10-Q 1 ilmn-20240331.htm 10-Q ilmn-20240331
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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 31, 2024
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 
ilmnlogoa191.jpg
Illumina, Inc.
(Exact name of registrant as specified in its charter)
Delaware33-0804655
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
5200 Illumina Way, San Diego, CA 92122
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueILMNThe Nasdaq Stock Market LLC

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.
Large accelerated filerþAccelerated 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 April 26, 2024, there were 159.3 million shares of the registrant’s common stock outstanding.


ILLUMINA, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED MARCH 31, 2024
TABLE OF CONTENTS

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.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTSPAGE
MANAGEMENT’S DISCUSSION & ANALYSIS
OTHER KEY INFORMATION
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 expectations regarding the pending divestiture of GRAIL, LLC (f/k/a GRAIL, Inc.) (GRAIL);
the transitional measures imposed by the European Commission in connection with our acquisition of GRAIL, the duration and impact of such measures on Illumina and GRAIL, and the appointment of a monitoring trustee to monitor our compliance with such measures;
the prohibition decision adopted by the European Commission on September 6, 2022 (the Prohibition Decision), informing us of its decision to prohibit our acquisition of GRAIL, and the decision adopted by the European Commission on October 12, 2023, requiring us to (among other things) divest GRAIL and imposing transitional measures (the EC Divestment Decision);
any future order issued by the Federal Trade Commission (FTC) requiring us to, among other things, divest GRAIL and to hold GRAIL separate through the completion of the divestiture;
the Article 14(2)(b) fine imposed by the European Commission on July 12, 2023; 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;
3

the impact of recently launched or pre-announced products and services on existing products and services;
risks and uncertainties regarding legal and regulatory proceedings, including the failure to obtain or delays in obtaining the required regulatory approvals or clearances including for the divestiture of GRAIL and other actions that have been or may be taken or pursued by the European Commission, the FTC and/or other governmental or regulatory authorities in connection with such acquisition;
the burdensome transitional measures and hold separate requirements imposed by the European Commission, the duration and impact of these requirements on Illumina and GRAIL (which may include additional costs or liabilities, loss of revenue and other adverse effects on our business, financial condition and results of operations), the administration of these requirements by an appointed monitoring trustee and the risk that the European Commission could impose or seek to impose additional fines and other penalties for alleged noncompliance with these requirements;
the EC Divestment Decision and any future FTC order, which may each adversely affect us and our business, including current plans and operations, financial condition and results of operations, each requiring us to divest GRAIL and to hold GRAIL separate through the completion of the divestiture, the terms and conditions thereof (including with respect to a divestiture of GRAIL), and the timing of and the risks, costs and business disruptions (including the diversion of management’s attention) associated with such divestiture and/or any related appeals, the implementation thereof or any associated legal or regulatory proceedings or obligations, including any related appeals, and other uncertainties related to our compliance (or ability to comply) with each of the EC Divestment Decision and any future FTC order, which may adversely affect us and our business, including current plans and operations, financial condition and results of operations;
risks associated with contracts or other agreements containing provisions that might be implicated by any divestiture of GRAIL or other aspects of the EC Divestment Decision, 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 and the risk that we will be unable to fully discharge such obligations in connection with a divestiture of GRAIL, that a divestiture will result in a change in obligor on the CVRs and/or of other consequences related thereto, which may adversely affect us and our business and/or the market value of the CVRs;
our ability to satisfy the necessary conditions to consummate the divestiture of GRAIL on a timely basis or at all, due to the requirements under the EC Divestment Decision;
the risks and costs associated with the divestiture of GRAIL;
the risk of adverse effects resulting from additional potential litigation associated with the acquisition of GRAIL, such as additional legal, financial advisory, regulatory and other professional services fees;
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 that determine our 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, 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 31, 2023, the “Risk Factors” section below, or in information disclosed in public conference calls, the date and time of which are released beforehand.
4

