PR Newswire | Nov 4, 2021 04:06PM EDT

11/04 15:05 CDT

Illumina Reports Financial Results for Third Quarter of Fiscal Year 2021Raises Fiscal Year 2021 Revenue Guidance SAN DIEGO, Nov. 4, 2021

SAN DIEGO, Nov. 4, 2021 /PRNewswire/ -- Illumina, Inc. (NASDAQ: ILMN) today announced its financial results for the third quarter of fiscal year 2021, which include the consolidated financial results of GRAIL.

Third quarter consolidated results:

* Revenue of $1,108 million, a 40% increase compared to the prior year period * GAAP net income for the quarter of $317 million, or $2.08 per diluted share, which included a $900 million gain from our previously held investment in GRAIL and $654 million in day one compensation expense related to the GRAIL acquisition. This compared to $179 million, or $1.21 per diluted share, for the prior year period * Non-GAAP net income for the quarter of $221 million, or $1.45 per diluted share, which included dilution from GRAIL non-GAAP operating loss of $0.19 per diluted share and incremental dilution from the 9.8 million shares issued to fund the GRAIL acquisition of $0.06 per diluted share. This compared to $150 million, or $1.02 per diluted share, for the prior year period. Non-GAAP net income excludes gain on previously held investment in GRAIL, day one compensation related expense and other acquisition-related expenses (see the "Reconciliation Between GAAP and Non-GAAP Net Income" table for a reconciliation of these GAAP and non-GAAP financial measures) * Cash flow from operations of $(272) million compared to $153 million in the prior year period * Free cash flow (cash flow from operations less capital expenditures) of $(324) million for the quarter compared to $105 million in the prior year period

"Illumina's financial results again exceeded expectations in the third quarter led by record shipments for both clinical and research," said Francis deSouza, Chief Executive Officer. "Clinical market expansion is driving momentum in the core business, including significant demand in testing for therapy selection in oncology as we continue to advance genomics as a standard of care in the clinic. Our teams' continued execution to meet this robust demand will enable a strong finish to an exceptional 2021."

Gross margin in the third quarter of 2021 was 69.5% compared to 66.2% in the prior year period. Excluding amortization of acquired intangible assets, non-GAAP gross margin was 71.2% for the third quarter of 2021 compared to 67.4% in the prior year period.

Research and development (R&D) expenses for the third quarter of 2021 were $436 million compared to $172 million in the prior year period. Excluding acquisition-related compensation expense, non-GAAP R&D expenses as a percentage of revenue were 21.7% compared to 21.2% in the prior year period.

Selling, general and administrative (SG&A) expenses for the third quarter of 2021 were $879 million compared to $192 million in the prior year period. Excluding day one compensation related expense and other acquisition-related expenses, and fair value adjustments on contingent consideration liabilities, non-GAAP SG&A expenses as a percentage of revenue were 26.0% compared to 24.8% in the prior year period.

Depreciation and amortization expenses were $65 million and capital expenditures for free cash flow purposes were $52 million during the third quarter of 2021. At the close of the quarter, the company held $1.3 billion in cash, cash equivalents and short-term investments, compared to $3.5 billion as of January 3, 2021.

Third quarter segment results:

Following the acquisition of GRAIL on August 18, 2021, we have two reportable segments, Core Illumina and GRAIL. GRAIL financial results are reflected for the period after the acquisition.

Core Illumina



GAAP Non-GAAP (a)

Dollars in millions Q3 2021 Q3 2020Q3 2021Q3 2020

Revenue $1,106 $794

Gross margin 70.7 %66.2 %71.3 %67.4 %

Research and development expense $212 $172 $212 $169

Selling, general and administrative $365 $192 $266 $196 expense

Operating income $205 $162 $310 $170

Operating margin 18.5 %20.4 %28.0 %21.4 %



(a) See the "Core Illumina Itemized Reconciliation Between GAAP and Non-GAAP Results of Operations as a Percentage of Revenue" table for a reconciliation of these GAAP and non-GAAP financial measures.

