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Item 1. Financial Statements

2023-05-04 compared with 2022-11-08 · 180 added, 343 removed, 322 unchanged (62% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

(in thousands, except per share amounts)

(in thousands, except per share amounts) March 31,

2023 December 31,

Current assets

Cash and cash equivalents $ 353,834 $ 325,089

Investments 521,058 447,229

Accounts receivable, net 29,589 18,786

7 unchanged sentences

Intangible assets, net 410,011 410,245

Goodwill 409,974 409,974

Other long-term assets 13,319 10,528

Total assets $ 1,896,417 $ 1,767,086

Liabilities and Stockholders’ Equity

5 unchanged sentences

Other liabilities, current 4,670 7,233

Contingent consideration liability, current 184,350 172,094

Total current liabilities 265,674 263,335

Deferred revenue, non-current 1,849 1,794

Contingent consideration liability, non-current

Operating lease liabilities, non-current 38,969 41,070

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Authorized 1,000,000 shares;

issued and outstanding 225,916 and 220,978 shares at September 30, 2022 and December 31, 2021, respectively

issued and outstanding 249,803 and 226,505 shares at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 2,314,146 2,099,782

1 unchanged sentence

Accumulated deficit ( 1,620,355 ) ( 1,532,340 )

( 1,447,956 )

( 1,218,092 )

Total stockholders’ equity 692,117 562,904

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PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

Three Months Ended September 30,

Nine Months Ended September 30,

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended March 31,

(in thousands, except per share amounts) 2023 2022

7 unchanged sentences

Total cost of revenue 29,139 19,018

Gross profit 9,761 14,155

Operating Expense:

1 unchanged sentence

Sales, general and administrative 39,818 39,804

Merger-related expenses

Change in fair value of contingent consideration 12,256 ( 1,063 )

1 unchanged sentence

Operating loss ( 91,252 ) ( 77,523 )

Loss from Continuation Advances

Interest expense ( 3,630 ) ( 3,697 )

Other income (expense), net 6,867 ( 279 )

Loss before benefit from income taxes

Benefit from income taxes

Net (loss) income

Other comprehensive (loss) income:

Unrealized (loss) gain on investments

Comprehensive (loss) income

Net (loss) income per share:

Weighted average shares outstanding used in calculating net (loss) income per share:

Loss before expense (benefit) from income taxes ( 88,015 ) ( 81,499 )

Expense (benefit) from income taxes — —

Net loss ( 88,015 ) ( 81,499 )

Other comprehensive income (loss):

Unrealized gain (loss) on investments 2,841 ( 2,998 )

Comprehensive loss $ ( 85,174 ) $ ( 84,497 )

Net loss per share:

Basic $ ( 0.36 ) $ ( 0.37 )

Diluted $ ( 0.36 ) $ ( 0.37 )

Weighted average shares outstanding used in calculating net loss per share:

Basic 242,032 222,289

Diluted 242,032 222,289

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Statements of Stockholders’ Equity

Common Stock Additional

Capital Accumulated

Comprehensive

Stockholders'

(in thousands)

(Loss) Income

For the three months ended September 30, 2022

Balance at June 30, 2022

( 1,370,985 )

Other comprehensive loss

Issuance of common stock in conjunction with equity plans

Stock-based compensation expense

Balance at September 30, 2022

( 1,447,956 )

For the three months ended September 30, 2021

Balance at June 30, 2021

( 1,165,305 )

Other comprehensive income

Issuance of common stock in conjunction with equity plans

Issuance of common stock in Private Placement, net of issuance costs

Issuance of common stock in acquisition of Omniome

Stock-based compensation expense

Balance at September 30, 2021

( 1,148,763 )

For the nine months ended September 30, 2022

(Loss) Income Accumulated

Deficit Total

Stockholders'

(in thousands) Shares Amount

For the three months ended March 31, 2023

Balance at December 31, 2022 226,505 $ 227 $ 2,099,782 $ ( 4,765 ) $ ( 1,532,340 ) $ 562,904

( 1,218,092 )

Other comprehensive loss

Net loss — — — — ( 88,015 ) ( 88,015 )

Other comprehensive income — — — 2,841 — 2,841

Issuance of common stock from Underwritten Public Equity Offering, net of issuance costs 20,125 20 189,180 — — 189,200

Issuance of common stock in conjunction with equity plans 3,173 3 7,232 — — 7,235

Stock-based compensation expense

Balance at September 30, 2022

( 1,447,956 )

For the nine months ended September 30, 2021

Share-based compensation expense — — 17,952 — — 17,952

Balance at March 31, 2023 249,803 $ 250 $ 2,314,146 $ ( 1,924 ) $ ( 1,620,355 ) $ 692,117

For the three months ended March 31, 2022

Balance at December 31, 2021 220,978 $ 221 $ 2,009,945 $ ( 1,087 ) $ ( 1,218,092 ) $ 790,987

( 1,036,869 )

Net loss — — — — ( 81,499 ) ( 81,499 )

Other comprehensive loss — — — ( 2,998 ) — ( 2,998 )

Issuance of common stock in conjunction with equity plans 3,351 3 5,589 — — 5,592

Issuance of common stock in Private Placement, net of issuance costs

Issuance of common stock in acquisition of Omniome

Stock-based compensation expense

Balance at September 30, 2021

( 1,148,763 )

Share-based compensation expense — — 22,496 — — 22,496

Balance at March 31, 2022 224,329 $ 224 $ 2,038,030 $ ( 4,085 ) $ ( 1,299,591 ) $ 734,578

See accompanying notes to the condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

Cash flows from operating activities

Net loss $ ( 88,015 ) $ ( 81,499 )

Adjustments to reconcile net loss to net cash used in operating activities

Loss from Continuation Advances

Depreciation 2,755 2,268

Amortization of intangible assets 234 228

1 unchanged sentence

Amortization of debt discount and financing costs 162 159

Stock-based compensation

Amortization of premium and accretion of discount on marketable securities, net

Deferred income taxes

Share-based compensation expense 17,952 22,703

Accretion of discount and amortization of premium on marketable securities, net ( 2,155 ) 758

Change in the estimated fair value of contingent consideration 12,256 ( 1,063 )

