of December 31, 2023 is $387 million. The Company recognized a $24 million gain in the current year as a result of the change in the fair value of the contingent consideration liability. Auditing the valuation of the contingent consideration liability was complex and required significant auditor judgment due to the estimation uncertainty in evaluating the reasonableness of the significant assumptions. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the GRAIL contingent consideration due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions to the model include forecasted revenues for GRAIL and the discount rate based on the estimated timing of payments. These significant assumptions are forward-looking and could be affected by future economic and market conditions. 48 48 48 How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the contingent consideration liability related to the GRAIL acquisition. This included controls over management's development of the above-described assumptions used in the valuation model applied. In testing the valuation of the contingent consideration liability, we performed audit procedures that included, among others, evaluating the Company's use of the Monte Carlo simulation model and testing the significant assumptions used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. We evaluated the reasonableness of projected revenue growth used within the valuations against analyst expectations, industry trends, market trends, and other market information. In addition, we involved valuation specialists to assist in evaluating the Company's use of the Monte Carlo simulation model and selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the contingent consideration liability related to the GRAIL acquisition. This included controls over management's development of the above-described assumptions used in the valuation model applied. In testing the valuation of the contingent consideration liability, we performed audit procedures that included, among others, evaluating the Company's use of the Monte Carlo simulation model and testing the significant assumptions used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. We evaluated the reasonableness of projected revenue growth used within the valuations against analyst expectations, industry trends, market trends, and other market information. In addition, we involved valuation specialists to assist in evaluating the Company's use of the Monte Carlo simulation model and selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities. /s/ Ernst & Young LLP We have served as the Company's auditor since 2000. San Diego, California February 16, 2024 49 49 49 **Current (2025):** In connection with the August 18, 2021 acquisition of GRAIL, the Company recognized a contingent consideration liability at the estimated fair value on the acquisition date. The Company uses a Monte Carlo simulation model to determine the fair value of the contingent consideration liability each reporting period. As disclosed in Note 4 of the consolidated financial statements, the fair value of the contingent consideration liability as of December 29, 2024 is $71 million. The Company recognized a $315 million gain in the current year as a result of the change in the fair value of the contingent consideration liability. Auditing the valuation of the contingent consideration liability was complex and required significant auditor judgment due to the estimation uncertainty in evaluating the reasonableness of a significant assumption, which is the revenue risk premium. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the GRAIL contingent consideration due to the sensitivity of the fair value to changes in the revenue risk premium. The revenue risk premium is forward-looking and could be affected by future economic and market conditions. 48 48 48 How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the contingent consideration liability related to GRAIL. This included controls over management's development of the above-described assumption used in the valuation model applied. In testing the valuation of the contingent consideration liability, we performed audit procedures that included, among others, evaluating the Company's use of the Monte Carlo simulation model and testing the significant assumption used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumption and estimate. In addition, we involved valuation specialists to assist in evaluating the Company's use of the Monte Carlo simulation model and selection of the revenue risk premium. Our valuation specialists evaluated the revenue risk premium by comparing it against a range that was independently developed using publicly available market data for comparable entities. Impairment assessment of GRAIL in-process research and development (IPR&D)Description of the MatterThe Company tests indefinite-lived intangible assets for impairment annually, as of May, or more frequently if events or circumstances indicate it is more likely than not that the fair value of an asset is less than its carrying amount. The Company identified a triggering event that occurred in the three months ended June 30, 2024 that required an interim impairment test. GRAIL IPR&D was tested for impairment by comparing its fair value to its carrying value. As disclosed in Note 5 of the consolidated financial statements, as a result of the interim impairment assessment, the Company recorded an impairment loss of $420 million related to GRAIL IPR&D. The carrying value of IPR&D following the impairment assessment was $140 million. The Company divested GRAIL on June 24, 2024. Auditing the Company's IPR&D impairment assessment was complex and required significant auditor judgment due to the significant estimation uncertainty in determining the fair value of GRAIL IPR&D. Management used an income approach to estimate the fair value of GRAIL IPR&D. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of GRAIL IPR&D due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions include forecasted revenues for GRAIL IPR&D and the discount rate used to discount future cash flows. These significant assumptions related to the fair value of GRAIL IPR&D are forward-looking and could be affected by future economic and market conditions.How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of GRAIL IPR&D. This included controls over management's development of the above-described assumptions used in the valuation model applied.In testing the valuation of GRAIL IPR&D, we performed audit procedures that included, among others, evaluating the Company's use of the income approach and testing the significant assumptions used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. We evaluated the reasonableness of projected revenue growth used within the valuation against industry trends, market trends, and other market information. In addition, we involved valuation specialists to assist in evaluating the Company's use of the income approach and selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the contingent consideration liability related to GRAIL. This included controls over management's development of the above-described assumption used in the valuation model applied. In testing the valuation of the contingent consideration liability, we performed audit procedures that included, among others, evaluating the Company's use of the Monte Carlo simulation model and testing the significant assumption used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumption and estimate. In addition, we involved valuation specialists to assist in evaluating the Company's use of the Monte Carlo simulation model and selection of the revenue risk premium. Our valuation specialists evaluated the revenue risk premium by comparing it against a range that was independently developed using publicly available market data for comparable entities. --- ## Modified: Financial Statement Schedules **Key changes:** - Reworded sentence: "99 99 99 Table of Contents Table of Contents" **Prior (2024):** All financial schedules have been omitted as the required information is not applicable, not material, or because the information required is included in the consolidated financial statements and notes thereto included in the Consolidated Financial Statements section of this report. 96 96 96 Table of Contents Table of Contents **Current (2025):** All financial schedules have been omitted as the required information is not applicable, not material, or because the information required is included in the consolidated financial statements and notes thereto included in the Consolidated Financial Statements section of this report. 99 99 99 Table of Contents Table of Contents --- ## Modified: Property and Equipment **Key changes:** - Reworded sentence: "Costs incurred to develop internal-use software during the application development stage are recorded at cost as computer software." - Reworded sentence: "The estimated useful lives of the major classes of property and equipment are generally as follows: Buildings and leasehold improvements4 to 20 yearsMachinery and equipment3 to 5 yearsComputer hardware and software3 to 9 yearsFurniture and fixtures7 years 4 to 20 years 3 to 5 years 3 to 9 years 7 years Leases We have various non-cancellable operating lease agreements for office, lab, manufacturing, and distribution facilities." - Reworded sentence: "As of December 29, 2024, we do not have any financing leases." **Prior (2024):** Property and equipment are stated at cost, subject to review for impairment, and depreciated over the estimated useful lives of the assets, using the straight-line method. Depreciation of leasehold improvements is recorded over the shorter of the lease term or the estimated useful life of the related assets. Maintenance and repairs are expensed as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense. Costs incurred to develop internal-use software during the application development stage are recorded as computer software costs, at cost. Costs incurred in the development of such internal-use software, including external direct costs of materials and services and applicable compensation costs of employees devoted to specific software application development, are capitalized. Costs incurred outside of the application development stage are expensed as incurred. The estimated useful lives of the major classes of property and equipment are generally as follows: Buildings and leasehold improvements4 to 20 yearsMachinery and equipment3 to 5 yearsComputer hardware and software3 to 9 yearsFurniture and fixtures7 years 4 to 20 years 3 to 5 years 3 to 9 years 7 years Leases We lease approximately 2.8 million square feet of office, lab, manufacturing, and distribution facilities under various non-cancellable operating lease agreements (real estate leases). Our real estate leases have remaining lease terms of approximately 1 year to 15 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms, ranging from approximately 2 years to 20 years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms, as well as payments for common-area-maintenance and administrative services. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. We do not have any material financing leases. Operating lease right-of-use assets and liabilities on our consolidated balance sheets represent the present value of our remaining lease payments over the remaining lease terms, less any impairments recorded for right-of-use assets. We do not allocate lease payments to non-lease components; therefore, fixed payments for common-area-maintenance and administrative services are included in our operating lease right-of-use assets and liabilities. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable. Operating lease costs consist primarily of the fixed lease payments included in our operating lease liabilities and are recorded on a straight-line basis over the lease terms. We sublease certain real estate to third parties and this sublease income is also recorded on a straight-line basis. **Current (2025):** Property and equipment are stated at cost, subject to review for impairment, and depreciated over the estimated useful lives of the assets, using the straight-line method. Depreciation of leasehold improvements is recorded over the shorter of the lease term or the estimated useful life of the related assets. Maintenance and repairs are expensed as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense. Costs incurred to develop internal-use software during the application development stage are recorded at cost as computer software. Costs incurred in the development of such internal-use software, including external direct costs of materials and services and applicable compensation costs of employees devoted to specific software application development, are capitalized. Costs incurred outside of the application development stage are expensed as incurred. The estimated useful lives of the major classes of property and equipment are generally as follows: Buildings and leasehold improvements4 to 20 yearsMachinery and equipment3 to 5 yearsComputer hardware and software3 to 9 yearsFurniture and fixtures7 years 4 to 20 years 3 to 5 years 3 to 9 years 7 years Leases We have various non-cancellable operating lease agreements for office, lab, manufacturing, and distribution facilities. These leases have remaining lease terms of 1 year to 14 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms, ranging from 2 years to 20 years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms, as well as payments for common-area-maintenance and administrative services. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. As of December 29, 2024, we do not have any financing leases. 60 60 60 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: RECENT ACCOUNTING PRONOUNCEMENTS **Key changes:** - Reworded sentence: "For a summary of recent accounting pronouncements applicable to our consolidated financial statements refer to note 1." **Prior (2024):** For a summary of recent accounting pronouncements applicable to our consolidated financial statements see note "1. Organization and Significant Accounting Policies" within the Consolidated Financial Statements section of this report, which is incorporated herein by reference. 45 45 45 **Current (2025):** For a summary of recent accounting pronouncements applicable to our consolidated financial statements refer to note 1. Organization and Significant Accounting Policies within the Consolidated Financial Statements section of this report, which is incorporated herein by reference. 46 46 46 --- ## Modified: Cash Equivalents and Investments **Key changes:** - Reworded sentence: "Cash equivalents are comprised of short-term, highly-liquid investments with original maturities of 90 days or less." - Reworded sentence: "Realized and unrealized gains and losses on our equity investments are recorded in other expense, net in the consolidated statements of operations." - Reworded sentence: "Impairment losses, equal to the difference between the carrying value and the fair value of the investment, are recorded in other expense, net." - Reworded sentence: "Such investments are recorded in other assets, and our share of net income or loss is recognized on a one quarter lag in other expense, net." **Prior (2024):** We have strategic investments in privately-held companies (non-marketable equity securities) and companies that have completed initial public offerings (marketable equity securities). Our marketable equity securities are measured at fair value. Our non-marketable equity securities without readily determinable market values are initially measured at cost and adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Equity investments are classified as current, short-term investments, or noncurrent, recorded in other assets, based on the nature of the securities and their availability for use in current operations. Unrealized gains and losses on our equity investments are recorded in other (expense) income, net in the consolidated statements of operations. Our equity investments are assessed for impairment quarterly. Impairment losses, equal to the difference between the carrying value and the fair value of the investment, are recorded in other (expense) income, net. We use the equity method to account for investments through which we have the ability to exercise significant influence, but not control, over the investee. Such investments are recorded in other assets, and our share of net income or loss is recognized on a one quarter lag in other (expense) income, net. **Current (2025):** Cash equivalents are comprised of short-term, highly-liquid investments with original maturities of 90 days or less. We have strategic investments in privately-held companies (non-marketable equity securities) and publicly traded companies (marketable equity securities). Our marketable equity securities are measured at fair value. Our non-marketable equity securities without readily determinable market values are initially measured at cost and adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment. Equity investments are classified as current, short-term investments, or noncurrent, recorded in other assets, based on the nature of the securities and their availability for use in current operations. Realized and unrealized gains and losses on our equity investments are recorded in other expense, net in the consolidated statements of operations. Our equity investments are assessed for impairment quarterly. Impairment losses, equal to the difference between the carrying value and the fair value of the investment, are recorded in other expense, net. We use the equity method to account for investments through which we have the ability to exercise significant influence, but not control, over the investee. Such investments are recorded in other assets, and our share of net income or loss is recognized on a one quarter lag in other expense, net. 59 59 59 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Employee Stock Purchase Plan **Key changes:** - Reworded sentence: "The 2000 Employee Stock Purchase Plan, or ESPP, permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods." - Reworded sentence: "During 2024, 2023, and 2022, approximately 0.5 million, 0.4 million, and 0.3 million shares, respectively, were issued under the ESPP." **Prior (2024):** A total of 15.5 million shares of our common stock have been reserved for issuance under our 2000 Employee Stock Purchase Plan, or ESPP. The ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower. The initial offering period commenced in July 2000. Approximately 0.4 million, 0.3 million and 0.2 million shares during 2023, 2022 and 2021, respectively, were issued under the ESPP. As of December 31, 2023 and January 1, 2023, there were approximately 12.4 million and 12.8 million shares available for issuance under the ESPP, respectively. 79 79 79 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** The 2000 Employee Stock Purchase Plan, or ESPP, permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower. The initial offering period commenced in July 2000. During 2024, 2023, and 2022, approximately 0.5 million, 0.4 million, and 0.3 million shares, respectively, were issued under the ESPP. As of December 29, 2024, approximately 12.4 million shares remained available for issuance under the ESPP, which includes an increase of 0.5 million shares pursuant to the terms of the ESPP to account for the GRAIL Spin-Off. 80 80 80 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Cash Flow Summary **Key changes:** - Reworded sentence: "In millions202420232022Net cash provided by operating activities$837 $478 $392 Net cash used in investing activities(178)(231)(591)Net cash (used in) provided by financing activities(570)(1,210)1,000 Effect of exchange rate changes on cash and cash equivalents(10) - (22)Net increase (decrease) in cash and cash equivalents$79 $(963)$779 39 39 39 Operating Activities Net cash provided by operating activities in 2024 consisted of a net loss of $1,223 million, plus net adjustments of $2,543 million, less net changes in operating assets and liabilities of $483 million." **Prior (2024):** In millions202320222021Net cash provided by operating activities$478 $392 $545 Net cash used in investing activities(231)(591)(1,069)Net cash (used in) provided by financing activities(1,210)1,000 (51)Effect of exchange rate changes on cash and cash equivalents - (22)(3)Net (decrease) increase in cash and cash equivalents$(963)$779 $(578) Operating Activities Net cash provided by operating activities in 2023 primarily consisted of net adjustments of $1,729 million, less net loss of $1,161 million, and less net changes in operating assets and liabilities of $90 million. The primary non-cash adjustments to net loss included goodwill and IPR&D impairments of $827 million, depreciation and amortization expenses of $432 million, share-based compensation of $380 million, property and equipment and right-of-use asset impairment of $100 million, net losses on strategic investments of $40 million, and an unrealized loss on foreign exchange translation of $22 million, partially offset by deferred income taxes of $33 million and a gain recorded on our contingent consideration liabilities of $24 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by increases in accounts receivable and inventory, and a decrease in accounts payable. Net cash provided by operating activities in 2022 primarily consisted of net adjustments of $4,592 million and net changes in operating assets and liabilities of $204 million, less net loss of $4,404 million. The primary non-cash adjustments to net loss included goodwill impairment of $3,914 million, depreciation and amortization expenses of $394 million, share-based compensation of $366 million, and net losses on strategic investments of $122 million, partially offset by a gain recorded on our contingent consideration liabilities of $205 million and deferred income taxes of $23 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by an increase in accrued liabilities, partially offset by an increase in inventory and a decrease in accounts payable. Investing Activities Net cash used in investing activities totaled $231 million in 2023. We invested $195 million in capital expenditures, primarily associated with our investment in facilities, paid $29 million, net of cash acquired, for an acquisition, and used $6 million for net purchases of strategic investments. Net cash used in investing activities totaled $591 million in 2022. We invested $286 million in capital expenditures, primarily associated with our investment in facilities, paid $180 million for an intangible asset related to our settlement with BGI, $85 million, net of cash acquired, for an acquisition, and $40 million for purchases of strategic investments. Financing Activities Net cash used in financing activities totaled $1,210 million in 2023. We repaid our 2023 Term Notes, with an aggregate principal amount of $500 million, in Q1 2023, repaid our 2023 Convertible Notes, with an aggregate principal amount of $750 million, in Q3 2023, and used $40 million to pay taxes related to net share settlement of equity awards, partially offset by $67 million received in proceeds from the sale of shares under our employee stock purchase plan and the issuance of common stock through the exercise of stock options. Net cash provided by financing activities totaled $1,000 million in 2022. We received $991 million in net proceeds from the issuance of debt and $63 million in proceeds from the sale of shares under our employee stock purchase plan and the issuance of common stock through the exercise of stock options, partially offset by $54 million used to pay taxes related to net share settlement of equity awards. **Current (2025):** In millions202420232022Net cash provided by operating activities$837 $478 $392 Net cash used in investing activities(178)(231)(591)Net cash (used in) provided by financing activities(570)(1,210)1,000 Effect of exchange rate changes on cash and cash equivalents(10) - (22)Net increase (decrease) in cash and cash equivalents$79 $(963)$779 39 39 39 Operating Activities Net cash provided by operating activities in 2024 consisted of a net loss of $1,223 million, plus net adjustments of $2,543 million, less net changes in operating assets and liabilities of $483 million. The primary adjustments to net loss included goodwill and intangible impairment of $1,889 million, share-based compensation expense of $370 million, depreciation and amortization expense of $354 million, net loss on strategic investments of $312 million, and property and equipment and right-of-use asset impairment of $46 million, offset by change in fair value of contingent consideration liabilities of $315 million and deferred income taxes of $112 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by decreases in accrued liabilities and inventory, offset by increases in accounts receivable, operating lease right-of-use assets and liabilities, net, and other long-term liabilities. Net cash provided by operating activities in 2023 consisted of net adjustments of $1,729 million, less a net loss of $1,161 million and net changes in operating assets and liabilities of $90 million. The primary adjustments to net loss included goodwill and intangible impairment of $827 million, depreciation and amortization expense of $432 million, share-based compensation of $380 million, property and equipment and right-of-use asset impairment of $100 million, and net loss on strategic investments of $40 million, offset by deferred income taxes of $33 million and change in fair value of contingent consideration liabilities of $24 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by increases in accounts receivable and inventory and a decrease in accounts payable. Investing Activities Net cash used in investing activities totaled $178 million in 2024. We invested $128 million in capital expenditures, net of proceeds received from sales, 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 $52 million. This was offset by the receipt of $83 million related to the settlement of our Helix contingent value right. Net cash used in investing activities totaled $231 million in 2023. We invested $195 million in capital expenditures, primarily associated with our investment in facilities, paid $30 million for an acquisition, net of cash acquired, and other intangible assets, and used $6 million for net purchases of strategic investments. Financing Activities Net cash used in financing activities totaled $570 million in 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, used $116 million to repurchase our common stock, and used $32 million to pay taxes related to net share settlement of equity awards. 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. Net cash used in financing activities totaled $1,210 million in 2023. We repaid our 2023 Term Notes, with an aggregate principal amount of $500 million, repaid our 2023 Convertible Notes, with an aggregate principal amount of $750 million, and used $40 million to pay taxes related to net share settlement of equity awards. This was offset by $67 million received in proceeds from the sale of shares under our employee stock purchase plan and the issuance of common stock through the exercise of stock options. --- ## Modified: 2022 Impairment of Goodwill **Key changes:** - Reworded sentence: "On July 13, 2022, the EU General Court ruled that the European Commission had jurisdiction under the EU Merger Regulation to review our acquisition of GRAIL." - Reworded sentence: "These decisions, along with a continued and significant decrease in the Company's stock price and market capitalization, required us to perform an interim impairment test in Q3 2022." - Reworded sentence: "The income approach utilized the estimated discounted cash flows for each reporting unit, while the market approach utilized comparable company information." - Reworded sentence: "For GRAIL, the discount rate selected was 22.0%." - Reworded sentence: "In conjunction with our interim goodwill impairment test, we also evaluated GRAIL's IPR&D intangible asset for potential impairment." **Prior (2024):** On July 13, 2022, the EU General Court ruled that the European Commission has jurisdiction under the EU Merger Regulation to review our acquisition of GRAIL. Additionally, on September 6, 2022, the European Commission issued its decision prohibiting the acquisition. Refer to note "8. Legal Proceedings" for additional details. These decisions, along with a continued and significant decrease in the Company's stock price and market capitalization, required us to perform an interim goodwill and intangible asset impairment test in Q3 2022. Based on our interim analysis, we concluded that our GRAIL reporting unit's carrying value exceeded its estimated fair value. As a result, we recorded $3,914 million of goodwill impairment related to our GRAIL reporting unit in Q3 2022, primarily due to the negative impact of current capital market conditions and a higher discount rate selected for the fair value calculation of the GRAIL reporting unit. No impairment was recorded for our Core Illumina reporting unit, noting its fair value exceeded its carrying value by more than $30 billion. We performed our interim goodwill impairment test using a combination of both an income and a market approach to determine the fair value of each reporting unit. The income approach utilized the estimated discounted cash flows for each reporting unit while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows for both the GRAIL and Core Illumina reporting units and a discount rate for each reporting unit. Discount rates were determined using a weighted average cost of capital for risk factors specific to each reporting unit and other market and industry data. For the GRAIL reporting unit, the discount rate selected was 22.0%. The estimates and assumptions used in our assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. In order to further validate the reasonableness of the fair values concluded for our reporting units, a reconciliation to market capitalization was performed by estimating a reasonable implied control premium and other market factors. In conjunction with the interim goodwill impairment test in Q3 2022, we also evaluated the IPR&D intangible asset, assigned to the GRAIL reporting unit, for potential impairment. We performed our interim impairment test by comparing the carrying value of the IPR&D intangible asset to its estimated fair value, which was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach included projected cash flows and a discount rate. These estimates and assumptions represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Based on our interim impairment test, the carrying value of the IPR&D intangible asset did not exceed its estimated fair value. As a result, no impairment for the IPR&D intangible asset was recorded. We also performed a recoverability test for the definite-lived intangible assets assigned to the GRAIL reporting unit, which includes developed technology and trade name, noting no impairment. Additionally, no impairment was noted for the definite-lived intangible assets assigned to our Core Illumina reporting unit. 72 72 72 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** On July 13, 2022, the EU General Court ruled that the European Commission had jurisdiction under the EU Merger Regulation to review our acquisition of GRAIL. Additionally, on September 6, 2022, the European Commission issued its decision prohibiting the acquisition. See note 9. Legal Proceedings. These decisions, along with a continued and significant decrease in the Company's stock price and market capitalization, required us to perform an interim impairment test in Q3 2022. Based on our analysis, we concluded GRAIL's carrying value exceeded its fair value and recorded a goodwill impairment of $3,914 million, primarily due to the negative impact of capital market conditions and a higher discount rate selected for the fair value calculation of GRAIL. There was no impairment for Core Illumina. We performed our interim goodwill impairment test using a combination of both an income and a market approach to determine the fair value of each reporting unit. The income approach utilized the estimated discounted cash flows for each reporting unit, while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows for both GRAIL and Core Illumina and a discount rate for each reporting unit. Discount rates were determined using a weighted average cost of capital for risk factors specific to each reporting unit and other market and industry data. For GRAIL, the discount rate selected was 22.0%. In order to further validate the reasonableness of the fair values concluded for our reporting units, a reconciliation to market capitalization was performed by estimating a reasonable implied control premium and other market factors. In conjunction with our interim goodwill impairment test, we also evaluated GRAIL's IPR&D intangible asset for potential impairment. We performed our impairment test by comparing the carrying value of the IPR&D intangible asset to its estimated fair value, which was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach included projected cash flows and a discount rate. Based on our analysis, the carrying value of the IPR&D intangible asset did not exceed its estimated fair value and no impairment was recorded. We also performed a recoverability test for the definite-lived intangible assets assigned to GRAIL, which included developed technology and trade name, and to Core Illumina and noted no impairment. 