GRAIL



GAAP Non-GAAP (a)

In millions Q3 2021 Q3 2020 Q3 2021 Q3 2020

Revenue $2 - $ 2 -

Operating loss $(750) - $ (50)-

(a) See the "GRAIL Itemized Reconciliation Between GAAP and Non-GAAP Results ofOperations" table for a reconciliation of these GAAP and non-GAAP financialmeasures.

Updates since our last earnings release:

* Closed the GRAIL acquisition to accelerate patient access to life-saving, multi-cancer early-detection tests; we are holding GRAIL as a separate entity pending EU regulatory review of the merger * Announced TSO 500 partnership with Merck to develop and commercialize tests that identify genetic mutations used in the assessment of homologous recombination deficiency (HRD) * Co-authored study published in JAMA Pediatrics reporting findings from the NICUSeq Randomized Time-Delayed Trial, demonstrating whole genome sequencing outperforms usual care by two-fold in diagnostic efficacy and clinical management of acutely-ill newborns with suspected genetic disease * Announced an agreement with Israel's Ministry of Health for a pilot program to implement the use of whole-genome sequencing in critically-ill infants suspected of having a genetic disorder in neonatal intensive care units * Expanded presence in Latin America with the creation of Illumina Colombia S.A.S. and Illumina Mxico Productos de Biotecnologa to advance clinical business in the region and increase support for local customers and partners * Announced net zero global greenhouse gas emissions commitment by 2050, including milestone targets of 46% reduction in emissions and 100% renewable electricity by 2030 * GRAIL announced Galleri was approved for prescription by the New York State Department of Health, making the test commercially available in New York, and marking a significant regulatory milestone. * NHS launched UK trial of Galleri under a commercial partnership program that aims to confirm Galleri's clinical and economic performance in the NHS system as a precursor to its routine use by the NHS * Appointed Robert Ragusa, former Chief Operations Officer of Illumina, as Chief Executive Officer of GRAIL

Financial outlook and guidance

The non-GAAP financial guidance discussed below reflects certain pro forma adjustments to assist in analyzing and assessing our core operational performance, including our Core Illumina and GRAIL segments. Please see our Reconciliation of Non-GAAP Financial Guidance included in this release for a reconciliation of the GAAP and non-GAAP financial measures.

For fiscal 2021, the company now expects both consolidated and Core Illumina revenue growth of approximately 36%. The company now expects GAAP earnings per diluted share of $4.41 to $4.51, and non-GAAP earnings per diluted share of $5.50 to $5.60, which includes dilution from GRAIL non-GAAP operating loss of approximately $1.00 and incremental dilution from the 9.8 million shares issued to fund the GRAIL acquisition of $0.15.

Conference call information

The conference call will begin at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, November 4, 2021. Interested parties may access the live teleconference through the Investor Info section of Illumina's website under the "Company" tab at www.illumina.com. Alternatively, individuals can access the call by dialing 1 (844) 200-6205 or 1 (929) 526-1599 outside North America, both using conference ID 808648.

A replay of the conference call will be posted on Illumina's website after the event and will be available for at least 30 days following.

Statement regarding use of non-GAAP financial measures

The company reports non-GAAP results for diluted net income per share, net income, gross margins, operating expenses, including research and development expenses and selling general and administrative expenses, operating income (loss), operating margins, gross profit, other income, and free cash flow (on a consolidated and as applicable, segment basis for our Core Illumina and GRAIL segments) in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The company's financial measures under GAAP include substantial charges such as amortization of acquired intangible assets, non-cash interest expense associated with the company's convertible debt instruments that may be settled in cash, and others that are listed in the itemized reconciliations between GAAP and non-GAAP financial measures included in this press release. Management has excluded the effects of these items in non-GAAP measures to assist investors in analyzing and assessing past and future operating performance, including in the non-GAAP measures relating to our Core Illumina and GRAIL segments. Additionally, non-GAAP net income and diluted earnings per share are key components of the financial metrics utilized by the company's board of directors to measure, in part, management's performance and determine significant elements of management's compensation.

The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand its business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.