Inventory provision 3,521 386

Loss on disposition of equipment 201 100

Changes in assets and liabilities

Accounts receivable

Accounts receivable, net ( 10,803 ) ( 3,611 )

Inventory, net ( 13,319 ) ( 6,661 )

Prepaid expenses and other assets ( 6,888 ) ( 1,185 )

7 unchanged sentences

Purchase of property and equipment ( 3,721 ) ( 3,638 )

Cash paid for purchase of Circulomics, net of cash acquired

Cash paid for purchase of Omniome, net of cash acquired

Purchase of investments ( 233,291 ) ( 76,369 )

1 unchanged sentence

Maturities of investments 163,864 122,060

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities ( 72,553 ) 42,053

Cash flows from financing activities

Continuation Advances

Proceeds from issuance of Convertible Senior Notes, net of issuance costs

Proceeds from issuance of common stock under equity offerings, net of issuance costs 189,200 —

2 unchanged sentences

Net cash provided by financing activities 195,989 5,215

Net (decrease) increase in cash, cash equivalents, and restricted cash

Net increase (decrease) in cash, cash equivalents, and restricted cash 28,745 ( 31,761 )

Cash, cash equivalents, and restricted cash at beginning of period 328,311 465,817

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Cash, cash equivalents, and restricted cash at end of period $ 357,056 $ 434,056

Supplemental disclosure of non-cash investing and financing activities

Issuance of common stock in acquisition of Omniome

See accompanying notes to the condensed consolidated financial statements.

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ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

We are a life science technology company that designs, develops, and manufactures advanced sequencing solutions to help scientists and clinical researchers resolve genetically complex problems.

Our products and technology under development stem from two highly differentiated core technologies focused on accuracy, quality and completeness which include our existing HiFi long-read sequencing technology and our emerging short-read Sequencing by Binding (SBB ® ) technology.

Our products address solutions across a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.

We are a life science technology company that is designing, developing, and manufacturing advanced sequencing solutions that enable scientists and clinical researchers to improve their understanding of the genome and ultimately, resolve genetically complex problems.

Our products and technology under development stem from two highly differentiated core technologies focused on accuracy, quality, and completeness, which include our existing HiFi long-read sequencing technology and our emerging short-read Sequencing by Binding (SBB TM ) technology.

Our products address solutions across a broad set of applications including human genomics, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.

Our focus is on providing our customers with advanced sequencing technologies with higher throughput and improved workflows that we believe will enable dramatic advancements in routine healthcare.

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Certain information and footnote disclosures typically included in our audited financial statements have been condensed or omitted.

The accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the December 31, 2021 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state our financial position, results of operations, comprehensive (loss) income, and cash flows for the period, but are not necessarily indicative of the results to be expected for the entire year or any future periods.

The accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the December 31, 2022 audited consolidated financial statements and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state our financial position, results of operations, comprehensive loss, and cash flows for the period, but are not necessarily indicative of the results to be expected for the entire year or any future periods.

All intercompany transactions and balances have been eliminated.

Certain prior period amounts have been reclassified to conform to current period presentation.

The financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2022.

2 unchanged sentences

On an ongoing basis, we evaluate our significant estimates including, but not limited to, the valuation of inventory, the determination of stand-alone selling prices for revenue recognition, the fair value of contingent consideration, the valuation of acquired intangible assets, the fair value of certain equity awards, the useful lives assigned to long-lived assets, the computation of provisions for income taxes, the borrowing rate used in calculating the operating lease right-of-use assets and operating lease liabilities, the probability associated with variable payments under partnership development agreements, and the valuations related to our convertible senior notes.

While the extent of the potential impact of the current macroeconomic conditions and ongoing COVID-19 pandemic on our business is highly uncertain, we considered information available related to assumptions and estimates used to determine the results reported and asset valuations as of September 30, 2022.

While the extent of the potential impact of the current macroeconomic conditions on our business is highly uncertain, we considered information available related to assumptions and estimates used to determine the results reported and asset valuations as of March 31, 2023.

Actual results could differ materially from these estimates.

Cash, Cash Equivalents, and Investments

Cash, Cash Equivalents, Restricted Cash and Investments

We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents.

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We evaluate our available-for-sale investments in unrealized loss positions and assess whether the unrealized loss is credit-related.

Unrealized gains and losses that are not credit-related are recognized in accumulated other

comprehensive (loss) income in stockholders’ equity.

Unrealized gains and losses that are not credit-related are recognized in accumulated other comprehensive loss in stockholders’ equity.

Realized gains and losses, expected credit losses, as well as interest income, on available-for-sale securities are also reported in other income (expense), net.

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We have established guidelines regarding diversification and maturities of investments with the objectives of maintaining safety and liquidity, while maximizing yield.

Restricted cash includes cash that is not readily available for use in the Company’s operating activities.

Restricted cash is primarily comprised of cash pledged under letters of credit.

Concentration and Other Risks

For the three and nine months ended September 30, 2022, one customer accounted for approximately 13 % and 11 % of total revenue during the period.

For the three and nine months ended September 30, 2021, one customer accounted for approximately 17 % and 15 % of total revenue during the period.

For the three months ended March 31, 2023, no customer represented 10% or greater of our total revenue during the period.

For the three months ended March 31, 2022, two customers accounted for approximately 14 % and 11 %, respectively, of total revenue during the period.

No other customers exceeded 10% during those periods.

As of September 30, 2022, 54 % of our accounts receivable were from domestic customers, compared to 53 % as of December 31, 2021.

As of September 30, 2022, one customer represented 10 % of our accounts receivable, while no customer represented 10% or greater of our net accounts receivable as of December 31, 2021.

As of March 31, 2023, 49 % of our accounts receivable were from domestic customers, compared to 57 % as of December 31, 2022.

As of March 31, 2023, no customer represented 10% or greater of our accounts receivable, while one customer represented approximately 10 % of our net accounts receivable as of December 31, 2022.

Recent Accounting Pronouncements

There are no accounting standards updates (“ASUs”) that have been recently adopted.

Recently Adopted Accounting Standards

In October 2021, the FASB issued Accounting Standards Update ("ASU") No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

This ASU provides specific guidance on how to recognize contract assets and contract liabilities related to revenue contracts with customers acquired in a business combination.

