For the second quarter of 2009, Illumina reported revenue of $161.6 million, a 15% increase over the $140.2 million reported in the second quarter of 2008. The Company reported net income for the quarter of $24.7 million, or $0.18 per diluted share, compared to $12.7 million, or $0.09 per diluted share in the comparable period of 2008. Net income for the second quarter of 2009 included non-cash charges of $14.9 million in stock compensation expense associated with SFAS No. 123R, $4.8 million in non-cash interest expense associated with the adoption of FSP APB 14-1 and other items listed in the table entitled "Itemized Reconciliation Between GAAP and Non-GAAP Net Income Per Share." Excluding the impact of these items, and net of pro forma tax expense, Illumina's net income on a non-GAAP basis for the second quarter of 2009 was $39.4 million, or $0.30 per diluted share, compared to $27.5 million, or $0.22 per diluted share, for the second quarter of 2008.

Gross margin in the second quarter of 2009 was 68.8% compared to 59.2% in the comparable period of 2008. Excluding the effect of non-cash charges associated with stock compensation, the amortization of intangibles, and the impairment of manufacturing equipment in the second quarter of 2008, non-GAAP gross margin was 70.6% for the second quarter of 2009 compared to 65.0% in the prior year period.

Research and development (R&D) expenses for the second quarter of 2009 were $33.1 million compared to $23.5 million in the second quarter of 2008. Second quarter 2009 R&D expenses included $5.0 million of non-cash stock compensation expense and $0.9 million of accrued contingent compensation associated with the Avantome acquisition. The comparable period in 2008 included $3.4 million of non-cash stock compensation expense. Excluding these charges, R&D expenses as a percentage of revenues were 16.8% compared to 14.3% in the prior year period.

Selling, general, and administrative (SG&A) expenses for the quarter were $41.9 million compared to $35.6 million for the second quarter of 2008. SG&A expenses include $8.6 million and $7.4 million of non-cash stock compensation expense in the second quarter of 2009 and 2008, respectively. Excluding these charges, SG&A expenses as a percentage of revenues were 20.6% compared to 20.1% in the prior year period.

The Company generated $39.4 million in cash flow from operations during the second quarter of 2009 compared to $37.2 million in the prior year period. Depreciation and amortization expenses were $7.9 million and capital expenditures were $14.0 million during the quarter. The Company ended the second quarter with $790 million in cash and investments compared to $728 million as of March 29, 2009.

Highlights since our last earnings release:

Launched the HumanOmni1-Quad BeadChip, a four sample microarray with over 1 million data points per sample that includes up-to-date content for all major classes of genetic variation, including over 100,000 variants from the 1,000 Genomes Projects.

Launched Multi-Sample Indexing for the GoldenGate assay enabling researchers to screen up to 16 times as many samples per reaction while decreasing total reagent consumption, ideal for screening in the livestock and agriculture market as well as for whole-genome association target validation and quality control applications.

Announced software advancements for the Genome AnalyzerIIx which enable real-time analysis and provide a significant reduction in computing infrastructure requirements. These improvements enable researchers to increase their sequencing output up to 65%.

Launched the Personal Genome Sequencing Service offering whole human genome sequencing to consumers with a physician's prescription for $48,000.

Received CLIA certification of Illumina's services laboratory for high complexity testing.

Surpassed 300 scientific publications where the Genome Analyzer has been used for data generation, analysis or novel method development.

Financial Outlook and Guidance

The non-GAAP financial guidance discussed below excludes tax-adjusted non-cash charges resulting from stock compensation expense, the incremental interest expense and gain on debt extinguishment associated with the adoption of FSP APB 14-1 "Accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement)" on December 29, 2008, acquired research and development, amortization expense related to intangible assets, the accrual of contingent compensation related to the Avantome acquisition, and the double dilution associated with the accounting treatment of the Company's convertible debt outstanding and the corresponding call option overlay (see table which reconciles these non-GAAP financial measures to the related GAAP measures).

We expect 2009 revenues to fall within the range of $690 to $720 million, representing year-over-year growth between 20% and 26%. We expect our gross margin percentage to be in the upper 60s. We expect non-GAAP earnings per fully diluted pro forma share between $1.13 and $1.23. We expect the full-year pro forma tax rate to be approximately 33% and stock compensation expense of approximately $62 million or a tax-adjusted amount of $0.31 per fully diluted pro forma share. The Company expects full-year weighted-average diluted shares outstanding for the measurement of pro forma amounts to be approximately 133 million.

For the third quarter of 2009, we expect revenues between $162 and $172 million. We expect earnings per fully diluted share of $0.26 to $0.30 assuming approximately 135 million shares. We expect stock compensation expense during the third quarter of approximately $16 million or a tax adjusted amount of $0.08 per fully diluted pro forma share.