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.
5

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ILLUMINA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
March 31,
2024
December 31,
2023
 (Unaudited) 
ASSETS
Current assets:
Cash and cash equivalents$1,108 $1,048 
Accounts receivable, net635 734 
Inventory, net584 587 
Prepaid expenses and other current assets256 240 
Total current assets2,583 2,609 
Property and equipment, net964 1,007 
Operating lease right-of-use assets550 544 
Goodwill2,545 2,545 
Intangible assets, net2,940 2,993 
Other assets458 413 
Total assets$10,040 $10,111 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$201 $245 
Accrued liabilities1,273 1,325 
Total current liabilities1,474 1,570 
Operating lease liabilities700 687 
Term notes1,490 1,489 
Other long-term liabilities642 620 
Stockholders’ equity:
Common stock2 2 
Additional paid-in capital9,658 9,555 
Accumulated other comprehensive income (loss)12 (1)
Accumulated deficit
(145)(19)
Treasury stock, at cost(3,793)(3,792)
Total stockholders’ equity5,734 5,745 
Total liabilities and stockholders’ equity$10,040 $10,111 

See accompanying notes to condensed consolidated financial statements.

6

ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per share amounts)
 
 Three Months Ended
 March 31,
2024
April 2,
2023
Revenue:
Product revenue$876 $922 
Service and other revenue200 165 
Total revenue1,076 1,087 
Cost of revenue:
Cost of product revenue255 285 
Cost of service and other revenue106 99 
Amortization of acquired intangible assets48 48 
Total cost of revenue409 432 
Gross profit667 655 
Operating expense:
Research and development339 341 
Selling, general and administrative439 378 
Total operating expense778 719 
Loss from operations(111)(64)
Other income (expense):
Interest income12 17 
Interest expense(18)(20)
Other income (expense), net8 (11)
Total other income (expense), net2 (14)
Loss before income taxes(109)(78)
Provision (benefit) for income taxes17 (81)
Net (loss) income$(126)$3 
(Loss) earnings per share:
Basic$(0.79)$0.02 
Diluted$(0.79)$0.02 
Shares used in computing (loss) earnings per share:
Basic 159 158 
Diluted159 158 

See accompanying notes to condensed consolidated financial statements.

7

ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In millions)
 
 Three Months Ended
 March 31,
2024
April 2,
2023
Net (loss) income$(126)$3 
Unrealized gain (loss) on cash flow hedges, net of deferred tax
13 (4)
Total comprehensive loss$(113)$(1)

See accompanying notes to condensed consolidated financial statements.

8

ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In millions)
AdditionalAccumulated OtherRetainedTotal
 Common StockPaid-InComprehensive
Earnings
Treasury StockStockholders’
 SharesAmountCapital
Income (Loss)
(Accumulated Deficit)
SharesAmountEquity
Balance as of January 1, 2023198 $2 $9,207 $3 $1,142 (40)$(3,755)$6,599 
Net income— — — — 3 — — 3 
Unrealized loss on cash flow hedges, net of deferred tax— — — (4)— — — (4)
Issuance of common stock, net of repurchases— — 37 — — — (9)28 
Share-based compensation— — 67 — — — — 67 
Balance as of April 2, 2023198 2 9,311 (1)1,145 (40)(3,764)6,693 
Net loss— — — — (234)— — (234)
Unrealized gain on cash flow hedges, net of deferred tax— — — 13 — — — 13 
Issuance of common stock, net of repurchases— —  — — — (3)(3)
Share-based compensation— — 77 — — — — 77 
Reclassification of liability-classified awards— — 9 — — — — 9 
Balance as of July 2, 2023198 2 9,397 12 911 (40)(3,767)6,555 
Net loss— — — — (754)— — (754)
Unrealized gain on cash flow hedges, net of deferred tax— — — 9 — — — 9 
Issuance of common stock, net of repurchases— — 30 — — — (2)28 
Share-based compensation— — 60 — — — — 60 
Balance as of October 1, 2023198 2 9,487 21 157 (40)(3,769)5,898 
Net loss— — — — (176)— — (176)
Unrealized loss on cash flow hedges, net of deferred tax— — — (22)— — — (22)
Issuance of common stock, net of repurchases1 — (3)— — — (23)(26)
Share-based compensation— — 71 — — — — 71 
Balance as of December 31, 2023199 $2 $9,555 $(1)$(19)(40)$(3,792)$5,745 

See accompanying notes to condensed consolidated financial statements.