This amendment improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination.

We adopted this ASU on January 1, 2023.

The adoption of this guidance did not have a material effect on our consolidated financial statements.

Significant Accounting Policies

There have been no changes to our significant accounting policies as disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

however, as a result of certain changes to the standard contractual terms and conditions with customers implemented during the quarter ended March 31, 2022, we concluded that a change in the application of our accounting policy, in accordance with ASC 606, was appropriate.

Specifically, we modified the standard contractual terms with customers during the first quarter of 2022, to reflect transfer of title and risk of loss and right to invoice upon delivery.

We also updated the terms of the warranty provided with the instrument to remove the service component.

As a result, the warranty is no longer a separate performance obligation and, accordingly, we accrue for the cost of the assurance warranty when revenue of the instrument is recognized.

In addition, because of technical enhancements associated with our more recent instrument releases, including the Sequel IIe systems, installation services are now distinct from the instrument itself.

Therefore, instrument revenue is now recognized upon transfer of control of the asset to the customer, which is generally upon delivery for sales made to our non-distributor customers.

BUSINESS ACQUISITIONS

Omniome, Inc.

On September 20, 2021, we completed our acquisition of Omniome, Inc.

(“Omniome”), a San Diego-based company, to obtain their proprietary short-read DNA sequencing platform capable of delivering high accuracy (the “Omniome acquisition”).

In connection with the Omniome acquisition, all outstanding equity securities of Omniome were cancelled in exchange for approximately $ 315.7 million in cash, 8,911,580 shares of our common stock with a fair value of $ 249.4 million and contingent consideration with a fair value of $ 168.6 million.

The fair value of the 8,911,580 common shares issued was determined based on the closing market price of PacBio’s common shares on the acquisition date.

In addition, approximately $ 18.9 million, comprised of $ 7.4 million of cash, 226,811 shares of our common stock with a fair value of $ 6.3 million, and $ 5.2 million related to contingent consideration, was accounted for as a one-time post acquisition stock-based compensation expense.

This stock-based compensation expense was due to accelerated vesting of Omniome stock awards in connection with the acquisition.

In connection with the acquisition, contingent consideration of $ 200 million (composed of $ 100 million in cash and $ 100 million in shares of our common stock) is due upon the achievement of a milestone, defined as the first commercial shipment to a customer of a nucleotide sequencing platform, comprising both an instrument and related consumables, that utilizes SBB technology.

The number of shares of stock to be issued will be determined using the volume-weighted average of the trading prices of our common stock for the twenty trading days ending with and

including the trading day that is two days immediately prior to the achievement of the milestone.

Of the $ 100 million in shares of our common stock to be issued as part of the milestone, $ 4.1 million was attributable to stock options issued by PacBio in replacement of Omniome’s unvested options as part of the transaction.

Upon achievement of the milestone, shares will be issued not in excess of an amount equal to 19.9 % of our outstanding shares of common stock on the date of closing (prior to the issuance of any shares issued in connection with the transaction or the related private placement), less 11,500,000 shares.

The contingent consideration is accounted for as a liability at fair value, with changes during each reporting period recognized in our Consolidated Statements of Operations and Comprehensive Loss.

The fair value of the contingent consideration liability is calculated, with the assistance from a third-party valuation firm, using a scenario-based method which considers a range of possible outcomes and their assigned probabilities of occurrence.

The potential outcomes are discounted to present value at a discount rate equal to the sum of the term-matched risk-free-interest rate plus PacBio’s credit spread.

The total consideration transferred for the acquisition is as follows (in thousands):

Total cash paid

Fair value of share consideration

Fair value of contingent consideration

Stock-based compensation expense excluded from consideration transferred

Total consideration transferred

The acquisition was accounted for as a business combination and, accordingly, the total fair value of the consideration transferred was allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair values on the acquisition date.

As of December 31, 2021, the major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred were as follows (in thousands):

Cash and cash equivalents

Property and equipment, net

Operating lease right-of-use assets, net

In-process research and development ("IPR&D")

Deferred income tax liability

Liabilities assumed

Total consideration transferred

During the year ended December 31, 2021, we recorded a measurement period adjustment of $ 1.6 million to decrease goodwill and a corresponding $ 0.4 million to decrease the deferred tax liability on the Consolidated Balance Sheet, and a $ 1.2 million decrease to our benefit from income taxes on the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The measurement period adjustment was due to new information that became available to us upon the completion of the IRC Section 382 Tax Study, where we identified additional net operating losses that are available to us from acquired assets.

Refer to Note 9 – Income Taxes , in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2021 for more information .

The goodwill recognized was primarily attributable to the assembled workforce and synergies that are expected to occur from the integration of Omniome and is not deductible for income tax purposes.

We incurred costs related to the Omniome acquisition of approximately $ 11.6 million during the three and nine months ended September 30, 2021, which are included in merger-related costs on the Consolidated Statement of Operations and Comprehensive (Loss) Income.

No significant merger-related costs were incurred during the three and nine months ended September 30, 2022.

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented as if Omniome had been acquired as of the beginning of 2020, giving effect on a pro forma basis to the purchase accounting adjustments such as $ 11.6 million of PacBio acquisition-related costs, $ 18.9 million of stock-based compensation expense related to acceleration of certain Omniome stock options not attributable to pre-combination service, and a $ 92.2 million one-time income tax benefit from the reduction

of our deferred tax asset valuation allowance resulting from the Omniome acquisition, as well as a pro forma adjustment to reflect $ 16.7 million of Omniome’s acquisition-related costs.

The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of the consolidated results of the combined business had the acquisition actually occurred at the beginning of 2020 or the results of future operations of the combined business.

The following table summarizes the unaudited pro forma financial information (in thousands):

Three Months Ended

Nine Months Ended

September 30, 2021

Pro forma total revenue

Pro forma net loss

Our consolidated financial statements include the results of operations for Omniome beginning September 20, 2021.

Revenues of $ 0 and a net loss of $ 1.6 million from the acquired Omniome business have been included in our Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2021.

Circulomics, Inc.

On July 20, 2021, we acquired Circulomics Inc.

