ILMN 10-Q
Illumina, Inc. (ILMN)
10-Q
2025-05-09
For: 2025-03-30
View Original
Added on
April 12, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For the Quarterly Period Ended March 30, 2025
| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For the transition period from to
Commission File Number 001-35406
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) (Zip code)
(858 ) 202-4500
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| þ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13a of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
As of May 2, 2025, there were 158.3 million shares of the registrant’s common stock outstanding.
ILLUMINA, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED MARCH 30, 2025
TABLE OF CONTENTS
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | PAGE | ||||
| MANAGEMENT’S DISCUSSION & ANALYSIS | |||||
| OTHER KEY INFORMATION | |||||
See “Form 10-Q Cross-Reference Index” within Other Key Information for a cross-reference to the parts and items requirements of the Securities and Exchange Commission Quarterly Report on Form 10-Q.
2
Consideration Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “continue,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “potential,” “predict,” “should,” “will,” or similar words or phrases, or the negatives of these words, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward looking. Examples of forward-looking statements include, among others, statements we make regarding:
•our expectations as to our future financial performance, results of operations, or other operational results or metrics;
•the benefits that we expect will result from our business activities and certain transactions we have completed, or may complete, such as product introductions, increased revenue, decreased expenses, and avoided expenses and expenditures;
•our expectations of the effect on our financial condition of claims, litigation, contingent liabilities, and governmental investigations, proceedings, and regulations;
•our strategies or expectations for product development, market position, financial results, and reserves;
•our ability to successfully implement cost reduction plans in a timely manner and the possibility that costs associated with our cost reduction plans are greater than we anticipate;
•our estimate of the cost impact on Illumina of the tariffs announced by the U.S. Government and other countries in April 2025; and
•other expectations, beliefs, plans, strategies, anticipated developments, and other matters that are not historical facts.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
•our expectations and beliefs regarding prospects and growth for our business and the markets in which we operate;
•the timing and mix of customer orders among our products and services;
•challenges inherent in developing, manufacturing, and launching new products and services, including expanding manufacturing operations and reliance on third-party suppliers for critical components;
•uncertainty regarding the impact of our recent inclusion on the “unreliable entities list” by regulatory authorities in China and the decision by regulatory authorities in China to not permit us to export sequencing instruments into China;
•any reductions or potential reductions in funding for the National Institutes of Health (NIH), or targeted cancellations by the U.S. federal government of certain grants or contracts, could negatively impact our customers and reduce demand for our products and services;
•the impact of recently launched or pre-announced products and services on existing products and services;
•uncertainty regarding, or potential changes in, diplomatic and trade relationships, for example, as a result of the recent change in the U.S. government administration;
3
•risks and uncertainties regarding legal and regulatory proceedings;
•the impact of tariffs recently imposed by the U.S. government and its trading partners in response, other possible tariffs or trade protection measures, import or export licensing requirements, new or different customs duties, trade embargoes and sanctions and other trade barriers, as well as the impact of Illumina’s efforts to mitigate the effect of such tariffs;
•risks associated with contracts or other agreements containing provisions that might be implicated by the divestiture of GRAIL, Inc. (f/k/a GRAIL, LLC) (GRAIL), including our ability to fully realize the anticipated economic benefits of our commercial arrangements with GRAIL and our obligations with respect to contingent value rights (the CVRs) issued by us in connection with the GRAIL acquisition, which may adversely affect us and our business and/or the market value of the CVRs;
•the risk of additional litigation arising against us in connection with the GRAIL acquisition;
•the assumptions underlying our critical accounting policies and estimates;
•our assessments and estimates used to determine our expected effective tax rate;
•our assessments and beliefs regarding the outcome of pending legal proceedings and any liability that we may incur as a result of those proceedings, as well as the cost and potential diversion of management resources associated with these proceedings;
•uncertainty, or adverse economic and business conditions, including as a result of slowing or uncertain economic growth, competitive landscape, public health crisis, or armed conflict; and
•other factors detailed in our filings with the Securities and Exchange Commission (SEC), including the risks, uncertainties, and assumptions described in “Risk Factors” within the Business & Market Information section of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024, the “Risk Factors” section below, or in information disclosed in public conference calls, the date and time of which are released beforehand.
Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation, and do not intend, to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, or to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of any current financial quarter, in each case whether as a result of new information, future developments, or otherwise.
4
| CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||
ILLUMINA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
| March 30, 2025 | December 29, 2024 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term investments | |||||||||||
| Accounts receivable, net | |||||||||||
| Inventory, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Deferred tax assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Term debt, current portion | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities | |||||||||||
| Term debt | |||||||||||
| Other long-term liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | |||||||||||
| Additional paid-in capital | |||||||||||
Accumulated other comprehensive income | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Treasury stock, at cost | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
5
ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per share amounts)
| Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Revenue: | |||||||||||
| Product revenue | $ | $ | |||||||||
| Service and other revenue | |||||||||||
| Total revenue | |||||||||||
| Cost of revenue: | |||||||||||
| Cost of product revenue | |||||||||||
| Cost of service and other revenue | |||||||||||
| Amortization of acquired intangible assets | |||||||||||
| Total cost of revenue | |||||||||||
| Gross profit | |||||||||||
| Operating expense: | |||||||||||
| Research and development | |||||||||||
| Selling, general and administrative | |||||||||||
| Total operating expense | |||||||||||
Income (loss) from operations | ( | ||||||||||
| Other income (expense): | |||||||||||
| Interest income | |||||||||||
| Interest expense | ( | ( | |||||||||
| Other income, net | |||||||||||
| Total other income, net | |||||||||||
| Income (loss) before income taxes | ( | ||||||||||
| Provision for income taxes | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Earnings (loss) per share: | |||||||||||
| Basic | $ | $ | ( | ||||||||
| Diluted | $ | $ | ( | ||||||||
| Shares used in computing earnings (loss) per share: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See accompanying notes to condensed consolidated financial statements.
6
ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In millions)
| Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Unrealized (loss) gain on cash flow hedges, net of deferred tax | ( | ||||||||||
| Total comprehensive income (loss) | $ | $ | ( | ||||||||
See accompanying notes to condensed consolidated financial statements.
7
ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In millions)
| Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Comprehensive | Accumulated | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Income (Loss) | Deficit | Shares | Amount | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized gain on cash flow hedges, net of deferred tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of repurchases | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Unrealized gain on cash flow hedges, net of deferred tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of repurchases | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Spin-Off of GRAIL | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Unrealized loss on cash flow hedges, net of deferred tax | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of repurchases | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance as of September 29, 2024 | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on cash flow hedges, net of deferred tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of repurchases | — | ( | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance as of December 29, 2024 | $ | $ | $ | $ | ( | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
8
ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In millions)
| Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Paid-In | Comprehensive | Accumulated | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Income | Deficit | Shares | Amount | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 29, 2024 | $ | $ | $ | $ | ( | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Unrealized loss on cash flow hedges, net of deferred tax | — | — | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of repurchases | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance as of March 30, 2025 | $ | $ | $ | $ | ( | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
9
ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
| Three Months Ended | |||||||||||
| March 30, 2025 | March 31, 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Depreciation expense | |||||||||||
| Amortization of intangible assets | |||||||||||
| Share-based compensation expense | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Net gains on strategic investments | ( | ( | |||||||||
| Change in fair value of contingent consideration liabilities | ( | ||||||||||
| Gain on Helix contingent value right | ( | ||||||||||
| Property and equipment and right-of-use asset impairment | |||||||||||
| Other | ( | ||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Inventory | |||||||||||
| Prepaid expenses and other current assets | ( | ||||||||||
| Operating lease right-of-use assets and liabilities, net | ( | ( | |||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued liabilities | ( | ( | |||||||||
| Other long-term liabilities | |||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Purchases of strategic investments | ( | ( | |||||||||
| Cash paid for intangible assets | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Common stock repurchases | ( | ||||||||||
| Taxes paid related to net share settlement of equity awards | ( | ( | |||||||||
| Proceeds from issuance of common stock | |||||||||||
| Net cash (used in) provided by financing activities | ( | ||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
10
ILLUMINA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Unless the context requires otherwise, references in this report to “Illumina,” the “Company,” “we,” “us,” and “our” refer to Illumina, Inc. and its consolidated subsidiaries.
| 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES | ||
We are a provider of sequencing- and array-based solutions for genetic and genomic analysis, 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 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 GRAIL’s results of operations and cash flows have not been reclassified.