Use of forward-looking statements

This release may contain forward-looking statements that involve risks and uncertainties. Among the important factors to which our business is subject that could cause actual results to differ materially from those in any forward-looking statements are: (i) the impact to our business and operating results of the COVID-19 pandemic; (ii) changes in the rate of growth in the markets we serve; (iii) the volume, timing and mix of customer orders among our products and services; (iv) our ability to adjust our operating expenses to align with our revenue expectations; (v) our ability to manufacture robust instrumentation and consumables; (vi) the success of products and services competitive with our own; (vii) challenges inherent in developing, manufacturing, and launching new products and services, including expanding or modifying manufacturing operations and reliance on third-party suppliers for critical components; (viii) the impact of recently launched or pre-announced products and services on existing products and services; (ix) our ability to further develop and commercialize our instruments, consumables, and products, including Galleri, the cancer screening test developed by GRAIL, to deploy new products, services, and applications, and to expand the markets for our technology platforms; (x) the risks and costs associated with the integration of, and our ability to integrate, GRAIL's business successfully to achieve anticipated synergies, including the restrictions on integration during any hold separate period or any delay in integration following any hold separate period; (xi) the risk that disruptions from the consummation of our recent acquisition of GRAIL or any associated legal or regulatory proceedings or obligations will harm our business, including current plans and operations; (xii) potential adverse reactions or changes to business relationships resulting from the consummation of our recent acquisition of GRAIL; (xiii) our ability to obtain approval by third-party payors to reimburse patients for our products; (xiv) our ability to obtain regulatory clearance for our products from government agencies; (xv) our ability to successfully partner with other companies and organizations to develop new products, expand markets, and grow our business; (xvi) our ability to successfully identify and integrate acquired technologies, products, or businesses; (xvii) the application of generally accepted accounting principles, which are highly complex and involve many subjective assumptions, estimates, and judgments and (xviii) legislative, regulatory and economic developments, together with other factors detailed in our filings with the Securities and Exchange Commission, including our most recent filings on Forms 10-K and 10-Q, or in information disclosed in public conference calls, the date and time of which are released beforehand. We undertake no obligation, and do not intend, to update these forward-looking statements, to review or confirm analysts' expectations, or to provide interim reports or updates on the progress of the current quarter.

About Illumina

Illumina is improving human health by unlocking the power of the genome. Our focus on innovation has established us as the 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. To learn more, visit www.illumina.com and connect with us on Twitter, Facebook, LinkedIn, Instagram, and YouTube.

Illumina, Inc. Condensed Consolidated Balance Sheets (In millions)



October 3, January 3, 2021 2021

ASSETS (unaudited)

Current assets:

Cash and cash equivalents $1,080 $1,810

Short-term investments 185 1,662

Accounts receivable, net 604 487

Inventory 401 372

Prepaid expenses and other current assets 181 152

Total current assets 2,451 4,483

Property and equipment, net 1,009 922

Operating lease right-of-use assets 676 532

Goodwill 7,098 897

Intangible assets, net 3,351 142

Other assets 478 609

Total assets $15,063 $7,585



LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $248 $192

Accrued liabilities 666 541

Convertible senior notes, current portion - 511

Total current liabilities 914 1,244

Operating lease liabilities 784 671

Term notes 993 -

Convertible senior notes 694 673

Other long-term liabilities 1,085 303

Stockholders' equity 10,593 4,694

Total liabilities and stockholders' equity$15,063 $7,585

Illumina, Inc. Condensed Consolidated Statements of Income (In millions, except per share amounts) (unaudited)



Three Months EndedNine Months Ended

OctoberSeptemberOctober September 3, 27, 3, 27, 2021 2020 2021 2020

Revenue:

Product revenue $978 $676 $2,903$1,904

Service and other revenue 130 118 424 382

Total revenue 1,108 794 3,327 2,286

Cost of revenue:

Cost of product revenue (a) 264 209 782 535

Cost of service and other revenue (a)56 52 177 157

Amortization of acquired intangible 18 7 31 21 assets

Total cost of revenue 338 268 990 713

Gross profit 770 526 2,337 1,573

Operating expense:

Research and development (a) 436 172 835 483

Selling, general and administrative 879 192 1,666 643 (a)