Quarterly Conference Call Information

The conference call will begin at 2:00pm Pacific Time (5:00pm Eastern Time) on Tuesday, July 21, 2009. Interested parties may listen to the call by dialing 1-800-638-5495 (passcode: 29875910), or if outside North America, by dialing +1-617-614-3946 (passcode: 29875910). Individuals may access the live teleconference under the "Corporate/Investor Information" tab of Illumina's web site at www.illumina.com.

A replay of the conference call will be available from 5:00pm Pacific Time (8:00pm Eastern Time) on July 21, 2009 through July 28, 2009 by dialing 1-888-286-8010 (passcode: 85375226), or if outside North America, by dialing +1-617-801-6888 (passcode: 85375226).

About Illumina

Illumina is a leading developer, manufacturer, and marketer of next-generation life science tools and integrated systems for the large scale analysis of genetic variation and biological function. We provide a comprehensive line of proprietary products and services that currently serve the sequencing, genotyping, and gene expression markets, and we expect to enter the market for molecular diagnostics. Our customers include leading genomic research centers, academic institutions, agriculture and livestock companies, pharmaceutical companies, clinical research organizations and biotechnology companies. Our tools provide researchers around the world with the performance, throughput, cost effectiveness and flexibility necessary to perform the billions of genetic tests needed to extract valuable medical information from advances in genomics and proteomics. We believe this information will enable researchers to correlate genetic variation and biological function, which will enhance drug discovery and clinical research, allow diseases to be detected earlier and permit better choices of drugs for individual patients.

Statement Regarding Use of Non-GAAP Financial Measures

The Company reported non-GAAP results for diluted net income per share, net income, gross margins, operating margins, cash flow from operations and free cash flow in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

The Company's financial results under GAAP include substantial non-cash charges related to stock compensation expense, interest expense and gain on debt extinguishment associated with the adoption of FSP APB 14-1, the amortization of intangible assets, expense related to acquired research and development, and compensation expense related to contingent consideration due to stockholders of Avantome, Inc. Per share amounts also include the double dilution associated with the accounting treatment of the Company's convertible debt outstanding and the corresponding call option overlay. Management believes that presentation of operating results that excludes these non-cash charges provides useful supplemental information to investors that facilitates analysis of the Company's core operating results and comparison of operating results across reporting periods. Management believes that this supplemental non-GAAP information is therefore useful to investors in analyzing and assessing the Company's past and future operating performance.

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

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: this release may contain forward-looking statements that involve risks and uncertainties. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are Illumina's ability (i) to develop and commercialize further our BeadArray, VeraCode®, and Solexa® technologies and to deploy new sequencing, gene expression, and genotyping products and applications for our technology platforms, (ii) to manufacture robust instrumentation and reagents technology, together with other factors detailed in our filings with the Securities and Exchange Commission including our recent filings on Forms 10-K and 10-Q or in information disclosed in public conference calls, the date and time of which are released beforehand. We disclaim any intent or obligation to update these forward-looking statements beyond the date of this release.

  Illumina, Inc.                                                                              Condensed Consolidated Balance Sheets                                                       (In thousands)                                                                              (unaudited)                                                                                                                                                                                                                                 June 28, 2009   December 28, 2008 (a)   ASSETS                                                                                                                                                                                  Current assets:                                                                              Cash and cash equivalents                          $  352,097      $  327,024               Short-term investments                                382,472         313,051               Accounts receivable, net                              154,251         133,266               Inventory, net                                        70,666          73,431                Deferred tax assets, current portion                  9,929           8,635                 Prepaid expenses and other current assets             12,344          14,154                Total current assets                                  981,759         869,561                                                                                                          Property and equipment, net                            103,907         89,436               Long-term investments                                  55,750          55,900               Goodwill                                               228,734         228,734              Intangible assets, net                                 44,805          47,755               Deferred tax assets, long-term portion                 37,618          30,960               Other assets                                           24,595          4,825                                                                                                             Total assets                                       $  1,477,168    $  1,327,171                                                                                                        LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                    Current liabilities:                                                                         Accounts payable                                   $  41,158       $  29,204                Accrued liabilities                                   84,436          80,355                Long-term debt, current portion                       279,703         276,889                                                                                                           Total current liabilities                             405,297         386,448                                                                                                          Other long-term liabilities                            21,835          18,946               Conversion option subject to cash settlement           110,296         123,110              Stockholders' equity                                   939,740         798,667                                                                                                           Total liabilities and stockholders' equity         $  1,477,168    $  1,327,171                                                                                                        (a) Adjusted due to the adoption of FSP APB 14-1.                                            -------------------------------------------------------------------------------  

  Illumina, Inc.