9

ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(In millions)
AdditionalAccumulated Other

Total
 Common StockPaid-InComprehensive
Accumulated
Treasury StockStockholders’
 SharesAmountCapital
(Loss) Income
Deficit
SharesAmountEquity
Balance as of December 31, 2023199 $2 $9,555 $(1)$(19)(40)$(3,792)$5,745 
Net loss    (126)  (126)
Unrealized gain on cash flow hedges, net of deferred tax   13    13 
Issuance of common stock, net of repurchases  36    (1)35 
Share-based compensation  67     67 
Balance as of March 31, 2024199 $2 $9,658 $12 $(145)(40)$(3,793)$5,734 

See accompanying notes to condensed consolidated financial statements.
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ILLUMINA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 Three Months Ended
 March 31,
2024
April 2,
2023
Cash flows from operating activities:
Net (loss) income$(126)$3 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation expense59 57 
Amortization of intangible assets49 50 
Share-based compensation expense96 93 
Deferred income taxes(24)(17)
Property and equipment and right-of-use asset impairment
32  
Net (gains) losses on strategic investments
(5)16 
Gain on Helix contingent value right
(3)(3)
Change in fair value of contingent consideration liabilities16 (1)
Other9 7 
Changes in operating assets and liabilities:
Accounts receivable90 1 
Inventory4 (18)
Prepaid expenses and other current assets(23)(17)
Operating lease right-of-use assets and liabilities, net(7)(5)
Other assets(6)2 
Accounts payable(37)(46)
Accrued liabilities(53)(123)
Other long-term liabilities6 11 
Net cash provided by operating activities77 10 
Cash flows from investing activities:
Purchases of property and equipment(36)(52)
Purchases of strategic investments(12)(3)
Cash paid for intangible asset (1)
Net cash used in investing activities(48)(56)
Cash flows from financing activities:
Debt issuance costs paid for credit facility (1)
Payments on financing obligations
 (500)
Taxes paid related to net share settlement of equity awards(1)(9)
Proceeds from issuance of common stock36 37 
Net cash provided by (used in) financing activities35 (473)
Effect of exchange rate changes on cash and cash equivalents(4)2 
Net increase (decrease) in cash and cash equivalents60 (517)
Cash and cash equivalents at beginning of period1,048 2,011 
Cash and cash equivalents at end of period$1,108 $1,494 
    

See accompanying notes to condensed consolidated financial statements.
11

ILLUMINA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Unless the context requires otherwise, references in this report toIllumina,” the “Company,” “we,” “us,” and “our” refer to Illumina, Inc. and its consolidated subsidiaries.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Overview
We are a provider of sequencing- and array-based solutions, serving customers in the research, clinical and applied markets. Our products are used for applications in the life sciences, oncology, reproductive health, agriculture and other emerging segments. Our customers include leading genomic research centers, academic institutions, government laboratories, and hospitals, as well as pharmaceutical, biotechnology, commercial molecular diagnostic laboratories, and consumer genomics companies.
On August 18, 2021, we acquired GRAIL, a healthcare company focused on early detection of multiple cancers. The acquisition is subject to ongoing legal proceedings, and, currently, GRAIL must be held and operated separately and independently from Illumina pursuant to the transitional measures ordered by the European Commission in the EC Divestment Decision, following the prohibition of our acquisition of GRAIL on September 6, 2022. On December 17, 2023, we announced that we will divest GRAIL, and on April 12, 2024, the European Commission formally approved our divestment plan with respect to GRAIL, which had been submitted pursuant to the EC Divestment Decision. Refer to note “7. Legal Proceedings” for additional details.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Interim financial results are not necessarily indicative of results anticipated for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, from which the prior year balance sheet information herein was derived. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expense, and related disclosure of contingent assets and liabilities. Though macroeconomic factors such as inflation, exchange rates fluctuations and concerns about an economic downturn present additional uncertainty, we continue to use the best information available to form our critical accounting estimates. Actual results could differ from those estimates.
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 2024 and Q1 2023 refer to the three months ended March 31, 2024 and April 2, 2023, respectively, which were both 13 weeks.
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Significant Accounting Policies
During Q1 2024, 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 31, 2023, with the exception of the following for income taxes:
Other than in Q2 2023, we historically calculated the provision/(benefit) for income taxes for interim periods utilizing an estimated annual effective tax rate applied to the income/(loss) for the reporting period. In accordance with the authoritative guidance for accounting for income taxes in interim periods, we concluded for Q1 2024 that it was appropriate to determine the provision for income taxes utilizing the year-to-date effective tax rate method. Since minor changes in the estimated income/(loss) before income taxes would result in significant changes in the estimated annual effective tax rate, we determined the year-to-date effective tax rate method would provide a more reliable estimate of the provision for income taxes for Q1 2024.
Accounting Pronouncements Pending Adoption
In December 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard requires a company to disclose incremental segment information on an annual and interim basis, including significant segment expenses and measures of profit or loss that are regularly provided to the chief operating decision maker (CODM). The standard is effective for us beginning in fiscal year 2024 and interim periods within fiscal year 2025, with early adoption permitted. We do not expect to early adopt the new standard. We are currently evaluating the impact of ASU 2023-07 on the consolidated financial statements and related disclosures and will adopt the new standard using a retrospective approach.