Total operating expense 1,315 364 2,501 1,126

(Loss) income from operations (545) 162 (164) 447

Other income, net 965 53 962 110

Income before income taxes 420 215 798 557

Provision for income taxes 103 36 148 158

Net income $317 $179 $650 $399

Earnings per share:

Basic $2.09$1.22 $4.39 $2.72

Diluted $2.08$1.21 $4.36 $2.70

Shares used in computing earnings per common share:

Basic 152 146 148 147

Diluted 153 148 149 148



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



Three Months EndedNine Months Ended

OctoberSeptemberOctober September 3, 27, 3, 27, 2021 2020 2021 2020

Cost of product revenue $7 $6 $22 $13

Cost of service and other revenue 1 1 3 3

Research and development 193 21 243 48

Selling, general and administrative 496 33 576 52

Stock-based compensation expense $697 $61 $844 $116 before taxes

Illumina, Inc. Condensed Consolidated Statements of Cash Flows (In millions) (unaudited)



Three Months Ended Nine Months Ended

October SeptemberOctober September 3, 27, 3, 27, 2021 2020 2021 2020

Net cash (used in) provided by $(272)$ 153 $263 $ 674 operating activities

Net cash used in investing (2,448)(65) (1,069)(520) activities

Net cash (used in) provided by (394) (101) 78 (435) financing activities

Effect of exchange rate changes on (2) 4 (2) - cash and cash equivalents

Net decrease in cash and cash (3,116)(9) (730) (281) equivalents

Cash and cash equivalents, beginning4,196 1,770 1,810 2,042 of period

Cash and cash equivalents, end of $1,080$ 1,761$1,080$ 1,761period



Calculation of free cash flow:

Net cash (used in) provided by $(272)$ 153 $263 $ 674 operating activities

Purchases of property and equipment (52) (48) (138) (127)

Free cash flow (a) $(324)$ 105 $125 $ 547

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

Illumina, Inc. Results of Operations - Non-GAAP (In millions, except per share amounts) (unaudited)



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



Three Months EndedNine Months Ended

OctoberSeptemberOctoberSeptember 3, 27, 3, 27, 2021 2020 2021 2020

GAAP earnings per share - diluted $2.08$1.21 $4.36$2.70

Cost of revenue (b) 0.12 0.06 0.21 0.16

Research and development costs (b) 1.28 0.03 1.32 0.01

Selling, general and administrative 3.86 (0.03) 5.94 0.58 costs (b)

Other income, net (b) (6.35)(0.31) (6.53)(0.61)

Incremental non-GAAP tax expense (c) 0.47 0.07 (0.05)(0.05)

Income tax benefit (d) (0.01)(0.01) (0.05)(0.12)

Tax expense related to increase in - - - 0.42 valuation allowance (e)

Tax expense related to cost-sharing - - - 0.19 arrangement (f)

Non-GAAP earnings per share - diluted $1.45$1.02 $5.20$3.28 (a)



CONSOLIDATED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME:



Three Months EndedNine Months Ended

OctoberSeptemberOctoberSeptember 3, 27, 3, 27, 2021 2020 2021 2020

GAAP net income $317 $179 $650 $399

Cost of revenue (b) 18 9 32 24

Research and development costs (b) 196 3 196 1

Selling, general and administrative 591 (4) 885 87 costs (b)

Other income, net (b) (971) (46) (973) (90)

Incremental non-GAAP tax expense (c) 71 11 (8) (8)

Income tax benefit (d) (1) (2) (7) (18)

Tax expense related to increase in - - - 62 valuation allowance (e)

Tax expense related to cost-sharing - - - 28 arrangement (f)

Non-GAAP net income (a) $221 $150 $775 $485

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

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

Refer to our "Itemized Reconciliation between GAAP and Non-GAAP Results of(b) Operations as a Percent of Revenue," below, for the components of these amounts.

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

(d) Amounts represent tax deductions taken in excess of stock-based compensation cost.

(e) Amounts represent discrete tax expense related to the valuation allowance established in Q2 2020 against the deferred tax asset for California research and development credits.

Amounts represent discrete tax expense related to the finalization of the(f) Altera court case in Q2 2020 which determined stock-based compensation must be included in intercompany cost sharing payments.

Illumina, Inc. Results of Operations - Non-GAAP (continued) (Dollars in millions) (unaudited)



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



Three Months Ended Nine Months Ended

October 3, September 27, October 3, September 27, 2021 2020 2021 2020

GAAP gross $770 69.5 %$52666.2 %$2,33770.2 %$1,57368.8 %profit (b)

Core Illumina cost of 6 0.6 %9 1.2 %20 0.6 %24 1.0 %revenue

GRAIL cost of 12 1.1 %- - 12 0.4 %- - revenue

Non-GAAP gross$788 71.2 %$53567.4 %$2,36971.2 %$1,59769.8 %profit (a)



GAAP research and $436 39.4 %$17221.6 %$835 25.1 %$483 21.1 %development expense

Core Illumina research & - - (3) (0.4)%- - (1) - development costs

GRAIL research & development (196) (17.7)%- - (196) (5.9) %- - costs

Non-GAAP research and $240 21.7 %$16921.2 %$639 19.2 %$482 21.1 %development expense



GAAP selling, general and $879 79.3 %$19224.2 %$1,66650.1 %$643 28.1 %administrative expense

Core Illumina selling, general, and (99) (8.9) %4 0.6 %(393) (11.8)%(87) (3.8)%administrative costs

GRAIL selling, general, and (492) (44.4)%- - (492) (14.8)%- - administrative costs

Non-GAAP selling, general and $288 26.0 %$19624.8 %$781 23.5 %$556 24.3 %administrative expense



GAAP operating$(545)(49.2)%$16220.4 %$(164)(5.0) %$447 19.6 %(loss) profit

Core Illumina 105 9.5 %8 1.0 %413 12.4 %112 4.8 %

GRAIL 700 63.2 %- - 700 21.1 %- -

Non-GAAP operating $260 23.5 %$17021.4 %$949 28.5 %$559 24.4 %profit (a)



GAAP other income $965 87.1 %$53 6.6 %$962 28.9 %$110 4.8 %(expense), net

Core Illumina (971) (87.6)%(46) (5.7)%(973) (29.2)%(90) (3.9)%adjustments

Non-GAAP other (expense) $(6) (0.5) %$7 0.9 %$(11) (0.3) %$20 0.9 %income, net (a)

Illumina, Inc. Results of Operations - Non-GAAP (continued) (Dollars in millions) (unaudited)



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



Three Months Ended Nine Months Ended

October 3, September 27, October 3, September 27, 2021 2020 2021 2020

GAAP gross profit -$78170.7 %$52666.2 %$2,34870.6 %$1,57368.8 %Core Illumina (b)

Amortization of acquired intangible7 0.6 %7 0.9 %19 0.6 %21 0.9 %assets

Expenses related to- - 3 0.4 %1 - 5 0.2 %COVID-19 (c)

Income related to - - (1) (0.1)%- - (4) (0.2)%COVID-19 (d)

Restructuring (e) - - - - - - 2 0.1 %

Non-GAAP gross profit - Core $78871.3 %$53567.4 %$2,36871.2 %$1,59769.8 %Illumina (a)



GAAP research and development expense$21219.1 %$17221.6 %$611 18.4 %$483 21.1 %- Core Illumina

Expenses related to- - (3) (0.4)%- - (3) (0.1) COVID-19 (c)

Income related to - - - - - - 2 0.1 %COVID-19 (d)

Non-GAAP research and development $21219.1 %$16921.2 %$611 18.4 %$482 21.1 %expense - Core Illumina



GAAP selling, general and administrative $36533.0 %$19224.2 %$1,15234.6 %$643 28.1 %expense - Core Illumina

Amortization of acquired intangible- - (1) (0.1)%(1) - (1) - assets

Acquisition-related(106)(9.6) %(13) (1.5)%(400) (12.0)%(106) (4.6)%(f)

Contingent consideration 7 0.7 %- - 7 0.2 %- - liabilities (n)

Expenses related to- - (7) (0.9)%(2) (0.1) %(9) (0.5)%COVID-19 (c)

Income related to - - - - 1 - 2 0.1 %COVID-19 (d)

Gain on litigation - - 25 3.1 %2 0.1 %25 1.1 %(g)

Restructuring (e) - - - - - - 2 0.1 %

Non-GAAP selling, general and administrative $26624.1 %$19624.8 %$759 22.8 %$556 24.3 %expense - Core Illumina



GAAP operating profit - Core $20518.5 %$16220.4 %$586 17.6 %$447 19.6 %Illumina

Cost of revenue 6 0.6 %9 1.2 %20 0.6 %24 1.0 %

Research and - - 3 0.4 %- - 1 - development costs

Selling, general and administrative 99 8.9 %(4) (0.6)%393 11.8 %87 3.8 %costs

Non-GAAP operating profit - Core $31028.0 %$17021.4 %$999 30.0 %$559 24.4 %Illumina (a)



GAAP other income (expense), net - $96587.3 %$53 6.6 %$962 28.9 %$110 4.8 %Core Illumina

Acquisition-related(900)(81.4)%- - (900) (27.1)%- - (f)

Non-cash interest 7 0.7 %11 1.4 %27 0.9 %31 1.4 %expense (h)

Strategic investment related (66) (6.0) %(67) (8.4)%(52) (1.6) %(141) (6.2)%(gain), net (i)

Loss (gain) on derivative assets - - 10 1.3 %(26) (0.8) %25 1.1 %(j)

Bridge facility - - - - 7 0.3 %- - fees (k)

Gain on contingent (12) (1.1) %- - (30) (0.9) %(5) (0.2)%value right (l)

Loss on extinguishment of - - - - 1 - - - debt (m)

Non-GAAP other (expense) income, $(6)(0.5) %$7 0.9 %$(11) (0.3) %$20 0.9 %net - Core Illumina (a)

Illumina, Inc. Results of Operations - Non-GAAP (continued) (In millions) (unaudited)



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



Three Months Ended Nine Months Ended

October SeptemberOctober September 3, 27, 3, 27, 2021 2020 2021 2020

GAAP gross loss - GRAIL (b) $(11) - $(11) -

Amortization of acquired intangible 12 - 12 - assets

Non-GAAP gross profit - GRAIL (a) $1 - $1 -



GAAP research and development $224 - $224 - expense - GRAIL

Acquisition related (f) (196) - (196) -

Non-GAAP research and development $28 - $28 - expense - GRAIL



GAAP selling, general and $514 - $514 - administrative expense - GRAIL

Acquisition-related (f) (492) - (492) -

Non-GAAP selling, general and $22 - $22 - administrative expense - GRAIL



GAAP operating loss - GRAIL $(750)- $(750)-

Cost of revenue 12 - 12 -

Research and development costs 196 - 196 -

Selling, general and administrative 492 - 492 - costs

Non-GAAP operating loss - GRAIL (a) $(50) - $(50) -

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

Non-GAAP gross profit, included within non-GAAP operating profit (loss), is a key measure of the effectiveness and efficiency of manufacturing processes, product mix and the average selling prices of our products and(a) services. Non-GAAP operating profit (loss), and non-GAAP other (expense) income, net, exclude the effects of the pro forma adjustments as detailed above. Management has excluded the effects of these items in these measures to assist investors in analyzing and assessing past and future operating performance, including in the non-GAAP measures relating to our Core Illumina and GRAIL segments.

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

Amounts consist of direct and incremental expenses incurred due to the COVID-19 pandemic, primarily expenses related to employee testing and(c) incremental cleaning in 2021, and a one-time allowance paid to employees working remotely in Q3 2020 to help with additional expenses, premium pay for onsite essential workers, and personal protective equipment.

(d) Amounts consist of direct and incremental income due to the COVID-19 pandemic, primarily payroll-related credits earned in the US and Canada in Q1 2021, and payroll-related credits earned in Singapore in 2020.

(e) Amount consists primarily of employee costs, net of adjustments, related to restructuring in 2020.

Amounts for Q3 2021 consist primarily of gain related to fair value adjustment of our previously held interest in GRAIL of approximately $900 million, GRAIL day one acquisition-related compensation expense of approximately $654 million, and other acquisition related expenses. In(f) addition to this, amount for the first three quarters of 2021 consists of expenses related to the Continuation Payments related to the acquisition totaling $245 million. Amounts for 2020 consist primarily of acquisition related expenses, expenses related to the Continuation Advances and Reverse Termination Fee paid to Pacific Biosciences related to the terminated acquisition.

(g) Amount consists of a gain related to a patent litigation settlement.

(h) Non-cash interest expense is calculated in accordance with the authoritative accounting guidance for convertible debt instruments that may be settled in cash.

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

Amount for the three quarters of 2021 consists of a gain recorded on our derivative assets related to the terminated acquisition with Pacific(j) Biosciences as a result of Pacific Biosciences repaying to us $52 million in Continuation Advances. Amounts for Q3 2020 and the three quarters of 2020 consist of fair value adjustments recorded on our derivative assets.

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

(l) Amounts consist of fair value adjustments related to our contingent value right received from Helix.

(m) Amount consists of loss on extinguishment of our 2021 Convertible Senior Notes, which matured in June 2021.

(n) Amount consists of fair value adjustment of contingent consideration liabilities related to the acquisitions.

Illumina, Inc. Reconciliation of Non-GAAP Financial Guidance (unaudited)



Our future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect our financial results are stated above in this press release. More information on potential factorsthat could affect our financial results is included from time to time in the public reports filed with the Securities and Exchange Commission, including Form 10-K for the fiscal year ended January 3, 2021 filed with the SEC on February 17, 2021, Form 10-Q for the fiscal quarter ended April 4, 2021, and Form 10-Q for the fiscal quarter ended July 4, 2021. We assume no obligation to update any forward-looking statements or information.



Fiscal Year 2021

GAAP diluted earnings per share $4.41 - $4.51

Amortization of acquired intangible assets 0.49

Non-cash interest expense (a) 0.23

Acquisition-related (b) 1.24

Bridge facility fees (c) 0.05

COVID-19 expenses, net (d) 0.02

Loss on extinguishment of debt (e) 0.01

Strategic investment related gain, net (f) (0.34)

Gain on contingent value right (g) (0.20)

Gain on derivative assets (h) (0.17)

Contingent consideration liabilities (i) (0.05)

Gain on litigation (j) (0.01)

Incremental non-GAAP tax expense (k) (0.13)

Excess tax benefits from share-based compensation (l)(0.05)

Non-GAAP diluted earnings per share $5.50 - $5.60

Non-cash interest expense is calculated in accordance with the(a) authoritative accounting guidance for convertible debt instruments that may be settled in cash.

Amount consists primarily of gain related to fair value adjustment of our(b) previously held interest in GRAIL of approximately $900 million, day one acquisition-related compensation expense of approximately $654 million, Continuation Payments related to the acquisition of $245 million, and other acquisition related expenses.

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

Amount consists of direct and incremental expenses incurred due to the COVID-19 pandemic, primarily expenses related to employee testing and(d) incremental cleaning, partially offset by direct and incremental income due to the COVID-19 pandemic, primarily payroll-related credits earned in the US and Canada.

(e) Amount consists of loss on extinguishment of our 2021 Convertible Senior Notes, which matured in June 2021.

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

(g) Amount consists of fair value adjustments related to our contingent value right received from Helix.

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

(i) Amount consists of fair value adjustment of contingent consideration liabilities related to the acquisitions.

(j) Amount consists of a gain related to a patent litigation settlement.

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

(l) Amount represents tax deductions taken in excess of stock-based compensation cost.

Investors: Brian Blanchett+1.858.291.6421 ir@illumina.com

Media: Dr. Karen Birmingham+1.646.355.2111 kbirmingham@illumina.com

View original content: https://www.prnewswire.com/news-releases/illumina-reports-financial-results-for-third-quarter-of-fiscal-year-2021-301416872.html

SOURCE Illumina, Inc.