72 72 72 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Business Combinations **Key changes:** - Added sentence: "Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition." - Added sentence: "These valuations require us to make estimates and assumptions, especially with respect to intangible assets." - Added sentence: "We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill." - Added sentence: "Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as they are incurred." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** Under the acquisition method of accounting, we allocate the fair value of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. The fair values assigned, defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on estimates and assumptions determined by management. These valuations require us to make estimates and assumptions, especially with respect to intangible assets. We record the excess consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, as goodwill. Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as they are incurred. In connection with certain acquisitions, contingent consideration can be earned by the sellers upon completion of certain future performance milestones. In these cases, a liability is recorded on the acquisition date, as a component of accrued liabilities and/or other long-term liabilities, for an estimate of the acquisition-date fair value of the contingent consideration. We generally use a Monte Carlo simulation or an income approach to estimate the fair value of contingent consideration. Estimates and assumptions used in a Monte Carlo simulation include forecasted revenues, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. An income approach utilizes inputs such as anticipated future cash flows, risk-free adjusted discount rates, and nonperformance risk, as well as management judgment regarding the probability of achieving certain future milestones. Future changes in our estimates could result in expenses or gains. Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in selling, general and administrative expense. We typically use a discounted cash flow method to value acquired intangible assets. This method requires management judgment to forecast future operating results and establish residual growth rates and discount factors. The estimates we use to value and amortize intangible assets are consistent with the plans and estimates that we use to manage our business and are based on available historical information and industry estimates and averages. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges. In addition, we have estimated the economic lives of the acquired assets, which are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expense could be accelerated or extended. We capitalize in-process research and development (IPR&D) with an indefinite life until completion or abandonment of the associated research and development efforts. Upon reaching the end of the research and development project (i.e., upon commercialization), the IPR&D asset is amortized over its estimated useful life. If the research and development project is abandoned, the IPR&D asset is expensed in the period of abandonment. If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period (not to exceed one year from the date of acquisition), we report provisional amounts in our consolidated financial statements. During the measurement period, we adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. We record these adjustments to the provisional amounts with a corresponding offset to goodwill. Any adjustments identified after the measurement period are recorded in the consolidated statements of operations. 42 42 42 --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "We established a rabbi trust for the benefit of the participants under the Plan and have included the assets of the rabbi trust in other assets in the consolidated balance sheets." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "As of December 29, 2024, we asserted that $1,806 million of foreign earnings would not be indefinitely reinvested, and accordingly, recorded a deferred tax liability of $24 million." - Reworded sentence: "We recognized expense of $6 million and $2 million in 2024 and 2023, respectively, and income of $3 million in 2022, related to potential interest and penalties on uncertain tax positions." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: (In millions) **Key changes:** - Reworded sentence: "AccumulatedRetainedAdditionalOtherEarningsTotal Common StockPaid-InComprehensive(AccumulatedTreasury StockStockholders' SharesAmountCapitalIncome (Loss)Deficit)SharesAmountEquityBalance as of January 2, 2022197 $2 $8,938 $17 $5,485 (40)$(3,702)$10,740 Net loss - - - - (4,404) - - (4,404)Unrealized loss on cash flow hedges, net of deferred tax - - - (14) - - - (14)Issuance of common stock, net of repurchases1 - 63 - - - (53)10 Share-based compensation - - 299 - - - - 299 Cumulative-effect adjustment from adoption of ASU 2020-06, net of deferred tax - - (93) - 61 - - (32)Balance as of January 1, 2023198 2 9,207 3 1,142 (40)(3,755)6,599 Net loss - - - - (1,161) - - (1,161)Unrealized loss on cash flow hedges, net of deferred tax - - - (4) - - - (4)Issuance of common stock, net of repurchases1 - 64 - - - (37)27 Share-based compensation - - 275 - - - - 275 Reclassification of liability-classified awards - - 9 - - - - 9Balance as of December 31, 2023199 2 9,555 (1)(19)(40)(3,792)5,745 Net loss - - - - (1,223) - - (1,223)Unrealized gain on cash flow hedges, net of deferred tax - - - 23 - - - 23 Issuance of common stock, net of repurchases1 - 51 - - (1)(142)(91)Share-based compensation - - 318 - - - - 318 Spin-Off of GRAIL (see Note 2) - - (2,399) - - - - (2,399)Balance as of December 29, 2024200 $2 $7,525 $22 $(1,242)(41)$(3,934)$2,373" **Prior (2024):** Years Ended December 31,2023January 1,2023January 2,2022Net (loss) income$(1,161)$(4,404)$762 Unrealized (loss) gain on cash flow hedges, net of deferred tax(4)(14)16 Unrealized loss on available-for-sale debt securities, net of deferred tax - - (1)Total comprehensive (loss) income $(1,165)$(4,418)$777 See accompanying notes to consolidated financial statements. 52 52 52 **Current (2025):** Years Ended December 29,2024December 31,2023January 1,2023Net loss$(1,223)$(1,161)$(4,404)Unrealized gain (loss) on cash flow hedges, net of deferred tax23 (4)(14)Total comprehensive loss$(1,200)$(1,165)$(4,418) See accompanying notes to consolidated financial statements. 52 52 52 --- ## Modified: Income Taxes **Key changes:** - Reworded sentence: "64 64 64 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents" **Prior (2024):** Our provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid. Judgments and estimates based on interpretations of existing tax laws or regulations in the United States and the numerous foreign jurisdictions where we are subject to income tax are required in determining our provision for income taxes. Changes in tax laws, regulations, or statutory tax rates (including the implementation of global minimum tax rates in certain jurisdictions), and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the consolidated financial statements and would require an adjustment to the provision for income taxes. Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when we believe it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating our ability to recover deferred tax assets within the jurisdiction which they arise, we consider all available positive and negative evidence. Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, our history of earnings and reliability of our forecasts, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies. We recognize the impact of a tax position in our consolidated financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Tax authorities regularly examine our returns in the jurisdictions in which we do business and we regularly assess the tax risk of our return filing positions. Due to the complexity of some of the uncertainties, the ultimate resolution may result in payments that are materially different from our current estimate of the tax liability. These differences, as well as any interest and penalties, will be reflected in the provision for income taxes in the period in which they are determined. **Current (2025):** Our provision for income taxes, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid. Judgments and estimates based on interpretations of existing tax laws or regulations in the United States and the numerous foreign jurisdictions where we are subject to income tax are required in determining our provision for income taxes. Changes in tax laws, regulations, or statutory tax rates (including the implementation of global minimum tax rates in certain jurisdictions), and estimates of our future taxable income could impact the deferred tax assets and liabilities provided for in the consolidated financial statements and would require an adjustment to the provision for income taxes. Deferred tax assets are regularly assessed to determine the likelihood they will be recovered from future taxable income. A valuation allowance is established when we believe it is more likely than not the future realization of all or some of a deferred tax asset will not be achieved. In evaluating our ability to recover deferred tax assets within the jurisdiction which they arise, we consider all available positive and negative evidence. Factors reviewed include the cumulative pre-tax book income for the past three years, scheduled reversals of deferred tax liabilities, our history of earnings and reliability of our forecasts, projections of pre-tax book income over the foreseeable future, and the impact of any feasible and prudent tax planning strategies. We recognize the impact of a tax position in our consolidated financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Tax authorities regularly examine our returns in the jurisdictions in which we do business and we regularly assess the tax risk of our return filing positions. Due to the complexity of some of the uncertainties, the ultimate resolution may result in payments that are materially different from our current estimate of the tax liability. These differences, as well as any interest and penalties, will be reflected in the provision for income taxes in the period in which they are determined. 44 44 44 --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Removed sentence: "Our revenue is generated primarily from the sale of products and services." - Removed sentence: "Product revenue primarily consists of sales of instruments and consumables used in genetic analysis." - Removed sentence: "Service and other revenue primarily consists of revenue generated from genotyping and sequencing services, instrument service contracts, development and licensing agreements, and cancer detection testing services related to the GRAIL business." - Reworded sentence: "Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice." **Prior (2024):** Our revenue is generated primarily from the sale of products and services. Product revenue primarily consists of sales of instruments and consumables used in genetic analysis. Service and other revenue primarily consists of revenue generated from genotyping and sequencing services, instrument service contracts, development and licensing agreements, and cancer detection testing services related to the GRAIL business. We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. 40 40 40 **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: 0% Convertible Senior Notes due 2023 (2023 Convertible Notes) **Key changes:** - Added sentence: "In August 2018, we issued $750 million aggregate principal amount of 2023 Convertible Notes." - Added sentence: "The notes were convertible into cash, shares of common stock or a combination of cash and shares of common stock, at our election, based on conversion rates as defined in the indenture." - Added sentence: "The 2023 Convertible Notes matured on August 15, 2023, at which time the principal was repaid in cash." - Added sentence: "We did not issue any shares of common stock." - Removed sentence: "Assumptions used in the estimate represented what market participants would use in pricing the liability component, including market interest rates, credit standing, and yield curves, all of which are defined as Level 2 observable inputs." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** In August 2018, we issued $750 million aggregate principal amount of 2023 Convertible Notes. The notes were convertible into cash, shares of common stock or a combination of cash and shares of common stock, at our election, based on conversion rates as defined in the indenture. The 2023 Convertible Notes matured on August 15, 2023, at which time the principal was repaid in cash. We did not issue any shares of common stock. The 2023 Convertible Notes were initially accounted for in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance required the carrying amount of the liability component to be estimated by estimating the fair value of a similar liability that does not have an associated conversion feature. Because at issuance we had no outstanding non-convertible public debt, we determined that market-traded senior, unsecured corporate bonds represented a similar liability without a conversion option. Based on market data available for publicly traded, senior, unsecured corporate bonds issued by companies in our industry, and with similar maturities to the 2023 Convertible Notes, we estimated an implied interest rate of 3.7%, assuming no conversion option. The estimated implied interest rate was applied to the 2023 Convertible Notes, which resulted in a fair value of the liability component in aggregate of $624 million upon issuance, calculated as the present value of implied future payments based on the $750 million aggregate principal amount. The $126 million difference ($93 million, net of tax) between the aggregate principal amount of $750 million and the estimated fair value of the liability component was recorded in additional paid-in capital as the 2023 Convertible Notes were not considered redeemable. As of January 3, 2022, we adopted ASU 2020-06, which removed the requirement to separate the embedded conversion feature from the notes and requires the notes to be accounted for as a single liability measured at amortized cost. Accordingly, we reclassified the unamortized debt discount from additional paid-in capital to convertible senior notes in the consolidated balance sheets on January 3, 2022. This resulted in an increase to retained earnings and a decrease to additional paid-in capital of $61 million and $93 million, respectively. Interest expense recognized on our 2023 Convertible Notes was immaterial in both 2023 and 2022. --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "The impact of net operating losses on GILTI, U.S." - Reworded sentence: "Based on the available evidence as of December 29, 2024, we were not able to conclude it is more likely than not certain deferred tax assets will be realized." - Reworded sentence: "As of December 29, 2024, we had net operating loss carryforwards for federal and state tax purposes of $74 million and $1,872 million, respectively, which will begin to expire in 2036 and 2025, respectively, unless utilized prior." - Reworded sentence: "The deferred tax assets as of December 29, 2024 are net of any previous limitations due to Section 382 and 383." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Other Liability-Classified Awards **Key changes:** - Reworded sentence: "Prior to the GRAIL Spin-Off, we granted cash-based equity incentive awards to GRAIL employees, which were accounted for as liability-classified awards." **Prior (2024):** We grant cash-based equity incentive awards to GRAIL employees. For purposes of valuation and performance measurement of the awards, GRAIL's stand-alone value calculation, as estimated by GRAIL based on its analysis and on input from independent valuation advisors and analyses, is used. The awards generally have terms of four years and vest in four equal installments on each anniversary of the grant date, subject to continued employment through the vesting period. These awards are accounted for as liability-classified awards. four 78 78 78 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Prior to the GRAIL Spin-Off, we granted cash-based equity incentive awards to GRAIL employees, which were accounted for as liability-classified awards. In connection with the Spin-Off, these awards were assumed by GRAIL. For purposes of valuation and performance measurement of the awards, GRAIL's stand-alone value calculation, as estimated by GRAIL based on its analysis and on input from independent valuation advisors and analyses, was used. The awards generally had terms of four years and vested in four equal installments on each anniversary of the grant date, subject to continued employment through the vesting period. four 79 79 79 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Employee Separation Costs **Key changes:** - Reworded sentence: "Amount recorded in accrued liabilities as of January 1, 2023 Expense recorded Amount recorded in accrued liabilities as of December 31, 2023 Expense recorded Amount recorded in accrued liabilities as of December 29, 2024 9." **Prior (2024):** We are involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. In connection with these matters, we assess, on a regular basis, the probability and range of possible loss based on the developments in these matters. A liability is recorded in the consolidated financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review outstanding legal matters to determine the adequacy of the liabilities accrued and related disclosures in consideration of many factors, which include, but are not limited to, past history, scientific and other evidence, and the specifics and status of each matter. We may change our estimates if our assessment of the various factors changes and the amount of ultimate loss may differ from our estimates, resulting in a material effect on our business, financial condition, results of operations, and/or cash flows. **Current (2025):** Amount recorded in accrued liabilities as of January 1, 2023 Expense recorded Amount recorded in accrued liabilities as of December 31, 2023 Expense recorded Amount recorded in accrued liabilities as of December 29, 2024 9. LEGAL PROCEEDINGSWe are involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. In connection with these matters, we assess, on a regular basis, the probability and range of possible loss based on the developments in these matters. A liability is recorded in the consolidated financial statements if it is believed to be probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review outstanding legal matters to determine the adequacy of the liabilities accrued and related disclosures in consideration of many factors, which include, but are not limited to, past history, scientific and other evidence, and the specifics and status of each matter. We may change our estimates if our assessment of the various factors changes and the amount of ultimate loss may differ from our estimates, resulting in a material effect on our business, financial condition, results of operations, and/or cash flows. --- ## Modified: Restructuring **Key changes:** - Reworded sentence: "In both 2024 and 2023, we recorded restructuring charges primarily consisting of asset impairments related to exit activities at certain of our leased facilities." **Prior (2024):** We measure and accrue liabilities associated with employee separation costs, which primarily consist of severance pay and other separation costs such as outplacement services and benefits, at fair value as of the date the plan is approved and when such costs are reasonably estimable. The fair value measurement of restructuring related liabilities requires certain assumptions and estimates to be made, such as the retention period of certain employees. It is our policy to use the best estimates based on facts and circumstances available at the time of measurement, review the assumptions and estimates periodically, and adjust the liabilities when necessary. **Current (2025):** We measure and accrue liabilities associated with employee separation costs, which primarily consist of severance pay and other separation costs such as outplacement services and benefits, at fair value as of the date the plan is approved and when such costs are reasonably estimable. The fair value measurement of restructuring related liabilities requires certain assumptions and estimates to be made, such as the retention period of certain employees. It is our policy to use the best estimates based on facts and circumstances available at the time of measurement, review the assumptions and estimates periodically, and adjust the liabilities when necessary. --- ## Modified: Non-Marketable Equity Securities **Key changes:** - Reworded sentence: "As of December 29, 2024 and December 31, 2023, non-marketable equity securities, without readily determinable fair values, included in other assets, were $26 million and $28 million, respectively." **Prior (2024):** As of both December 31, 2023 and January 1, 2023, the aggregate carrying amounts of our non-marketable equity securities without readily determinable fair values, included in other assets, were $28 million. Revenue recognized from transactions with our strategic investees was $69 million, $113 million, and $74 million in 2023, 2022, and 2021, respectively. **Current (2025):** As of December 29, 2024 and December 31, 2023, non-marketable equity securities, without readily determinable fair values, included in other assets, were $26 million and $28 million, respectively. --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "We use foreign currency forward contracts to hedge portions of our foreign currency exposure associated with forecasted revenue transactions." - Reworded sentence: "Changes in fair value are recorded as a component of accumulated other comprehensive income (loss) and are reclassified to revenue in the same period the underlying hedged transactions are recorded." - Reworded sentence: "Changes in fair value of the ineffective portions of our cash flow hedges, if any, are recognized in other expense, net." **Prior (2024):** We are exposed to foreign exchange rate risks in the normal course of business and use derivative financial instruments to partially offset this exposure. We do not use derivative financial instruments for speculative or trading purposes. Foreign exchange contracts are carried at fair value in other current assets, other assets, accrued liabilities, or other long-term liabilities, as appropriate, on the consolidated balance sheets. We use foreign exchange forward contracts to manage foreign currency risks related to monetary assets and liabilities denominated in currencies other than the U.S. dollar. These derivative financial instruments have terms of one month or less and are not designated as hedging instruments. Changes in fair value of these derivatives are recognized in other (expense) income, net, along with the re-measurement gain or loss on the foreign currency denominated assets or liabilities. As of December 31, 2023, we had foreign exchange forward contracts in place to hedge exposures to monetary assets and liabilities denominated in the euro, Japanese yen, Australian dollar, Canadian dollar, Singapore dollar, Chinese Yuan Renminbi, and British pound. As of December 31, 2023 and January 1, 2023, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases were $926 million and $485 million, respectively. In July 2023, we entered into forward contracts for a total notional amount of €432 million to hedge the foreign currency exposure for the fine imposed by the European Commission on July 12, 2023. We also use foreign currency forward contracts to hedge portions of our foreign currency exposure associated with forecasted revenue transactions. These derivative financial instruments have terms up to 24 months and are designated as cash flow hedges. Changes in fair value of our cash flow hedges are recorded as a component of accumulated other comprehensive income and are reclassified to revenue in the same period the underlying hedged transactions are recorded. We regularly review the effectiveness of our cash flow hedges and consider them to be ineffective if it becomes probable that the forecasted transactions will not occur in the identified period. Changes in fair value of the ineffective portions of our cash flow hedges, if any, are recognized in other (expense) income, net. As of December 31, 2023, we had foreign currency forward contracts in place to hedge exposures associated with forecasted revenue transactions denominated in the euro, Japanese yen, Australian dollar, Canadian dollar, and Chinese Yuan Renminbi. As of December 31, 2023 and January 1, 2023, the total notional amounts of outstanding cash flow hedge contracts in place for these foreign currency purchases were $628 million and $425 million, respectively. We reclassified $18 million, $53 million, and $10 million to revenue in 2023, 2022, and 2021, respectively. As of December 31, 2023, the fair value of the foreign currency forward contracts recorded in total assets and total liabilities was $5 million and $9 million, respectively. As of January 1, 2023, the fair value of foreign currency forward contracts recorded in total assets and total liabilities was $8 million and $6 million, respectively. Warranties We generally provide a one-year warranty on instruments. Additionally, we provide a warranty on consumables through the expiration date, which generally ranges from six to twelve months after the manufacture date. At the time revenue is recognized, an accrual is established for estimated warranty expenses based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranty expense is recorded as a component of cost of product revenue. six **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Stock Units **Key changes:** - Reworded sentence: "(PSU) (1) Unvested adjustment for GRAIL Spin-Off (1)For EPS and OM PSU, the number of units reflect the estimated number of shares to be issued at the end of the performance period." - Removed sentence: "As of December 31, 2023, there were approximately 129,000 rTSR PSU granted." - Reworded sentence: "(1) Pre-tax intrinsic value and fair value of vested restricted stock was as follows: In millions202420232022Pre-tax intrinsic value of outstanding restricted stock:RSU$525 $306 $326 PSU$95 $ - $15 Fair value of restricted stock vested:RSU$116 $122 $162 PSU$ - $ - $49" **Prior (2024):** (PSU) (2) (1)In connection with the GRAIL acquisition, replacement awards of 59,000 RSU