Basis of Presentation
The unaudited condensed consolidated financial statements include our accounts, our wholly-owned subsidiaries, and majority-owned or controlled companies. All intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation. In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented.
Fiscal Year
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 Q1 2025 and Q1 2024 refer to the three months ended March 30, 2025 and March 31, 2024, respectively, which were both 13 weeks.
11
Significant Accounting Policies
During Q1 2025, there were no changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024. For Q1 2024, we determined the provision for income taxes utilizing the year-to-date effective tax rate method instead of the estimated annual effective tax rate method.
Accounting Pronouncements Pending Adoption
In December 2023, the FASB issued ASU 2023-09, Income Taxes - 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.
Earnings (Loss) per Share
The weighted average shares used to calculate basic and diluted earnings (loss) per share were as follows:
| In millions | Q1 2025 | Q1 2024 | |||||||||
Weighted average shares used in calculating basic earnings (loss) per share | |||||||||||
Weighted average shares used in calculating diluted earnings (loss) per share | |||||||||||
| Antidilutive shares: | |||||||||||
| Equity awards | |||||||||||
| Potentially dilutive shares excluded from calculation due to antidilutive effect | |||||||||||
| 2. REVENUE | ||
12
Revenue by Source
| Q1 2025 | Q1 2024 | ||||||||||||||||||||||||||||||||||
| In millions | Sequencing | Microarray | Total | Sequencing | Microarray | Total | |||||||||||||||||||||||||||||
| Consumables | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Instruments | |||||||||||||||||||||||||||||||||||
| Total product revenue | |||||||||||||||||||||||||||||||||||
| Service and other revenue | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Revenue by Geographic Area
| Based on region of destination (in millions) | Q1 2025 | Q1 2024 | |||||||||
| Americas | $ | $ | |||||||||
| Europe | |||||||||||
Greater China (1) | |||||||||||
Asia-Pacific, Middle East, and Africa (2) | |||||||||||
| Total revenue | $ | $ | |||||||||
_____________
(1)Region includes revenue from China, Taiwan, and Hong Kong.
(2)Region includes revenue from Russia and Turkey.
Performance Obligations
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 to six months , after the contract execution date. As of March 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $891 million, of which approximately 83 % is expected to be converted to revenue in the next twelve months , approximately 7 % in the following twelve months , and the remainder thereafter.
Contract Assets and Liabilities
Contract assets, which consist of revenue recognized and performance obligations satisfied or partially satisfied in advance of customer billing, were $15 million and $16 million as of March 30, 2025 and December 29, 2024, respectively, and were recorded in prepaid expenses and other current assets.
Contract liabilities, which consist of deferred revenue and customer deposits, as of March 30, 2025 and December 29, 2024, were $329 million and $327 million, respectively, of which $256 million and $260 million, respectively, was short-term and recorded in accrued liabilities and the remaining long-term portions were recorded in other long-term liabilities. Revenue recorded in Q1 2025 included $97 million of previously deferred revenue that was included in contract liabilities as of December 29, 2024.
| 3. INVESTMENTS AND FAIR VALUE MEASUREMENTS | ||
Strategic Investments
Marketable Equity Securities
Our short-term investments consist of marketable equity securities. As of March 30, 2025 and December 29, 2024, the fair value of our marketable equity securities totaled $124 million and $93 million, respectively.
13
Gains recognized in other income, net on marketable equity securities were as follows:
| In millions | Q1 2025 | Q1 2024 | |||||||||
Net gains recognized during the period | $ | $ | |||||||||
Less: Net gains recognized during the period on securities sold during the period | |||||||||||
| Net unrealized gains recognized during the period on securities still held at the reporting date | $ | $ | |||||||||
Non-Marketable Equity Securities
As of March 30, 2025 and December 29, 2024, non-marketable equity securities, without readily determinable fair values, included in other assets, were $46 million and $26 million, respectively.
Venture Funds
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 $205 million and $201 million as of March 30, 2025 and December 29, 2024, respectively. We recorded net gains of $2 million and $6 million in Q1 2025 and Q1 2024, respectively, in other income, net.
Our commitments to the Funds are as follows:
Dollars in millions | Capital commitments | Callable through date | Remaining callable as of March 30, 2025 (1) | ||||||||||||||
Fund I | $ | April 2026 | $ | ||||||||||||||
Fund II | $ | July 2029 | $ | ||||||||||||||
Fund III | $ | December 2034 | $ | ||||||||||||||
(1)Fund I also had recallable distributions of approximately $10 million.
Revenue recognized from transactions with our strategic investees was immaterial for both Q1 2025 and Q1 2024.
14
Fair Value Measurements
The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis:
| March 30, 2025 | December 29, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| In millions | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
| Money market funds (cash equivalents) | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Marketable equity securities | |||||||||||||||||||||||||||||||||||||||||||||||
Other investments | |||||||||||||||||||||||||||||||||||||||||||||||
| Deferred compensation plan assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Total assets measured at fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Contingent consideration liabilities | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Deferred compensation plan liability | |||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Marketable equity securities are measured at fair value based on quoted trade prices in active markets. Other investments, included in other assets, consist of convertible notes, for which we elected the fair value option. Fair value is derived using a probability-weighted scenario approach. Changes in fair value are recognized in other income, net. Deferred compensation plan assets consist primarily of investments in life insurance contracts carried at cash surrender value, which reflects the net asset value of the underlying publicly traded mutual funds. We corroborate the fair value of our holdings, comparing valuations obtained from our investment service provider to valuations reported by our asset custodians, validating pricing sources and models, and reviewing key model inputs.
Contingent Consideration Liabilities
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.
Changes in the estimated fair value of our contingent consideration liabilities during Q1 2025 were as follows:
| In millions | |||||
| Balance as of December 29, 2024 | $ | ||||
| Change in estimated fair value | ( | ||||
| Balance as of March 30, 2025 | $ | ||||
The fair value of our contingent consideration liability related to GRAIL was $61 million and $71 million as of March 30, 2025 and December 29, 2024, respectively, of which $59 million and $70 million, respectively, was included in other long-term liabilities, with the remaining balances included in accrued liabilities. 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 2024 and Q4 2023 were $38 million and $30 million, respectively, driven primarily by sales of GRAIL’s Galleri test. Covered Revenue Payments relating to such periods were $360,000 and $284,000 , respectively, which were paid in Q1 2025 and Q1 2024, respectively.
15
We use a Monte Carlo simulation to estimate the fair value of our GRAIL contingent consideration. 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 GRAIL Spin-Off, we no longer have access to GRAIL management’s forecasts. Therefore, we rely on information made public by GRAIL and information published in analyst reports to estimate forecasted revenues through August 2033. To estimate the liability as of March 30, 2025, we selected a revenue risk premium of 5 %, derived from reconciling our forecasted revenues for GRAIL to GRAIL’s market capitalization based on a 10 -day trailing average. We used a 10 -day trailing average in Q1 2025, instead of a 60-day trailing average as used in prior periods, given the volatility in GRAIL’s market capitalization at the beginning of Q1 2025.