(“Circulomics”), a Maryland-based biotechnology company focused on delivering highly differentiated sample preparation products that enable genomic workflows (the “Circulomics acquisition”).

We paid $ 29.5 million in cash in exchange for all outstanding shares of common stock of Circulomics.

We allocated the consideration transferred to the identifiable assets acquired and liabilities assumed based on their respective fair values at the date of the completion of the Circulomics acquisition.

The major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred were as follows (in thousands):

Cash and cash equivalents

Property and equipment, net

Intangible assets

Deferred income tax liability

Liabilities assumed

Total consideration transferred

The excess of the value of consideration paid over the aggregate fair value of those net assets has been recorded as goodwill.

We recognized goodwill of $ 19.3 million, which is primarily attributable to the synergies expected from capabilities in extraction and sample preparation and is not deductible for income tax purposes.

We recorded $ 11.4 million for the fair value of acquired intangible assets, which consist of developed technology and customer relationships.

INVITAE COLLABORATIO N

On June 24, 2022, we entered into an Amended and Restated Development and Commercialization Agreement (the “Amended and Restated Agreement”) with Invitae Corporation (“Invitae”).

The Amended and Restated Agreement amended and restated the existing Development and Commercialization Agreement, effective as of January 12, 2021, as amended by Amendment No.

1 to Development and Commercialization Agreement, entered into on June 3, 2021, by and between us and Invitae (together, the “Original Agreement”).

Unless otherwise agreed in writing or terminated in accordance with the Amended and Restated Agreement, the term of the Amended and Restated Agreement shall continue until June 30, 2028 (“Term”).

Pursuant to the Original Agreement, Invitae provided certain funding to us to develop products relating to production-scale high-throughput sequencing (“Program Products”).

If Program Products were to become commercially available, Invitae had the right to purchase the Program Products at preferred pricing.

Under the Amended and Restated Agreement, we will continue to receive feedback, input and insight from Invitae in connection with the intended development of our new sequencing systems;

however, such feedback will not be contractually required, and Invitae has no contractual right to participate in decisions regarding the development program for such new sequencing systems.

Our development plans for such new sequencing systems will be at our

discretion and pursuant to our own internal processes and programs.

Invitae will not be contractually obligated to reimburse us for development costs under the Amended and Restated Agreement.

There can be no assurances that the in-development sequencing systems will continue to be developed, be successfully developed or become available for commercial sale.

In consideration of the non-refundable payments received from Invitae pursuant to the Original Agreement of $ 23.5 million, we will provide Invitae with credits in connection with Invitae’s anticipated purchase of certain currently available and in-development sequencing systems (instruments and consumables).

The credits will expire on June 30, 2025 (“Credit Expiration Date”).

Subject to certain conditions, Invitae will also be entitled to most favored pricing for the Company’s Sequel IIe systems and certain in-development systems through the Term.

We and Invitae may terminate the Amended and Restated Agreement if the other party remains in material breach of the Amended and Restated Agreement following a cure period to remedy the material breach.

The Amended and Restated Agreement is deemed a contract modification and accounted for on a prospective basis in accordance with ASC Topic 606.

We will recognize proportionate amounts of the transaction price, including payments made by Invitae to us pursuant to the Original Agreement, in revenue as the remaining performance obligations are satisfied, which is when Invitae places purchase orders for certain currently available and in-development sequencing platforms and the associated goods are delivered.

Any remaining unused credits will be recognized when they expire.

During the three and nine months ended September 30, 2022, Invitae purchased certain currently available instruments, for which $ 0 and $ 3.7 million, respectively, of revenue was recognized as Product Revenue on the Condensed Consolidated Statements of Operations and Comprehensive Loss under the terms of the Amended and Restated Agreement.

As of December 31, 2021, we have recognized payments received from Invitae of $ 23.5 million in deferred revenue, non-current, on the Consolidated Balance Sheet.

As of September 30, 2022, $ 21.4 million of deferred revenue, current, is recorded on the Condensed Consolidated Balance Sheet relating to all future performance obligations under the Amended and Restated Agreement.

TERMINATION OF MERGER WITH ILLUMINA

On November 1, 2018, we entered into an Agreement and Plan of Merger (as amended, the “Illumina Merger Agreement”) with Illumina, Inc.

(“Illumina”) and FC Ops Corp., a wholly owned subsidiary of Illumina (“Illumina Merger Sub”).

On January 2, 2020, we, Illumina and Illumina Merger Sub, entered into an agreement to terminate the Merger Agreement (the “Termination Agreement”).

Continuation Advances from Illumina

As part of the Termination Agreement, Illumina paid us cash payments (“Continuation Advances”) totaling $ 52.0 million.

Up to the full $ 52.0 million of Continuation Advances paid to us were repayable without interest to Illumina if, within two years of March 31, 2020, we entered into, or consummated a Change of Control Transaction or raised at least $ 100 million in a single equity or debt financing (that may have multiple closings), with the amount repayable dependent on the amount raised by us.

Resulting from the issuance and sale of $ 900 million of 1.50 % Convertible Senior Notes due February 15, 2028 , $ 52.0 million of Continuation Advances were paid without interest to Illumina in February 2021, and a corresponding non-operating expense was recorded in the Consolidated Statements of Operations and Comprehensive (Loss) Income during the quarter ended March 31, 2021.

FINANCIAL INSTRUMENTS

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table sets forth the fair value of our financial assets and liabilities that were measured on a recurring basis as of September 30, 2022 and December 31, 2021 respectively (in thousands):

September 30, 2022

December 31, 2021

The following table sets forth the fair value of our financial assets and liabilities that were measured on a recurring basis (in thousands):

March 31, 2023 December 31, 2022

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 103,753 $ 250,081 $ — $ 353,834 $ 137,636 $ 187,453 $ — $ 325,089

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We estimate the fair value of the contingent consideration liability by discounting the probability-weighted outcomes to present value using an estimate of our borrowing rate and the risk-free rate.

The potential outcomes of milestone achievement dates are within the period from December 31, 2022 to June 30, 2025.

The potential outcomes of milestone achievement dates are within the period from June 30, 2023 to June 30, 2025.

A decrease in the probability of an earlier scenario within this range would result in a decrease in the fair value of the liability.