were awarded to GRAIL employees in 2021. (2)The number of units reflect the estimated number of shares to be issued at the end of the performance period. For rTSR PSU, the number of units reflect the estimated number of shares to be issued based on performance as of the current reporting period. As of December 31, 2023, there were approximately 129,000 rTSR PSU granted. Awarded units are presented net of performance adjustments. (2) The number of units reflect the estimated number of shares to be issued at the end of the performance period. For rTSR PSU, the number of units reflect the estimated number of shares to be issued based on performance as of the current reporting period. As of December 31, 2023, there were approximately 129,000 rTSR PSU granted . Awarded units are presented net of performance adjustments. Pre-tax intrinsic value and fair value of vested restricted stock was as follows: In millions202320222021Pre-tax intrinsic value of outstanding restricted stock:RSU$306 $326 $430 PSU$ - $15 $125 Fair value of restricted stock vested:RSU$122 $162 $247 PSU$ - $49 $35 77 77 77 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** (PSU) (1) Unvested adjustment for GRAIL Spin-Off (1)For EPS and OM PSU, the number of units reflect the estimated number of shares to be issued at the end of the performance period. For rTSR PSU, the number of units reflect the estimated number of shares to be issued based on performance as of the current reporting period. Awarded units are presented net of performance adjustments. (1) Pre-tax intrinsic value and fair value of vested restricted stock was as follows: In millions202420232022Pre-tax intrinsic value of outstanding restricted stock:RSU$525 $306 $326 PSU$95 $ - $15 Fair value of restricted stock vested:RSU$116 $122 $162 PSU$ - $ - $49 --- ## Modified: ADOPTIONS, MODIFICATIONS OR TERMINATIONS OF TRADING PLANS **Key changes:** - Reworded sentence: "During the quarterly period ended December 29, 2024, the following directors and officers adopted, modified or terminated 10b5-1 plans: •On November 6, 2024, Frances Arnold, a member of our Board of Directors, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)." **Prior (2024):** During the quarterly period ended December 31, 2023, the following directors and officers adopted, modified or terminated 10b5-1 plans: •On November 16, 2023, Caroline Dorsa, Director, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on November 18, 2024 and provides for the purchase of up to $200,000 in shares. On November 16, 2023, Caroline Dorsa, Director, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on November 18, 2024 and provides for the purchase of up to $200,000 in shares. •On November 22, 2023, Jacob Thaysen, our Chief Executive Officer, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on November 22, 2024 and provides for the purchase of up to $1,000,000 in shares. On November 22, 2023, Jacob Thaysen, our Chief Executive Officer, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on November 22, 2024 and provides for the purchase of up to $1,000,000 in shares. Other than as disclosed above, during the quarterly period ended December 31, 2023, (i) none of the Company's directors or officers adopted or terminated any "Rule 10b5-1 trading arrangement" or any "non-Rule 10b5-1 trading arrangement," and (ii) the Company did not adopt a "10b5-1 trading arrangement," in each case as such term is defined in Item 408 of Regulation S-K. 94 94 94 Table of Contents Table of Contents **Current (2025):** During the quarterly period ended December 29, 2024, the following directors and officers adopted, modified or terminated 10b5-1 plans: •On November 6, 2024, Frances Arnold, a member of our Board of Directors, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on February 27, 2026 and provides for the sale of up to 120 shares. On November 6, 2024, Frances Arnold, a member of our Board of Directors, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on February 27, 2026 and provides for the sale of up to 120 shares. •On November 7, 2024, Jakob Wedel, our Chief Strategy and Corporate Development Officer, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on May 29, 2026 and provides for the sale of up to 3,182 shares. On November 7, 2024, Jakob Wedel, our Chief Strategy and Corporate Development Officer, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on May 29, 2026 and provides for the sale of up to 3,182 shares. •On November 8, 2024, Scott Davies, our Interim General Counsel, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on December 16, 2025 and provides for the sale of up to 3,301 shares. On November 8, 2024, Scott Davies, our Interim General Counsel, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on December 16, 2025 and provides for the sale of up to 3,301 shares. •On November 13, 2024, Patricia Leckman, our Chief People Officer, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on November 14, 2025 and provides for the sale of up to 1,615 shares. On November 13, 2024, Patricia Leckman, our Chief People Officer, entered in a new arrangement intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). The arrangement terminates on November 14, 2025 and provides for the sale of up to 1,615 shares. Other than as disclosed above, during the quarterly period ended December 29, 2024, none of the Company's directors or officers adopted, modified or terminated any "Rule 10b5-1 trading arrangement" or any "non-Rule 10b5-1 trading arrangement," in each case as such term is defined in Item 408 of Regulation S-K. 97 97 97 Table of Contents Table of Contents --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "The assumptions used for the specified reporting periods and the resulting estimates of weighted-average fair value per share for stock purchased under the ESPP were as follows: 202420232022Risk-free interest rate4.35% - 5.54% 0.78% - 5.54% 0.06% - 2.98%Expected volatility41% - 49% 41% - 51% 37% - 51%Expected term0.5 - 1.1 year 0.5 - 1.1 year 0.5 - 1.0 yearExpected dividends0%0%0%Weighted-average grant-date fair value per share$37.24 $49.87 $50.22" **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "We performed our interim goodwill impairment test using a combination of both an income and a market approach to determine the fair value of each reporting unit." - Reworded sentence: "Estimates and assumptions used in the income approach included projected cash flows for both GRAIL and Core Illumina and a discount rate for each reporting unit." - Added sentence: "An increase of 50 to 100 basis points to the discount rate would have resulted in additional impairment of $200 million to $350 million." - Removed sentence: "The assumptions used are inherently subject to uncertainty and we note that small changes in these assumptions could have a significant impact on the concluded value." - Reworded sentence: "In conjunction with our interim goodwill impairment test, we also evaluated GRAIL's IPR&D intangible asset for potential impairment." **Prior (2024):** We test goodwill for impairment annually, as of May, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We performed our annual impairment test in Q2 2023, as of May 2023. We performed a quantitative assessment for our two reporting units: Core Illumina and GRAIL. No impairment was recorded for either Core Illumina or GRAIL in Q2 2023. In Q3 2023, we concluded the sustained decrease in the Company's stock price and overall market capitalization during the quarter was a triggering event indicating the fair value of a reporting unit might be less than its carrying amount and that an interim goodwill and intangible impairment test was required. Based on our interim assessment, we concluded that our GRAIL reporting unit's carrying value exceeded its estimated fair value. As a result, we recorded $712 million of goodwill impairment related to our GRAIL reporting unit in Q3 2023, primarily due to a decrease in the company's consolidated market capitalization and a higher discount rate selected for the fair value calculation of the GRAIL reporting unit. No impairment was recorded for our Core Illumina reporting unit, noting its fair value exceeded its carrying value. We performed our impairment test using a combination of an income and a market approach to determine the fair value of each reporting unit. The income approach utilized the estimated discounted cash flows for each reporting unit, while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows and a discount rate for each reporting unit. Discount rates were determined using a weighted average cost of capital for risk factors specific to each reporting unit and other market and industry data. For GRAIL, the selected discount rate was 24.0%. The estimates and assumptions used in our assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. The assumptions used are inherently subject to uncertainty and we note that small changes in these assumptions could have a significant impact on the concluded value. In order to further validate the reasonableness of the fair values concluded for our reporting units, a reconciliation to market capitalization was performed by estimating a reasonable implied control premium and other market factors. In conjunction with the Q3 2023 interim goodwill impairment test, we also evaluated the in-process research and development (IPR&D) asset assigned to the GRAIL reporting unit for potential impairment. We performed our impairment test by comparing the carrying value of the IPR&D asset to its estimated fair value, which was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach, which represent a Level 3 measurement, included projected cash flows and a selected discount rate of 19.0%. Based on our Q3 2023 impairment test, the carrying value of the GRAIL IPR&D asset exceeded its estimated fair value and we recorded an impairment of $109 million in Q3 2023, primarily due to a decrease in projected cash flows and a higher discount rate selected for the fair value calculation of the GRAIL IPR&D asset. As of December 31, 2023, the carrying value of the GRAIL IPR&D asset was $561 million. We also performed a recoverability test for the definite-lived intangible assets assigned to GRAIL, which includes developed technology and trade name, noting no impairment. No impairment was noted for Core Illumina definite-lived intangible assets. 71 71 71 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Shareholder Derivative Complaints **Key changes:** - Reworded sentence: "Before the filing of the complaint, the purported stockholders did not make a demand that our Board of Directors pursue the claims asserted therein." - Removed sentence: "Since the lawsuit is brought in part on behalf of Illumina as a nominal defendant, the alleged damages were allegedly suffered by us." - Reworded sentence: "On the same day, Illumina-joined by the director defendants-moved to strike portions of the complaint that contain improperly included confidential and privileged information." - Reworded sentence: "On December 5, 2023, the plaintiffs moved to expedite the proceedings with respect to their direct claims." - Reworded sentence: "On January 19, 2024, the Court denied plaintiffs' motion to expedite." **Prior (2024):** On October 17, 2023, a stockholder derivative and class action complaint captioned Icahn Partners LP, et al. v. deSouza, et al., purportedly brought on behalf of Illumina and public holders of Illumina's common stock, was filed in the Delaware Court of Chancery against certain current and former directors (including our former Chief Executive Officer). We are named as a nominal defendant in the complaint. The lawsuit alleges the named directors breached their fiduciary duties by knowingly causing Illumina to unlawfully close the GRAIL acquisition, concealing material facts related to the GRAIL acquisition and making inadequate disclosures. Prior to the filing of the complaint, the purported stockholders did not make a demand that our Board of Directors pursue the claims asserted therein. The complaint seeks damages, costs and expenses, including attorney fees, the certification and consolidation of a putative class, the issuance of amended disclosures, the removal of conflicted directors and declaratory and other equitable relief. Since the lawsuit is brought in part on behalf of Illumina as a nominal defendant, the alleged damages were allegedly suffered by us. On November 1, 2023, the defendants filed a motion to dismiss the complaint, which has not yet been briefed. On the same day, Illumina - joined by the director defendants - moved to strike portions of the complaint that contain improperly included confidential and privileged information. On January 16, 2024, the Court granted the motion to strike. On January 23, 2024, plaintiffs filed a motion seeking re-argument of the Court's order granting the motion to strike. On December 6, 2023, the plaintiffs moved to expedite the proceedings with respect to their direct claims. The director defendants opposed that motion and Illumina joined their opposition. On January 19, 2023, the court denied plaintiffs' motion to expedite. In light of the fact that the lawsuit is in an early stage, we cannot predict the ultimate outcome of the suit. We deny the allegations in the complaint and intend to vigorously defend the litigation. **Current (2025):** On October 17, 2023, a stockholder derivative and class action complaint captioned Icahn Partners LP, et al. v. deSouza, et al., purportedly brought on behalf of Illumina and public holders of Illumina's common stock, was filed in the Delaware Court of Chancery against certain current and former directors (including our former Chief Executive Officer). We are named as a nominal defendant in the complaint. The lawsuit alleges the named directors breached their fiduciary duties by knowingly causing Illumina to unlawfully close the GRAIL acquisition, concealing material facts related to the GRAIL acquisition and making inadequate disclosures. Before the filing of the complaint, the purported stockholders did not make a demand that our Board of Directors pursue the claims asserted therein. The complaint seeks damages, costs and expenses, including attorney fees, the certification and consolidation of a putative class, the issuance of amended disclosures, the removal of conflicted directors and declaratory and other equitable relief. On November 1, 2023, the defendants filed a motion to dismiss the complaint, which has not yet been briefed. On the same day, Illumina-joined by the director defendants-moved to strike portions of the complaint that contain improperly included confidential and privileged information. On January 16, 2024, the Court granted the motion to strike. On December 5, 2023, the plaintiffs moved to expedite the proceedings with respect to their direct claims. The director defendants opposed that motion and Illumina joined their opposition. On January 19, 2024, the Court denied plaintiffs' motion to expedite. On January 23, 2024, the plaintiffs filed a motion for reargument of the Court's January 16 opinion, which the Court denied on February 19, 2024. On February 29, 2024, the plaintiffs filed an application to the trial court to certify the orders granting the motion to strike and denying the motion for reargument for interlocutory appeal. The Court refused the application on March 20, 2024. On March 14, 2024, the plaintiffs filed an application for interlocutory appeal with the Supreme Court of Delaware, which the Court denied on April 11, 2024. 85 85 85 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Loss per Share **Key changes:** - Reworded sentence: "Basic loss per share is computed based on the weighted average number of common shares outstanding during the period." - Removed sentence: "Potentially dilutive common shares consist of shares issuable under convertible senior notes and equity awards." - Removed sentence: "On January 3, 2022, we adopted ASU 2020-06." - Removed sentence: "As a result, beginning in Q1 2022, we utilize the if-converted method to calculate the impact of convertible senior notes on diluted (loss) earnings per share." - Removed sentence: "Prior to the adoption of ASU 2020-06, we applied the treasury stock method when calculating the potential dilutive effect, if any, of convertible senior notes which we intended to settle or have settled in cash the principal outstanding." **Prior (2024):** Basic (loss) earnings per share is computed based on the weighted average number of common shares outstanding during the period. Diluted (loss) earnings per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. In loss periods, basic and diluted loss per share are identical since the effect of potentially dilutive common shares is antidilutive and therefore excluded. Potentially dilutive common shares consist of shares issuable under convertible senior notes and equity awards. On January 3, 2022, we adopted ASU 2020-06. As a result, beginning in Q1 2022, we utilize the if-converted method to calculate the impact of convertible senior notes on diluted (loss) earnings per share. Prior to the adoption of ASU 2020-06, we applied the treasury stock method when calculating the potential dilutive effect, if any, of convertible senior notes which we intended to settle or have settled in cash the principal outstanding. Under the treasury stock method, convertible senior notes would have a dilutive impact when the average market price of our common stock exceeded the applicable conversion price of the respective notes. Potentially dilutive common shares from equity awards are determined using the average share price for each period under the treasury stock method. In addition, proceeds from exercise of equity awards and the average amount of unrecognized compensation expense for equity awards are assumed to be used to repurchase shares. The following table presents the calculation of weighted average shares used to calculate basic and diluted (loss) earnings per share: Years EndedIn millionsDecember 31,2023January 1,2023January 2,2022Weighted average shares outstanding158 157 150 Effect of potentially dilutive common shares from:Equity awards - - 1 Weighted average shares used in calculating diluted (loss) earnings per share158 157 151 Antidilutive shares:Convertible senior notes1 2 - Equity awards3 2 - Potentially dilutive shares excluded from calculation due to antidilutive effect4 4 - 58 58 58 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Basic loss per share is computed based on the weighted average number of common shares outstanding during the period. Diluted loss per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. In loss periods, basic and diluted loss per share are identical since the effect of potentially dilutive common shares is antidilutive and therefore excluded. Potentially dilutive common shares from equity awards are determined using the average share price for each period under the treasury stock method. In addition, proceeds from exercise of equity awards and the average amount of unrecognized compensation expense for equity awards are assumed to be used to repurchase shares. Potentially dilutive common shares issuable upon conversion of convertible senior notes are determined using the if-converted method. 58 58 58 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: LIQUIDITY AND CAPITAL RESOURCES **Key changes:** - Reworded sentence: "As of December 29, 2024, we had $1,127 million in cash and cash equivalents, of which approximately $439 million was held by our foreign subsidiaries." - Reworded sentence: "In 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." - Reworded sentence: "As of December 29, 2024, we owed $39 million, which we expect to pay within the next year." - Reworded sentence: "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." **Prior (2024):** At December 31, 2023, we had approximately $1,048 million in cash and cash equivalents, of which approximately $386 million was held by our foreign subsidiaries. Cash and cash equivalents decreased by $963 million from the prior year due primarily to the repayment of our 2023 Term Notes in Q1 2023 of $500 million, the repayment of our 2023 Convertible Notes in Q3 2023 of $750 million, 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 December 31, 2023, we had $6 million remaining 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 December 31, 2023, we accrued $484 million, including related foreign currency losses and accrued interest, 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. In March 2021, we issued term notes due 2023 with an aggregate principal amount of $500 million and term notes due 2031 with an aggregate principal amount of $500 million. The 2023 Term Notes matured and were repaid in cash on March 23, 2023. 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. Our convertible senior notes, with an aggregate principal amount of $750 million, matured on August 15, 2023, at which time the principal was repaid in cash. We did not issue any shares of common stock. 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 and the 2027 Term Notes accrue interest at a rate of 5.800% and 5.750% per annum, respectively, payable semi-annually in June and December of each year. The 2025 Term Notes mature on December 12, 2025 and the 2027 Term Notes mature on December 13, 2027. We may redeem for cash all or any portion of the Term Notes, at our option, at any time prior to maturity. On January 4, 2023, we obtained a new 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 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, the consent of the extending lenders, and certain other conditions. As of December 31, 2023, there were no borrowings outstanding under the 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 December 31, 2023, the fair value of our contingent consideration liability related to our acquisition of GRAIL was $387 million, of which $385 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. We expect Covered Revenues for Q4 2023 to be approximately $30 million and for related Covered Revenue Payments to total approximately $284,000 in Q1 2024. In 2023, we paid $803,000 in aggregate Covered Revenue Payments related to Covered Revenues for the periods Q4 2022 through Q3 2023 of $85 million in aggregate. We grant cash incentive equity awards to GRAIL employees that generally have terms of four years and vest in equal annual installments. As of December 31, 2023, the aggregate cash value of awards outstanding and unvested was $292 million, and we accrued an estimated liability of $55 million, included in accrued liabilities. In addition, we have an outstanding performance-based award for which vesting is based on GRAIL's future revenues. The award has an 37 37 37 aggregate potential value of up to $78 million, which is expected to be settled in cash, and expires, to the extent unvested, in August 2030. As of December 31, 2023, it was not probable that the performance conditions associated with the award will be achieved. We had $4 million and up to $71 million, respectively, remaining in our capital commitments to two venture capital investment funds as of December 31, 2023, that are callable through April 2026 and July 2029, respectively. The impact of the 2017 Tax Cuts and Jobs Act resulted in a one-time transition tax on earnings of certain foreign subsidiaries which we elected to pay in installments. As of December 31, 2023, we owed $71 million, which we expect to pay over the next two years. Authorizations to repurchase $15 million of our common stock remained available as of December 31, 2023 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 do not intend to make any share repurchases during fiscal year 2024. Our other short-term and long-term material cash requirements, from known contractual obligations as of December 31, 2023, include operating lease liabilities, uncertain tax positions, and amounts due under our executive deferred compensation plan, as discussed in the Consolidated Financial Statements section of this report. 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 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, 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; •the requirement to ensure that GRAIL has access to sufficient funds, at the time of a divestment, to cover at least 2.5 years of operations according to its latest long-range plan per the EC Divestment Decision; •potential strategic acquisitions and investments; •repayment of debt obligations; and •the expansion needs of our facilities, including costs of leasing and building out additional facilities. We expect that our revenue and the resulting operating income, 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. 38 38 38 **Current (2025):** As of December 29, 2024, we had $1,127 million in cash and cash equivalents, of which approximately $439 million was held by our foreign subsidiaries. Cash and cash equivalents increased by $79 million from the prior year due primarily to 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. In 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. 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). As of December 29, 2024, we had $93 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 9. 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, as well as accrued interest, in an aggregate amount 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, the consent of the extending lenders, and certain other conditions. As of December 29, 2024, there were no outstanding borrowings. As of December 29, 2024, the fair value of our contingent consideration liability related to GRAIL was $71 million, of which $70 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 2024, we paid $1.1 million in aggregate Covered Revenue Payments related to Covered Revenues for the period Q4 2023 through Q3 2024 of $117 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 December 29, 2024. Subsequent to December 29, 2024 and through February 11, 2025, we repurchased an additional 1.0 million shares of our common stock for $126 million. 38 38 38 We had $3 million (plus recallable distributions of approximately $10 million), $46 million, and $47 million, respectively, remaining in our capital commitments to three venture capital investment funds as of December 29, 2024 that are callable through April 2026, July 2029, and December 2034, respectively. The impact of the 2017 Tax Cuts and Jobs Act resulted in a one-time transition tax on earnings of certain foreign subsidiaries which we elected to pay in installments. As of December 29, 2024, we owed $39 million, which we expect to pay within the next year. Our other short-term and long-term material cash requirements, from known contractual obligations as of December 29, 2024, include operating lease liabilities, uncertain tax positions, and amounts due under our executive deferred compensation plan, as discussed in the Consolidated Financial Statements section of this report. 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. --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "The provision for income taxes consisted of the following: In millions202420232022Current: Federal$6 $(5)$(11)State18 6 27 Foreign137 77 75 Total current provision161 78 91 Deferred:Federal(59)(13)40 State(56)(26)(47)Foreign(2)5 (16)Total deferred benefit(117)(34)(23)Total tax provision$44 $44 $68 The provision for income taxes reconciles to the amount computed by applying the federal statutory rate to loss before income taxes as follows: In millions202420232022Tax at federal statutory rate$(248)$(235)$(911)State, net of federal benefit(38)(16)(9)Research and other credits(32)(42)(46)Change in valuation allowance29 48 62 Impact of R&D expense capitalization52 86 87 Impact of net operating losses on GILTI, U.S." - Reworded sentence: "The most significant tax benefits from foreign operations were from our earnings in Singapore, which had a statutory tax rate of 17% in 2024." - Reworded sentence: "89 89 89 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents" **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Accounting Pronouncements Pending Adoption **Key changes:** - Reworded sentence: "In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)." - Reworded sentence: "The standard is effective for us beginning in fiscal year 2025, with early adoption permitted, and is expected to be applied prospectively, but retrospective application is permitted." **Prior (2024):** In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker (CODM). The standard is effective for us beginning in fiscal year 2024 and interim periods within fiscal year 2025, with early adoption permitted. We do not expect to early adopt the new standard. We are currently evaluating the impact of ASU 2023-07 on the consolidated financial statements and related disclosures and will adopt the new standard using a retrospective approach. In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for us beginning in fiscal year 2025, with early adoption permitted. We do not expect to early adopt the new standard. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures. **Current (2025):** In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The new standard requires a company to provide disaggregated disclosures, in the notes to the financial statements, of specified categories of expenses that are included in line items on the face of the income statement. The standard is effective for us beginning in fiscal year 2027 and interim periods within fiscal year 2028, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for us beginning in fiscal year 2025, with early adoption permitted, and is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures. --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Removed sentence: "Restricted stock units (RSU) and performance stock units (PSU) are both considered restricted stock." - Removed sentence: "The determination of the amount of share-based compensation expense for our PSU requires the use of certain estimates and assumptions that affect the amount of share-based compensation expense recognized in our consolidated statements of operations." - Removed sentence: "The fair value of restricted stock and performance stock units that do not include a market condition is determined by the closing market price of our common stock on the date of grant." - Removed sentence: "PSU that do not include a market condition represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period." - Removed sentence: "At each reporting period, we reassess the probability of the achievement of such corporate performance goals and any increase or decrease in share-based compensation expense resulting from an adjustment in the estimated shares to be released is treated as a cumulative catch-up in the period of adjustment." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: (In millions, except par value) **Key changes:** - Reworded sentence: "December 29,2024December 31,2023ASSETSCurrent assets: Cash and cash equivalents$1,127 $1,048 Short-term investments93 6 Accounts receivable, net735 734 Inventory, net547 587 Prepaid expenses and other current assets244 234 Total current assets2,746 2,609 Property and equipment, net815 1,007 Operating lease right-of-use assets419 544 Goodwill1,113 2,545 Intangible assets, net295 2,993 Deferred tax assets, net567 56 Other assets348 357 Total assets$6,303 $10,111 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable$221 $245 Accrued liabilities827 1,325 Term debt, current portion499 - Total current liabilities1,547 1,570 Operating lease liabilities554 687 Term debt1,490 1,489 Other long-term liabilities339 620 Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value, 10 million shares authorized; no shares issued and outstanding at December 29, 2024 and December 31, 2023 - - Common stock, $0.01 par value, 320 million shares authorized; 200 million shares issued and 159 million outstanding at December 29, 2024; 199 million shares issued and 159 million outstanding at December 31, 20232 2 Additional paid-in capital7,525 9,555 Accumulated other comprehensive income (loss)22 (1)Accumulated deficit(1,242)(19)Treasury stock, at cost; 41 million shares and 40 million shares at December 29, 2024 and December 31, 2023, respectively(3,934)(3,792)Total stockholders' equity2,373 5,745 Total liabilities and stockholders' equity$6,303 $10,111 Preferred stock, $0.01 par value, 10 million shares authorized; no shares issued and outstanding at December 29, 2024 and December 31, 2023 Common stock, $0.01 par value, 320 million shares authorized; 200 million shares issued and 159 million outstanding at December 29, 2024; 199 million shares issued and 159 million outstanding at December 31, 2023 Treasury stock, at cost; 41 million shares and 40 million shares at December 29, 2024 and December 31, 2023, respectively See accompanying notes to consolidated financial statements." **Prior (2024):** December 31,2023January 1,2023ASSETSCurrent assets: Cash and cash equivalents$1,048 $2,011 Short-term investments6 26 Accounts receivable, net734 671 Inventory, net587 568 Prepaid expenses and other current assets234 285 Total current assets2,609 3,561 Property and equipment, net1,007 1,091 Operating lease right-of-use assets544 653 Goodwill2,545 3,239 Intangible assets, net2,993 3,285 Other assets413 423 Total assets$10,111 $12,252 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable$245 $293 Accrued liabilities1,325 1,232 Term notes, current portion - 500 Convertible senior notes, current portion - 748 Total current liabilities1,570 2,773 Operating lease liabilities687 744 Term notes1,489 1,487 Other long-term liabilities620 649 Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value, 10 million shares authorized; no shares issued and outstanding at December 31, 2023 and January 1, 2023 - - Common stock, $0.01 par value, 320 million shares authorized; 199 million shares issued and 159 million outstanding at December 31, 2023; 198 million shares issued and 158 million outstanding at January 1, 20232 2 Additional paid-in capital9,555 9,207 Accumulated other comprehensive (loss) income(1)3 (Accumulated deficit) retained earnings(19)1,142 Treasury stock, 40 million shares at both December 31, 2023 and January 1, 2023(3,792)(3,755)Total stockholders' equity5,745 6,599 Total liabilities and stockholders' equity$10,111 $12,252 Preferred stock, $0.01 par value, 10 million shares authorized; no shares issued and outstanding at December 31, 2023 and January 1, 2023 Common stock, $0.01 par value, 320 million shares authorized; 199 million shares issued and 159 million outstanding at December 31, 2023; 198 million shares issued and 158 million outstanding at January 1, 2023 (Accumulated deficit) retained earnings Treasury stock, 40 million shares at both December 31, 2023 and January 1, 2023 See accompanying notes to consolidated financial statements. 50 50 50 **Current (2025):** December 29,2024December 31,2023ASSETSCurrent assets: Cash and cash equivalents$1,127 $1,048 Short-term investments93 6 Accounts receivable, net735 734 Inventory, net547 587 Prepaid expenses and other current assets244 234 Total current assets2,746 2,609 Property and equipment, net815 1,007 Operating lease right-of-use assets419 544 Goodwill1,113 2,545 Intangible assets, net295 2,993 Deferred tax assets, net567 56 Other assets348 357 Total assets$6,303 $10,111 LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable$221 $245 Accrued liabilities827 1,325 Term debt, current portion499 - Total current liabilities1,547 1,570 Operating lease liabilities554 687 Term debt1,490 1,489 Other long-term liabilities339 620 Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value, 10 million shares authorized; no shares issued and outstanding at December 29, 2024 and December 31, 2023 - - Common stock, $0.01 par value, 320 million shares authorized; 200 million shares issued and 159 million outstanding at December 29, 2024; 199 million shares issued and 159 million outstanding at December 31, 20232 2 Additional paid-in capital7,525 9,555 Accumulated other comprehensive income (loss)22 (1)Accumulated deficit(1,242)(19)Treasury stock, at cost; 41 million shares and 40 million shares at December 29, 2024 and December 31, 2023, respectively(3,934)(3,792)Total stockholders' equity2,373 5,745 Total liabilities and stockholders' equity$6,303 $10,111 Preferred stock, $0.01 par value, 10 million shares authorized; no shares issued and outstanding at December 29, 2024 and December 31, 2023 Common stock, $0.01 par value, 320 million shares authorized; 200 million shares issued and 159 million outstanding at December 29, 2024; 199 million shares issued and 159 million outstanding at December 31, 2023 Treasury stock, at cost; 41 million shares and 40 million shares at December 29, 2024 and December 31, 2023, respectively See accompanying notes to consolidated financial statements. 50 50 50 --- ## Modified: 6. DEBT AND OTHER COMMITMENTSSummary of Term Debt Obligations **Key changes:** - Reworded sentence: "Summary of Term Debt Obligations In millionsDecember 29,2024December 31,2023Principal amount of 2025 Term Notes outstanding$500 $500 Principal amount of 2026 Term Notes outstanding500 - Principal amount of 2027 Term Notes outstanding500 500 Principal amount of 2031 Term Notes outstanding500 500 Unamortized discounts and debt issuance costs(11)(11)Net carrying amount of term debt1,989 1,489 Less: current portion499 - Term debt, non-current$1,490 $1,489 Fair value of term debt outstanding (Level 2)$1,940 $1,440 Net carrying amount of term debt Term debt, non-current Fair value of term debt outstanding (Level 2) Interest expense recognized on our term notes and delayed draw term loan, which included amortization of debt discounts and issuance costs, was $99 million, $74 million, and $21 million in 2024, 2023 and 2022, respectively." **Prior (2024):** In millionsDecember 31,2023January 1,2023Principal amount of 2031 Term Notes outstanding$500 $500 Principal amount of 2027 Term Notes outstanding500 500 Principal amount of 2025 Term Notes outstanding500 500 Principal amount of 2023 Term Notes outstanding - 500 Unamortized discounts and debt issuance costs(11)(13)Net carrying amount of term notes1,489 1,987 Less: current portion - (500)Term notes, non-current$1,489 $1,487 Fair value of term notes outstanding (Level 2)$1,440 $1,913 Interest expense recognized on our term notes, which included amortization of debt discounts and issuance costs, was $74 million, $21 million and $14 million in 2023, 2022 and 2021, respectively. **Current (2025):** Summary of Term Debt Obligations In millionsDecember 29,2024December 31,2023Principal amount of 2025 Term Notes outstanding$500 $500 Principal amount of 2026 Term Notes outstanding500 - Principal amount of 2027 Term Notes outstanding500 500 Principal amount of 2031 Term Notes outstanding500 500 Unamortized discounts and debt issuance costs(11)(11)Net carrying amount of term debt1,989 1,489 Less: current portion499 - Term debt, non-current$1,490 $1,489 Fair value of term debt outstanding (Level 2)$1,940 $1,440 Net carrying amount of term debt Term debt, non-current Fair value of term debt outstanding (Level 2) Interest expense recognized on our term notes and delayed draw term loan, which included amortization of debt discounts and issuance costs, was $99 million, $74 million, and $21 million in 2024, 2023 and 2022, respectively. --- ## Modified: Fair Value Measurements **Key changes:** - Reworded sentence: "The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis: December 29, 2024December 31, 2023In millionsLevel 1Level 2Level 3TotalLevel 1Level 2Level 3TotalAssets:Money market funds (cash equivalents)$931 $ - $ - $931 $774 $ - $ - $774 Marketable equity securities93 - - 93 6 - - 6 Other investments - - 17 17 - - - - Helix contingent value right - - - - - - 68 68 Deferred compensation plan assets - 70 - 70 - 61 - 61 Total assets measured at fair value$1,024 $70 $17 $1,111 $780 $61 $68 $909 Liabilities:Contingent consideration liabilities$ - $ - $73 $73 $ - $ - $387 $387 Deferred compensation plan liability - 65 - 65 - 59 - 59 Total liabilities measured at fair value$ - $65 $73 $138 $ - $59 $387 $446 Other investments Marketable equity securities are measured at fair value based on quoted trade prices in active markets." **Prior (2024):** The fair value of assets and liabilities are based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value: •Level 1 - Quoted prices in active markets for identical assets or liabilities. •Level 2 - Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. •Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amounts of financial instruments such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate the related fair values due to the short-term maturities of these instruments. **Current (2025):** The fair value of assets and liabilities are based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize use of observable inputs and minimize use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value: •Level 1 - Quoted prices in active markets for identical assets or liabilities. •Level 2 - Inputs, other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. •Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amounts of financial instruments such as cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate the related fair values due to the short-term maturities of these instruments. --- ## Modified: Restricted Stock **Key changes:** - Reworded sentence: "We issue three different PSU awards." - Reworded sentence: "Shares issuable under all PSU awards are subject to continued employment through the vesting period." **Prior (2024):** We issue restricted stock units (RSU) and performance stock units (PSU), both of which are considered restricted stock. We grant restricted stock pursuant to the 2015 Stock Plan and satisfy such grants through the issuance of either new shares or shares from treasury stock. RSU are share awards that, upon vesting, will deliver to the holder shares of our common stock. RSU generally vest over a four-year period with equal vesting annually. We issue two different PSU awards. We issue PSU for which the number of shares issuable at the end of a three-year performance period is based on our performance relative to specified earnings per share targets and continued employment through the vesting period (EPS PSU). During 2023, we began to issue PSU with a market condition that vest based on the Company's relative total shareholder return as compared to a peer group of companies measured over a three-fiscal year performance period and continued employment through the vesting period (rTSR PSU). Depending on the actual performance over the measurement period, an rTSR PSU award recipient could receive up to 175% of the granted award. Restricted stock activity was as follows: Restricted Stock Units (RSU) (1)Performance Stock Units(PSU) (2)Weighted-Average Grant-Date Fair Value per ShareUnits in thousandsRSUPSUOutstanding at January 3, 20211,721 - $313.35 $ - Awarded259 456 $438.46 $471.63 Vested(606)(72)$303.08 $492.55 Cancelled(244)(56)$321.93 $475.38 Outstanding at January 2, 20221,130 328 $345.66 $466.42 Awarded1,370 (108)$302.52 $479.85 Vested(707)(99)$341.56 $492.55 Cancelled(182)(47)$341.14 $411.78 Outstanding at January 1, 20231,611 74 $311.23 $446.74 Awarded2,032 39 $195.94 $239.98 Vested(987) - $268.08 $ - Cancelled(458)(113)$253.52 $299.98 Outstanding at December 31, 20232,198 - $236.32 $ - _____________ Restricted **Current (2025):** We issue restricted stock units (RSU) and performance stock units (PSU), both of which are considered restricted stock. We grant restricted stock pursuant to the 2015 Stock Plan and satisfy such grants through the issuance of either new shares or shares from treasury stock. RSU are share awards that, upon vesting, will deliver to the holder shares of our common stock. RSU generally vest over a four-year period with equal vesting annually. We issue three different PSU awards. We issue PSU for which the number of shares issuable at the end of a three-year performance period is based on our performance relative to specified earnings per share targets (EPS PSU) and, during 2024, we began to issue PSU for which the number of shares issuable at the end of a three-year performance period is based on our performance relative to specified operating margin targets (OM PSU). During 2023, we began to issue PSU with a market condition that vest based on the Company's relative total shareholder return as compared to a peer group of companies measured over a three-fiscal year performance period (rTSR PSU). Depending on the actual performance over the measurement period, an rTSR PSU award recipient could receive up to 175% of the granted award. Shares issuable under all PSU awards are subject to continued employment through the vesting period. three-fiscal 77 77 77 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Financial Overview **Key changes:** - Reworded sentence: "Since 2023, macroeconomic factors such as inflation, exchange rate fluctuations and concerns about an economic downturn, competitive challenges in our China region, and the sanctions imposed on Russia as a result of the armed conflict between Russia and Ukraine have impacted both Illumina directly and our customers' behavior." - Reworded sentence: "We expect these factors to continue to have an impact on our sales and results of operations in 2025, the size and duration of which is significantly uncertain." - Reworded sentence: "32 32 32 •Loss from operations was $0.8 billion in 2024 compared to $1.1 billion in 2023." - Reworded sentence: "•Our effective tax rate was (3.8)% and (3.9)% in 2024 and 2023, respectively." - Reworded sentence: "•We ended 2024 with cash, cash equivalents, and short-term investments totaling $1,220 million, of which approximately $439 million was held by our foreign subsidiaries." **Prior (2024):** During fiscal year 2023, macroeconomic factors such as inflation, exchange rate fluctuations and concerns about an economic downturn, competitive challenges in our China region, and the sanctions imposed on Russia as a result of the armed conflict between Russia and Ukraine have impacted both Illumina directly and our customers' behavior. For example, some customers experienced supply chain pressures that delayed their lab expansions and others are managing inventory and capital more conservatively. We expect these factors to continue to impact our sales and results of operations in 2024, the size and duration of which is significantly uncertain. Financial highlights for 2023 included the following: •Revenue decreased 2% in 2023 to $4.5 billion compared to $4.6 billion in 2022 primarily due to decreases in sequencing consumables revenue and sequencing instruments revenue, partially offset by an increase in service and other revenue. We expect revenue for Core Illumina to remain flat in 2024. •Gross profit as a percentage of revenue (gross margin) was 60.9% in 2023 compared to 64.8% in 2022. The decrease in gross margin was driven primarily by less fixed cost leverage on lower manufacturing volumes and lower instrument margins due to the NovaSeq X launch in 2023. Our gross margin depends on many factors, including: market conditions that may impact our pricing; sales mix changes among consumables, instruments, services, and development and licensing revenue; product mix changes between established products and new products; excess and obsolete inventories; royalties; our cost structure for manufacturing operations relative to volume; freight costs; and product support obligations. •Loss from operations was $(1.1) billion in 2023 compared to $(4.2) billion in 2022. The decrease was primarily due to a decrease in operating expenses of $3.3 billion, which included significant decreases in goodwill and intangible impairment of $3.1 billion and legal contingency and settlement of $599 million, partially offset by a $228 million decrease in gross profit. We continue to focus on our cost reduction initiatives to accelerate progress toward higher margins and create flexibility for further investment in high-growth areas. We expect Core Illumina operating expenses to slightly increase in 2024. •Our effective tax rate was (3.9)% and (1.6)% in 2023 and 2022, respectively. In 2023, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the income tax expense impacts of the impairment of goodwill, which is nondeductible for tax purposes, the income tax expense impact of capitalizing research and development expense for tax purposes, and the income tax expense impact of GRAIL pre-acquisition net operating losses on GILTI and the utilization of U.S. foreign tax credits. This was partially offset by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore. 32 32 32 Our future effective tax rate may vary from the U.S. federal statutory tax rate due to the mix of earnings in tax jurisdictions with different statutory tax rates and the other factors discussed in the risk factor "We are subject to risks related to taxation in multiple jurisdictions" in "Risk Factors" within the Business & Market Information section of this report, including future tax legislation that changes existing tax policies, laws, regulations, or rates. •We ended 2023 with cash, cash equivalents, and short-term investments totaling $1.1 billion, of which approximately $386 million was held by our foreign subsidiaries. **Current (2025):** Since 2023, macroeconomic factors such as inflation, exchange rate fluctuations and concerns about an economic downturn, competitive challenges in our China region, and the sanctions imposed on Russia as a result of the armed conflict between Russia and Ukraine have impacted both Illumina directly and our customers' behavior. For example, some customers experienced supply chain pressures that delayed their lab expansions and others are managing inventory and capital more conservatively. We expect these factors to continue to have an impact on our sales and results of operations in 2025, the size and duration of which is significantly uncertain. In February 2025, we were added to China's Ministry of Commerce List of Unreliable Entities, the implications of which are currently uncertain. See the risk factor "China's Ministry of Commerce has added Illumina to its List of Unreliable Entities" in Risk Factors within the Business & Market Information section of this report for additional information. During 2024, we made significant progress towards our strategic goals to accelerate growth and expand operating margins. We focused on operational excellence initiatives, to improve productivity and achieve cost savings, and on our capital allocation strategy, including obtaining authorization for a new share repurchase program. We expect to continue to make further progress towards these goals in 2025, including a focus on returning to revenue growth. Financial highlights for 2024 included the following: •Revenue decreased 3% in 2024 to $4.4 billion compared to $4.5 billion in 2023 primarily due to a decrease in sequencing instruments revenue, driven by fewer shipments of our high-throughput and mid-throughput instruments, offset by increases in sequencing consumables revenue. •Gross profit as a percentage of revenue (gross margin) was 65.4% in 2024 compared to 60.9% in 2023. The increase in gross margin was driven primarily by execution of our operational excellence initiatives that continue to deliver cost savings, including freight, and improve productivity, a more favorable revenue mix towards sequencing consumables, and a decrease in warranty and field service costs. This was partially offset by higher strategic partnership revenue that is lower margin. Our gross margin depends on many factors, including: market conditions that may impact our pricing; sales mix changes among consumables, instruments, services, and development and licensing revenue; product mix changes between established products and new products; excess and obsolete inventories; royalties; our cost structure for manufacturing operations relative to volume; freight costs; and product support obligations. 32 32 32 •Loss from operations was $0.8 billion in 2024 compared to $1.1 billion in 2023. The decrease was due to a decrease in operating expense of $119 million and an increase in gross profit of $117 million. The decrease in operating expense included a $476 million favorable impact in legal contingency and settlement, as a result of the European Commission withdrawing, in September 2024, its previously imposed fine, a decrease of $323 million in GRAIL operating expenses, as a result of the Spin-Off in Q2 2024, an increase in the gains recognized on our GRAIL contingent consideration liability of $290 million, and a decrease in restructuring charges of $86 million, offset by an increase in goodwill and intangible impairment of $1,062 million. We continue to focus on our cost reduction initiatives to accelerate progress toward higher margins and create flexibility for further investment in high-growth areas. •Our effective tax rate was (3.8)% and (3.9)% in 2024 and 2023, respectively. In 2024, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the income tax expense impact of the impairment of goodwill, which is nondeductible for tax purposes, the income tax expense impact of the reversal of the European Commission fine related to the GRAIL acquisition, which is excluded from taxable income, the income tax expense impact of research and development expense capitalization for tax purposes, and the income tax expense 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. This was partially offset by the mix of earnings in jurisdictions with lower statutory tax rates than the U.S. federal statutory tax rate, such as in Singapore. •We ended 2024 with cash, cash equivalents, and short-term investments totaling $1,220 million, of which approximately $439 million was held by our foreign subsidiaries. 33 33 33 --- ## Modified: MARKET INFORMATION **Key changes:** - Reworded sentence: "20242023 HighLowHighLowFirst Quarter$145.50 $123.54 $238.55 $182.00 Second Quarter$136.02 $98.27 $233.42 $181.62 Third Quarter$137.18 $103.57 $195.64 $127.37 Fourth Quarter$156.66 $125.06 $143.93 $89.00 28 28 28" **Prior (2024):** Our common stock has been quoted on The Nasdaq Global Select Market under the symbol "ILMN" since July 28, 2000. The following table sets forth, for the fiscal periods indicated, the quarterly high and low sales prices per share of our common stock as reported on The Nasdaq Global Select Market. 20232022 HighLowHighLowFirst Quarter$238.55 $182.00 $428.00 $302.79 Second Quarter$233.42 $181.62 $371.16 $180.00 Third Quarter$195.64 $127.37 $236.29 $173.45 Fourth Quarter$143.93 $89.00 $248.87 $179.75 29 29 29 **Current (2025):** Our common stock has been quoted on The Nasdaq Global Select Market under the symbol "ILMN" since July 28, 2000. The following table sets forth, for the fiscal periods indicated, the quarterly high and low sales prices per share of our common stock as reported on The Nasdaq Global Select Market. 20242023 HighLowHighLowFirst Quarter$145.50 $123.54 $238.55 $182.00 Second Quarter$136.02 $98.27 $233.42 $181.62 Third Quarter$137.18 $103.57 $195.64 $127.37 Fourth Quarter$156.66 $125.06 $143.93 $89.00 28 28 28 --- ## Modified: Acquisition of GRAIL **Key changes:** - Reworded sentence: "As of September 6, 2024, all previously disclosed regulatory proceedings in the United States and European Union related to our acquisition of GRAIL have been resolved (as further described below)." - Removed sentence: "On December 16, 2021, the EU General Court held a hearing regarding the European Commission's assertion of jurisdiction." - Reworded sentence: "On September 22, 2022, we filed an appeal in the Court of Justice of the European Union (the EU Court of Justice) asking for annulment of the EU General Court's judgment." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** As of September 6, 2024, all previously disclosed regulatory proceedings in the United States and European Union related to our acquisition of GRAIL have been resolved (as further described below). On April 19, 2021, the European Commission sought and subsequently accepted a request for a referral of the GRAIL acquisition for European Union merger review, submitted by a Member State of the European Union (France), and joined by several other EEA Member States (Belgium, Greece, Iceland, the Netherlands and Norway), under Article 22(1) of Council Regulation (EC) No 139/2004 (the EU Merger Regulation). The European Commission had never solicited referrals to take jurisdiction over an acquisition of a U.S. company that had no revenue in Europe. On April 28, 2021, we filed an action in the General Court of the European Union (the EU General Court) asking for annulment of the European Commission's assertion of jurisdiction to review the acquisition under Article 22 of the EU Merger Regulation, as the acquisition does not meet the jurisdictional criteria under the EU Merger Regulation or under the national merger control laws of any Member State of the European Union. On July 13, 2022, the EU General Court reached a decision in favor of the European Commission, holding that the European Commission has jurisdiction under the EU Merger Regulation to review the acquisition. On September 22, 2022, we filed an appeal in the Court of Justice of the European Union (the EU Court of Justice) asking for annulment of the EU General Court's judgment. On October 12, 2023, the European Commission adopted a decision requiring Illumina to unwind its acquisition of GRAIL (the EC Divestment Decision). On December 17, 2023, we announced that we would divest GRAIL. On June 24, 2024, we completed the separation (the Spin-Off) of GRAIL into a separate, independent publicly traded company through the distribution of approximately 85.5% of the outstanding GRAIL common stock to Illumina stockholders on a pro rata basis. 84 84 84 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Critical Audit Matters **Key changes:** - Reworded sentence: "GRAIL Contingent ConsiderationDescription of the MatterIn connection with the August 18, 2021 acquisition of GRAIL, the Company recognized a contingent consideration liability at the estimated fair value on the acquisition date." - Reworded sentence: "As disclosed in Note 4 of the consolidated financial statements, the fair value of the contingent consideration liability as of December 29, 2024 is $71 million." **Prior (2024):** The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 47 47 47 Interim goodwill impairment assessment of GRAIL reporting unitDescription of the MatterThe Company tests goodwill for impairment annually, as of May, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company identified certain triggering events that occurred in the three months ended October 1, 2023 that required an interim goodwill impairment test. Reporting units were tested for impairment by comparing their fair values to their carrying values. As discussed in Note 4 to the consolidated financial statements, as a result of the interim impairment assessment, the Company recorded an impairment loss of $712 million related to the GRAIL reporting unit. The carrying value of goodwill as of December 31, 2023 was $2.5 billion, of which $1.5 billion related to the GRAIL reporting unit. Auditing the Company's goodwill impairment assessment was complex and required significant auditor judgment due to the significant estimation uncertainty in determining the fair value of the GRAIL reporting segment. Management used a combination of income- and market-based approaches to estimate the fair value of the GRAIL reporting unit. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the GRAIL reporting unit due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions include forecasted revenues for GRAIL and the discount rate used to discount future cash flows. These significant assumptions related to the fair value of the GRAIL reporting unit are forward-looking and could be affected by future economic and market conditions.How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the GRAIL reporting unit used in the goodwill impairment assessment. This included controls over management's development of the above-described assumptions used in the valuation model applied.In testing the valuation of the GRAIL reporting unit, we performed audit procedures that included, among others, evaluating the Company's use of the income- and market-based approaches and testing the significant assumptions used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. We evaluated the reasonableness of projected revenue growth used within the valuations against analyst expectations, industry trends, market trends, and other market information. In addition, we involved valuation specialists to assist in evaluating the Company's use of the income- and market-based approaches and selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities.GRAIL contingent considerationDescription of the MatterIn connection with the August 18, 2021 acquisition of GRAIL, the Company recognized a contingent consideration liability at the estimated fair value on the acquisition date. The Company uses a Monte Carlo simulation model to determine the fair value of the contingent consideration liability each reporting period. As disclosed in Note 3 of the consolidated financial statements, the fair value of the contingent consideration liability as of December 31, 2023 is $387 million. The Company recognized a $24 million gain in the current year as a result of the change in the fair value of the contingent consideration liability.Auditing the valuation of the contingent consideration liability was complex and required significant auditor judgment due to the estimation uncertainty in evaluating the reasonableness of the significant assumptions. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the GRAIL contingent consideration due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions to the model include forecasted revenues for GRAIL and the discount rate based on the estimated timing of payments. These significant assumptions are forward-looking and could be affected by future economic and market conditions. **Current (2025):** The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. GRAIL Contingent ConsiderationDescription of the MatterIn connection with the August 18, 2021 acquisition of GRAIL, the Company recognized a contingent consideration liability at the estimated fair value on the acquisition date. The Company uses a Monte Carlo simulation model to determine the fair value of the contingent consideration liability each reporting period. As disclosed in Note 4 of the consolidated financial statements, the fair value of the contingent consideration liability as of December 29, 2024 is $71 million. The Company recognized a $315 million gain in the current year as a result of the change in the fair value of the contingent consideration liability.Auditing the valuation of the contingent consideration liability was complex and required significant auditor judgment due to the estimation uncertainty in evaluating the reasonableness of a significant assumption, which is the revenue risk premium. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the GRAIL contingent consideration due to the sensitivity of the fair value to changes in the revenue risk premium. The revenue risk premium is forward-looking and could be affected by future economic and market conditions. --- ## Modified: Performance Stock Options(1) **Key changes:** - Reworded sentence: "The number of units reflected awards that had been granted and for which it was assumed to be probable that the underlying performance goals would be achieved." **Prior (2024):** _____________ (1)In connection with the GRAIL acquisition, we issued replacement performance stock options to GRAIL employees in 2021. The number of units reflect awards that have been granted and for which it is assumed to be probable that the underlying performance goals will be achieved. (1) In connection with the GRAIL acquisition, we issued replacement performance stock options to GRAIL employees in 2021. The number of units reflect awards that have been granted and for which it is assumed to be probable that the underlying performance goals will be achieved. The aggregate intrinsic value of options outstanding as of December 31, 2023 was zero. Aggregate intrinsic value represents the product of the number of options outstanding multiplied by the difference between our closing stock price per share on the last trading day of the fiscal period, which was $139.24 as of December 29, 2023, and the exercise price. Total intrinsic value of options exercised was $1 million, zero, and $1 million in 2023, 2022, and 2021, respectively. The weighted-average remaining life of options outstanding was 5.2 years as of December 31, 2023. The aggregate intrinsic value of performance stock options outstanding as of December 31, 2023 was $1 million. The total intrinsic value of performance stock options exercised was zero and $6 million in 2023 and 2021, respectively. No performance stock options were exercised in 2022. Outstanding performance stock options, in general, have contractual terms of ten years from the respective grant dates. **Current (2025):** _____________ (1)In connection with the GRAIL acquisition, we issued replacement performance stock options to GRAIL employees in 2021. The number of units reflected awards that had been granted and for which it was assumed to be probable that the underlying performance goals would be achieved. In connection with the GRAIL Spin-Off, all outstanding performance stock options were assumed by GRAIL. (1) The total intrinsic value of stock options exercised was immaterial in both 2023 and 2022. None exercised in 2024. --- ## Modified: Contingent Consideration Liabilities **Key changes:** - Reworded sentence: "We reassess the fair value of contingent consideration related to acquisitions on a quarterly basis, with changes in the fair value, subsequent to the acquisition date, recognized in selling, general and administrative expense." - Reworded sentence: "Covered Revenues for the periods Q4 2023 through Q3 2024, Q4 2022 through Q3 2023, and Q4 2021 through Q3 2022 were $117 million, $85 million, and $42 million, respectively, driven primarily by sales of GRAIL's Galleri test." - Reworded sentence: "Subsequent to the Spin-Off, we no longer have access to GRAIL management's forecasts." **Prior (2024):** We reassess the fair value of contingent consideration related to acquisitions on a quarterly basis. Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in selling, general and administrative expense. The contingent value rights issued as part of the GRAIL 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. As defined in the Contingent Value Rights Agreement, 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. Covered Revenues for the period Q4 2022 through Q3 2023 were $85 million in aggregate and Covered Revenues for the period Q4 2021 through Q3 2022 were $42 million in aggregate, driven primarily by sales of GRAIL's Galleri test. Covered Revenue Payments relating to such periods were approximately $803,000 and $396,000 in 2023 and 2022, respectively. Pursuant to the Contingent Value Rights Agreement, a portion of the Covered Revenue Payments in 2022 were applied to reimburse us for certain expenses. We use a Monte Carlo simulation to estimate the fair value of contingent consideration related to the GRAIL acquisition. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues for GRAIL, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. The fair value of our contingent consideration liability related to GRAIL was $387 million and $412 million as of December 31, 2023 and January 1, 2023, respectively, of which $385 million and $411 million, respectively, was included in other long-term liabilities, with the remaining balances included in accrued liabilities. Changes in the estimated fair value of our contingent consideration liabilities were as follows: In millionsBalance as of January 3, 2021$ - Acquisition of GRAIL762 Other acquisition14 Measurement period adjustment related to GRAIL acquisition(5)Cash payments(15)Exchange of GRAIL contingent value rights(145)Change in estimated fair value4 Balance as of January 2, 2022615 Acquisition2 Change in estimated fair value(205)Balance as of January 1, 2023412 Change in estimated fair value(24)Cash payments(1)Balance as of December 31, 2023$387 In December 2021, we exchanged approximately 73 million contingent value rights, that were issued as part of the GRAIL acquisition, for an aggregate cash payment of $57 million and the issuance of $2 million in shares of our common stock. As a result of the exchange, we recognized a gain of $86 million in other (expense) income, net in 2021, which represented the difference between the fair value of the contingent consideration liability for the contingent value rights exchanged of $145 million and the total consideration transferred of $59 million. We recorded a contingent consideration liability of $14 million as a result of an acquisition completed in Q2 2021. The acquisition-date fair value of the contingent consideration was derived using the income approach. Assumptions used to estimate the liability included the probability of achieving certain milestones and a discount rate. These unobservable inputs represented a Level 3 measurement because they were supported by little or no market activity and reflected our own assumptions in measuring fair value. We recorded an expense of $1 million in selling, general and administrative expense in 2021 due to the change in estimated fair value of the contingent consideration and made a payment of $15 million in Q4 2021 upon achievement of the milestones. 68 68 68 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** We reassess the fair value of contingent consideration related to acquisitions on a quarterly basis, with changes in the fair value, subsequent to the acquisition date, recognized in selling, general and administrative expense. The contingent value rights issued as part of the GRAIL 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 (through August 2033). As defined in the Contingent Value Rights Agreement, 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. Covered Revenues for the periods Q4 2023 through Q3 2024, Q4 2022 through Q3 2023, and Q4 2021 through Q3 2022 were $117 million, $85 million, and $42 million, respectively, driven primarily by sales of GRAIL's Galleri test. Covered Revenue Payments relating to such periods were $1.1 million, $803,000, and $396,000 in 2024, 2023, and 2022, respectively. A portion of the Covered Revenue Payments in 2022 were applied to reimburse us for certain expenses. The fair value of our contingent consideration liability related to GRAIL was $71 million and $387 million as of December 29, 2024 and December 31, 2023, respectively, of which $70 million and $385 million, respectively, was included in other long-term liabilities, with the remaining balances included in accrued liabilities. We use a Monte Carlo simulation to estimate the fair value of the GRAIL contingent consideration liability. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues for GRAIL, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Subsequent to the Spin-Off, we no longer have access to GRAIL management's forecasts. Therefore, we must rely on information made public by GRAIL's management and, beginning in Q4 2024, information published in analyst reports to estimate forecasted revenues through August 2033. In August 2024, GRAIL publicly announced a corporate restructure, including a reduction in headcount and planned hires and a substantial decrease in certain R&D projects and investments. To estimate the liability as of December 29, 2024, we selected a revenue risk premium of 9%, which was derived from reconciling our forecasted revenues for GRAIL to GRAIL's market capitalization based on a 60-day trailing average. The significant decrease in the contingent consideration liability from December 31, 2023 was due to a decrease in the forecasted revenues, following revised revenue projections announced by GRAIL in May 2024 and the restructuring announcement in August 2024. 69 69 69 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: CONSOLIDATED FINANCIAL STATEMENTS **Key changes:** - Reworded sentence: "INDEX TO CONSOLIDATED FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting Firm (PCAOB ID: 42)48Consolidated Balance Sheets50Consolidated Statements of Operations51Consolidated Statements of Comprehensive Loss52Consolidated Statements of Stockholders' Equity53Consolidated Statements of Cash Flows54Notes to the Consolidated Financial Statements551." - Reworded sentence: "Investments and Fair Value Measurements675." - Reworded sentence: "Investments and Fair Value Measurements 67 5." **Prior (2024):** INDEX TO CONSOLIDATED FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting Firm (PCAOB ID: 42)47Consolidated Balance Sheets50Consolidated Statements of Operations51Consolidated Statements of Comprehensive (Loss) Income52Consolidated Statements of Stockholders' Equity53Consolidated Statements of Cash Flows54Notes to the Consolidated Financial Statements551. Organization and Significant Accounting Policies552. Revenue643. Investments and Fair Value Measurements664. Acquisitions, Goodwill and Intangible Assets695. Debt and Other Commitments746. Stockholders' Equity767. Supplemental Balance Sheet and Statement of Operations Details818. Legal Proceedings839. Income Taxes8610. Employee Benefit Plans8911. Segments and Geographic Data90 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 47 Consolidated Balance Sheets 50 Consolidated Statements of Operations 51 Consolidated Statements of Comprehensive (Loss) Income 52 Consolidated Statements of Stockholders' Equity 53 Consolidated Statements of Cash Flows 54 Notes to the Consolidated Financial Statements 55 1. Organization and Significant Accounting Policies 55 2. Revenue 64 3. Investments and Fair Value Measurements 66 4. Acquisitions, Goodwill and Intangible Assets 69 5. Debt and Other Commitments 74 6. Stockholders' Equity 76 7. Supplemental Balance Sheet and Statement of Operations Details 81 8. Legal Proceedings 83 9. Income Taxes 86 10. Employee Benefit Plans 89 11. Segments and Geographic Data 90 46 46 46 **Current (2025):** INDEX TO CONSOLIDATED FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting Firm (PCAOB ID: 42)48Consolidated Balance Sheets50Consolidated Statements of Operations51Consolidated Statements of Comprehensive Loss52Consolidated Statements of Stockholders' Equity53Consolidated Statements of Cash Flows54Notes to the Consolidated Financial Statements551. Organization and Significant Accounting Policies552. GRAIL Spin-Off653. Revenue664. Investments and Fair Value Measurements675. Goodwill, Intangible Assets, and Acquisitions706. Debt and Other Commitments747. Stockholders' Equity778. Supplemental Balance Sheet Details829. Legal Proceedings8410. Income Taxes8811. Employee Benefit Plans9112. Segment and Geographic Information92 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 48 Consolidated Balance Sheets 50 Consolidated Statements of Operations 51 Consolidated Statements of Comprehensive Loss 52 Consolidated Statements of Stockholders' Equity 53 Consolidated Statements of Cash Flows 54 Notes to the Consolidated Financial Statements 55 1. Organization and Significant Accounting Policies 55 2. GRAIL Spin-Off 65 3. Revenue 66 4. Investments and Fair Value Measurements 67 5. Goodwill, Intangible Assets, and Acquisitions 70 6. Debt and Other Commitments 74 7. Stockholders' Equity 77 8. Supplemental Balance Sheet Details 82 9. Legal Proceedings 84 10. Income Taxes 88 11. Employee Benefit Plans 91 12. Segment and Geographic Information 92 47 47 47 --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "The IPR&D impairment test is performed by comparing the fair value of the asset to its carrying amount." - Reworded sentence: "We consider a triggering event to reassess a right-of-use asset's asset group to have occurred if we exit a portion of or the full facility or enter into a sublease." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Accrued Liabilities **Key changes:** - Reworded sentence: "In millionsDecember 29,2024December 31,2023Legal contingencies(1)$26 $484 Contract liabilities, current portion260 252 Accrued compensation expenses252 223 Accrued taxes payable101 79 Operating lease liabilities, current portion79 86 Liability-classified equity incentive awards - 55 Other, including warranties(2)109 146 Total accrued liabilities$827 $1,325 _____________ Legal contingencies(1) Accrued compensation expenses Operating lease liabilities, current portion Operating lease liabilities, current portion Other, including warranties(2) (1)See note 9." **Prior (2024):** In millionsDecember 31,2023January 1,2023Legal contingencies(1)$484 $473 Contract liabilities, current portion252 245 Accrued compensation expenses(2)223 188 Accrued taxes payable79 97 Operating lease liabilities, current portion86 76 Liability-classified equity incentive awards55 36 Other, including warranties(3)146 117 Total accrued liabilities$1,325 $1,232 Legal contingencies(1) Accrued compensation expenses(2) Operating lease liabilities, current portion Operating lease liabilities, current portion Other, including warranties(3) _____________ (1)See note "8. Legal Proceedings" for additional details. (2)Included employee separation costs related to restructuring activities. (3)See table below for changes in the reserve for product warranties. 81 81 81 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** In millionsDecember 29,2024December 31,2023Legal contingencies(1)$26 $484 Contract liabilities, current portion260 252 Accrued compensation expenses252 223 Accrued taxes payable101 79 Operating lease liabilities, current portion79 86 Liability-classified equity incentive awards - 55 Other, including warranties(2)109 146 Total accrued liabilities$827 $1,325 _____________ Legal contingencies(1) Accrued compensation expenses Operating lease liabilities, current portion Operating lease liabilities, current portion Other, including warranties(2) (1)See note 9. Legal Proceedings for additional details. (2)See table below for changes in the reserve for product warranties. 82 82 82 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: About Illumina **Key changes:** - Reworded sentence: "31 31 31 On June 24, 2024, we completed the Spin-Off of GRAIL into a separate, independent publicly traded company through the distribution of approximately 85.5% of the outstanding shares of common stock of GRAIL to Illumina stockholders on a pro rata basis." - Reworded sentence: "While these trends are important to understanding and evaluating our financial results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto within the Consolidated Financial Statements section of this report, and the other transactions, events, and trends discussed in Risk Factors within the Business & Market Information section of this report." **Prior (2024):** Our focus on innovation has established us as a global leader in DNA sequencing and array-based technologies, serving customers in the research, clinical and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. Our customers include leading genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies. Our comprehensive line of products addresses the scale of experimentation and breadth of functional analysis to advance disease research, drug development, and the development of molecular tests. This portfolio of leading-edge sequencing and array-based solutions addresses a range of genomic complexity and throughput, enabling researchers and clinical practitioners to select the best solution for their scientific challenge. 31 31 31 On August 18, 2021, we acquired GRAIL, a healthcare company focused on early detection of multiple cancers. GRAIL's Galleri blood test detects various types of cancers before they are symptomatic. The acquisition is subject to ongoing legal proceedings, and, currently, GRAIL must be held and operated separately and independently from Illumina pursuant to the transitional measures ordered by the European Commission in the EC Divestment Decision, following the prohibition of our acquisition of GRAIL on September 6, 2022. See note "8. Legal Proceedings" for further details. On December 17, 2023, we announced that we will divest GRAIL. The divestiture of GRAIL is expected to be executed through a third-party sale or capital markets transaction in accordance with the EC Divestment Decision, with the goal of finalizing the terms of the divestiture by the end of the second quarter of 2024. There can be no assurance regarding the ultimate timing of the divestiture of GRAIL. We have two reportable segments, Core Illumina and GRAIL. Core Illumina relates to our core operations, excluding the results of GRAIL. See note "11. Segments and Geographic Data" for additional details. Our financial results have been, and will continue to be, impacted by several significant trends, which are described below. While these trends are important to understanding and evaluating our financial results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto within the Consolidated Financial Statements section of this report, and the other transactions, events, and trends discussed in "Risk Factors" within the Business & Market Information section of this report. **Current (2025):** Our focus on innovation has established us as a global leader in DNA sequencing and array-based technologies, serving customers in the research, clinical and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. Our customers include leading genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies. Our comprehensive line of products addresses the scale of experimentation and breadth of functional analysis to advance disease research, drug development, and the development of molecular tests. This portfolio of leading-edge sequencing and array-based solutions addresses a range of genomic complexity and throughput, enabling researchers and clinical practitioners to select the best solution for their scientific challenge. 31 31 31 On June 24, 2024, we completed the Spin-Off of GRAIL into a separate, independent publicly traded company through the distribution of approximately 85.5% of the outstanding shares of common stock of GRAIL to Illumina stockholders on a pro rata basis. We retained approximately 14.5% of the shares of GRAIL common stock immediately following the Spin-Off. The disposition of GRAIL did not meet the criteria to be reported as a discontinued operation and accordingly, GRAIL's assets, liabilities, results of operations and cash flows have not been reclassified. In connection with the Spin-Off, Illumina's stockholders received one share of GRAIL common stock for every six shares of Illumina common stock held on the Record Date. Refer to note 2. GRAIL Spin-Off for further details. We have one reportable segment, Core Illumina, as of December 29, 2024. Prior to the Spin-Off of GRAIL on June 24, 2024, our reportable segments included both Core Illumina and GRAIL. See note 12. Segment and Geographic Information within the Consolidated Financial Statements section of this report for details on our reportable segments. Our financial results have been, and will continue to be, impacted by several significant trends, which are described below. While these trends are important to understanding and evaluating our financial results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto within the Consolidated Financial Statements section of this report, and the other transactions, events, and trends discussed in Risk Factors within the Business & Market Information section of this report. --- ## Modified: Purchase Obligations **Key changes:** - Reworded sentence: "In the normal course of business, we enter into agreements to purchase goods or services that are not cancelable without penalty, primarily related to licensing and supply arrangements." - Removed sentence: "76 76 76 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents" **Prior (2024):** The 2015 Stock and Incentive Compensation Plan (the 2015 Stock Plan) and the New Hire Stock and Incentive Plan allow for the issuance of stock options, performance stock options, restricted stock units and awards, and performance stock units. In Q2 2023, the Company's stockholders approved an amended and restated version of the 2015 Stock Plan and increased the maximum number of shares authorized for issuance by 8.0 million shares. As of December 31, 2023, approximately 8.2 million shares remained available for future grants under the 2015 Stock Plan. There is no set number of shares reserved for issuance under the New Hire Stock and Incentive Plan. 76 76 76 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** In the normal course of business, we enter into agreements to purchase goods or services that are not cancelable without penalty, primarily related to licensing and supply arrangements. For those agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities or pricing as of the reporting date. Licensing agreements under which we commit to minimum royalty payments, some of which are subject to adjustment, may be terminated prior to the expiration of underlying intellectual property under certain circumstances. Annual minimum payments for noncancelable purchase obligations as of December 29, 2024 totaled $212 million, approximately half of which are due within the next twelve months. 7. STOCKHOLDERS' EQUITYThe 2015 Stock and Incentive Compensation Plan (the 2015 Stock Plan) and the New Hire Stock and Incentive Plan allow for the issuance of stock options, performance stock options, restricted stock units and awards and performance stock units. In 2023, the Company's stockholders approved an amended and restated version of the 2015 Stock Plan and increased the maximum number of shares authorized for issuance by 8.0 million shares. In connection with the GRAIL Spin-Off, all unvested RSU and PSU were equitably adjusted pursuant to the plan to preserve their intrinsic value and the number of shares reserved for issuance under the 2015 Stock Plan was increased by 160,000 shares. As of December 29, 2024, approximately 5.4 million shares remained available for future grants under the 2015 Stock Plan. There is no set number of shares reserved for issuance under the New Hire Stock and Incentive Plan. --- ## Modified: Securities Class Actions **Key changes:** - Reworded sentence: "(collectively, the Actions)." - Reworded sentence: "On January 9, 2024, four movants filed motions to consolidate the Actions and to appoint a lead plaintiff (Lead Plaintiff Motions)." **Prior (2024):** Federal Securities Class Actions. On November 11, 2023, the first of three securities class action complaints was filed against Illumina and certain of its current and former executive officers in the United States District Court for the Southern District of California. The first-filed case is captioned Kangas v. Illumina, Inc. et al., the second-filed case is captioned Roy v. Illumina, Inc. et al., and the third-filed case is captioned Louisiana Sheriffs' Pension & Relief Fund v. Illumina, Inc. et al. (collectively, the "Actions"). The complaints generally allege, among other things, that defendants made materially false and misleading statements and omitted material facts relating to Illumina's acquisition of Grail. The complaints seek unspecified damages, interest, fees, and costs. On January 9, 2024, four movants filed motions to consolidate the Actions and to appoint a lead plaintiff ("Lead Plaintiff Motions"). We expect the court to consolidate the three actions and appoint a lead plaintiff in the coming months. 85 85 85 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Federal Securities Class Actions. On November 11, 2023, the first of three securities class action complaints was filed against Illumina and certain of its current and former executive officers in the United States District Court for the Southern District of California. The first-filed case is captioned Kangas v. Illumina, Inc. et al., the second-filed case is captioned Roy v. Illumina, Inc. et al., and the third-filed case is captioned Louisiana Sheriffs' Pension & Relief Fund v. Illumina, Inc. et al. (collectively, the Actions). The complaints generally allege, among other things, that defendants made materially false and misleading statements and omitted material facts relating to Illumina's acquisition of GRAIL. The complaints seek unspecified damages, interest, fees, and costs. On January 9, 2024, four movants filed motions to consolidate the Actions and to appoint a lead plaintiff (Lead Plaintiff Motions). On April 11, 2024, the Court issued an order consolidating the Actions into a single action (captioned in re Illumina, Inc. Securities Litigation No. 23-cv-2082-LL-MMP), and appointed Universal-Investment-Gesellschaft mbH, UI BVK Kapitalverwaltungsgesellschaft mbH, and ACATIS Investment Kapitalverwaltungsgesellschaft mbH as lead plaintiffs (the Lead Plaintiffs). On June 21, 2024, the Lead Plaintiffs filed their consolidated amended complaint. The complaint alleges that Illumina and GRAIL and certain of their current and former directors and officers violated Sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5 in connection with Illumina's acquisition of GRAIL. On September 13, 2024, the Lead Plaintiffs filed a second amended consolidated complaint. On November 12, 2024, the Company and other defendants filed a motion to dismiss the second amended consolidated complaint. On December 20, 2024, the Lead Plaintiffs filed their opposition to the motion to dismiss. The defendants' final reply brief was filed on February 3, 2025. No hearing date has been set. State Securities Class Actions. On February 2, 2024, the first of two additional securities class actions was filed against Illumina, certain of its officers and directors, and several other individuals and entities in the Superior Court of the State of California, County of San Mateo, captioned Loren Scott Mar v. Illumina, et al. and Scott Zerzanek v. Illumina, Inc. et al. Both complaints generally allege, among other things, that defendants made materially false and misleading statements and omitted material facts in the November 2020 and February 2021 registration statements and prospectus relating to Illumina's acquisition of GRAIL. The complaints seek unspecified damages, interest, fees, and costs. On March 29, 2024, the parties to the actions filed a Joint Stipulation to Consolidate the actions and to appoint co-lead counsel for plaintiffs, which the Court granted on April 5, 2024. On August 12, 2024, the Plaintiffs filed their consolidated complaint. On September 6, 2024, Illumina and the other named defendants filed a motion to stay the litigation. On October 4, 2024, the plaintiffs opposed the motion to stay. At a hearing held on December 6, 2024, the Court declined to stay the litigation. The defendants' demurrer is due February 28, 2025. Plaintiffs' oppositions to the demurrer are due April 30, 2025, and defendants' final reply briefs are due May 30, 2025. A hearing is set for June 20, 2025. In light of the fact that the lawsuits are in an early stage, we cannot predict the ultimate outcome of the suits. We deny the allegations in the complaints and intend to vigorously defend the litigation. 