In December 2023, the FASB also issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for us beginning in fiscal year 2025, with early adoption permitted. We do not expect to early adopt the new standard. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures.
(Loss) Earnings per Share
Basic (loss) earnings per share is computed based on the weighted average number of common shares outstanding during the period. Diluted (loss) earnings per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. In loss periods, basic and diluted loss per share are identical since the effect of potentially dilutive common shares is antidilutive and therefore excluded. Potentially dilutive common shares from equity awards are determined using the average share price for each period under the treasury stock method. In addition, proceeds from exercise of equity awards and the average amount of unrecognized compensation expense for equity awards are assumed to be used to repurchase shares.
The following table presents the weighted average shares used to calculate basic and diluted (loss) earnings per share:
In millionsQ1 2024Q1 2023
Weighted average shares used in calculating basic (loss) earnings per share
159 158 
Weighted average shares used in calculating diluted (loss) earnings per share
159 158 
Antidilutive shares:
Equity awards3 1 
Convertible senior notes 2 
Potentially dilutive shares excluded from calculation due to antidilutive effect3 3 
2. REVENUE
Our revenue is generated from the sale of products and services. Product revenue consists of sales of instruments and consumables used in genetic analysis. Service and other revenue consists of revenue generated from
13

genotyping and sequencing services, instrument service contracts, development and licensing agreements, and cancer detection testing services related to the GRAIL business.
Revenue by Source
Q1 2024Q1 2023
In millionsSequencingMicroarrayTotalSequencingMicroarrayTotal
Consumables$691 $71 $762 $686 $78 $764 
Instruments110 4 114 152 6 158 
Total product revenue801 75 876 838 84 922 
Service and other revenue178 22 200 138 27 165 
Total revenue$979 $97 $1,076 $976 $111 $1,087 
Revenue by Geographic Area
Based on region of destination (in millions)Q1 2024
Q1 2023
Americas$603 $616 
Europe279 261 
Greater China(1)
78 91 
Asia-Pacific, Middle East, and Africa(2)
116 119 
Total revenue$1,076 $1,087 
_____________
(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 three to six months, after the contract execution date. As of March 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $796 million, of which approximately 87% is expected to be converted to revenue in the next twelve months, approximately 9% 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 $18 million as of March 31, 2024 and December 31, 2023, respectively, and were recorded in prepaid expenses and other current assets.
Contract liabilities, which consist of deferred revenue and customer deposits, as of March 31, 2024 and December 31, 2023 were $324 million and $329 million, respectively, of which the short-term portions of $248 million and $252 million, respectively, were recorded in accrued liabilities and the remaining long-term portions were recorded in other long-term liabilities. Revenue recorded in Q1 2024 included $95 million of previously deferred revenue that was included in contract liabilities as of December 31, 2023.
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
Strategic Investments
Non-Marketable Equity Securities
As of March 31, 2024 and December 31, 2023, the aggregate carrying amounts of our non-marketable equity securities without readily determinable fair values, included in other assets, were $28 million.
14