The discount rates used are the sum of the U.S.

risk-free rate and the estimated subordinated credit spread for B- and B credit rating, which range from 10.5 % to 10.9 %.

An increase in the discount rates used can also result in the decrease in the fair value of liability, which was the primary factor for the $ 2.2 million decrease in liability at September 30, 2022.

risk-free rate and the estimated subordinated credit spread for B- and B credit rating, which ranges from 9.3 % to 10.2 %.

Changes in our estimated subordinated credit spread can result in changes in the fair value of the contingent consideration liability, where a lower credit spread may result in an increased liability valuation.

Changes in the estimated fair value of the contingent consideration liability for the nine months ended September 30, 2022 were as follows (in thousands):

Changes in the estimated fair value of the contingent consideration liability for the three months ended March 31, 2023 were as follows (in thousands):

Beginning balance as of December 31, 2022 $ 172,094

Change in estimated fair value 12,256

Ending balance as of September 30, 2022

Changes to the fair value are recorded as Change in fair value of contingent consideration in the Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income.

For the nine months ended September 30, 2022, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis, and our valuation techniques did not change compared to the prior year.

Ending balance as of March 31, 2023 $ 184,350

Changes to the fair value are recorded as change in fair value of contingent consideration in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

For the three months ended March 31, 2023, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis, and our valuation techniques did not change compared to the prior year.

The following tables summarize our cash, cash equivalents and investments (in thousands):

As of September 30, 2022

As of March 31, 2023

Cash and cash equivalents 353,837 24 ( 27 ) 353,834

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Long-term restricted cash $ 2,922 $ — $ — $ 2,922

The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of September 30, 2022 (in thousands):

The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of March 31, 2023 (in thousands):

Due in one year or less $ 634,191

Due after one year through five years 136,948

Total investments

Total $ 771,139

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

BALANCE SHEET COMPONENTS

Short-term Restricted Cash

As of September 30, 2022 and December 31, 2021, the short-term restricted cash balance was $ 0.3 million and $ 0.5 million, respectively, which was comprised of security deposits for the credit cards of employees.

Inventory, net

As of September 30, 2022 and December 31, 2021, our inventory, net, consisted of the following components (in thousands):

September 30,

Our inventory, net, consisted of the following components (in thousands):

2023 December 31,

Purchased materials $ 25,475 $ 24,139

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Finished goods 14,775 12,180

Long-term Restricted Cash

For our facility located at 1305 O’Brien Drive, Menlo Park, California (the “O’Brien Lease”), we were required to establish a letter of credit for the benefit of the landlord and to submit $ 4.5 million as a deposit for the letter of credit in October 2015.

Subsequently, pursuant to the terms of the O’Brien Lease, beginning on May 1, 2019, the amount of the letter of credit was reduced by $ 0.5 million each year thereafter on May 1.

As such, $ 2.5 million and $ 3.0 million was recorded in long-term restricted cash related to the O’Brien Lease in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

In connection with the acquisition of Omniome in September 2021, we acquired $ 1.6 million of long-term restricted cash related to a letter of credit established for a facility lease.

Long-term restricted cash related to this facility was $ 0 and $ 1.6 million in the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022, we had an additional $ 0.4 million in long-term restricted cash primarily related to a letter of credit established for a facility lease.

Inventory, net $ 61,955 $ 50,381

Intangible Assets and Goodwill

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Upon completion of the development, we will begin to amortize the asset over the life of the product, or record an impairment charge if the asset is determined to be impaired.

In addition to IPR&D, definite-lived intangible assets from business acquisitions included the following (in thousands, except years):

As of September 30, 2022

As of December 31, 2021

In addition to IPR&D, definite-lived intangible assets included the following (in thousands, except years):

As of March 31, 2023 As of December 31, 2022

(in years) Gross

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Developed technology 15 $ 11,179 $ ( 1,228 ) $ 9,951 $ 11,179 $ ( 1,039 ) $ 10,140

Customer relationships 2 360 ( 300 ) 60 360 ( 255 ) 105

The estimated future amortization expense of acquisition-related intangible assets with definite lives is estimated as follows (in thousands):

Total $ 11,539 $ ( 1,528 ) $ 10,011 $ 11,539 $ ( 1,294 ) $ 10,245

The estimated future amortization expense of intangible assets with definite lives is as follows (in thousands):

Remainder of 2023 $ 619

2028 and thereafter 6,411

Total $ 10,011

We review definite-lived intangible assets for impairment when indication of potential impairment exists, such as a significant reduction in cash flows associated with the assets.

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Deferred Revenue

As of September 30, 2022, we had a total of $ 32.5 million of deferred revenue, $ 30.7 million of which was recorded as deferred revenue, current, and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae as described in Note 3.

Invitae Collaboration in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On June 24, 2022, we entered into an Amended and Restated Development and Commercialization Agreement (the “Amended and Restated Agreement”) with Invitae Corporation (“Invitae”).

During the three months ended March 31, 2023, Invitae did not purchase any of the instruments or consumables under the terms of the

Amended and Restated Agreement.

As of March 31, 2023 and December 31, 2022, $ 21.4 million of deferred revenue, current, is recorded on the Condensed Consolidated Balance Sheet relating to all future performance obligations under the Amended and Restated Agreement.

Refer to Note 3 – Invitae Collaboration , in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for more information .

As of March 31, 2023, we had a total of $ 32.7 million of deferred revenue, $ 30.9 million of which was recorded as deferred revenue, current, and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae.

The deferred revenue, non-current balance of $ 1.8 million primarily relates to deferred service contract revenues and is scheduled to be recognized in the next 5 years.

Revenue recorded in the nine months ended September 30, 2022 includes $ 11.5 million of previously deferred revenue that was included in deferred revenue as of December 31, 2021.

Contract assets as of September 30, 2022 and December 31, 2021 were not material.

As of September 30, 2022, we had a total of $ 0.6 million of deferred commissions included in prepaid expenses and other current assets which is recognized as sales, general and administrative expense as the related revenue is recognized.

Costs to obtain a contract are expensed as incurred if the amortization period would have been a year or less.

Revenue recorded in the three months ended March 31, 2023 includes $ 3.5 million of previously deferred revenue that was included in deferred revenue as of December 31, 2022.