The assumptions used in estimating the fair value of our contingent consideration liability related to GRAIL are inherently subject to uncertainty and we note that small changes in these assumptions could have a significant impact on the concluded value. For example, an increase or decrease of 20%, in each year, to the forecasted revenues would have resulted in an increase and a decrease, respectively, of $15 10 million and an increase of $13 million, respectively. We expect certain levels of volatility in the GRAIL contingent consideration liability are possible in future periods.
| 4. DEBT | ||
| In millions | March 30, 2025 | December 29, 2024 | |||||||||
| Principal amount of 2025 Term Notes outstanding | $ | $ | |||||||||
Principal amount of 2026 Term Notes outstanding | |||||||||||
| Principal amount of 2027 Term Notes outstanding | |||||||||||
| Principal amount of 2031 Term Notes outstanding | |||||||||||
| Unamortized discounts and debt issuance costs | ( | ( | |||||||||
Net carrying amount of term debt | |||||||||||
| Less: current portion | |||||||||||
Term debt, non-current | $ | $ | |||||||||
Fair value of term debt outstanding (Level 2) | $ | $ | |||||||||
Interest expense recognized on our term notes, which included amortization of debt discounts and issuance costs, was $24 million and $18 million in Q1 2025 and Q1 2024, respectively.
In September 2024, we issued $500 million aggregate principal amount of 2026 Term Notes, which mature on September 9, 2026 and 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 notes, at our option, at any time prior to maturity at make-whole premium redemption prices defined in the form of the notes.
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 Notes, which mature on December 12, 2025, and the 2027 Notes, which mature on December 13, 2027, accrue interest at a rate of 5.800 % and 5.750 % per annum, respectively, payable semi-annually. Interest for the 2025 Notes is payable on June 12 and December 12 of each year and interest for the 2027 Notes is payable on June 13 and December 13 of each year.
16
We may redeem for cash all or any portion of the 2025 or 2027 Term Notes, at our option, at any time prior to maturity. Prior to November 12, 2025 for the 2025 Notes and prior to November 13, 2027 for the 2027 Notes, the notes are redeemable at make-whole premium redemption prices as defined in the applicable forms of note. After November 12, 2025 and November 13, 2027, respectively, the notes are redeemable at a redemption price equal to 100 % of the principal to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date.
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 on March 23 and September 23 of each year. We may redeem for cash all or any portion of the notes, at our option, at any time prior to maturity. Prior to December 23, 2030, the notes are redeemable at make-whole premium redemption prices as defined in the form of the notes. After December 23, 2030, the notes are redeemable at a redemption price equal to 100 % of the principal to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date.
Revolving Credit Agreement
On January 4, 2023, we entered into a 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 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 March 30, 2025, there were no borrowings or letters of credit outstanding under the credit facility, and we were in compliance with all financial and operating covenants.
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. The Revolving Credit Agreement includes an option for us to elect to increase commitments under the credit facility or enter into one or more tranches of term loans in the aggregate principal amount of up to $250 million, subject to consent of the lenders providing the additional commitments or loans and certain other conditions.
The Revolving Credit Agreement contains financial and operating covenants. Pursuant to the Revolving 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 Revolving Credit Agreement) and us providing notice to the Administrative Agent, the ratio increases to 4.00 to 1.00 for the fiscal quarter in which the acquisition is consummated and the three consecutive fiscal quarters thereafter. The operating covenants include, among other things, limitations on (i) the incurrence of indebtedness by our subsidiaries, (ii) liens on our and our subsidiaries assets, and (iii) certain fundamental changes and the disposition of assets by us and our subsidiaries. The Credit Agreement contains other customary covenants, representations and warranties, and events of default.
| 5. STOCKHOLDERS' EQUITY | ||
17
Restricted Stock
Restricted stock activity was as follows:
| Restricted Stock Units (RSU) | Performance Stock Units (PSU) (1) | Weighted-Average Grant Date Fair Value per Share | |||||||||||||||||||||
| Units in thousands | RSU | PSU | |||||||||||||||||||||
| Outstanding at December 29, 2024 | $ | $ | |||||||||||||||||||||
| Awarded | $ | $ | |||||||||||||||||||||
| Vested | ( | $ | $ | ||||||||||||||||||||
| Cancelled | ( | ( | $ | $ | |||||||||||||||||||
| Outstanding at March 30, 2025 | $ | $ | |||||||||||||||||||||
_____________
(1)We issue PSU for which the number of shares issuable is based on our performance relative to specified operating margin targets (OM PSU) and PSU with a market condition that vest based on the Company’s relative total shareholder return as compared to a peer group of companies (rTSR PSU). Beginning in fiscal year 2025, we no longer issue PSU for which the number of shares issuable is based on our performance relative to specified earnings per share targets. For 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.
Employee Stock Purchase Plan (ESPP)
The price at which common 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. During Q1 2025, approximately 0.4 million shares were issued under the plan. As of March 30, 2025, approximately 12.0 million shares remained available for issuance under the ESPP.
The assumptions used and the resulting estimate of weighted-average fair value per share for stock purchased under the ESPP during Q1 2025 were as follows:
| Risk-free interest rate | |||||
| Expected volatility | |||||
| Expected term | |||||
| Expected dividends | |||||
| Weighted-average grant-date fair value per share | $ | ||||
Share-Based Compensation
Share-based compensation expense reported in our consolidated statements of operations was as follows:
| In millions | Q1 2025 | Q1 2024 | |||||||||
| Cost of product revenue | $ | $ | |||||||||
| Cost of service and other revenue | |||||||||||
| Research and development | |||||||||||
| Selling, general and administrative | |||||||||||
| Share-based compensation expense, before taxes | |||||||||||
| Related income tax benefits | ( | ( | |||||||||
Share-based compensation expense, net of taxes (1) | $ | $ | |||||||||
(1)In Q1 2024, we recognized share-based compensation expense related to GRAIL liability-classified awards of $29 million.
As of March 30, 2025, unrecognized compensation cost, related to restricted stock and ESPP shares issued to date, of $687 million was expected to be recognized over a weighted-average period of approximately 2.7 years.
18
Share Repurchases
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 $1.2 billion of our outstanding common stock remained available as of March 30, 2025.
Share repurchase activity during Q1 2025 was as follows:
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, and was immaterial for Q1 2025.
| 6. SUPPLEMENTAL BALANCE SHEET DETAILS | ||
| In millions | March 30, 2025 | December 29, 2024 | |||||||||
| Trade accounts receivable, gross | $ | $ | |||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Total accounts receivable, net | $ | $ | |||||||||
Inventory
| In millions | March 30, 2025 | December 29, 2024 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Inventory, gross | |||||||||||
| Inventory reserve | ( | ( | |||||||||
| Total inventory, net | $ | $ | |||||||||
Accrued Liabilities
| In millions | March 30, 2025 | December 29, 2024 | |||||||||
| Contract liabilities, current portion | $ | $ | |||||||||
Accrued compensation expenses (1) | |||||||||||
| Accrued taxes payable | |||||||||||
| Operating lease liabilities, current portion | |||||||||||
Other, including warranties (2) | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
(1)Includes employee separation costs related to restructuring activities.
(2)See table below for changes in the reserve for product warranties.
19
Changes in the reserve for product warranties were as follows:
| In millions | Q1 2025 | Q1 2024 | |||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Additions charged to cost of product revenue | |||||||||||
| Repairs and replacements | ( | ( | |||||||||
| Balance at end of period | $ | $ | |||||||||
We generally provide a one-year warranty on instruments. Additionally, we provide a warranty on consumables through the expiration date, which generally ranges from 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.