Revenue recognized from transactions with our strategic investees was $2 million and $36 million for Q1 2024 and Q1 2023, respectively.
Venture Funds
We invest in two venture capital investment funds (the Funds) with capital commitments of $100 million, callable through April 2026, and up to $150 million, callable through July 2029, respectively, of which $4 million (plus recallable distributions of approximately $10 million) and up to $59 million, respectively, remained callable as of March 31, 2024. Our investments in the Funds are accounted for as equity-method investments. The aggregate carrying amounts of the Funds, included in other assets, were $185 million and $168 million as of March 31, 2024 and December 31, 2023, respectively. We recorded an unrealized gain of $6 million and an unrealized loss of $12 million in Q1 2024 and Q1 2023, respectively, in other income (expense), net.
Fair Value Measurements
The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis:
March 31, 2024December 31, 2023
In millionsLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:
Money market funds (cash equivalents)$869 $ $ $869 $774 $ $ $774 
Marketable equity securities7   7 6   6 
Helix contingent value right  71 71   68 68 
Deferred compensation plan assets 66  66  61  61 
Total assets measured at fair value$876 $66 $71 $1,013 $780 $61 $68 $909 
Liabilities:
Contingent consideration liabilities$ $ $403 $403 $ $ $387 $387 
Deferred compensation plan liability 63  63  59  59 
Total liabilities measured at fair value$ $63 $403 $466 $ $59 $387 $446 
Our marketable equity securities, which are included in prepaid expenses and other current assets, are measured at fair value based on quoted trade prices in active markets. Our 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 perform control procedures to corroborate the fair value of our holdings, including 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, if necessary.
Helix Contingent Value Right

In conjunction with the deconsolidation of Helix Holdings I, LLC (Helix) in April 2019, we received a contingent value right with a 7-year term that entitles us to consideration dependent upon the outcome of Helix’s future financing and/or liquidity events. We elected the fair value option to measure the contingent value right received from Helix. The fair value of the contingent value right, included in other assets, is derived using a Monte Carlo simulation. Estimates and assumptions used in the Monte Carlo simulation include probabilities related to the timing and outcome of future financing and/or liquidity events, assumptions regarding collectability and volatility, and an estimated equity value of Helix. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Changes in the fair value of the Helix contingent value right, included in other income (expense), net during Q1 2024 were as follows:
15


In millions
Balance as of December 31, 2023$68 
Change in estimated fair value3 
Balance as of March 31, 2024$71 
Contingent Consideration Liabilities
We reassess the fair value of contingent consideration related to acquisitions on a quarterly basis. Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in selling, general and administrative expense. The contingent value rights issued as part of the GRAIL acquisition entitle the holders to receive future cash payments on a quarterly basis (Covered Revenue Payments) representing a pro rata portion of certain GRAIL-related revenues (Covered Revenues) each year for a 12-year period. As defined in the Contingent Value Rights Agreement, this will reflect a 2.5% payment right to the first $1 billion of revenue each year for 12 years. Revenue above $1 billion each year will be subject to a 9% contingent payment right during this same period. Covered Revenues for Q4 2023 and Q4 2022 were $30 million and $23 million, respectively, driven primarily by sales of GRAIL’s Galleri test. Covered Revenue Payments relating to such periods were approximately $284,000 and $217,000 in Q1 2024 and Q1 2023, respectively. We use a Monte Carlo simulation to estimate the fair value of contingent consideration related to the GRAIL acquisition. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues for GRAIL, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. The fair value of our contingent consideration liability related to GRAIL was $403 million and $387 million as of March 31, 2024 and December 31, 2023, respectively, of which $401 million and $385 million, respectively, was included in other long-term liabilities, with the remaining balances included in accrued liabilities.
Changes in the estimated fair value of our contingent consideration liabilities during Q1 2024 were as follows:
In millions
Balance as of December 31, 2023$387 
Change in estimated fair value16 
Balance as of March 31, 2024$403 
4. DEBT
Summary of Term Debt Obligations
In millionsMarch 31,
2024
December 31,
2023
Principal amount of 2025 Term Notes outstanding$500 $500 
Principal amount of 2027 Term Notes outstanding500 500 
Principal amount of 2031 Term Notes outstanding500 500 
Unamortized discounts and debt issuance costs(10)(11)
Net carrying amount of term notes, non-current
$1,490 $1,489 
Fair value of term notes outstanding (Level 2)$1,419 $1,440 
Interest expense recognized on our term notes, which included amortization of debt discounts and issuance costs, was $18 million and $19 million in Q1 2024 and Q1 2023, respectively.
5.800% Term Notes due 2025 (2025 Term Notes) and 5.750% Term Notes due 2027 (2027 Term 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 Term Notes, which mature on December 12, 2025, and the 2027 Term Notes, which mature on December 13, 2027, accrue interest at a rate of 5.800% and 5.750% per
16