Product Warranties

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Changes in the reserve for product warranties were as follows for the periods indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Balance at beginning of period $ 1,651 $ 594

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Payments are made in equal monthly installments including principal and interest.

As of March 31, 2023, the carrying value of term loans outstanding was $ 1.9 million.

The related long-term portion of $ 0.2 million was recorded as part of other liabilities, non-current and the short-term portion of $ 1.7 million was recorded as part of other liabilities, current on the Condensed Consolidated Balance Sheet.

The interest expense was $ 0.1 million for the three months ended March 31, 2023, which was included as part of interest expense in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

The following table presents the future principal payments on the term loans (in thousands):

Remainder of 2023 $ 1,395

Total $ 1,885

CONVERTIBLE SENIOR NOTES

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However, due to the nature and terms of the reporting obligations, the value of the embedded derivative is immaterial.

We incurred issuance costs related to the Notes of approximately $ 4.5 million, which were recorded as debt issuance cost and are presented as a reduction to the Notes on our Consolidated Balance Sheets and are amortized to interest expense using the effective interest method over the term of the Notes, resulting in an effective interest rate of 1.6 %.

As of September 30, 2022 and December 31, 2021, the net carrying amount of the liability for the Notes is recorded as convertible senior notes, net, in the Condensed Consolidated Balance Sheets as follows (in thousands):

September 30,

amortized to interest expense using the effective interest method over the term of the Notes, resulting in an effective interest rate of 1.6 %.

The net carrying amount of the liability for the Notes is recorded as convertible senior notes, net, non-current in the Condensed Consolidated Balance Sheets as follows (in thousands):

2023 December 31,

Principal amount $ 900,000 $ 900,000

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Net carrying amount $ 896,839 $ 896,683

For the three and nine months ended September 30, 2022, interest expense for the Notes was as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

For the three months ended March 31, 2023 and 2022, interest expense for the Notes was as follows (in thousands):

Three Months Ended March 31,

Contractual interest expense $ 3,375 $ 3,375

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Total interest expense $ 3,531 $ 3,528

As of September 30, 2022, the estimated fair value (Level 2) of the Notes was $ 554.4 million.

As of March 31, 2023, the estimated fair value (Level 2) of the Notes was $ 693.0 million.

The fair value of the Notes is estimated using a pricing model that is primarily affected by the trading price of our common stock and market interest rates.

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We accrue liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

District Court Proceedings

On September 26, 2019, Personal Genomics of Taiwan, Inc.

(“PGI”) filed a complaint in the U.S.

District Court for the District of Delaware against us for patent infringement (C.A.

19-cv-1810) (the “PGI District Court matter”).

The matter from this complaint is based on PGI’s U.S.

7,767,441 (the “‘441 Patent”).

We plan to vigorously defend in this matter.

On November 20, 2019, we filed our answer to the complaint, denying infringement and seeking a declaratory judgement of invalidity of the ‘441 Patent.

On June 22, 2020, we filed a petition requesting institution of an inter-partes review (IPR) to the Patent Trial and Appeals Board (the “Board”) at the United States Patent Office requesting the Board to find a set of claims in the ‘441 Patent invalid.

On June 27, 2020, we filed a second petition requesting institution of an IPR requesting the Board to find another set of claims in the ‘441 Patent invalid.

The two petitions (the “PacBio IPR Petitions”) requesting IPRs assert that all of the claims relevant to the PGI complaint are invalid.

On January 19, 2021, the Board ordered that both PacBio IPR Petitions are instituted on all grounds presented.

On January 18, 2022, the Board issued decisions on the two IPRs.

In one IPR, all challenged claims were found unpatentable including PGI’s core device claims.

In the second IPR, the

board did not find the disputed claims unpatentable.

We are appealing the decision in the second IPR to the U.S.

Court of Appeals for the Federal Circuit.

On August 19, 2020, the court ordered a stay of the PGI District Court matter based on a joint stipulation by the parties pending a final written decision on the IPRs.

Following the final decision on the IPRs described above, on February 2, 2022, the judge ordered that the PGI District Court matter be reopened.

However, in a subsequent order dated September 15, 2022, the judge stayed the PGI District Court matter pending a final decision in the Federal Circuit appeal of the IPRs.

Proceedings in China

On May 12, 2020, PGI filed a complaint in the Wuhan Intermediate People’s Court in China alleging infringement of one or more claims of China patent No.

CN101743321B (the “CN321 Patent”), which is related to the ‘441 Patent.

On November 23, 2020, we filed an Invalidation Petition at the China National Intellectual Property Administration (CNIPA) demonstrating the invalidity of the claims in the CN321 Patent on grounds of insufficient disclosure, and the lack of support, essential technical features, clarity, novelty, and inventiveness.

A hearing in the invalidation proceeding at the CNIPA was held on April 29, 2021.

On September 2, 2021, the CNIPA issued its decision on the Invalidation Petition and determined that all claims (1-61) of the CN321 patent were invalid.

On December 1, 2021, PGI filed an appeal with the Beijing IP Court, contesting the CNIPA decision.

We filed a petition with the Wuhan Intermediate People’s court requesting dismissal of the infringement action based on the CNIPA invalidation decision, and PGI filed a petition to withdraw its complaint.

The Wuhan Intermediate People’s court granted PGI’s petition and dismissed the infringement action in May 2022.

Other Proceedings

From time to time, we may also be involved in a variety of other claims, lawsuits, investigations and proceedings relating to securities laws, product liability, patent infringement, contract disputes, employment and other matters that arise in the normal course of our business.

In addition, third parties may, from time to time, assert claims against us in the form of letters and other communications.

We record a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

We currently do not believe that the ultimate outcome of any of the matters described above is probable or reasonably estimable, or that these matters will have a material adverse effect on our business;

We do not believe that the ultimate outcome of any such pending matters is probable or reasonably estimable, or that these matters will have a material adverse effect on our business;

however, the results of litigation and claims are inherently unpredictable.

Regardless of the outcome, litigation can have an adverse impact on us because of litigation and settlement costs, diversion of management resources, and other factors.

Please see subsection titled Legal Proceedings, in Part II, Item 1 of this Quarterly Report on Form 10-Q.