Restructuring
In 2023, we implemented a cost reduction initiative that included workforce reductions, consolidation of certain facilities and other actions to reduce expenses, all as part of a plan to realign operating expenses while maintaining focus on our innovation roadmap and sustainable long-term growth. In Q1 2025, we implemented an incremental cost reduction initiative that included optimizing stock-based compensation and non-labor spending, as well as workforce reductions, to help mitigate the expected impact of a reduction in revenue and operating income from our Greater China business and the uncertainty in the U.S. government’s funding of the National Institutes of Health.
A summary of the pre-tax restructuring charges is as follows:
| In millions | Q1 2025 | Q1 2024 | Cumulative charges recorded since inception | ||||||||||||||
| Employee separation costs | $ | $ | $ | ||||||||||||||
Asset impairment charges (1) | |||||||||||||||||
| Other costs | |||||||||||||||||
Total restructuring charges (2) | $ | $ | $ | ||||||||||||||
_____________
(1)For Q1 2024, primarily relates to impairment of right-of-use assets and leasehold improvements for our Foster City campus.
(2)For Q1 2025, $18 million was recorded in SG&A expense, $11 million in R&D expense, with remainder in cost of revenue.
For Q1 2024, $35 million was recorded in SG&A expense and $1 million in R&D expense and primarily related to Core Illumina segment.
In Q1 2024, we recorded right-of-use asset impairments of $18 million related to our campus in Foster City, California and another property in San Diego, California. The impairments were determined by comparing the fair values of the impacted right-of-use assets to the carrying values of the assets as of the impairment measurement date. The fair values of the right-of-use assets were estimated using the discounted future cash flows method, which includes estimates and assumptions for future sublease rental rates that reflect current sublease market conditions, as well as discount rates. The estimates and assumptions used in our assessments represent Level 3 measurements because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. We also recorded $14 million of leasehold improvement impairments, in Q1 2024, related to our Foster City campus. The impairments were recognized in selling, general and administrative expense.
20
A summary of restructuring liability activity during Q1 2025 is as follows:
| In millions | Employee Separation Costs (1) | Other Costs | Total | ||||||||||||||
Amount recorded in accrued liabilities as of December 29, 2024 | $ | $ | $ | ||||||||||||||
Additional expense recorded | |||||||||||||||||
Cash payments | ( | ( | ( | ||||||||||||||
Amount recorded in accrued liabilities as of March 30, 2025 | $ | $ | $ | ||||||||||||||
Estimated costs to still be incurred | $ | $ | $ | ||||||||||||||
_____________
(1)It is expected that substantially all of the employee separation related charges will be incurred and paid by the end of Q3 2025.
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 condensed consolidated balance sheets. The cash flows associated with such foreign exchange contracts are classified as cash flows from operating activities in the condensed 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 income, net, along with the re-measurement gain or loss on the foreign currency denominated assets or liabilities. As of March 30, 2025, 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 March 30, 2025 and December 29, 2024, the total notional amounts of outstanding forward contracts in place for these foreign currency purchases were $503 million and $477 million, respectively.
We 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 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 income, net. As of March 30, 2025, 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 March 30, 2025 and December 29, 2024, the total notional amounts of outstanding cash flow hedge contracts in place for these foreign currency purchases were $634 million and $621 million, respectively. We reclassified $6 million and $3 million to revenue in Q1 2025 and Q1 2024, respectively. As of March 30, 2025, the fair value of foreign currency forward contracts recorded in total assets and total liabilities was $11 million and $2 million, respectively. As of December 29, 2024, the fair value of foreign currency forward contracts was $27 million, recorded in total assets. Estimated gains reported in accumulated other comprehensive income expected to be reclassified into earnings within the next 12 months are $9 million as of March 30, 2025.
21
Indemnification Liability
| 7. LEGAL PROCEEDINGS | ||
Acquisition of GRAIL
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.
22
On September 3, 2024, the EU Court of Justice ruled in our favor, confirming that the European Commission had unlawfully asserted jurisdiction over our acquisition of GRAIL, and hence annulling the EU General Court’s judgment and the European Commission’s decisions accepting the referral of the GRAIL acquisition for EU merger review (the EU Court of Justice Judgment). The EU Court of Justice Judgment concludes these proceedings and is not subject to further appeals. In view of this judgment, on September 6, 2024, the European Commission issued a decision (the Withdrawal Decision) withdrawing all of its prior decisions, including (1) its July 22, 2021 decision opening an investigation of Illumina’s proposed acquisition of GRAIL, (2) its September 6, 2022 decision prohibiting Illumina’s acquisition of GRAIL, (3) its October 29, 2021 and October 28, 2022 decisions concerning interim measures, (4) the EC Divestment Decision, and (5) its July 12, 2023 decision fining Illumina €432 million and GRAIL for closing the acquisition before approval by the European Commission. Following the Withdrawal Decision, the EU General Court issued orders in the various judicial proceedings (the EU General Court Orders) finding that there was no longer any need to adjudicate. The Withdrawal Decision and the EU General Court Orders resolve all ongoing regulatory and judicial proceedings in the European Union. The European Commission has also been ordered to pay Illumina’s costs incurred in connection with the GRAIL-related proceedings before the EU Court of Justice and the EU General Court.
As a result of the European Commission withdrawing its previously imposed fine, we recognized a net gain of $481 million in Q3 2024. We recognized a gain of $489 million in operating expense, resulting from reversal of the accrued fine and related accrued interest, offset by a loss of $8 million, recognized in other income (expense), net, for the reversal of associated foreign currency fluctuations. The fine accrued interest at a rate of 5.5 % per annum while it was outstanding. 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.
On August 15, 2024, the U.S. Federal Trade Commission dismissed the previously disclosed administrative complaint in light of the completion of the Spin-Off.
SEC Inquiry Letter
In July 2023, the SEC requested documents and communications pertaining to an investigation they had initiated concerning GRAIL, its products, and its acquisition. In a “termination letter” on May 1, 2025, the SEC staff informed Illumina that it had concluded its investigation and did not intend to recommend any enforcement action by the SEC against Illumina.
Shareholder Derivative Complaints
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.
23
On February 26, 2024, a stockholder derivative complaint captioned City of Omaha Police and Firefighters Retirement System v. deSouza, et al., purportedly brought on behalf of Illumina, was filed in the Delaware Court of Chancery against certain current and former directors. On April 16, 2024, a stockholder derivative complaint captioned City of Roseville General Employees Retirement System, et al. v. deSouza, et al., purportedly brought on behalf of Illumina, was filed in the Delaware Court of Chancery against certain current and former directors and officers. On August 16, 2024, a stockholder derivative complaint captioned Thomas P. DiNapoli v. John Thompson et al., purportedly brought on behalf of Illumina, was filed in the Delaware Court of Chancery against certain current and former directors. We are named as a nominal defendant in the complaints. The lawsuits allege the named directors and officers breached their fiduciary duties by knowingly causing Illumina to unlawfully close the GRAIL acquisition. The stockholders previously made requests to inspect certain books and records under Delaware law, and they purport to base their complaint in part on documents obtained from Illumina in response to those requests. Before the filing of the complaint, the purported stockholders did not make a demand that our Board of Directors pursue the claim asserted therein. The complaints seek damages against the individual defendants, costs and expenses, including attorney fees and other equitable relief.
On March 26, 2024, the defendants filed a motion to dismiss the complaint in the lawsuit filed by City of Omaha Police and Firefighters Retirement System. The motion has not yet been briefed. On May 16, 2024, the defendants filed a motion to dismiss the complaint in the lawsuit filed by City of Roseville General Employees Retirement System, et al. The motion has not yet been briefed. On September 16, 2024, the defendants filed a motion to dismiss the complaint in the lawsuit filed by Thomas DiNapoli. On March 14, 2025, the parties filed a stipulation to dismiss the DiNapoli lawsuit and the court entered an order dismissing that action.