annum, respectively, payable semi-annually. Interest for the 2025 Term Notes is payable on June 12 and December 12 of each year, beginning on June 12, 2023. Interest for the 2027 Term Notes is payable on June 13 and December 13 of each year, beginning on June 13, 2023.
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 Term Notes and prior to November 13, 2027 for the 2027 Term Notes, the notes are redeemable at make-whole premium redemption prices as defined in the applicable forms of note. After November 12, 2025 for the 2025 Term Notes and after November 13, 2027 for the 2027 Term Notes, the notes are redeemable at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest up to, but excluding, the redemption date.
2.550% Term Notes due 2031 (2031 Term Notes)
In March 2021, we issued $500 million aggregate principal amount of 2031 Term Notes. The 2031 Term Notes, which mature on March 23, 2031, 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 2031 Term Notes, at our option, at any time prior to maturity. Prior to December 23, 2030, the 2031 Term Notes are redeemable at make-whole premium redemption prices as defined in the applicable forms of note. After December 23, 2030, the notes are redeemable at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest up to, but excluding, the redemption date.
Credit Agreement
On January 4, 2023, we entered into a new credit agreement (the Credit Agreement), which provides us with a $750 million senior unsecured five-year revolving credit facility, including a $40 million sublimit for swingline borrowings and a $50 million sublimit for letters of credit (the Credit Facility). The proceeds of the loans under the Credit Facility may be used to finance working capital needs and for general corporate purposes.
The Credit Facility matures, and all amounts outstanding thereunder become due and payable in full, on January 4, 2028, subject to two one-year extensions at our option, the consent of the extending lenders and certain other conditions. We may prepay amounts borrowed and terminate commitments under the Credit Facility at any time without premium or penalty. As of March 31, 2024, there were no borrowings or letters of credit outstanding under the Credit Facility, and we were in compliance with all financial and operating covenants.
Any loans under the Credit Facility will have a variable interest rate based on either the term secured overnight financing rate or the alternate base rate, plus an applicable rate that varies with the Company’s debt rating and, in the case of loans bearing interest based on the term secured overnight financing rate, a credit spread adjustment equal to 0.10% per annum. The Credit Agreement includes an option for us to elect to increase the commitments under the Credit Facility or to enter into one or more tranches of term loans in the aggregate principal amount of up to $250 million, subject to the consent of the lenders providing the additional commitments or term loans, as applicable, and certain other conditions.
The Credit Agreement contains financial and operating covenants. Pursuant to the Credit Agreement, we are required to maintain a ratio of total debt to adjusted annual earnings before interest, taxes, depreciation and amortization (EBITDA), calculated based on the four consecutive fiscal quarters ending with the most recent fiscal quarter, of not greater than 3.50 to 1.00 as of the end of each fiscal quarter. Upon the consummation of any Qualified Acquisition (as defined in the Credit Agreement) and us providing notice to the Administrative Agent, the ratio increases to 4.00 to 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.
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5. STOCKHOLDERS’ EQUITY
As of March 31, 2024, approximately 5.3 million shares remained available for future grants under the 2015 Stock and Incentive Compensation Plan.
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 thousandsRSUPSU
Outstanding at December 31, 20232,198  $236.32 $ 
Awarded2,592 504 $134.71 $156.98 
Vested(17)