Indemnification

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In addition, we may have obligations to hold harmless and indemnify third parties involved with our fundraising efforts and their respective affiliates, directors, officers, employees, agents or other representatives against any and all losses, claims, damages and liabilities related to claims arising against such parties pursuant to the terms of agreements entered into between such third parties and us in connection with such fundraising efforts.

To the extent that any such indemnification obligations apply to the lawsuits described above, any associated expenses incurred are included within the related accrued litigation expense amounts.

No additional liability associated with such indemnification obligations has been recorded as of September 30, 2022 and December 31, 2021.

To the extent that any such indemnification obligations apply to the lawsuits described above, any associated expenses incurred are included within the related accrued litigation

expense amounts.

No additional liability associated with such indemnification obligations has been recorded as of March 31, 2023 and December 31, 2022.

STOCKHOLDERS’ EQUITY

The 2020 Equity Incentive Plan (the “2020 Plan”), the 2020 Inducement Equity Incentive Plan (the “Inducement Plan”) and the 2021 adopted Omniome Equity Incentive Plan of Pacific Biosciences of California, Inc.

(the “Omniome Plan”) allow for the issuance of stock options, restricted units and awards and performance-based awards.

On August 4, 2020, stockholders approved the 2020 Plan and reserved 11,000,000 shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan.

On December 2, 2020, the Board of Directors (the “Board”) adopted the Inducement Plan and reserved 2,500,000 shares of our common stock for issua nce pursuant to equity awards granted under the Inducement Plan.

On April 18, 2021 and November 22, 2021, the Board amended the Inducement Plan to reserve an additional 750,000 and 360,000 shares, respectively.

On September 20, 2021, in connection with the acquisition of Omniome, we adopted the Omniome Equity Incentive Plan of Pacific Biosciences of California, Inc.

(the “Omniome Plan”).

Under the Omniome Merger Agreement, each unvested option to purchase Omniome common stock, granted under the Omniome Plan held by employees continuing with us, were assumed by PacBio and converted into an option to purchase shares of our common stock.

The terms and conditions of the converted options are substantially the same (including vesting and exercisability), except that (A) the assumed options cover shares of PacBio’s common stock;

(B) the number of shares of our common stock subject to the assumed option is equal to the product of (i) the number of shares of Omniome common stock subject to the corresponding unvested option, multiplied by (ii) the exchange ratio (as defined below), with any resulting fractional share rounded down to the nearest whole share;

and (C) the exercise price per share of the assumed options is equal to the quotient of (i) the exercise price per share of the corresponding unvested option to purchase shares of Omniome common stock, divided by (ii) the exchange ratio (as defined below), with any resulting fractional cent rounded up to the nearest whole cent.

The exchange ratio was equal to 0.259204639 .

We reserved 2,494,128 shares of our common stock for issuance pursuant to equity awards under the Omniome Plan.

On May 25, 2022, stockholders approved an amendment to the 2020 Plan and we reserved an additional 18,000,000 shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan.

As of September 30, 2022, we had 18.7 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan.

Underwritten Public Equity Offering

In January 2023, we entered into an underwriting agreement, relating to the public offering of 17.5 million shares of our common stock, $ 0.001 par value per share, at a price to the public of $ 10.00 per share.

Under the terms of the underwriting agreement, we also granted the underwriters a 30 -day option to purchase up to an additional 2.6 million shares of our common stock, which was subsequently exercised in full, and the offering, including the sale of shares of common stock subject to the underwriters' option, closed in January 2023.

In total, we sold 20.1 million shares of our common stock.

We paid a commission equal to 5.75 % of the gross proceeds from the sale of shares of our common stock.

The total net proceeds to us from the offering after deducting the underwriting discount were approximately $ 189.7 million, excluding approximately $ 0.5 million of offering expenses.

Refer to Note 10 – Stockholders' Equity , in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for more information on the Company's underwritten public equity offerings and private placement of common stock .

At March 31, 2023, the Company had share-based compensation awards outstanding under the 2020 Equity Incentive Plan (the “2020 Plan”), the 2020 Inducement Equity Incentive Plan (the “Inducement Plan”), the 2021 adopted Omniome Equity Incentive Plan of Pacific Biosciences of California, Inc.

(the “Omniome Plan”) and the 2010 Employee Stock Purchase Plan, from which we issued equity awards and employee stock.

As of March 31, 2023, we had 12.8 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan.

Refer to Note 10 – Stockholders' Equity , in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for more information on the Company's equity plans .

Stock Options

Time-based Stock Options

The following table summarizes stock option activity for time-based awards for the nine months ended September 30, 2022 (shares in thousands):

Exercise price

The following table summarizes stock option activity for time-based awards (shares in thousands):

of shares Weighted

exercise price

Outstanding at December 31, 2022 14,618 $ 10.60

Outstanding at September 30, 2022

Exercised ( 250 ) 3.75

Canceled ( 362 ) 17.16

Outstanding at March 31, 2023 14,006 $ 10.55

Performance-based Stock Options

The following table summarizes stock option activity for performance-based awards for the nine months ended September 30, 2022 (shares in thousands):

Exercise price

The following table summarizes stock option activity for performance-based awards (shares in thousands):

of shares Weighted

exercise price

Outstanding at December 31, 2022 258 $ 4.71

Outstanding at September 30, 2022

For the three and nine months ended September 30, 2022, we recognized stock-based compensation expense of $ 6.4 million and $ 20.9 million, respectively, related to time-based and performance-based options.

Restricted Stock Units (“RSUs”)

The following table summarizes the time-based RSU activity for the nine months ended September 30, 2022 (shares in thousands):

Weighted average

Exercised ( 230 ) 4.71

Canceled ( 4 ) 4.71

Outstanding at March 31, 2023 24 $ 4.71

Restricted Stock Units (“RSU”) and Performance Stock Units ("PSU")

We issue RSUs for which the respective shares vest when the requisite service period is achieved.

We issue PSUs for which the number of shares issuable in the third year of the performance period based on performance relative to specified revenue targets and continued employment through the vesting period.