On December 23, 2024, a stockholder derivative complaint captioned The Pavers and Road Builders Benefit Funds v. deSouza, et al., purportedly brought on behalf of Illumina, was filed in the Delaware Court of Chancery against certain current and former directors and officers. Like the complaints described above, the lawsuits allege the named directors and officers breached their fiduciary duties by knowingly causing Illumina to unlawfully close the GRAIL acquisition. The stockholder previously made requests to inspect certain books and records under Delaware law and litigated a books and records action against the Company (described below), and it purports to base its complaint in part on documents obtained from Illumina in response to those requests and that litigation. Before the filing of the complaint, the purported stockholder did not make a demand that our Board of Directors pursue the claim asserted therein. The complaint seeks damages against the individual defendants and other equitable relief.
On January 21, 2025, the defendants filed a motion to dismiss the complaint in the lawsuit filed by The Pavers and Road Builders Benefit Funds. The motion has not yet been briefed.
On March 27, 2025, the parties in the Icahn Partners LP, et al. v. deSouza, et al., City of Omaha Police and Firefighters Retirement System v. deSouza, et al., City of Roseville General Employees Retirement System, et al. v. deSouza, et al. and The Pavers and Road Builders Benefit Funds v. deSouza, et al. Delaware shareholder derivative actions filed a stipulation to consolidate those actions, which is pending.
In light of the fact that these 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 litigations.
On February 21, 2024, a stockholder derivative complaint captioned Elaine Wang, et al. v. deSouza, et al., purportedly brought on behalf of the Company was filed in the United States District Court for the District of Delaware (District of Delaware) against certain current and former directors. The Company was named as a nominal defendant in the complaint. The lawsuit alleged that the named directors breached their fiduciary duties by knowingly causing the Company to unlawfully close the GRAIL acquisition. Before the filing of the complaint, the purported stockholder did not make a demand that our Board of Directors pursue the asserted claims therein. The complaint sought, among other things, restitution to the Company for the alleged damages caused by the named defendants.
24
On March 8, 2024, a stockholder derivative complaint captioned Michael Warner, et al. v. deSouza, et al., purportedly brought on behalf of Illumina was also filed in the United States District Court for the Southern District of California against certain current and former directors. We were named as a nominal defendant in the complaint. The lawsuit alleged that the named directors breached their fiduciary duties by knowingly causing us to unlawfully close the GRAIL acquisition. Before the filing of the complaint, the purported stockholder did not make a demand that our Board of Directors pursue the asserted claims therein. The complaint sought, among other things, restitution to Illumina for the alleged damages caused by the named defendants. On March 28, 2024, the parties submitted a Joint Motion to Transfer the lawsuit to the District of Delaware, which the Court granted on March 29, 2024, and the Court transferred the lawsuit to the District of Delaware on the same day.
Elaine Wang, et al. v. deSouza, et al. and Michael Warner, et al. v. deSouza, et al. were voluntarily dismissed on April 29, 2024, and May 1, 2024, respectively. On May 1, 2024, Michael Warner sent a litigation demand to our Board of Directors requesting that a civil action for monetary damages be brought by the Board of Directors on behalf of Illumina against officers and directors involved with the GRAIL acquisition. On July 30, 2024, the Board unanimously determined that it was in the best interest of the Company and its shareholders to defer a final decision on the demand given, among other things, the pending stockholder lawsuits described herein and the similarity of issues raised in the demand and those lawsuits. Our Board will monitor the stockholder lawsuits and revisit the demand as warranted as the lawsuits progress. On June 3, 2024, Elaine Wang made requests to inspect certain books and records under Delaware law and the Company sent a production of documents in response to that demand.
On August 21, 2024, an additional stockholder, Jane Davidson, sent a litigation demand to our Board of Directors requesting that a civil action for breaches of fiduciary duty, indemnification, contribution and other appropriate claims be brought by the Board of Directors on behalf of Illumina against officers and directors involved with the GRAIL acquisition. On October 29, 2024, the Board unanimously determined that it was in the best interest of the Company and its shareholders to defer a final decision on the demand given, among other things, the pending stockholder lawsuits described herein and the similarity of issues raised in the demand and those lawsuits. Our Board will monitor the stockholder lawsuits and revisit the demand as warranted as the lawsuits progress.
Securities Class Actions
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.
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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. On February 28, 2025, the defendants filed demurrers seeking dismissal of the litigation. On April 30, 2025, Plaintiffs filed their oppositions to the demurrers. 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.
DOJ Civil Investigative Demand
| 8. INCOME TAXES | ||
Our effective tax rate for Q1 2025 was 27.9 % compared to (15.3 )% in Q1 2024. The variance from the U.S. federal statutory tax rate of 21% in Q1 2025 was primarily because of the $10 million income tax expense impact of capitalizing research and development expenses for tax purposes. The income tax rate in Q1 2025 was 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.
As of March 30, 2025 and December 29, 2024, prepaid income taxes, included within prepaid expenses and other current assets on the condensed consolidated balance sheets, were $50 million and $74 million, respectively.
| 9. SEGMENT INFORMATION | ||
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 following tables present selected financial information with respect to segments for the periods presented:
| In millions | Q1 2025 | Q1 2024 | |||||||||
Core Illumina: | |||||||||||
Revenue (1) | $ | $ | |||||||||
Less: | |||||||||||
| Cost of revenue | |||||||||||
| Research and development | |||||||||||
| Selling and marketing | |||||||||||
| General and administrative | |||||||||||
| Core Illumina income from operations | |||||||||||
GRAIL: | |||||||||||
Revenue | |||||||||||
Total operating expenses (2) | |||||||||||
Consolidated other income, net | |||||||||||
Consolidated provision for income taxes | |||||||||||
Intersegment eliminations | |||||||||||
Consolidated net income (loss) | $ | $ | ( | ||||||||
_____________
(1)Core Illumina revenue included intercompany revenue of $7 million in Q1 2024.
(2)GRAIL operating expenses are inclusive of cost of revenue, research and development, selling and marketing, and general and administrative for the comparative period prior to the Spin-Off on June 24, 2024.
| In millions | Q1 2025 | Q1 2024 | |||||||||
| Depreciation and amortization: | |||||||||||
| Core Illumina | $ | $ | |||||||||
| GRAIL | |||||||||||
| Consolidated depreciation and amortization | $ | $ | |||||||||
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| MANAGEMENT’S DISCUSSION & ANALYSIS | ||
•Management’s Overview and Outlook. High level discussion of our operating results and significant known trends that affect our business.
•Results of Operations. Detailed discussion of our revenues and expenses.
•Liquidity and Capital Resources. Discussion of key aspects of our condensed consolidated statements of cash flows, changes in our financial position, and our financial commitments.
•Critical Accounting Policies and Estimates. Discussion of significant changes since our most recent Annual Report on Form 10-K that we believe are important to understanding the assumptions and judgments underlying our condensed consolidated financial statements.
•Recent Accounting Pronouncements. Summary of recent accounting pronouncements applicable to our condensed consolidated financial statements.
•Quantitative and Qualitative Disclosure About Market Risk. Discussion of our financial instruments’ exposure to market risk.
Our discussion of our results of operations, financial condition, and cash flow for Q1 2024 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our filing of Form 10-Q for the fiscal quarter ended March 31, 2024.
This MD&A discussion contains forward-looking statements that involve risks and uncertainties. See Consideration Regarding Forward-Looking Statements preceding the Condensed Consolidated Financial Statements section of this report for additional factors relating to such statements. This MD&A should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this report and our Annual Report on Form 10-K for the fiscal year ended December 29, 2024. Operating results are not necessarily indicative of results that may occur in future periods.
MANAGEMENT’S OVERVIEW AND OUTLOOK
This overview and outlook provide a high-level discussion of our operating results and significant known trends that affect our business. We believe an understanding of these trends is important to understanding our financial results for the periods being reported herein as well as our future financial performance. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere.
About Illumina
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.
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On June 24, 2024, we completed the Spin-Off of GRAIL into a new public 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 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 GRAIL’s 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.
We have one reportable segment, Core Illumina, as of March 30, 2025. Prior to the GRAIL Spin-Off, our reportable segments included both Core Illumina and GRAIL. See note 9. Segment Information for details on our 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 condensed consolidated financial statements and the notes thereto within the Condensed Consolidated Financial Statements section of this report, and the other transactions, events, and trends discussed in Risk Factors within the Other Key Information section of this report.
Financial Overview
Macroeconomic factors such as tariffs, inflation, exchange rate fluctuations and concerns about an economic downturn, competitive challenges in our China region, the sanctions imposed on Russia as a result of the armed conflict between Russia and Ukraine, and reductions in the U.S. government’s funding of the NIH continue to impact 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. In Q1 2025, we were added to the unreliable entities list by regulatory authorities in China and received notice that we are not permitted to export sequencing instruments into China. See the risk factor “Regulatory Authorities in China have added Illumina to the List of Unreliable Entities” in Risk Factors for additional information. 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.
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. We further implemented, in Q1 2025, an incremental $100 million cost reduction program for 2025, including optimizing stock-based compensation and non-labor spending and accelerating certain productivity measures, as well as workforce reductions, to help mitigate the expected impact of a reduction in revenue and related operating income from our Greater China business and the uncertainty in the U.S. government’s funding of the NIH.
In April 2025, the U.S. government and several other countries enacted tariffs on the cross-border movement of goods. Under the current tariff environment, the estimated cost impact of these tariffs to us is approximately $85 million. The largest part of this relates to importation from our manufacturing facility in Singapore. The remainder is a mix of importation of parts and sub-assemblies to our manufacturing operations in the United States and importation into China. We are taking several actions to fully mitigate the impact of these tariffs, expecting to partially mitigate the impact in 2025, through supply chain optimization, cost measures, and pricing actions. Based on the current tariff environment, our aim is to more fully mitigate the impact in 2026.
Financial highlights for Q1 2025 included the following:
•Revenue decreased 3% in Q1 2025 to $1,041 million compared to $1,076 million in Q1 2024 primarily due to a decrease in service and other revenue driven by a decrease in GRAIL service and other revenue, as a result of the Spin-Off in Q2 2024, and a decrease in Core Illumina service and other revenue, primarily due to decreased revenue from our strategic partnerships. The decrease was also driven by slight decreases in Core Illumina sequencing consumables revenue and instruments revenue.
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•Gross margin was 65.6% in Q1 2025 compared to 62.0% in Q1 2024. The increase in gross margin was driven by the Spin-Off of GRAIL in Q2 2024. Core Illumina gross margin remained relatively flat in Q1 2025 primarily due to a favorable impact from the execution of our operational excellence initiatives that continue to deliver cost savings and improve productivity and lower strategic partnership revenue that is lower margin. This was offset by lower product margins, primarily due to reduced pricing, and an increase in field service costs. 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; tariffs; and product support obligations.
•Income from operations was $164 million in Q1 2025 compared to loss from operations of $(111) million in Q1 2024. The change was primarily due to a decrease in operating expense of $259 million and an increase in gross profit of $16 million. The decrease in operating expense was primarily driven by a decrease in GRAIL operating expense of $205 million given the Spin-Off in Q2 2024, as well as a favorable impact from our GRAIL contingent consideration liability of $27 million, a decrease in Core Illumina acquisition-related costs (legal and transaction expenses) of $27 million, primarily due to the GRAIL Spin-Off, and a decrease in Core Illumina restructuring charges of $17 million, primarily due to lease impairments recognized in Q1 2024. We continue to focus on our operational excellence and cost reduction initiatives to accelerate growth and expand operating margins.
•Our effective tax rate was 27.9% in Q1 2025 compared to (15.3)% in Q1 2024. The variance from the U.S. federal statutory tax rate of 21% was primarily because of the income tax expense impact of research and development expense capitalization for tax purposes. 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 Q1 2025 with cash, cash equivalents, and short-term investments totaling $1,237 million, of which approximately $432 million was held by our foreign subsidiaries.
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RESULTS OF OPERATIONS
To enhance comparability, the following table sets forth unaudited condensed consolidated statement of operations data for the specified reporting periods, stated as a percentage of total revenue.(1)
| Q1 2025 | Q1 2024 | ||||||||||
| Revenue: | |||||||||||
| Product revenue | 84.5 | % | 81.4 | % | |||||||
| Service and other revenue | 15.5 | 18.6 | |||||||||
| Total revenue | 100.0 | 100.0 | |||||||||
| Cost of revenue: | |||||||||||
| Cost of product revenue | 24.3 | 23.6 | |||||||||
| Cost of service and other revenue | 8.5 | 9.9 | |||||||||
| Amortization of acquired intangible assets | 1.6 | 4.5 | |||||||||
| Total cost of revenue | 34.4 | 38.0 | |||||||||
| Gross profit | 65.6 | 62.0 | |||||||||
| Operating expense: | |||||||||||
| Research and development | 24.2 | 31.5 | |||||||||
| Selling, general and administrative | 25.6 | 40.8 | |||||||||
| Total operating expense | 49.8 | 72.3 | |||||||||
Income (loss) from operations | 15.8 | (10.3) | |||||||||
| Other income (expense): | |||||||||||
| Interest income | 1.1 | 1.1 | |||||||||
| Interest expense | (2.4) | (1.7) | |||||||||
Other income, net | 3.0 | 0.8 | |||||||||
Total other income, net | 1.7 | 0.2 | |||||||||
| Income (loss) before income taxes | 17.5 | (10.1) | |||||||||
| Provision for income taxes | 4.9 | 1.6 | |||||||||
| Net income (loss) | 12.6 | % | (11.7) | % | |||||||
_____________
(1)Percentages may not recalculate due to rounding.
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Revenue
| Dollars in millions | Q1 2025 | Q1 2024 | Change | % Change | |||||||||||||||||||
| Core Illumina: | |||||||||||||||||||||||
| Consumables | $ | 768 | $ | 769 | $ | (1) | — | % | |||||||||||||||
| Instruments | 112 | 114 | (2) | (2) | |||||||||||||||||||
| Total product revenue | 880 | 883 | (3) | — | |||||||||||||||||||
| Service and other revenue | 161 | 173 | (12) | (7) | |||||||||||||||||||
| Total Core Illumina revenue | 1,041 | 1,056 | (15) | (1) | |||||||||||||||||||
| GRAIL: | |||||||||||||||||||||||
| Service and other revenue | — | 27 | (27) | (100) | |||||||||||||||||||
| Eliminations | — | (7) | 7 | (100) | |||||||||||||||||||
| Total consolidated revenue | $ | 1,041 | $ | 1,076 | $ | (35) | (3) | % | |||||||||||||||
The slight decrease in Core Illumina consumables revenue in Q1 2025 was primarily due to an increase in sequencing consumables revenue, driven primarily by an increase in NovaSeq X consumables, partially offset by decreases in consumables across our other high-throughput instruments, as customers continue to transition to NovaSeq X, and across our mid-throughput instruments. This increase was more than offset by a decrease in intercompany consumables revenue recognized in Q1 2024 prior to the Spin-Off of GRAIL in Q2 2024. The slight decrease in Core Illumina instruments revenue in Q1 2025 was primarily due to increases in MiSeq i100 Series shipments, which launched in Q4 2024, and NovaSeq X shipments, as customers continue to transition. This increase was more than offset by fewer shipments of our other high- and mid-throughput instruments, as capital and cash flow constraints continue to impact our customer’s purchasing behavior. Core Illumina service and other revenue decreased in Q1 2025 primarily due to decreased revenue from our strategic partnerships.
The decrease in GRAIL revenue in Q1 2025 was due to the Spin-Off in Q2 2024.
Gross Margin
| Dollars in millions | Q1 2025 | Q1 2024 | Change | % Change | |||||||||||||||||||
| Gross profit (loss): | |||||||||||||||||||||||
| Core Illumina | $ | 683 | $ | 693 | $ | (10) | (1) | % | |||||||||||||||
| GRAIL | — | (22) | 22 | (100) | |||||||||||||||||||
| Eliminations | — | (4) | 4 | (100) | |||||||||||||||||||
| Consolidated gross profit | $ | 683 | $ | 667 | $ | 16 | 2 | % | |||||||||||||||
| Gross margin: | |||||||||||||||||||||||
| Core Illumina | 65.6 | % | 65.7 | % | |||||||||||||||||||
| GRAIL | * | * | |||||||||||||||||||||
| Consolidated gross margin | 65.6 | % | 62.0 | % | |||||||||||||||||||
________________
*Not meaningful.
Core Illumina gross margin was relatively flat in Q1 2025 primarily due to a favorable impact from the execution of our operational excellence initiatives, that continue to deliver cost savings and improve productivity, and lower strategic partnership revenue, that is lower margin, offset by lower product margins, primarily due to reduced pricing, and an increase in field service costs.
The decrease in GRAIL gross loss in Q1 2025 was due to the Spin-Off in Q2 2024.
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Operating Expense
| Dollars in millions | Q1 2025 | Q1 2024 | Change | % Change | |||||||||||||||||||
| Research and development: | |||||||||||||||||||||||
| Core Illumina | $ | 252 | $ | 241 | $ | 11 | 5 | % | |||||||||||||||
| GRAIL | — | 101 | (101) | (100) | |||||||||||||||||||
| Eliminations | — | (3) | 3 | (100) | |||||||||||||||||||
| Consolidated research and development | 252 | 339 | (87) | (26) | |||||||||||||||||||
| Selling, general and administrative: | |||||||||||||||||||||||
| Core Illumina | 267 | 336 | (69) | (21) | |||||||||||||||||||
| GRAIL | — | 104 | (104) | (100) | |||||||||||||||||||
| Eliminations | — | (1) | 1 | (100) | |||||||||||||||||||
| Consolidated selling, general and administrative | 267 | 439 | (172) | (39) | |||||||||||||||||||
| Total consolidated operating expense | $ | 519 | $ | 778 | $ | (259) | (33) | % | |||||||||||||||
Core Illumina R&D expense increased by $11 million, or 5%, in Q1 2025 primarily due to an increase in employee-separation related restructuring charges of $10 million, as we continue to focus on our cost reduction initiatives.
Core Illumina SG&A expense decreased by $69 million, or 21%, in Q1 2025 primarily due to a favorable impact from our contingent consideration liability related to the GRAIL CVRs of $27 million (recognized a gain of $11 million in Q1 2025 and a loss of $16 million in Q1 2024), a decrease in acquisition-related costs of $27 million, primarily for legal and transaction expenses due to the Spin-Off of GRAIL in Q2 2024, and a decrease in restructuring charges of $17 million, primarily due to the lease and other asset impairments recognized in Q1 2024 on two of our properties.
The decrease in GRAIL R&D and SG&A expense in Q1 2025 was due to the Spin-Off in Q2 2024.
Other Income (Expense)
| Dollars in millions | Q1 2025 | Q1 2024 | Change | % Change | |||||||||||||||||||
| Interest income | $ | 11 | $ | 12 | $ | (1) | (8) | % | |||||||||||||||
| Interest expense | (25) | (18) | (7) | 39 | |||||||||||||||||||
Other income, net | 32 | 8 | 24 | 300 | |||||||||||||||||||
Total other income, net (1) | $ | 18 | $ | 2 | $ | 16 | 800 | % | |||||||||||||||
_____________
(1)Total other income, net in Q1 2024 primarily relates to the Core Illumina segment.
Interest income in Q1 2025 was relatively flat and consisted primarily of interest on our money market funds. Interest expense consisted primarily of interest on our outstanding term debt and increased in Q1 2025 due to the issuance of our 2026 Term Notes in Q3 2024. Other income, net increased in Q1 2025 primarily due to an increase in net gains recognized on our strategic investments, primarily related to marketable equity securities, of $27 million.
Provision for Income Taxes
| Dollars in millions | Q1 2025 | Q1 2024 | Change | % Change | |||||||||||||||||||
| Income (loss) before income taxes | $ | 182 | $ | (109) | $ | 291 | (267) | % | |||||||||||||||
| Provision for income taxes | 51 | 17 | 34 | 200 | |||||||||||||||||||
| Net income (loss) | $ | 131 | $ | (126) | $ | 257 | (204) | % | |||||||||||||||
| Effective tax rate | 27.9 | % | (15.3) | % | |||||||||||||||||||
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Our effective tax rate was 27.9% in Q1 2025 compared to (15.3)% in Q1 2024. The variance from the U.S. federal statutory tax rate of 21% for Q1 2025 was primarily because of the $10 million income tax expense impact of capitalizing research and development expenses for tax purposes. The income tax rate in Q1 2025 was 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 Q1 2024, the variance from the U.S. federal statutory tax rate of 21% was primarily because of the $21 million income tax expense impact of capitalizing research and development expenses for tax purposes, and the $18 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. The income tax expense in Q1 2024 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. For Q1 2024, we determined the provision for income taxes utilizing the year-to-date effective tax rate method instead of the estimated annual effective tax rate method.
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” described in “Risk Factors” within the Business & Market Information section of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024.
LIQUIDITY AND CAPITAL RESOURCES
As of March 30, 2025, we had $1,113 million in cash and cash equivalents, of which $432 million was held by our foreign subsidiaries. Cash and cash equivalents decreased by $14 million from December 29, 2024 due 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. Our ability to generate cash from operations, supplemented with the issuance of debt and/or liquidation of our short-term investments, provides us with the financial flexibility we need to meet operating, investing, and financing needs. As of March 30, 2025, we had $124 million in short-term investments, comprised of marketable equity securities.
In September 2024, we issued $500 million aggregate principal amount of 2026 Term Notes, which mature on September 9, 2026, and accrue interest at a rate of 4.650% per annum, payable semi-annually in March and September of each year. 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 Notes, which mature on December 12, 2025, and the 2027 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 Term Notes, at our option, at any time prior to maturity.
In January 2023, we entered into the Revolving Credit Agreement, which provides us with a $750 million senior unsecured five year revolving credit facility, including a $40 million sublimit for swingline borrowings and a $50 million sublimit for letters of credit. The credit facility matures, and all amounts outstanding become due and payable in full, on January 4, 2028, subject to two one-year extensions at our option and consent of the extending lenders and certain other conditions. As of March 30, 2025, there were no outstanding borrowings.
As of March 30, 2025, the fair value of our contingent consideration liability related to GRAIL was $61 million, of which $59 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 Q1 2025, we paid $360,000 in aggregate Covered Revenue Payments related to Covered Revenues for the period Q4 2024 of $38 million.
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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 $1.2 billion of our outstanding common stock remained available as of March 30, 2025. We intend to repurchase incremental shares over the course of 2025.
We had $3 million (plus recallable distributions of approximately $10 million), $42 million, and $47 million, respectively, remaining in our capital commitments to three venture capital investment funds as of March 30, 2025 that are callable through April 2026, July 2029, and December 2034, respectively.
We anticipate that our current cash, cash equivalents, and short-term investments, together with cash provided by operating activities and available borrowing capacity under the Revolving Credit Facility, are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include the planned costs to operate our business, including amounts required to fund working capital and capital expenditures. Our primary short-term needs for capital, which are subject to change, may include:
•support of commercialization efforts related to our current and future products;
•acquisitions of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities;
•the continued advancement of research and development efforts;
•potential strategic acquisitions and investments;
•repayment of debt obligations;
•repurchases of our outstanding common stock; and
•the evolving needs of our facilities, including costs of leasing and building out facilities.
We expect that our revenue and results of operations, as well as the status of each of our new product development programs, will significantly impact our cash management decisions. Our future capital requirements and the adequacy of our available funds will depend on many factors, including:
•our ability to successfully commercialize and further develop our technologies and create innovative products in our markets;
•scientific progress in our research and development programs and the magnitude of those programs;
•competing technological and market developments; and
•the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings.
Cash Flow Summary
| In millions | Q1 2025 | Q1 2024 | |||||||||
| Net cash provided by operating activities | $ | 240 | $ | 77 | |||||||
| Net cash used in investing activities | (63) | (48) | |||||||||
| Net cash (used in) provided by financing activities | (195) | 35 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 4 | (4) | |||||||||
| Net (decrease) increase in cash and cash equivalents | $ | (14) | $ | 60 | |||||||
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Operating Activities
Net cash provided by operating activities of $240 million in Q1 2025 consisted of net income of $131 million, plus net adjustments of $113 million, less net changes in operating assets and liabilities of $4 million. The primary adjustments to net income included share-based compensation expense of $73 million, depreciation and amortization expense of $69 million, and deferred income taxes of $16 million, offset by net gains on strategic investments of $32 million and change in fair value of contingent consideration liabilities of $11 million. Cash flow impact from changes in net operating assets and liabilities were primarily driven by decreases in accrued liabilities, accounts receivable, and accounts payable, partially offset by an increase in other long-term liabilities.
Investing Activities
Net cash used in investing activities was $63 million in Q1 2025. We primarily invested $32 million in capital expenditures, primarily associated with investments in facilities, and purchased strategic investments of $24 million.
Financing Activities
Net cash used in financing activities was $195 million in Q1 2025. We used $200 million to repurchase our common stock and $22 million to pay taxes related to net share settlement of equity awards. We received proceeds from the sale of shares under our employee stock purchase plan of $27 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In preparing our condensed consolidated financial statements, we make estimates, assumptions and judgments that can have a significant impact on our net revenue, operating income (loss), and net income (loss), as well as on the value of certain assets and liabilities on our balance sheet. We believe that the estimates, assumptions and judgments involved in the accounting policies described in “Critical Accounting Policies and Estimates” within the Management’s Discussion & Analysis section of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 have the greatest potential impact on our financial statements, so we consider them to be our critical accounting policies and estimates. Although recently imposed tariffs, reductions in the U.S. government’s funding of the National Institutes of Health, our inclusion on the unreliable entities list by regulatory authorities in China and the prohibition of our export of sequencing instruments into China, as well as macroeconomic factors such as inflation, exchange rate fluctuations, and concerns about an economic downturn present additional uncertainty, we continue to use the best information available to inform our critical accounting estimates. There were no material changes to our critical accounting policies and estimates during Q1 2025. For Q1 2024, we determined the provision for income taxes utilizing the year-to-date effective tax rate method instead of the estimated annual effective tax rate method.
RECENT ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our condensed consolidated financial statements, see note 1. Organization and Significant Accounting Policies within the Condensed Consolidated Financial Statements section of this report, which is incorporated herein by reference.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There were no substantial changes to our market risks in Q1 2025, when compared to the disclosures in “Quantitative and Qualitative Disclosures about Market Risk” within the Management’s Discussion & Analysis section of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024.
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| OTHER KEY INFORMATION | ||
We design our internal controls to provide reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported in conformity with U.S. generally accepted accounting principles. We also maintain internal controls and procedures to ensure that we comply with applicable laws and our established financial policies.
During the first quarter of 2025, we continued to monitor and evaluate the design and operating effectiveness of key controls. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that materially affected or are reasonably likely to materially affect internal control over financial reporting.
Based on management’s evaluation (under the supervision and with the participation of our chief executive officer (CEO) and chief financial officer (CFO)), as of the end of the period covered by this report, our CEO and CFO concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
LEGAL PROCEEDINGS
See discussion of legal proceedings in note 7. Legal Proceedings in the Condensed Consolidated Financial Statements section of this report, which is incorporated herein by reference.
RISK FACTORS
Our business is subject to various risks, including those described in “Risk Factors” within the Business & Market Information section of our Annual Report on Form 10-K for the fiscal year ended December 29, 2024, which we strongly encourage you to review. In addition to the risk factors disclosed in our Form 10-K, the issues raised in the following risk factor could adversely affect our operating results and stock price:
Regulatory authorities in China have added Illumina to the 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, regulatory authorities in China announced that Illumina had been added to the 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. On March 4, 2025, we received a notice from regulatory authorities in China that Illumina is no longer permitted to export sequencing instruments into China.
Regulatory authorities in China have not announced what other 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 regulatory authorities in China. 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.
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SHARE REPURCHASES AND SALES
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. Shares repurchased in open market transactions pursuant to this program during Q1 2025 were as follows:
| In thousands, except price per share | Total Number of Shares Purchased | Average Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | |||||||||||||||||||
| December 30, 2024 - January 26, 2025 | 226 | $ | 136.84 | 226 | $ | 1,353,529 | |||||||||||||||||
| January 27, 2025 - February 23, 2025 | 1,417 | $ | 113.52 | 1,417 | $ | 1,192,698 | |||||||||||||||||
| February 24, 2025 - March 30, 2025 | 85 | $ | 96.96 | 85 | $ | 1,184,405 | |||||||||||||||||
| Total | 1,728 | $ | 115.74 | 1,728 | $ | 1,184,405 | |||||||||||||||||
(1)Average price paid per share excludes the excise tax on share repurchases imposed as part of the Inflation Reduction Act of 2022.
Unregistered Sales of Equity Securities
None during the quarterly period ended March 30, 2025.
ADOPTIONS, MODIFICATIONS OR TERMINATIONS OF TRADING PLANS
During the quarterly period ended March 30, 2025, none of the Company’s directors or officers adopted terminated
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EXHIBITS
| Incorporated by Reference | ||||||||||||||||||||||||||||||||||||||
| Exhibit Number | Exhibit Description | Form | File Number | Exhibit | Filing Date | Filed Herewith | ||||||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||||||||
| 32.1 | X | |||||||||||||||||||||||||||||||||||||
| 32.2 | X | |||||||||||||||||||||||||||||||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | X | ||||||||||||||||||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File - formatted in Inline XBRL and included as Exhibit 101 | X | ||||||||||||||||||||||||||||||||||||
__________________________________
+ Management contract or corporate plan or arrangement
* Portions of this exhibit omitted pursuant to Item 601(b)(2) and Item 601(b)(10) of Regulation S-K, as applicable. The Company agrees to furnish a supplemental and unredacted copy of any omitted schedule to the Securities and Exchange Commission upon its request.
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FORM 10-Q CROSS-REFERENCE INDEX
| Page | |||||
| PART I. FINANCIAL INFORMATION | |||||
| PART II. OTHER INFORMATION | |||||
| Item 3. Defaults Upon Senior Securities | None | ||||
| Item 4. Mine Safety Disclosures | Not Applicable | ||||
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SIGNATURES
Pursuant to the requirements 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.
| ILLUMINA, INC. (registrant) | |||||||||||
| Date: | May 8, 2025 | ||||||||||
| By: | /s/ ANKUR DHINGRA | ||||||||||
| Name: | Ankur Dhingra | ||||||||||
| Title: | Chief Financial Officer | ||||||||||
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