87 87 87 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Revolving Credit Agreement **Key changes:** - Reworded sentence: "On January 4, 2023, we entered into a new credit agreement (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 Revolving Credit Facility)." - Reworded sentence: "The Revolving 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, the consent of the extending lenders and certain other conditions." **Prior (2024):** On January 4, 2023, we entered into a new credit agreement (the 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). The proceeds of the loans under the Credit Facility may be used to finance working capital needs and for general corporate purposes. The credit agreement dated as of March 8, 2021 and the commitments thereunder were terminated as of January 4, 2023. The 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, the consent of the extending lenders and certain other conditions. We may prepay amounts borrowed and terminate commitments under the Credit Facility at any time without premium or penalty. As of December 31, 2023, there were no borrowings or letters of credit outstanding under the Credit Facility and we were in compliance with all financial and operating covenants. one Any loans under the Credit Facility will have a variable interest rate based on either the term secured overnight financing rate or the alternate base rate, plus an applicable rate that varies with the Company's debt rating and, in the case of loans bearing interest based on the term secured overnight financing rate, a credit spread adjustment equal to 0.10% per annum. The Credit Agreement includes an option for us to elect to increase the commitments under the Credit Facility or to enter into one or more tranches of term loans in the aggregate principal amount of up to $250 million, subject to the consent of the lenders providing the additional commitments or term loans, as applicable, and certain other conditions. The Credit Agreement contains financial and operating covenants. Pursuant to the Credit Agreement, we are required to maintain a ratio of total debt to adjusted annual earnings before interest, taxes, depreciation and amortization (EBITDA), calculated based on the four consecutive fiscal quarters ending with the most recent fiscal quarter, of not greater than 3.50 to 1.00 as of the end of each fiscal quarter. Upon the consummation of any Qualified Acquisition (as defined in the Credit Agreement) and us providing notice to the Administrative Agent, the ratio increases to 4.00 to 75 75 75 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** On January 4, 2023, we entered into a new credit agreement (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 Revolving Credit Facility). Proceeds of the loans under the Revolving Credit Facility may be used to finance working capital needs and for general corporate purposes. The credit agreement dated as of March 8, 2021 and the commitments thereunder were terminated as of January 4, 2023. The Revolving 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, the consent of the extending lenders and certain other conditions. We may prepay amounts borrowed and terminate commitments under the Revolving Credit Facility at any time without premium or penalty. As of December 29, 2024, there were no borrowings or letters of credit outstanding under the credit facility, and we were in compliance with all financial and operating covenants. 75 75 75 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Venture Funds **Key changes:** - Reworded sentence: "We invest in three venture capital investment funds (the Funds), which are accounted for as equity-method investments." **Prior (2024):** We invest in two venture capital investment funds (the Funds) with capital commitments of $100 million, callable through April 2026, and up to $150 million, callable through July 2029, respectively, of which $4 million and up to $71 million, respectively, remained callable as of December 31, 2023. Our investments in the Funds are accounted for as equity-method investments. The aggregate carrying amounts of the Funds, included in other assets, were $168 million and $183 million as of December 31, 2023 and January 1, 2023, respectively. We recorded net unrealized losses of $33 million and $25 million in 2023 and 2022, respectively, and a net unrealized gain of $55 million in 2021, in other (expense) income, net. 66 66 66 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** We invest in three venture capital investment funds (the Funds), which are accounted for as equity-method investments. The aggregate carrying amount of the Funds, included in other assets, was $201 million and $168 million as of December 29, 2024 and December 31, 2023, respectively. We recorded a net gain of $5 million in 2024, and net losses of $33 million and $25 million in 2023 and 2022, respectively, in other expense, net. 67 67 67 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Intangible Assets **Key changes:** - Reworded sentence: "December 29, 2024December 31, 2023In millionsGrossCarryingAmountAccumulatedAmortizationIntangible Assets,NetGrossCarryingAmountAccumulatedAmortizationImpairmentIntangible Assets,NetDeveloped technologies$465 $(305)$160 $2,807 $(585)$ - $2,222 Licensed technologies234 (114)120 274 (133) - 141 License agreements19 (13)6 14 (13) - 1 Customer relationships16 (14)2 14 (13) - 1 Database12 (5)7 12 (3) - 9 Trade name2 (2) - 43 (14) - 29 Total finite-lived intangible assets, net748 (453)295 3,164 (761) - 2,403 In-process research and development (IPR&D) - - - 705 - (115)590 Total intangible assets, net$748 $(453)$295 $3,869 $(761)$(115)$2,993 In-process research and development (IPR&D) In-process research and development (IPR&D) The significant decrease in developed technologies, trade name, and IPR&D reflect the GRAIL intangible assets disposed of in connection with the Spin-Off." - Reworded sentence: "In millionsEstimated Annual Amortization2025$69 202657 202755 202852 202923 Thereafter39 Total$295 73 73 73 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents" **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** December 29, 2024December 31, 2023In millionsGrossCarryingAmountAccumulatedAmortizationIntangible Assets,NetGrossCarryingAmountAccumulatedAmortizationImpairmentIntangible Assets,NetDeveloped technologies$465 $(305)$160 $2,807 $(585)$ - $2,222 Licensed technologies234 (114)120 274 (133) - 141 License agreements19 (13)6 14 (13) - 1 Customer relationships16 (14)2 14 (13) - 1 Database12 (5)7 12 (3) - 9 Trade name2 (2) - 43 (14) - 29 Total finite-lived intangible assets, net748 (453)295 3,164 (761) - 2,403 In-process research and development (IPR&D) - - - 705 - (115)590 Total intangible assets, net$748 $(453)$295 $3,869 $(761)$(115)$2,993 In-process research and development (IPR&D) In-process research and development (IPR&D) The significant decrease in developed technologies, trade name, and IPR&D reflect the GRAIL intangible assets disposed of in connection with the Spin-Off. See note 2. GRAIL Spin-Off for details. Also, in Q1 2024, we placed into service (reflected in developed technologies), with a useful life of 10 years, the $35 million IPR&D intangible asset we acquired in 2021, net of impairments recognized in 2024 and 2023 of $3 million and $6 million, respectively. As a result of the Fluent BioSciences acquisition in Q3 2024, we recorded a developed technology asset of $42 million, with a useful life of 7 years, and a customer relationship asset of $2 million, with a useful life of 11 years. We are still finalizing the allocation of the purchase price as it relates to the completion of certain tax returns. We expect to finalize the valuation as soon as practicable, but no later than one year after the acquisition. As a result of an acquisition in Q4 2023, we recorded a developed technology asset of $19 million, with a useful life of 10 years. We finalized the allocation of the purchase price in Q4 2024 with no material adjustments to provisional amounts. The estimated future annual amortization of finite-lived intangible assets is shown in the following table. Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors. In millionsEstimated Annual Amortization2025$69 202657 202755 202852 202923 Thereafter39 Total$295 73 73 73 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Impairment assessment of GRAIL in-process research and development (IPR&D) **Key changes:** - Reworded sentence: "Description of the Matter The Company tests indefinite-lived intangible assets for impairment annually, as of May, or more frequently if events or circumstances indicate it is more likely than not that the fair value of an asset is less than its carrying amount." - Reworded sentence: "In testing the valuation of GRAIL IPR&D, we performed audit procedures that included, among others, evaluating the Company's use of the income approach and testing the significant assumptions used in the model, as described above." - Reworded sentence: "We evaluated the reasonableness of projected revenue growth used within the valuation against industry trends, market trends, and other market information." - Added sentence: "/s/ Ernst & Young LLP We have served as the Company's auditor since 2000." - Added sentence: "San Diego, California February 12, 2025 49 49 49" **Prior (2024):** The Company tests goodwill for impairment annually, as of May, or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The Company identified certain triggering events that occurred in the three months ended October 1, 2023 that required an interim goodwill impairment test. Reporting units were tested for impairment by comparing their fair values to their carrying values. As discussed in Note 4 to the consolidated financial statements, as a result of the interim impairment assessment, the Company recorded an impairment loss of $712 million related to the GRAIL reporting unit. The carrying value of goodwill as of December 31, 2023 was $2.5 billion, of which $1.5 billion related to the GRAIL reporting unit. Auditing the Company's goodwill impairment assessment was complex and required significant auditor judgment due to the significant estimation uncertainty in determining the fair value of the GRAIL reporting segment. Management used a combination of income- and market-based approaches to estimate the fair value of the GRAIL reporting unit. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of the GRAIL reporting unit due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions include forecasted revenues for GRAIL and the discount rate used to discount future cash flows. These significant assumptions related to the fair value of the GRAIL reporting unit are forward-looking and could be affected by future economic and market conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of the GRAIL reporting unit used in the goodwill impairment assessment. This included controls over management's development of the above-described assumptions used in the valuation model applied. In testing the valuation of the GRAIL reporting unit, we performed audit procedures that included, among others, evaluating the Company's use of the income- and market-based approaches and testing the significant assumptions used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. We evaluated the reasonableness of projected revenue growth used within the valuations against analyst expectations, industry trends, market trends, and other market information. In addition, we involved valuation specialists to assist in evaluating the Company's use of the income- and market-based approaches and selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities. **Current (2025):** Description of the Matter The Company tests indefinite-lived intangible assets for impairment annually, as of May, or more frequently if events or circumstances indicate it is more likely than not that the fair value of an asset is less than its carrying amount. The Company identified a triggering event that occurred in the three months ended June 30, 2024 that required an interim impairment test. GRAIL IPR&D was tested for impairment by comparing its fair value to its carrying value. As disclosed in Note 5 of the consolidated financial statements, as a result of the interim impairment assessment, the Company recorded an impairment loss of $420 million related to GRAIL IPR&D. The carrying value of IPR&D following the impairment assessment was $140 million. The Company divested GRAIL on June 24, 2024. Auditing the Company's IPR&D impairment assessment was complex and required significant auditor judgment due to the significant estimation uncertainty in determining the fair value of GRAIL IPR&D. Management used an income approach to estimate the fair value of GRAIL IPR&D. A significant emphasis is placed on the appropriateness of the estimate considerations used by management to determine the fair value of GRAIL IPR&D due to the sensitivity of the fair value to the underlying assumptions. The significant assumptions include forecasted revenues for GRAIL IPR&D and the discount rate used to discount future cash flows. These significant assumptions related to the fair value of GRAIL IPR&D are forward-looking and could be affected by future economic and market conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's process for determining the fair value of GRAIL IPR&D. This included controls over management's development of the above-described assumptions used in the valuation model applied. In testing the valuation of GRAIL IPR&D, we performed audit procedures that included, among others, evaluating the Company's use of the income approach and testing the significant assumptions used in the model, as described above. We evaluated the completeness and accuracy of underlying data used in supporting the assumptions and estimates. We evaluated the reasonableness of projected revenue growth used within the valuation against industry trends, market trends, and other market information. In addition, we involved valuation specialists to assist in evaluating the Company's use of the income approach and selection of the discount rate. Our valuation specialists evaluated the discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities. /s/ Ernst & Young LLP We have served as the Company's auditor since 2000. San Diego, California February 12, 2025 49 49 49 --- ## Modified: (In millions, except per share amounts) **Key changes:** - Reworded sentence: "Years EndedDecember 29,2024December 31,2023January 1,2023Revenue: Product revenue$3,656 $3,787 $3,953 Service and other revenue716 717 631 Total revenue4,372 4,504 4,584 Cost of revenue:Cost of product revenue1,017 1,177 1,144 Cost of service and other revenue367 392 295 Amortization of acquired intangible assets127 191 173 Total cost of revenue1,511 1,760 1,612 Gross profit2,861 2,744 2,972 Operating expense:Research and development1,169 1,354 1,321 Selling, general and administrative1,092 1,612 1,297 Goodwill and intangible impairment1,889 827 3,914 Legal contingency and settlement(456)20 619 Total operating expense3,694 3,813 7,151 Loss from operations(833)(1,069)(4,179)Other income (expense):Interest income46 58 11 Interest expense(100)(77)(26)Other expense, net(292)(29)(142)Total other expense, net(346)(48)(157)Loss before income taxes(1,179)(1,117)(4,336)Provision for income taxes44 44 68 Net loss$(1,223)$(1,161)$(4,404)Loss per share:Basic$(7.69)$(7.34)$(28.00)Diluted$(7.69)$(7.34)$(28.00)Shares used in computing loss per share:Basic159 158 157 Diluted159 158 157 See accompanying notes to consolidated financial statements." **Prior (2024):** Years EndedDecember 31,2023January 1,2023January 2,2022Revenue: Product revenue$3,787 $3,953 $3,968 Service and other revenue717 631 558 Total revenue4,504 4,584 4,526 Cost of revenue:Cost of product revenue1,177 1,144 1,060 Cost of service and other revenue392 295 241 Amortization of acquired intangible assets191 173 71 Total cost of revenue1,760 1,612 1,372 Gross profit2,744 2,972 3,154 Operating expense:Research and development1,354 1,321 1,185 Selling, general and administrative1,612 1,297 2,092 Goodwill and intangible impairment827 3,914 - Legal contingency and settlement20 619 - Total operating expense3,813 7,151 3,277 Loss from operations(1,069)(4,179)(123)Other income (expense): Interest income58 11 - Interest expense(77)(26)(61)Other (expense) income, net(29)(142)1,068 Total other (expense) income, net(48)(157)1,007 (Loss) income before income taxes(1,117)(4,336)884 Provision for income taxes44 68 122 Net (loss) income$(1,161)$(4,404)$762 (Loss) earnings per share:Basic$(7.34)$(28.00)$5.07 Diluted$(7.34)$(28.00)$5.04 Shares used in computing (loss) earnings per share:Basic158 157 150 Diluted158 157 151 See accompanying notes to consolidated financial statements. 51 51 51 **Current (2025):** Years EndedDecember 29,2024December 31,2023January 1,2023Revenue: Product revenue$3,656 $3,787 $3,953 Service and other revenue716 717 631 Total revenue4,372 4,504 4,584 Cost of revenue:Cost of product revenue1,017 1,177 1,144 Cost of service and other revenue367 392 295 Amortization of acquired intangible assets127 191 173 Total cost of revenue1,511 1,760 1,612 Gross profit2,861 2,744 2,972 Operating expense:Research and development1,169 1,354 1,321 Selling, general and administrative1,092 1,612 1,297 Goodwill and intangible impairment1,889 827 3,914 Legal contingency and settlement(456)20 619 Total operating expense3,694 3,813 7,151 Loss from operations(833)(1,069)(4,179)Other income (expense):Interest income46 58 11 Interest expense(100)(77)(26)Other expense, net(292)(29)(142)Total other expense, net(346)(48)(157)Loss before income taxes(1,179)(1,117)(4,336)Provision for income taxes44 44 68 Net loss$(1,223)$(1,161)$(4,404)Loss per share:Basic$(7.69)$(7.34)$(28.00)Diluted$(7.69)$(7.34)$(28.00)Shares used in computing loss per share:Basic159 158 157 Diluted159 158 157 See accompanying notes to consolidated financial statements. 51 51 51 --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "Loans under the Revolving Credit Facility will have a variable interest rate based on either the term secured overnight financing rate (SOFR) or the alternate base rate, plus an applicable rate that varies with our debt rating and, in the case of loans bearing interest based on term SOFR, a credit spread adjustment equal to 0.10% per annum." - Reworded sentence: "Leases As of December 29, 2024, the maturities of our operating lease liabilities were as follows: In millions2025$10520261052027103202884202981Thereafter275Total remaining lease payments753Less: imputed interest(120)Total operating lease liabilities633Less: current portion(79)Long-term operating lease liabilities$554Weighted-average remaining lease term8.0 yearsWeighted-average discount rate4.4 % Total remaining lease payments The components of our lease costs were as follows: In millions202420232022Operating lease costs$93 $116 $112 Sublease income(19)(20)(20)Variable lease costs(1)25 27 20 Total lease costs$99 $123 $112 Operating lease costs Variable lease costs(1) _____________ (1)Variable lease costs include non-fixed maintenance charges and property taxes." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: (In millions) **Key changes:** - Reworded sentence: "Years Ended December 29,2024December 31,2023January 1,2023Net loss$(1,223)$(1,161)$(4,404)Unrealized gain (loss) on cash flow hedges, net of deferred tax23 (4)(14)Total comprehensive loss$(1,200)$(1,165)$(4,418) See accompanying notes to consolidated financial statements." **Prior (2024):** Years Ended December 31,2023January 1,2023January 2,2022Net (loss) income$(1,161)$(4,404)$762 Unrealized (loss) gain on cash flow hedges, net of deferred tax(4)(14)16 Unrealized loss on available-for-sale debt securities, net of deferred tax - - (1)Total comprehensive (loss) income $(1,165)$(4,418)$777 See accompanying notes to consolidated financial statements. 52 52 52 **Current (2025):** Years Ended December 29,2024December 31,2023January 1,2023Net loss$(1,223)$(1,161)$(4,404)Unrealized gain (loss) on cash flow hedges, net of deferred tax23 (4)(14)Total comprehensive loss$(1,200)$(1,165)$(4,418) See accompanying notes to consolidated financial statements. 52 52 52 --- ## Modified: Spin-Off of GRAIL (see Note 2) **Key changes:** - Reworded sentence: "See accompanying notes to consolidated financial statements." **Prior (2024):** Deficit) Cumulative-effect adjustment from adoption of ASU 2020-06, net of deferred tax See accompanying notes to consolidated financial statements. 53 53 53 ILLUMINA, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions) Years EndedDecember 31,2023January 1,2023January 2,2022Cash flows from operating activities: Net (loss) income$(1,161)$(4,404)$762 Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation expense235 215 176 Amortization of intangible assets197 179 75 Share-based compensation expense380 366 754 Accretion of debt discount on convertible senior notes - - 32 Deferred income taxes(33)(23)(76)Goodwill and intangible (IPR&D) impairment827 3,914 - Gain on previously held investment in GRAIL - - (899)Gain on exchange of GRAIL contingent value rights - - (86)Net losses (gains) on strategic investments40 122 (18)(Gain) loss on Helix contingent value right(10)7 (30)Payment of accreted debt discount(15) - - Gain on derivative assets related to terminated acquisition - - (26)Property and equipment and right-of-use asset impairment100 9 6 Change in fair value of contingent consideration liabilities(24)(205)4 Unrealized loss on foreign exchange translation22 1 - Other10 7 23 Changes in operating assets and liabilities:Accounts receivable(40)(12)(164)Inventory(20)(135)(58)Prepaid expenses and other current assets11 16 (64)Operating lease right-of-use assets and liabilities, net(16)(8)(13)Other assets5 19 (27)Accounts payable(44)(38)60 Accrued liabilities15 381 101 Other long-term liabilities(1)(19)13 Net cash provided by operating activities478 392 545 Cash flows from investing activities: Maturities of available-for-sale securities - - 331 Purchases of available-for-sale securities - - (77)Sales of available-for-sale securities - - 1,031 Purchases of property and equipment(195)(286)(208)Net (purchases) sales of strategic investments(6)(40)246 Cash received for derivative assets related to terminated acquisition - - 52 Net cash paid for acquisitions(29)(85)(2,444)Cash paid for intangible asset(1)(180) - Net cash used in investing activities(231)(591)(1,069)Cash flows from financing activities: Debt issuance costs paid for credit facility(1) - - Payments on financing obligations(1,235) - (517)Payments on contingent consideration liabilities(1) - (71)Net proceeds from issuance of debt - 991 988 Proceeds from issuance of common stock67 63 60 Taxes paid related to net share settlement of equity awards(40)(54)(511)Net cash (used in) provided by financing activities(1,210)1,000 (51)Effect of exchange rate changes on cash and cash equivalents - (22)(3)Net (decrease) increase in cash and cash equivalents(963)779 (578)Cash and cash equivalents at beginning of year2,011 1,232 1,810 Cash and cash equivalents at end of year$1,048 $2,011 $1,232 Supplemental cash flow information: Cash paid for interest$73 $17 $9 Cash paid for income taxes$65 $122 $233 Cash paid for operating lease liabilities$123 $112 $96 See accompanying notes to consolidated financial statements. Cash received for derivative assets related to terminated acquisition See accompanying notes to consolidated financial statements. 54 54 54 **Current (2025):** See accompanying notes to consolidated financial statements. 53 53 53 ILLUMINA, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In millions) Years EndedDecember 29,2024December 31,2023January 1,2023Cash flows from operating activities: Net loss$(1,223)$(1,161)$(4,404)Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation expense224 235 215 Amortization of intangible assets130 197 179 Share-based compensation expense370 380 366 Deferred income taxes(112)(33)(23)Net losses on strategic investments312 40 122 Change in fair value of contingent consideration liabilities(315)(24)(205)(Gain) loss on Helix contingent value right(15)(10)7 Goodwill and intangible (IPR&D) impairment1,889 827 3,914 Property and equipment and right-of-use asset impairment46 100 9 Other14 17 8 Changes in operating assets and liabilities:Accounts receivable(25)(40)(12)Inventory19 (20)(135)Prepaid expenses and other current assets(14)11 16 Operating lease right-of-use assets and liabilities, net(32)(16)(8)Other assets(15)5 19 Accounts payable(4)(44)(38)Accrued liabilities(440)15 381 Other long-term liabilities28 (1)(19)Net cash provided by operating activities837 478 392 Cash flows from investing activities: Net purchases of property and equipment(128)(195)(286)Net purchases of strategic investments(52)(6)(40)Cash paid for acquisitions and intangible assets, net of cash acquired(81)(30)(265)Cash received for Helix contingent value right83 - - Net cash used in investing activities(178)(231)(591)Cash flows from financing activities: Proceeds from debt, net of issuance costs1,241 (1)991 Payments on debt obligations(750)(1,235) - Payments on contingent consideration liabilities(1)(1) - Proceeds from issuance of common stock56 67 63 Taxes paid related to net share settlement of equity awards(32)(40)(54)Common stock repurchases(116) - - GRAIL cash deconsolidated as a result of spin-off(968) - - Net cash (used in) provided by financing activities(570)(1,210)1,000 Effect of exchange rate changes on cash and cash equivalents(10) - (22)Net increase (decrease) in cash and cash equivalents79 (963)779 Cash and cash equivalents at beginning of year1,048 2,011 1,232 Cash and cash equivalents at end of year$1,127 $1,048 $2,011 Supplemental cash flow information: Cash paid for interest$83 $73 $17 Cash paid for income taxes$105 $65 $122 Cash paid for operating lease liabilities$132 $123 $112 Purchases of property and equipment included in accounts payable and accrued liabilities$4 $12 $16 GRAIL net assets, excluding cash and cash equivalents, deconsolidated as a result of spin-off$1,770 $ - $ - Net purchases of property and equipment Purchases of property and equipment included in accounts payable and accrued liabilities See accompanying notes to consolidated financial statements. 54 54 54 --- ## Modified: Property and Equipment **Key changes:** - Reworded sentence: "In millionsDecember 29,2024December 31,2023Leasehold improvements$772 $803 Machinery and equipment683 684 Computer hardware and software478 463 Furniture and fixtures53 55 Buildings44 44 Construction in progress39 96 Total property and equipment, gross2,069 2,145 Accumulated depreciation(1,254)(1,138)Total property and equipment, net$815 $1,007" **Prior (2024):** Property and equipment are stated at cost, subject to review for impairment, and depreciated over the estimated useful lives of the assets, using the straight-line method. Depreciation of leasehold improvements is recorded over the shorter of the lease term or the estimated useful life of the related assets. Maintenance and repairs are expensed as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense. Costs incurred to develop internal-use software during the application development stage are recorded as computer software costs, at cost. Costs incurred in the development of such internal-use software, including external direct costs of materials and services and applicable compensation costs of employees devoted to specific software application development, are capitalized. Costs incurred outside of the application development stage are expensed as incurred. The estimated useful lives of the major classes of property and equipment are generally as follows: Buildings and leasehold improvements4 to 20 yearsMachinery and equipment3 to 5 yearsComputer hardware and software3 to 9 yearsFurniture and fixtures7 years 4 to 20 years 3 to 5 years 3 to 9 years 7 years Leases We lease approximately 2.8 million square feet of office, lab, manufacturing, and distribution facilities under various non-cancellable operating lease agreements (real estate leases). Our real estate leases have remaining lease terms of approximately 1 year to 15 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms, ranging from approximately 2 years to 20 years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms, as well as payments for common-area-maintenance and administrative services. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. We do not have any material financing leases. Operating lease right-of-use assets and liabilities on our consolidated balance sheets represent the present value of our remaining lease payments over the remaining lease terms, less any impairments recorded for right-of-use assets. We do not allocate lease payments to non-lease components; therefore, fixed payments for common-area-maintenance and administrative services are included in our operating lease right-of-use assets and liabilities. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable. Operating lease costs consist primarily of the fixed lease payments included in our operating lease liabilities and are recorded on a straight-line basis over the lease terms. We sublease certain real estate to third parties and this sublease income is also recorded on a straight-line basis. **Current (2025):** Property and equipment are stated at cost, subject to review for impairment, and depreciated over the estimated useful lives of the assets, using the straight-line method. Depreciation of leasehold improvements is recorded over the shorter of the lease term or the estimated useful life of the related assets. Maintenance and repairs are expensed as incurred. When assets are sold, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operating expense. Costs incurred to develop internal-use software during the application development stage are recorded at cost as computer software. Costs incurred in the development of such internal-use software, including external direct costs of materials and services and applicable compensation costs of employees devoted to specific software application development, are capitalized. Costs incurred outside of the application development stage are expensed as incurred. The estimated useful lives of the major classes of property and equipment are generally as follows: Buildings and leasehold improvements4 to 20 yearsMachinery and equipment3 to 5 yearsComputer hardware and software3 to 9 yearsFurniture and fixtures7 years 4 to 20 years 3 to 5 years 3 to 9 years 7 years Leases We have various non-cancellable operating lease agreements for office, lab, manufacturing, and distribution facilities. These leases have remaining lease terms of 1 year to 14 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms, ranging from 2 years to 20 years. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms, as well as payments for common-area-maintenance and administrative services. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. As of December 29, 2024, we do not have any financing leases. 60 60 60 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: RESULTS OF OPERATIONS **Key changes:** - Reworded sentence: "To enhance comparability, the following table sets forth audited consolidated statement of operations data for 2024, 2023, and 2022, stated as a percentage of total revenue.(1) 202420232022Revenue: Product revenue83.6 %84.1 %86.2 %Service and other revenue16.4 15.9 13.8 Total revenue100.0 100.0 100.0 Cost of revenue: Cost of product revenue23.3 26.1 25.0 Cost of service and other revenue8.4 8.7 6.4 Amortization of acquired intangible assets2.9 4.3 3.8 Total cost of revenue34.6 39.1 35.2 Gross profit65.4 60.9 64.8 Operating expense: Research and development26.7 30.1 28.8 Selling, general and administrative25.0 35.8 28.3 Goodwill and intangible impairment43.2 18.3 85.4 Legal contingency and settlement(10.4)0.4 13.5 Total operating expense84.5 84.6 156.0 Loss from operations(19.1)(23.7)(91.2)Other income (expense): Interest income1.1 1.3 0.2 Interest expense(2.3)(1.7)(0.6)Other expense, net(6.7)(0.7)(3.0)Total other expense, net(7.9)(1.1)(3.4)Loss before income taxes(27.0)(24.8)(94.6)Provision for income taxes1.0 1.0 1.5 Net loss(28.0)%(25.8)%(96.1)% _____________ (1)Percentages may not recalculate due to rounding." **Prior (2024):** To enhance comparability, the following table sets forth audited consolidated statement of operations data for 2023, 2022, and 2021, stated as a percentage of total revenue.(1) 202320222021Revenue: Product revenue84.1 %86.2 %87.7 %Service and other revenue15.9 13.8 12.3 Total revenue100.0 100.0 100.0 Cost of revenue: Cost of product revenue26.1 25.0 23.4 Cost of service and other revenue8.7 6.4 5.3 Amortization of acquired intangible assets4.3 3.8 1.6 Total cost of revenue39.1 35.2 30.3 Gross profit60.9 64.8 69.7 Operating expense: Research and development30.1 28.8 26.2 Selling, general and administrative35.8 28.3 46.2 Goodwill and intangible impairment18.3 85.4 - Legal contingency and settlement0.4 13.5 - Total operating expense84.6 156.0 72.4 Loss from operations(23.7)(91.2)(2.7)Other income (expense): Interest income1.3 0.2 - Interest expense(1.7)(0.6)(1.3)Other (expense) income, net(0.7)(3.0)23.5 Total other (expense) income, net(1.1)(3.4)22.2 (Loss) income before income taxes(24.8)(94.6)19.5 Provision for income taxes1.0 1.5 2.7 Net (loss) income(25.8)%(96.1)%16.8 % _____________ (1)Percentages may not recalculate due to rounding. 33 33 33 Revenue 2023-2022Dollars in millions20232022Change% ChangeCore Illumina:Consumables$3,106 $3,246 $(140)(4)%Instruments706 729 (23)(3)Total product revenue3,812 3,975 (163)(4)Service and other revenue626 578 48 8 Total Core Illumina revenue4,438 4,553 (115)(3)GRAIL:Service and other revenue93 55 38 69 Eliminations(27)(24)(3)13 Total consolidated revenue$4,504 $4,584 $(80)(2)% The decrease in Core Illumina consumables revenue in 2023 was primarily due to a decrease in sequencing consumables revenue of $127 million, driven primarily by lower NovaSeq 6000 consumables pull-through as some of our high throughput customers transition to NovaSeq X, as well as the impact of macroeconomic conditions on customer purchasing power and project planning. Core Illumina instruments revenue decreased in 2023, primarily due to a decrease in sequencing instruments revenue of $23 million, which was driven by fewer shipments of our NovaSeq 6000, NextSeq and MiSeq instruments, partially offset by shipments of NovaSeq X that launched in the beginning of 2023. Core Illumina service and other revenue increased in 2023 primarily due to increased revenue from extended maintenance service contracts on a growing installed base. Additionally, Core Illumina revenue was adversely impacted by $7 million in 2023 due to foreign exchange rate fluctuations, which included $18 million reclassified to revenue in 2023 related to our cash flow hedges. GRAIL service and other revenue increased $38 million, or 69%, in 2023 primarily due to sales of Galleri. **Current (2025):** To enhance comparability, the following table sets forth audited consolidated statement of operations data for 2024, 2023, and 2022, stated as a percentage of total revenue.(1) 202420232022Revenue: Product revenue83.6 %84.1 %86.2 %Service and other revenue16.4 15.9 13.8 Total revenue100.0 100.0 100.0 Cost of revenue: Cost of product revenue23.3 26.1 25.0 Cost of service and other revenue8.4 8.7 6.4 Amortization of acquired intangible assets2.9 4.3 3.8 Total cost of revenue34.6 39.1 35.2 Gross profit65.4 60.9 64.8 Operating expense: Research and development26.7 30.1 28.8 Selling, general and administrative25.0 35.8 28.3 Goodwill and intangible impairment43.2 18.3 85.4 Legal contingency and settlement(10.4)0.4 13.5 Total operating expense84.5 84.6 156.0 Loss from operations(19.1)(23.7)(91.2)Other income (expense): Interest income1.1 1.3 0.2 Interest expense(2.3)(1.7)(0.6)Other expense, net(6.7)(0.7)(3.0)Total other expense, net(7.9)(1.1)(3.4)Loss before income taxes(27.0)(24.8)(94.6)Provision for income taxes1.0 1.0 1.5 Net loss(28.0)%(25.8)%(96.1)% _____________ (1)Percentages may not recalculate due to rounding. Revenue 2024-2023Dollars in millions20242023Change% ChangeCore Illumina:Consumables$3,169 $3,106 $63 2 %Instruments501 706 (205)(29)Total product revenue3,670 3,812 (142)(4)Service and other revenue662 626 36 6 Total Core Illumina revenue4,332 4,438 (106)(2)GRAIL:Service and other revenue55 93 (38)(41)Eliminations(15)(27)12 (44)Total consolidated revenue$4,372 $4,504 $(132)(3)% 34 34 34 Core Illumina consumables revenue increased in 2024 primarily due to an increase in sequencing consumables revenue of $59 million, driven primarily by an increase in NovaSeq X consumables, partially offset by decreases in consumables across our other high-throughput instruments, as customers transition to NovaSeq X, and across our mid-throughput instruments. Core Illumina instruments revenue decreased in 2024 primarily due to a decrease in sequencing instruments revenue of $203 million, driven by fewer shipments of our high-throughput instruments, following the first year of NovaSeq X shipments in 2023, and fewer shipments of our mid-throughput instruments, as capital and cash flow constraints continue to impact our customer's purchasing behavior. Core Illumina service and other revenue increased in 2024 primarily due to increased revenue from strategic partnerships and extended maintenance service contracts, partially offset by decreased revenues from genotyping services and development and licensing agreements. The decrease in GRAIL revenue in 2024 was due to the Spin-Off in Q2 2024. --- ## Modified: Geographic Data **Key changes:** - Reworded sentence: "Long-lived assets, consisting of property and equipment and operating lease right-of-use assets, were as follows: In millionsDecember 29,2024December 31,2023United States$750 $1,040 Singapore279 298 United Kingdom124 136 Other countries81 77 Total long-lived assets, net$1,234 $1,551 Total long-lived assets, net Refer to note 3." **Prior (2024):** Net long-lived assets, consisting of property and equipment and operating lease right-of-use assets, by region, were as follows: In millionsDecember 31,2023January 1,2023United States$1,040 $1,237 Singapore298 290 United Kingdom136 149 Other countries77 68 Total net long-lived assets$1,551 $1,744 Refer to note "2. Revenue" for revenue by geographic area. 91 91 91 Table of Contents Table of Contents **Current (2025):** Long-lived assets, consisting of property and equipment and operating lease right-of-use assets, were as follows: In millionsDecember 29,2024December 31,2023United States$750 $1,040 Singapore279 298 United Kingdom124 136 Other countries81 77 Total long-lived assets, net$1,234 $1,551 Total long-lived assets, net Refer to note 3. Revenue for revenue by geographic area. 94 94 94 Table of Contents Table of Contents --- ## Modified: Share-Based Compensation **Key changes:** - Reworded sentence: "Share-based compensation expense, which includes expense for both equity and liability-classified awards, reported in our consolidated statements of operations was as follows: In millions202420232022Cost of product revenue$25 $29 $26 Cost of service and other revenue6 7 6 Research and development146 155 153 Selling, general and administrative194 189 181 Share-based compensation expense, before taxes371 380 366 Related income tax benefits(83)(87)(83)Share-based compensation expense, net of taxes$288 $293 $283 As of December 29, 2024, unrecognized compensation cost, related to restricted stock and ESPP shares issued to date, of $565 million was expected to be recognized over a weighted-average period of approximately 2.5 years." **Prior (2024):** Share-based compensation expense is incurred related to restricted stock, cash-based equity incentive awards, Employee Stock Purchase Plan (ESPP), and stock options. Forfeitures are accounted for, as incurred, as a reversal of share-based compensation expense related to awards that will not vest. 62 62 62 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Share-based compensation expense is incurred related to restricted stock, employee stock purchase plan (ESPP), stock options, and, prior to the GRAIL Spin-Off on June 24, 2024, cash-based equity incentive awards. Forfeitures are accounted for, as incurred, as a reversal of share-based compensation expense related to awards that will not vest. Restricted stock units (RSU) and performance stock units (PSU) are both considered restricted stock. The determination of the amount of share-based compensation expense for our PSU requires the use of certain estimates and assumptions that affect the amount of share-based compensation expense recognized in our consolidated statements of operations. The fair value of restricted stock and performance stock units that do not include a market condition is determined by the closing market price of our common stock on the date of grant. PSU that do not include a market condition represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period. At each reporting period, we reassess the probability of the achievement of such corporate performance goals and any increase or decrease in share-based compensation expense resulting from an adjustment in the estimated shares to be released is treated as a cumulative catch-up in the period of adjustment. The fair value of performance stock units that include a market condition is determined on the date of grant using a Monte Carlo simulation, which includes assumptions for expected volatility, risk-free interest rate and dividend yield. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Share-based compensation expense is recognized based on the fair value on a straight-line basis over the requisite service periods of the awards. Compensation expense for PSU that include a market condition is recognized over the requisite service period regardless of whether the market conditions are achieved. 63 63 63 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "Cash-based equity incentive award activity was as follows: In millionsOutstanding at January 2, 2022$184 Granted168 Vested and paid in cash(41)Cancelled(41)Change in fair value23 Outstanding at January 1, 2023293 Granted116 Vested and paid in cash(77)Cancelled(32)Change in fair value(8)Outstanding at December 31, 2023292 Granted67 Vested and paid in cash(54)Cancelled(13)Change in fair value(9)Derecognition for GRAIL Spin-Off(1)(283)Outstanding at December 29, 2024$ - _____________ Vested and paid in cash Vested and paid in cash Derecognition for GRAIL Spin-Off(1) (1)The estimated liability immediately prior to the Spin-Off, recorded in accrued liabilities, was $53 million, which was disposed of as part of GRAIL's net assets." **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Operating Expense **Key changes:** - Reworded sentence: "2024-2023Dollars in millions20242023Change% ChangeResearch and development:Core Illumina$988 $1,030 $(42)(4)%GRAIL189 338 (149)(44)Eliminations(8)(14)6 (43)Consolidated research and development1,169 1,354 (185)(14)Selling, general and administrative:Core Illumina900 1,248 (348)(28)GRAIL192 366 (174)(48)Eliminations - (2)2 (100)Consolidated selling, general and administrative1,092 1,612 (520)(32)Goodwill and intangible impairment:Core Illumina3 6 (3)(50)GRAIL1,886 821 1,065 130 Consolidated goodwill and intangible impairment1,889 827 1,062 128 Legal contingency and settlement:Core Illumina(456)20 (476)(2,380)Total consolidated operating expense$3,694 $3,813 $(119)(3)% Core Illumina R&D expense decreased by $42 million, or 4%, in 2024 primarily due to decreases in headcount and employee compensation costs, and restructuring charges of $25 million, as we focus on cost reduction initiatives." **Prior (2024):** 2023-2022Dollars in millions20232022Change% ChangeResearch and development:Core Illumina$1,030 $1,004 $26 3 %GRAIL338 330 8 2 Eliminations(14)(13)(1)8 Consolidated research and development1,354 1,321 33 2 Selling, general and administrative:Core Illumina1,248 1,003 245 24 GRAIL366 296 70 24 Eliminations(2)(2) - - Consolidated selling, general and administrative1,612 1,297 315 24 Goodwill and intangible impairment:Core Illumina6 - 6 100 GRAIL821 3,914 (3,093)(79)Consolidated goodwill and intangible impairment827 3,914 (3,087)(79)Legal contingency and settlement:Core Illumina20 619 (599)(97)Total consolidated operating expense$3,813 $7,151 $(3,338)(47)% Core Illumina R&D expense increased by $26 million, or 3%, in 2023 primarily due to an increase in compensation related expenses, including performance-based compensation, as we continue to invest in the research and development of new products and enhancements to existing products, and an increase in restructuring charges of $18 million as compared to 2022, which consisted primarily of employee separation costs. The increase in 2023 was partially offset by decreases in expenses related to lab supplies, recruiting, professional services, and travel. GRAIL R&D expense increased by $8 million, or 2%, in 2023 primarily due to an increase in headcount and employee related compensation costs, as well as an increase in lab and consumables spend, partially offset by a decrease in clinical trial costs. Core Illumina SG&A expense increased by $245 million, or 24%, in 2023 primarily due to a lower gain recognized on our contingent consideration liability of $181 million in 2023 compared to 2022 (recognized a net gain of $24 million and $205 million in 2023 and 2022, respectively, primarily related to the GRAIL CVRs), an increase in restructuring charges of $94 million as compared to 2022, which consisted primarily of lease and other asset impairments and employee separation costs, and costs related to the proxy contest of $32 million. This increase was partially offset by decreases in professional services, facility related costs, as we exited certain of our facilities, and recruiting costs. GRAIL SG&A expense increased by $70 million, or 24%, in 2023 primarily due to an increase in headcount and employee related compensation costs, as well as increases in professional services and marketing related spend. Core Illumina impairment for 2023 consisted of an IPR&D intangible asset impairment. GRAIL impairment for 2023 consisted of goodwill impairment of $712 million and an IPR&D intangible asset impairment of $109 million as a result of an interim impairment test performed in Q3 2023. GRAIL impairment for 2022 consisted of goodwill impairment of $3,914 million. See note "4. Acquisitions, Goodwill, and Intangible Assets" for additional details. Core Illumina legal contingency and settlement for 2023 consisted of an adjustment to our accrual for the fine imposed by the European Commission in July 2023 and accrued interest on the fine of $5 million, as well as a gain and a loss on two separate patent litigation settlements. Core Illumina legal contingency and settlement for 2022 primarily consisted of an accrual for the fine imposed by the European Commission and a net loss of $145 million related to the settlement of our litigation with BGI. See note "8. Legal Proceedings" for additional details. 35 35 35 **Current (2025):** 2024-2023Dollars in millions20242023Change% ChangeResearch and development:Core Illumina$988 $1,030 $(42)(4)%GRAIL189 338 (149)(44)Eliminations(8)(14)6 (43)Consolidated research and development1,169 1,354 (185)(14)Selling, general and administrative:Core Illumina900 1,248 (348)(28)GRAIL192 366 (174)(48)Eliminations - (2)2 (100)Consolidated selling, general and administrative1,092 1,612 (520)(32)Goodwill and intangible impairment:Core Illumina3 6 (3)(50)GRAIL1,886 821 1,065 130 Consolidated goodwill and intangible impairment1,889 827 1,062 128 Legal contingency and settlement:Core Illumina(456)20 (476)(2,380)Total consolidated operating expense$3,694 $3,813 $(119)(3)% Core Illumina R&D expense decreased by $42 million, or 4%, in 2024 primarily due to decreases in headcount and employee compensation costs, and restructuring charges of $25 million, as we focus on cost reduction initiatives. Core Illumina SG&A expense decreased by $348 million, or 28%, in 2024 primarily due to an increase in the gains recognized on our GRAIL contingent consideration liability of $290 million, a decrease in proxy contest charges of $30 million, and decreases in restructuring charges of $61 million, facility related costs, and employee compensation costs, as we continue to exit certain of our facilities and focus on our cost reduction initiatives. The decrease was partially offset by an increase in share-based compensation expense related to PSU awards. The decrease in GRAIL R&D and SG&A expense in 2024 was due to the Spin-Off in Q2 2024. GRAIL goodwill and intangible impairment in 2024 consisted of goodwill impairment of $1,466 million and IPR&D impairment of $420 million as a result of impairment tests performed in Q2 2024. Core Illumina goodwill and intangible impairment for 2024 consisted of an IPR&D impairment recorded in Q1 2024. GRAIL goodwill and intangible impairment for 2023 consisted of goodwill impairment of $712 million and IPR&D impairment of $109 million as a result of an interim impairment test performed in Q3 2023. See note 5. Goodwill, Intangible Assets, and Acquisitions. Core Illumina legal contingency and settlement in 2024 primarily consisted of a gain recognized in Q3 2024 of $489 million for the reversal of the EC fine accrual, and related accrued interest, following the European Commission's decision to withdraw its previously imposed fine. Core Illumina legal contingency and settlement for 2023 primarily consisted of an adjustment to our accrual for the fine previously imposed by the European Commission and other patent litigation settlement activity. See note 9. Legal Proceedings for additional details. 36 36 36 --- ## Modified: 4.35% - 5.54% **Key changes:** - Reworded sentence: "0.78% - 5.54% 0.06% - 2.98% 41% - 49% 41% - 51% 37% - 51%" **Prior (2024):** 0.06% - 2.98% 0.06% - 0.12% 41% - 51% 37% - 51% 37% - 47% **Current (2025):** 0.78% - 5.54% 0.06% - 2.98% 41% - 49% 41% - 51% 37% - 51% --- ## Modified: 10. INCOME TAXES **Key changes:** - Reworded sentence: "Loss before income taxes summarized by region was as follows: In millions202420232022United States$(1,834)$(1,735)$(4,942)Foreign655 618 606 Total loss before income taxes$(1,179)$(1,117)$(4,336) Total loss before income taxes 88 88 88 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents" **Prior (2024):** (Loss) income before income taxes summarized by region was as follows: In millions202320222021United States$(1,735)$(4,942)$(115)Foreign618 606 999 Total (loss) income before income taxes$(1,117)$(4,336)$884 86 86 86 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Loss before income taxes summarized by region was as follows: In millions202420232022United States$(1,834)$(1,735)$(4,942)Foreign655 618 606 Total loss before income taxes$(1,179)$(1,117)$(4,336) Total loss before income taxes 88 88 88 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: Share-Based Compensation **Key changes:** - Reworded sentence: "Share-based compensation expense is incurred related to restricted stock, employee stock purchase plan (ESPP), stock options, and, prior to the GRAIL Spin-Off on June 24, 2024, cash-based equity incentive awards." - Reworded sentence: "Restricted stock units (RSU) and performance stock units (PSU) are both considered restricted stock." **Prior (2024):** Share-based compensation expense is incurred related to restricted stock, cash-based equity incentive awards, Employee Stock Purchase Plan (ESPP), and stock options. Forfeitures are accounted for, as incurred, as a reversal of share-based compensation expense related to awards that will not vest. 62 62 62 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Share-based compensation expense is incurred related to restricted stock, employee stock purchase plan (ESPP), stock options, and, prior to the GRAIL Spin-Off on June 24, 2024, cash-based equity incentive awards. Forfeitures are accounted for, as incurred, as a reversal of share-based compensation expense related to awards that will not vest. Restricted stock units (RSU) and performance stock units (PSU) are both considered restricted stock. The determination of the amount of share-based compensation expense for our PSU requires the use of certain estimates and assumptions that affect the amount of share-based compensation expense recognized in our consolidated statements of operations. The fair value of restricted stock and performance stock units that do not include a market condition is determined by the closing market price of our common stock on the date of grant. PSU that do not include a market condition represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period. At each reporting period, we reassess the probability of the achievement of such corporate performance goals and any increase or decrease in share-based compensation expense resulting from an adjustment in the estimated shares to be released is treated as a cumulative catch-up in the period of adjustment. The fair value of performance stock units that include a market condition is determined on the date of grant using a Monte Carlo simulation, which includes assumptions for expected volatility, risk-free interest rate and dividend yield. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Share-based compensation expense is recognized based on the fair value on a straight-line basis over the requisite service periods of the awards. Compensation expense for PSU that include a market condition is recognized over the requisite service period regardless of whether the market conditions are achieved. 63 63 63 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents --- ## Modified: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) **Key changes:** - Reworded sentence: "A summary of the restructuring liability is as follows: In millionsEmployee Separation CostsOther CostsTotalAmount recorded in accrued liabilities as of January 1, 2023$ - $ - $ - Expense recorded48 4 52 Cash payments(31)(3)(34)Amount recorded in accrued liabilities as of December 31, 202317 1 18 Expense recorded12 4 16 Cash payments(24)(2)(26)Adjustments to accrual(3)(1)(4)Amount recorded in accrued liabilities as of December 29, 2024$2 $2 $4" **Prior (2024):** days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. **Current (2025):** We recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The contract price is allocated to each performance obligation in proportion to its standalone selling price. We determine our best estimate of standalone selling price using average selling prices over a rolling 12-month period coupled with an assessment of current market conditions. If the product or service has no history of sales or if the sales volume is not sufficient, we rely upon prices set by management, adjusted for applicable discounts. Revenue from product sales is recognized generally upon delivery to the end customer, which is when control of the product is deemed to be transferred. Invoicing typically occurs upon shipment and payment is typically due within 30 days from invoice. In instances where right of payment or transfer of title is contingent upon the customer's acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenue from genotyping and sequencing services, including cancer detection testing services related to the GRAIL business, is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is made available to the customer. Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term. Revenue from development and licensing agreements generally includes upfront and periodic licensing fees, contract research and development services, or payments for development and regulatory milestones. Revenue for these agreements is recognized when each distinct performance obligation is satisfied. Revenue is recorded net of discounts, distributor commissions, and sales taxes collected on behalf of governmental authorities. Employee sales commissions are recorded as selling, general and administrative expense when incurred as the amortization period for such costs, if capitalized, would have been one year or less. In certain markets, products and services are sold to customers through distributors. In most sales through distributors, the product is delivered directly to customers by us. The terms of sales transactions through distributors are consistent with the terms of direct sales to customers. --- ## Modified: Other Income (Expense) **Key changes:** - Reworded sentence: "2024-2023Dollars in millions20242023Change% ChangeInterest income$46 $58 $(12)(21)%Interest expense(100)(77)(23)30 Other expense, net(292)(29)(263)907 Total other expense, net$(346)$(48)$(298)621 % Total other expense, net primarily relates to the Core Illumina segment." **Prior (2024):** 2023-2022Dollars in millions20232022Change% ChangeInterest income$58 $11 $47 427 %Interest expense(77)(26)(51)196 Other expense, net(29)(142)113 (80)Total other expense, net$(48)$(157)$109 (69)% Total other expense, net primarily relates to Core Illumina for both periods presented. Interest income consisted primarily of interest on our money market funds, which benefited from higher yields in 2023 due to rising interest rates. Interest expense consisted primarily of interest on our Term Notes and increased in 2023 due to the issuance of our 2025 and 2027 Term Notes in December 2022. The decrease in other expense, net was primarily due to a decrease in net losses recognized on our strategic investments of $82 million (net loss on our strategic investments of $40 million in 2023 compared to a net loss of $122 million in 2022), a favorable impact related to our Helix contingent value right (unrealized gain of $10 million in 2023 compared to an unrealized loss of $7 million in 2022), and a favorable impact related to our deferred compensation plan assets, partially offset by a net unrealized foreign currency loss related to the fine imposed by the European Commission. **Current (2025):** 2024-2023Dollars in millions20242023Change% ChangeInterest income$46 $58 $(12)(21)%Interest expense(100)(77)(23)30 Other expense, net(292)(29)(263)907 Total other expense, net$(346)$(48)$(298)621 % Total other expense, net primarily relates to the Core Illumina segment. Interest income consisted primarily of interest on our money market funds, which decreased in 2024 primarily due to a lower cash balance throughout the year, as compared to prior year, partially offset by an increase in average interest rates. Interest expense consisted primarily of interest on our outstanding term debt, including on our delayed draw term loan, and a loss on debt extinguishment of $5 million related to the repayment of our delayed draw term loan. The increase in other expense, net in 2024 was primarily driven by an increase in net losses recognized on our strategic investments of $272 million, which included an unrealized loss of $309 million on our retained investment in GRAIL subsequent to the Spin-Off. This was offset by a favorable net impact related to foreign currency activity, as compared to the prior year, and an increase of $5 million in the gains recognized on our Helix contingent value right, which was settled in Q3 2024. --- ## Modified: In April 2024, the FDA issued the Final Rule relating to Laboratory Development Tests (LDTs). Newly developed LDT products may be subject to regulatory clearance or approval, and could result in adverse impacts to our business, financial condition, or results of operations. **Key changes:** - Reworded sentence: "Certain of our in vitro diagnostic products, or IVDs, are currently available through laboratories that are certified under the Clinical Laboratory Improvements Amendments (CLIA) of 1988." **Prior (2024):** Certain of our diagnostic products are currently available through laboratories that are certified under the Clinical Laboratory Improvements Amendments (CLIA) of 1988. These products are commonly called "laboratory developed tests," or LDTs. For a number of years, the FDA has exercised its regulatory enforcement discretion not to regulate LDTs as medical devices if created and used within a single laboratory. However, the FDA has been reconsidering its enforcement discretion policy and has commented that regulation of LDTs may be warranted because of the growth in the volume and complexity of testing services utilizing LDTs. We cannot predict the nature or extent of the FDA's final guidance or regulation of LDTs, in general, or with respect to our LDTs, in particular. If the FDA requires in the future that LDT products are subject to regulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected. Risks Relating to Information Technology Security and Continuity **Current (2025):** Certain of our in vitro diagnostic products, or IVDs, are currently available through laboratories that are certified under the Clinical Laboratory Improvements Amendments (CLIA) of 1988. These IVD products are commonly called "laboratory developed tests," or LDTs. For a number of years, the FDA has exercised its regulatory enforcement discretion to not regulate LDTs as medical devices if created and used within a single laboratory. On April 29, 2024, the FDA released final regulations under 21 CFR Part 809 under the Federal Food, Drug, and Cosmetic Act (FD&C Act) amending the regulations to make explicit that LDTs offered as IVDs are devices under the FD&C Act including when the manufacturer of the IVD is a laboratory (the LDT Rule). The LDT Rule also provides that the FDA intends to exercise enforcement discretion with regard to premarket review and most quality system requirements for certain categories of IVDs, including currently marketed IVDs offered as LDTs that were first marketed prior to April 29, 2024. The FDA has included additional enforcement discretion policies within the rule for LDTs approved by the New York State's Clinical Laboratory Evaluation Program (NYS CLEP). The majority of revenue from products currently offered by our laboratories do not fall within the scope of the LDT Rule. With one exception, the LDTs currently offered as IVDs by our laboratories that fall within the purview of the LDT Rule are approved by NYS CLEP and were first marketed prior to the release of the LDT Rule. We cannot predict the specifics of how the FDA intends to implement the Final Rule and uncertainties remain as to whether and how newly developed LDT products that are now require regulatory clearance or approval may impact our business, financial condition, or results of operations. Risks Relating to Information Technology Security and Continuity --- ## Modified: Gross Margin **Key changes:** - Reworded sentence: "2024-2023Dollars in millions20242023Change% ChangeGross profit (loss):Core Illumina$2,909$2,856$53 2 %GRAIL(38)(96)58 (60)Eliminations(10)(16)6 (38)Consolidated gross profit$2,861$2,744$117 4 %Gross margin:Core Illumina67.1 %64.4 %GRAIL**Consolidated gross margin65.4 %60.9 % _____________ *Not meaningful." **Prior (2024):** 2023-2022Dollars in millions20232022Change% ChangeGross profit (loss):Core Illumina$2,856 $3,107 $(251)(8)%GRAIL(96)(117)21 (18)Eliminations(16)(18)2 (11)Consolidated gross profit$2,744 $2,972 $(228)(8)%Gross margin:Core Illumina64.4 %68.2 %GRAIL**Consolidated gross margin60.9 %64.8 % _____________ *Not meaningful. The decrease in Core Illumina gross margin in 2023 was driven primarily by less fixed cost leverage on lower manufacturing volumes, lower instrument margins due to the NovaSeq X launch, which is typical with a new platform introduction until we scale manufacturing and gain operating efficiencies, and increased field services and installation costs, partially offset by lower freight costs. GRAIL gross loss in 2023 and 2022 was primarily due to amortization of intangible assets of $134 million. 34 34 34 **Current (2025):** 2024-2023Dollars in millions20242023Change% ChangeGross profit (loss):Core Illumina$2,909$2,856$53 2 %GRAIL(38)(96)58 (60)Eliminations(10)(16)6 (38)Consolidated gross profit$2,861$2,744$117 4 %Gross margin:Core Illumina67.1 %64.4 %GRAIL**Consolidated gross margin65.4 %60.9 % _____________ *Not meaningful. The increase in Core Illumina gross margin in 2024 was driven primarily by a favorable impact from the execution of our operational excellence initiatives that continue to deliver cost savings, including freight, and improve productivity, a more favorable revenue mix towards sequencing consumables, and a decrease in warranty and field service costs, partially offset by higher strategic partnership revenue that is lower margin. The decrease in GRAIL gross loss in 2024 was due to the Spin-Off in Q2 2024. 35 35 35 --- ## Modified: Our acquisitions expose us to risks that could adversely affect our business, and we may not achieve the anticipated benefits of acquisitions of businesses or technologies. **Key changes:** - Reworded sentence: "Acquisitions involve numerous risks and operational, financial, and managerial challenges, including the following, any of which could materially and adversely affect our business, financial condition, or results of operations: •challenges, costs, delays, and uncertainty associated with obtaining any required regulatory approvals; •difficulties in integrating new operations, technologies, products, and personnel; •lack of synergies or the inability to realize expected synergies and cost-savings; •lengthy, expensive, and time and resource-intensive regulatory review processes, the outcomes of which can be unpredictable; •difficulties in managing geographically dispersed operations; •underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; •negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges; •the potential loss of key employees, customers, and strategic partners of acquired companies; •claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; •the issuance of dilutive securities, assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; 20 20 20 •diversion of management's attention and company resources from existing operations of the business; •inconsistencies in standards, controls, procedures, and policies; •the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; and •assumption of, or exposure to, known or unknown contingent liabilities or liabilities that are difficult to identify or accurately quantify." - Removed sentence: "Our acquisition of GRAIL remains subject to ongoing legal and regulatory proceedings in the United States and in the European Union." - Removed sentence: "On December 17, 2023, we announced that we will divest GRAIL." - Removed sentence: "Adverse decisions by the EU and/or U.S." - Removed sentence: "courts, the European Commission, the FTC and/or other governmental or regulatory authorities, that have been issued in the past or may be issued in the future, and/or other adverse consequences resulting from our decision to proceed with the completion of the acquisition, have resulted in significant financial penalties, operational restrictions and increased costs, and could result in similar additional future consequences or further result in loss of revenues, implicate our existing contractual arrangements or require us to divest all or a portion of the assets or equity interests of GRAIL on terms that are materially worse than the terms on which we acquired GRAIL, any or all of which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operation." **Prior (2024):** As part of our strategy to develop and identify new products, services, and technologies, we have made, and may continue to make, acquisitions of technologies, products, or businesses. Acquisitions involve numerous risks and operational, financial, and managerial challenges, including the following, any of which could materially and adversely affect our business, financial condition, or results of operations: •challenges, costs, delays, and uncertainty associated with obtaining any required regulatory approvals; •difficulties in integrating new operations, technologies, products, and personnel; •lack of synergies or the inability to realize expected synergies and cost-savings; •lengthy, expensive, and time and resource-intensive regulatory review processes, the outcomes of which can be unpredictable; •difficulties in managing geographically dispersed operations; •underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; •negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges; •the potential loss of key employees, customers, and strategic partners of acquired companies; •claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; •the issuance of dilutive securities, assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; •diversion of management's attention and company resources from existing operations of the business; 20 20 20 •inconsistencies in standards, controls, procedures, and policies; •the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; and •assumption of, or exposure to, known or unknown contingent liabilities or liabilities that are difficult to identify or accurately quantify. In addition, the successful integration of acquired businesses requires significant efforts and expense across all operational areas, including sales and marketing, research and development, manufacturing, finance, legal, and information technologies. There can be no assurance that any of the acquisitions we make will be successful or will be, or will remain, profitable. Our failure to successfully address the above risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all. Our acquisition of GRAIL remains subject to ongoing legal and regulatory proceedings in the United States and in the European Union. On December 17, 2023, we announced that we will divest GRAIL. Adverse decisions by the EU and/or U.S. courts, the European Commission, the FTC and/or other governmental or regulatory authorities, that have been issued in the past or may be issued in the future, and/or other adverse consequences resulting from our decision to proceed with the completion of the acquisition, have resulted in significant financial penalties, operational restrictions and increased costs, and could result in similar additional future consequences or further result in loss of revenues, implicate our existing contractual arrangements or require us to divest all or a portion of the assets or equity interests of GRAIL on terms that are materially worse than the terms on which we acquired GRAIL, any or all of which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operation. As previously disclosed, on March 30, 2021, the FTC filed an administrative complaint alleging that our acquisition of GRAIL (the Acquisition) would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. On September 1, 2022, the administrative law judge (the ALJ) ruled in favor of Illumina and found that the acquisition of GRAIL did not violate Section 7 of the Clayton Act. The FTC's complaint counsel appealed the ALJ's decision to the full FTC on September 2, 2022. On March 31, 2023, the FTC issued an opinion and order (the FTC Order) requiring Illumina to divest GRAIL, reversing the ALJ's ruling. On April 5, 2023, Illumina filed a petition for review of the FTC Order in the U.S. Court of Appeals for the Fifth Circuit. On April 24, 2023, the FTC granted a motion staying in its entirety the FTC Order pending resolution of Illumina's Fifth Circuit appeal. On December 15, 2023, the Fifth Circuit issued its opinion and order, in which the court ruled that the Commission applied the incorrect standard in assessing Illumina's open offer contract, and on that basis vacated the FTC Order and remanded the case to the Commission for reconsideration of the effects of the open offer contract under the proper standard as described in the Fifth Circuit's decision, and in all other respects upheld the Commission's decision. As previously disclosed, on April 19, 2021, the European Commission accepted a request for referral of the Acquisition (the Referral) for European Union merger review under Article 22(1) of Council Regulation (EC) No 139/2004 (the EU Merger Regulation), which had been submitted by a Member State of the European Union. On July 13, 2022, the EU General Court ruled that the European Commission has jurisdiction to review the Acquisition under the EU Merger Regulation. On September 22, 2022, we filed an appeal in the Court of Justice of the European Union asking for annulment of the EU General Court's decision. On December 12, 2023, the Court of Justice of the European Union held a hearing on the appeal. As previously disclosed, on October 29, 2021, the European Commission adopted an order imposing interim measures (the Initial Interim Measures Order), which was renewed on October 28, 2022 (subject to (x) certain operational modifications and (y) an express prohibition on Illumina selling, transferring, encumbering or otherwise disposing of GRAIL or any of GRAIL's assets), provided that (i) we ensure that Illumina and GRAIL will continue to operate as independent legal entities that transact at arms' length, no integration activity will take place, the day-to-day operation of GRAIL will remain the sole responsibility of GRAIL's management and our management will have no involvement in or influence over GRAIL, (ii) we take certain supportive measures to preserve GRAIL's viability, marketability and competitiveness, including with respect to the provision of resources to GRAIL and the retention and/or replacement of key personnel of GRAIL, (iii) subject to limited exceptions, we implement all necessary measures to ensure that Illumina does not obtain any confidential information relating to GRAIL during the hold separate period and vice versa and (iv) we appoint an independent firm as monitoring trustee to monitor our compliance with the Initial Interim Measures Order. An independent monitoring trustee has been appointed. Such hold separate arrangement, and our obligations pursuant thereto, have imposed implementation and administrative processes and additional legal, financial advisory, regulatory and other professional services costs, which have been 21 21 21 burdensome to implement and administer, and which we expect to continue for the duration of the hold separate arrangement (in the form of transitional measures imposed on Illumina pursuant to a decision adopted by the European Commission on October 12, 2023 (the EC Divestment Decision), which replaced the New Interim Measures Order). Such burdens and additional costs, independently or together with additional burdens, costs and/or liabilities arising from such arrangement, may result in loss of revenue and other adverse effects on our business, financial condition and results of operations. Moreover, our failure to comply with the terms of the EC Divestment Decision may result in the European Commission seeking to impose fines or other penalties on us. On January 10, 2023, we filed an action with the EU General Court asking for annulment of the New Interim Measures Order. On January 20, 2023, the European Commission requested that these proceedings be stayed pending our appeal on jurisdiction. We submitted a filing indicating that we had no objections to the European Commission's request, and the EU General Court stayed the proceedings on February 21, 2023. On September 6, 2022, the European Commission announced that it had completed its Phase II review of the Acquisition and adopted a final decision (the Prohibition Decision), which found that, in its view, our acquisition of GRAIL was incompatible with the internal market in Europe because it results in a significant impediment to effective competition. On November 17, 2022, we filed an action with the EU General Court asking for annulment of the Prohibition Decision. On October 12, 2023, the European Commission adopted the EC Divestment Decision requiring us to (among other things) divest GRAIL and imposing the transitional measures. On December 22, 2023, we filed an action with the EU General Court seeking an annulment of the EC Divestment Decision. The Prohibition Decision, the EC Divestment Decision, and any order or decision by the FTC or any other governmental or regulatory authority pursuant to which Illumina is required to divest GRAIL (an FTC Divestment Decision), if implemented once final and non-appealable or during the pendency of the applicable appeals proceedings, and our obligations pursuant thereto, have imposed in the past and may impose in the future significant costs and additional liabilities on us, including significant legal, financial advisory, regulatory and other professional services fees and additional expenses, and may result in loss of revenue and other adverse effects on our business, financial condition and results of operations. Such adverse effects could include divesting GRAIL on terms that are materially worse than the terms on which we acquired GRAIL. Furthermore, we may not be able to direct the timing, structure or financial terms of such divestment, which could result in negative financial or tax consequences. For example, we are unlikely to be able to, in a sale of GRAIL, effect such sale in a non-taxable transaction and so would incur significant tax liabilities attributable to the recognition of taxable gain equal to the difference between (i) the fair market value of any consideration received and (ii) our tax basis in GRAIL (which tax basis is currently estimated to be between zero and $500 million). In addition, any such divestment will likely implicate certain provisions in our third-party contracts and other agreements, including our obligations with respect to the contingent value rights (the CVRs) issued by us as part of the Acquisition. We may be unable to fully discharge our obligations with respect to the CVRs in connection with any such divestiture, and/or such divestiture may result in a change in obligor on the CVRs. Moreover, the business of GRAIL may be adversely affected by any such divestment, which could adversely affect the market value of the CVRs. The EC Divestment Decision requires us to ensure that GRAIL has access to sufficient funds to cover at least 2.5 years of operations according to its latest long-range plan. The Initial Interim Measures Order, the New Interim Measures Order, the Prohibition Decision, and the EC Divestment Decision, or an FTC Divestment Decision or any other order or decision by any other governmental or regulatory authority, if implemented once final and non-appealable or during the pendency of the applicable appeals proceedings, have in the past and could may also in the future divert management's attention and company resources away from existing operations and other opportunities that may have been beneficial to us, any or all of which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operation. We have experienced and might continue to experience negative impacts on our stock price. We cannot predict what other adverse consequences to, among other things, our reputation, our relationships with governmental or regulatory authorities, or our ability to successfully complete future transactions, our ability to attract, retain and motivate customers, key personnel and those with whom we conduct business may result. On July 12, 2023, the European Commission adopted a final decision finding that we breached the EU Merger Regulation by, in its view, acquiring the possibility to exert decisive influence over GRAIL and exerting such influence during the pendency of the European Commission's review (the Article 14(2)(b) Decision). The European Commission therefore imposed a fine on us pursuant to Article 14(2)(b) of the EU Merger Regulation of approximately €432 million, representing the maximum fine of 10% of our consolidated annual revenues for fiscal year 2022. 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 December 31, 2023, we accrued $484 million, including related foreign currency losses and accrued interest, included in accrued liabilities. In addition, the European 22 22 22 Commission, the FTC and/or other governmental or regulatory authorities may seek to impose other fines, penalties, remedies or restrictions. We expect to continue to hold the assets or equity interests of GRAIL separate until the divestment of GRAIL is effected, which could result in additional costs or liabilities, loss of revenue and other adverse effects on our business, financial condition and results of operations. In addition, under applicable accounting rules, we may be required from time to time to perform interim analyses of the value of GRAIL. To the extent that the value of GRAIL on a standalone basis is less than its book value, we would be required to record an impairment on our consolidated financial statements. As previously disclosed, we recorded a goodwill impairment of $712 million related to our GRAIL reporting unit in the third quarter of 2023, primarily due to a decrease in our consolidated market capitalization and a higher discount rate selected for the fair value calculation of the GRAIL reporting unit. On December 17, 2023, we announced that we will divest GRAIL. The divestiture is expected to be executed through a third-party sale or capital markets transaction in accordance with the EC Divestment Decision, with the goal of finalizing the terms of the divestiture by the end of the second quarter of 2024. There can be no assurance regarding the ultimate timing of the divestiture of GRAIL. Completion of the divestiture of GRAIL will be subject to the satisfaction of certain conditions, including, approval by the European Commission and the receipt of other regulatory approvals. There can be no assurance regarding the ultimate timing of the divestiture of GRAIL. Unanticipated developments could delay, prevent or otherwise adversely affect the divestiture of GRAIL, including but not limited to disruptions in general or financial market conditions or potential problems or delays in obtaining various regulatory clearances. Furthermore, we have and may continue to become subject to stockholder inspection demands under Delaware law, investigations initiated by regulators and law firms, and derivative or other similar litigation that can be expensive, divert management attention and human and financial capital to less productive uses and result in potential reputational damage. The GRAIL acquisition and subsequent litigation resulted in (i) the announcement of an investigation by the SEC and others by law firms of possible securities law violations; (ii) stockholder inspection demands seeking to investigate possible breaches of fiduciary duties, corporate wrongdoing or a lack of independence of the members of the Board; (iii) the filing of three securities class actions in the United States District Court for the Southern District of California: Kangas v. Illumina, Inc. et al., Roy v. Illumina, Inc. et al. and Louisiana Sheriffs' Pension & Relief Fund v. Illumina, Inc. et al; (iv) the filing of two securities class actions in the Superior Court of the State of California, County of San Mateo: Loren Scott Mar v. Illumina, et al. and Scott Zerzanek v. Illumina, Inc. et al.; and (v) the filing of a stockholder derivative and class action complaint captioned Icahn Partners LP, et al. v. deSouza, et al.. The Icahn Partners LP, et al. v. deSouza, et al. complaint, purportedly brought on behalf of Illumina and public holders of Illumina's common stock, was filed in the Delaware Court of Chancery against certain current and former directors (including our former Chief Executive Officer). We are named as a nominal defendant in the complaint. The lawsuit alleges the named directors breached their fiduciary duties by knowingly causing Illumina to unlawfully close the GRAIL acquisition, concealing material facts related to the GRAIL acquisition and making inadequate disclosures. See note "8. Legal Proceedings" within the Consolidated Financial Statements section of this report for further details. In the event that any of the matters described above result in one or more adverse judgments or settlements, we may experience an adverse impact on our financial condition, results of operations or stock price. **Current (2025):** As part of our strategy to develop and identify new products, services, and technologies, we have made, and may continue to make, acquisitions of technologies, products, or businesses. Acquisitions involve numerous risks and operational, financial, and managerial challenges, including the following, any of which could materially and adversely affect our business, financial condition, or results of operations: •challenges, costs, delays, and uncertainty associated with obtaining any required regulatory approvals; •difficulties in integrating new operations, technologies, products, and personnel; •lack of synergies or the inability to realize expected synergies and cost-savings; •lengthy, expensive, and time and resource-intensive regulatory review processes, the outcomes of which can be unpredictable; •difficulties in managing geographically dispersed operations; •underperformance of any acquired technology, product, or business relative to our expectations and the price we paid; •negative near-term impacts on financial results after an acquisition, including acquisition-related earnings charges; •the potential loss of key employees, customers, and strategic partners of acquired companies; •claims by terminated employees and shareholders of acquired companies or other third parties related to the transaction; •the issuance of dilutive securities, assumption or incurrence of additional debt obligations or expenses, or use of substantial portions of our cash; 20 20 20 •diversion of management's attention and company resources from existing operations of the business; •inconsistencies in standards, controls, procedures, and policies; •the impairment of intangible assets as a result of technological advancements, or worse-than-expected performance of acquired companies; and •assumption of, or exposure to, known or unknown contingent liabilities or liabilities that are difficult to identify or accurately quantify. In addition, the successful integration of acquired businesses requires significant efforts and expense across all operational areas, including sales and marketing, research and development, manufacturing, finance, legal, and information technologies. There can be no assurance that any of the acquisitions we make will be successful or will be, or will remain, profitable. Our failure to successfully address the above risks may prevent us from achieving the anticipated benefits from any acquisition in a reasonable time frame, or at all. --- ## Modified: 8. SUPPLEMENTAL BALANCE SHEET DETAILSAccounts Receivable **Key changes:** - Reworded sentence: "Accounts Receivable In millionsDecember 29,2024December 31,2023Trade accounts receivable, gross$744 $741 Allowance for credit losses(9)(7)Total accounts receivable, net$735 $734 Inventory In millionsDecember 29,2024December 31,2023Raw materials$225 $276 Work in process404 402 Finished goods31 30 Inventory, gross660 708 Inventory reserve(113)(121)Total inventory, net$547 $587" **Prior (2024):** Trade accounts receivable are recorded at the net invoice value and are not interest-bearing. Receivables are considered past due based on the contractual payment terms. We reserve a percentage of our trade receivable balance based on collection history and current economic trends that we expect will impact the level of credit losses over the life of our receivables. These reserves are re-evaluated on a regular basis and adjusted, as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the reserve. Inventory Inventory is stated at the lower of cost or net realizable value, on a first-in, first-out basis. Inventory includes raw materials and finished goods that may be used in the research and development process, and such items are expensed as consumed or capitalized as property and equipment and depreciated. Inventory write-downs for slow-moving, excess, and obsolete inventories are estimated based on product life cycles, quality issues, historical experience, and usage forecasts. 59 59 59 Table of ContentsILLUMINA, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Table of Contents **Current (2025):** Accounts Receivable In millionsDecember 29,2024December 31,2023Trade accounts receivable, gross$744 $741 Allowance for credit losses(9)(7)Total accounts receivable, net$735 $734 Inventory In millionsDecember 29,2024December 31,2023Raw materials$225 $276 Work in process404 402 Finished goods31 30 Inventory, gross660 708 Inventory reserve(113)(121)Total inventory, net$547 $587 --- ## Modified: Share Repurchases **Key changes:** - Reworded sentence: "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." **Prior (2024):** We did not repurchase any shares during 2023, 2022, or 2021. As of December 31, 2023, authorizations to repurchase approximately $15 million of our common stock remained available 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. **Current (2025):** 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 December 29, 2024. We did not repurchase any shares during 2023 or 2022. Share repurchase activity during 2024 was as follows: In millions, except shares in thousandsNumber of shares repurchased904 Total cost of shares repurchased(1)$116 _____________ In millions, except shares in thousands Number of shares repurchased Total cost of shares repurchased(1) (1)Total cost of shares repurchased includes the 1% excise tax imposed as part of the Inflation Reduction Act of 2022, which is calculated based on share repurchases, net of certain share issuances. Subsequent to December 29, 2024 and through February 11, 2025, we repurchased an additional 1.0 million shares of our common stock for $126 million. --- *Data sourced from SEC EDGAR. Last updated 2026-06-01.*