The following table summarizes the time-based RSUs and PSUs activity (shares in thousands):

Restricted Stock Units (RSU) Performance Stock Units (PSU) Weighted average grant date

Outstanding at December 31, 2022 8,535 — $ 15.16 $ —

Outstanding at September 30, 2022

For the three and nine months ended September 30, 2022, we recognized stock-based compensation expense of $ 10.3 million and $ 31.9 million, respectively, related to restricted stock units.

Granted 6,341 564 9.47 9.43

Vested ( 1,640 ) — 16.47 —

Forfeited ( 465 ) — 17.80 —

Outstanding at March 31, 2023 12,771 564 $ 12.07 $ 9.43

Employee Stock Purchase Plan (“ESPP”)

Shares issued under our ESPP were 1,878,168 and 1,913,968 during the nine months ended September 30, 2022 and 2021, respectively.

Shares issued under our ESPP were 1,052,908 and 1,316,923 during the three months ended March 31, 2023 and 2022, respectively.

In February 2023, an additional 4.0 million shares were reserved under the ESPP.

As of September 30, 2022, 9,932,505 shares of our common stock remain available for issuance under our ESPP.

For the three and nine months ended September 30, 2022, we recognized stock-based compensation expense of $ 2.3 million and $ 7.9 million, respectively, related to our ESPP.

Stock-Based Compensation

The following table summarizes stock-based compensation expense (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

As of March 31, 2023, 12.9 million shares of our common stock remain available for issuance under our ESPP.

Share-Based Compensation

The following table summarizes share-based compensation expense (in thousands):

Three Months Ended March 31,

Cost of revenue $ 1,949 $ 1,758

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Sales, general and administrative 9,299 11,980

Merger-related expenses - stock-settled

Merger-related expenses - milestone

Stock-based compensation

Merger-related expenses - cash-settled

Total stock-based compensation expense

Total share-based compensation expense $ 17,952 $ 22,703

Determining Fair Value

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This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

The fair market value of RSUs granted is the closing price of our shares on the date of grant and is generally recognized as compensation expense on a straight-line basis over the respective vesting period.

For shares purchased under our ESPP, we estimate the grant-date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model.

The fair market value of RSUs and PSUs granted is the closing price of our shares on the date of grant and is generally recognized as compensation expense on a straight-line basis over the respective vesting

For shares purchased under our ESPP, we estimate the grant-date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model.

We estimate forfeitures of stock options, RSUs and shares purchased under our ESPP which is utilized to determine the compensation expense to be recorded over the requisite service period.

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Treasury constant maturities issued with a term equivalent to the expected terms.

For the three and nine months ended September 30, 2022 and 2021, the fair value of employee stock options was estimated using the following assumptions:

Three Months Ended September 30,

Nine Months Ended September 30,

For the three months ended March 31, 2023, there were no employee stock options granted.

The fair value of employee stock options was estimated using the following assumptions:

Three Months Ended March 31,

Expected term in years 4.60

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Risk-free interest rate 1.76 %

0.05 % — 0.71 %

0.41 % - 3.66 %

0.05 % — 0.74 %

Dividend yield —

Weighted average grant date fair value per share $ 6.66

For the three and nine months ended September 30, 2022 and 2021, the fair value of shares to be issued under the ESPP was estimated using the following assumptions:

Three Months Ended September 30,

Nine Months Ended September 30,

T he fair value of shares to be issued under the ESPP was estimated using the following assumptions:

Three Months Ended March 31,

Expected term in years 0.5 — 2.0

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0.60 % — 1.31 %

0.06 % — 0.20 %

0.60% — 3.51%

0.06 % — 0.20 %

Dividend yield — —

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Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding and potential shares assuming the dilutive effect of the convertible senior notes, using the if-converted method, and outstanding stock options, restricted stock units and common stock issuable pursuant to our employee stock purchase plan, or ESPP, using the treasury stock method.

The following table presents the calculation of the basic and diluted net (loss) income per share amounts presented in the Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net (loss) income

Weighted average shares used in computing basic net (loss) income

Basic net (loss) income per share

Weighted average shares used in computing basic net (loss) income per share

weighted average stock options

weighted average restricted stock units

weighted average common stock issuable pursuant to our ESPP

The following table presents the calculation of the basic and diluted net loss per share amounts presented in the Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts):

Three Months Ended March 31,

Net loss $ ( 88,015 ) $ ( 81,499 )

Weighted average shares used in computing basic net loss 242,032 222,289

Basic net loss per share $ ( 0.36 ) $ ( 0.37 )

Weighted average shares used in computing diluted net loss per share 242,032 222,289

Diluted net (loss) income per share

The following outstanding shares issuable upon conversion of the convertible senior notes, common stock options, restricted stock units (“RSUs”), with time-based vesting and performance-based vesting and ESPP shares expected to be purchased, were excluded from the computation of diluted net (loss) income per share for the three and nine months ended September 30, 2022 and 2021 as the effect would be anti-dilutive or to reduce the net loss per share (in thousands).

Three Months Ended

Nine Months Ended

September 30,

Diluted net loss per share $ ( 0.36 ) $ ( 0.37 )

The following shares issuable upon conversion of the convertible senior notes and outstanding equity awards were excluded from the computation of diluted net loss per share for the periods presented because the effect of including such shares would have been antidilutive (in thousands):

Three Months Ended March 31,

Shares issuable upon conversion of convertible senior notes 20,690 20,690

Options to purchase common stock

Equity Awards 30,366 26,752

As described in Note 2.

Business Acquisition s in Part I, Item 1 of this Quarterly Report on Form 10-Q, the contingently issuable shares would be due upon the achievement of a milestone.

Stockholders’ Equity in Part I, Item 1 of this Quarterly Report on Form 10-Q for detailed information on RSUs with time-based vesting and RSUs with performance-based vesting .

A summary of our revenue by geographic location for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Business Acquisitions in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022, the contingently issuable shares would be due upon the achievement of a milestone.

A summary of our revenue by geographic location is as follows (in thousands):

Three Months Ended March 31,

Americas $ 19,071 $ 19,082

Europe, Middle East and Africa 7,870 5,700

A summary of our revenue by category for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Asia-Pacific 11,959 8,391

Total $ 38,900 $ 33,173

A summary of our revenue by category is as follows (in thousands):

Three Months Ended March 31,

Instrument revenue $ 20,700 $ 15,550

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements