PACIFIC BIOSCIENCES OF CALIFORNIA, INC. 10-Q

Item 1. Financial Statements PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except per share amounts) March 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 76,646 $ 179,911 Investments 485,268 451,505 Accounts receivable, net 30,323 36,615 Inventory, net 67,343 56,676 Prepaid expenses and other current assets 17,144 17,040 Short-term restricted cash 300 300 Total current assets 677,024 742,047 Property and equipment, net 37,291 36,432 Operating lease right-of-use assets, net 30,672 32,593 Long-term restricted cash 2,422 2,422 Intangible assets, net 450,131 456,984 Goodwill 462,261 462,261 Other long-term assets 10,119 13,274 Total assets $ 1,669,920 $ 1,746,013 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 21,006 $ 15,062 Accrued expenses 21,991 45,708 Deferred revenue, current 17,346 16,342 Operating lease liabilities, current 9,772 9,591 Other liabilities, current 2,836 8,326 Total current liabilities 72,951 95,029 Deferred revenue, non-current 6,127 5,530 Contingent consideration liability, non-current 19,480 19,550 Operating lease liabilities, non-current 29,049 31,606 Convertible senior notes, net, non-current 892,545 892,243 Other liabilities, non-current 751 751 Total liabilities 1,020,903 1,044,709 Commitments and contingencies Stockholders’ equity Preferred stock, $ 0.001 par value: Authorized 50,000 shares; No shares issued or outstanding — — Common stock, $ 0.001 par value: Authorized 1,000,000 shares; issued and outstanding 272,280 and 267,744 shares at March 31, 2024 and December 31, 2023, respectively 272 268 Additional paid-in capital 2,566,304 2,539,892 Accumulated other comprehensive (loss) income ( 306 ) 219 Accumulated deficit ( 1,917,253 ) ( 1,839,075 ) Total stockholders’ equity 649,017 701,304 Total liabilities and stockholders’ equity $ 1,669,920 $ 1,746,013 See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Three Months Ended March 31, (in thousands, except per share amounts) 2024 2023 Revenue: Product revenue $ 35,009 $ 34,654 Service and other revenue 3,801 4,246 Total revenue 38,810 38,900 Cost of Revenue: Cost of product revenue 22,447 25,164 Cost of service and other revenue 3,738 3,792 Amortization of acquired intangible assets 1,343 183 Total cost of revenue 27,528 29,139 Gross profit 11,282 9,761 Operating Expense: Research and development 43,455 48,939 Sales, general and administrative 43,753 39,818 Amortization of acquired intangible assets 5,506 — Change in fair value of contingent consideration ( 70 ) 12,256 Total operating expense 92,644 101,013 Operating loss ( 81,362 ) ( 91,252 ) Interest expense ( 3,575 ) ( 3,630 ) Other income, net 6,759 6,867 Loss before benefit from income taxes ( 78,178 ) ( 88,015 ) Benefit from income taxes — — Net loss ( 78,178 ) ( 88,015 ) Other comprehensive (loss) income: Unrealized (loss) gain on investments ( 525 ) 2,841 Comprehensive loss $ ( 78,703 ) $ ( 85,174 ) Net loss per share: Basic $ ( 0.29 ) $ ( 0.36 ) Diluted $ ( 0.29 ) $ ( 0.36 ) Weighted average shares outstanding used in calculating net loss per share: Basic 269,578 242,032 Diluted 269,578 242,032 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) Three Months Ended March 31, 2024 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity (in thousands) Shares Amount Balance at December 31, 2023 267,744 $ 268 $ 2,539,892 $ 219 $ ( 1,839,075 ) $ 701,304 Net loss — — — — ( 78,178 ) ( 78,178 ) Other comprehensive loss — — — ( 525 ) — ( 525 ) Issuance of common stock in conjunction with equity plans 4,536 4 6,887 — — 6,891 Share-based compensation expense — — 19,525 — — 19,525 Balance at March 31, 2024 272,280 $ 272 $ 2,566,304 $ ( 306 ) $ ( 1,917,253 ) $ 649,017 Three Months Ended March 31, 2023 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders' Equity (in thousands) Shares Amount Balance at December 31, 2022 226,505 $ 227 $ 2,099,782 $ ( 4,765 ) $ ( 1,532,340 ) $ 562,904 Net loss — — — — ( 88,015 ) ( 88,015 ) Other comprehensive income — — — 2,841 — 2,841 Issuance of common stock from Underwritten Public Equity, 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 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 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (in thousands) 2024 2023 Cash flows from operating activities Net loss $ ( 78,178 ) $ ( 88,015 ) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 3,240 2,755 Amortization of intangible assets 6,853 234 Amortization of right-of-use assets 1,921 1,527 Share-based compensation expense 19,525 17,952 Accretion of discount and amortization of premium on marketable securities, net ( 4,031 ) ( 2,155 ) Change in the estimated fair value of contingent consideration ( 70 ) 12,256 Inventory provision 3 3,521 Other 403 363 Changes in assets and liabilities Accounts receivable, net 6,292 ( 10,803 ) Inventory, net ( 11,655 ) ( 13,319 ) Prepaid expenses and other assets 3,051 ( 6,888 ) Accounts payable 6,644 5,068 Accrued expenses ( 23,753 ) ( 13,186 ) Deferred revenue 1,601 423 Operating lease liabilities ( 2,376 ) ( 1,969 ) Other liabilities ( 5,152 ) ( 2,455 ) Net cash used in operating activities ( 75,682 ) ( 94,691 ) Cash flows from investing activities Purchase of property and equipment ( 3,879 ) ( 3,721 ) Purchases of investments ( 191,907 ) ( 233,291 ) Sales of investments — 595 Maturities of investments 161,650 163,864 Net cash used in investing activities ( 34,136 ) ( 72,553 ) Cash flows from financing activities Proceeds from issuance of common stock under equity offerings, net of issuance costs — 189,200 Proceeds from issuance of common stock from equity plans 6,891 7,235 Notes payable principal payoff ( 338 ) ( 446 ) Net cash provided by financing activities 6,553 195,989 Net (decrease) increase in cash, cash equivalents, and restricted cash ( 103,265 ) 28,745 Cash, cash equivalents, and restricted cash at beginning of period 182,633 328,311 Cash, cash equivalents, and restricted cash at end of period $ 79,368 $ 357,056 Cash and cash equivalents at end of period 76,646 353,834 Restricted cash at end of period 2,722 3,222 Cash, cash equivalents, and restricted cash at end of period $ 79,368 $ 357,056 See accompanying notes to the condensed consolidated financial statements. 6 Table of Contents PACIFIC BIOSCIENCES OF CALIFORNIA, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES 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 HiFi long-read sequencing technology and our Sequencing by Binding (SBB TM ) short-read sequencing technology. Our products address solutions across a broad set of applications including human genetics, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications. Our focus is on creating some of the world's most advanced sequencing systems to provide our customers with the most complete and accurate view of genomes, transcriptomes, and epigenomes. Our customers include academic and governmental research institutions, commercial testing and service laboratories, genome centers, public health labs, hospitals and clinical research institutes, contract research organizations (CROs), pharmaceutical companies, and agricultural companies. References in this report to “PacBio,” “we,” “us,” the “Company,” and “our” refer to Pacific Biosciences of California, Inc. and its consolidated subsidiaries. Basis of Presentation and Consolidation Our unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, or U.S. GAAP, as set forth in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC. The unaudited condensed consolidated financial statements include the accounts of Pacific Biosciences and our wholly owned subsidiaries. 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, 2023 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, 2023. Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes to the financial statements. On an ongoing basis, we evaluate our significant estimates, including those relating to the valuation of inventory, fair value of contingent consideration, valuation of acquired intangible assets, useful lives assigned to long-lived assets, asset impairment assessments, computation of provisions for income taxes, and valuations related to our convertible senior notes. While the extent of the potential impact of 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, 2024. Actual results could differ materially from these estimates. 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. Cash equivalents may be comprised of money market funds, certificates of deposit, commercial paper, corporate bonds and notes, and government agencies’ securities. 7 Table of Contents We classify our investments in debt securities as available-for sale and report the investments at fair value in current assets. 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 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. The cost used in the determination of gains and losses of securities sold is based on the specific identification method. The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity. Premium and discount amortization is recorded in other income (expense), net. We have the ability to hold, and do not intend to sell investments in unrealized loss positions before the recovery of their amortized cost bases. Our investment portfolio at any point in time contains investments in cash deposits, money market funds, commercial paper, corporate debt securities and U.S. government and agency securities with high credit ratings. 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 months ended March 31, 2024, no customer exceeded 10% of total revenue during the period. For the three months ended March 31, 2023, no customer exceeded 10% of total revenue during the period. As of March 31, 2024, 42 % of our accounts receivable were from domestic customers, compared to 49 % as of December 31, 2023. As of March 31, 2024, no customer represented 10% or greater of our net accounts receivable, while one customer represented approximately 10 % of our net accounts receivable as of December 31, 2023. Recent Accounting Pronouncements Accounting Pronouncements Pending Adoption In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires entities to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. This authoritative guidance will be effective for us in fiscal year 2025, with early adoption permitted. The Company is currently evaluating the impact of the ASU but does not expect any material impact upon adoption. 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, 2023. NOTE 2. BUSINESS ACQUISITIONS Apton Biosystems On August 2, 2023, we acquired Apton Biosystems, Inc. (“Apton”), a California-based genomics company focused on developing a high throughput short-read sequencer using highly differentiated optics and image processing, paired with novel clustering and chemistry (the “Apton acquisition”). In connection with the Apton acquisition, all outstanding equity securities of Apton were cancelled in exchange for s hares of our common stock with a fair value of $ 76.6 million , cash of $ 0.2 million , and contingent consideration with a preliminary estimated fair value of $ 18.5 million . Excluded from consideration transferred was $ 1.3 million attributable to accelerated share-based compensation expense. The fair value of the 6,121,571 common shares issued was determined based on the closing market price of our common stock on the acquisition date. 8 Table of Contents In connection with the Apton acquisition, contingent consideration of $ 25.0 million, which we may elect to pay in cash, shares of our common stock or a combination of cash and shares of our common stock, is due upon the achievement of a milestone, defined as the achievement of $ 50.0 million in revenue associated with Apton's technology, provided that the milestone event occurs prior to the 5 -year anniversary of the closing date of the acquisition. At this time, the number of shares, if any, to be issued in connection with the achievement of the specified milestone is not known and will be calculated based on the daily volume-weighted average price of our common stock for the twenty trading days ending on and including the fifth trading day immediately prior to the occurrence of the specified milestone. Upon achievement of the milestone, we may pay cash in lieu of our common stock to ensure that the issuance of our common stock does not exceed 19.9 % of our outstanding shares of common stock then outstanding. 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 Monte Carlo Simulation to estimate the volatility and systematic relative risk of revenues subject to sales milestone payments and discounting the associated cash payment amounts to their present values using a credit-risk-adjusted interest rate. We allocated the consideration transferred to the identifiable assets acquired and liabilities assumed based on preliminary estimates of their respective fair values at the date of the completion of the Apton acquisition, and such allocation is subject to adjustment for up to one year after the close of the acquisition as additional information is obtained. The major classes of assets and liabilities to which we have allocated the total fair value of the consideration transferred, based on the preliminary estimated fair values were as follows (in thousands): Cash and cash equivalents $ 97 In-process research and development 55,000 Goodwill 52,287 Other assets, current 153 Deferred income tax liability ( 11,338 ) Liabilities assumed ( 2,191 ) Total consideration transferred $ 94,008 The purchase price allocation is preliminary, primarily due to the pending finalization of the review of various tax attributes. We expect to finalize the purchase price allocation within 12 months of the acquisition date. We will recognize adjustments to the preliminary amounts with a corresponding adjustment to goodwill in the reporting period in which the adjustments to the preliminary amounts are determined. We incurred costs related to the Apton acquisition of approxim ately $ 9.0 million during the year ended December 31, 2023 . Merger-related expenses include $ 2.8 million relating to a liquidity event bonus plan that was treated as a separate transaction and included the issuance of 168,621 shares of common stock that were issued with a fair value of $ 2.1 million based on the closing market price of our common stock on the acquisition date. As a result, the total shares issued in connection with the Apton acquisition were 6.3 million shares of common stock. 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 $ 52.3 million, based on preliminary estimates, which is primarily attributable to the synergies expected to occur from the integration of Apton and is not deductible for income tax purposes. We preliminarily allocated $ 55.0 million of the purchase price to acquired in-process research and development ("IPR&D"). The fair value of the IPR&D was determined, with the assistance of a third-party valuation firm, using an income approach based on a forecast of expected future cash flows. Expected future cash flows utilize significant assumptions such as assumed revenue growth, discount rate and obsolescence factors. NOTE 3. FINANCIAL INSTRUMENTS Fair Value of Financial Instruments Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 9 Table of Contents The fair value hierarchy established under GAAP requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: • Level 1: quoted prices in active markets for identical assets or liabilities; • Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and • Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider an active market as one in which transactions for the asset or liability occurs with sufficient frequency and volume to provide pricing information on an ongoing basis. Conversely, we view an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our non-performance risk, or that of our counterparty, is considered in determining the fair values of liabilities and assets, respectively. We classify our cash deposits and money market funds within Level 1 of the fair value hierarchy because they are valued using bank balances or quoted market prices. We classify our investments as Level 2 instruments based on market pricing and other observable inputs. We did not classify any of our investments within Level 3 of the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the entire fair value measurement requires management to make judgments and consider factors specific to the asset or liability. The carrying amount of our accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses and other liabilities, current, approximate fair value due to their short maturities. 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: March 31, 2024 December 31, 2023 (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents $ 71,652 $ 4,994 $ — $ 76,646 $ 70,172 $ 109,739 $ — $ 179,911 Investments: Commercial paper — 10,078 — 10,078 — 9,947 — 9,947 Corporate debt securities — 88,802 — 88,802 — 88,579 — 88,579 U.S. government & agency securities — 386,388 — 386,388 — 352,979 — 352,979 Total investments — 485,268 — 485,268 — 451,505 — 451,505 Short-term restricted cash 300 — — 300 300 — — 300 Long-term restricted cash 2,422 — — 2,422 2,422 — — 2,422 Total assets measured at fair value $ 74,374 $ 490,262 $ — $ 564,636 $ 72,894 $ 561,244 $ — $ 634,138 Liabilities Contingent consideration $ — $ — $ 19,480 $ 19,480 $ — $ — $ 19,550 $ 19,550 Total liabilities measured at fair value $ — $ — $ 19,480 $ 19,480 $ — $ — $ 19,550 $ 19,550 10 Table of Contents We classify contingent consideration, which was incurred in connection with the acquisition of Apton, within Level 3, as factors used to develop the estimate of fair value include unobservable inputs that are not supported by market activity and are significant to the fair value. Estimates and assumptions used in the Monte Carlo simulation include risk-adjusted forecasted revenues for products and services leveraging Apton's technology and an estimated credit spread. We estimate the fair value of the contingent consideration liability based on the simulated revenue of the Company through the 5 -year anniversary of the closing date of the acquisition. As of March 31, 2024, the key input used in the determination of the fair value included projected revenues of the high-throughput short-read products and services leveraging Apton's technology. A decrease in the projected revenues 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- credit rating, which ranges from 7.4 % to 7.7 %. 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 three months ended March 31, 2024 were as follows: (in thousands) Level 3 Beginning balance as of December 31, 2023 $ 19,550 Change in estimated fair value ( 70 ) Ending balance as of March 31, 2024 $ 19,480 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, 2024, 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. 11 Table of Contents The following tables summarize our cash, cash equivalents and investments: As of March 31, 2024 (in thousands) Amortized Cost Gross unrealized gains Gross unrealized losses Fair Value Cash and cash equivalents $ 76,646 $ — $ — $ 76,646 Investments: Commercial paper 10,078 — — 10,078 Corporate debt securities 88,755 133 ( 86 ) 88,802 U.S. government & agency securities 386,741 75 ( 428 ) 386,388 Total investments 485,574 208 ( 514 ) 485,268 Total cash, cash equivalents and investments $ 562,220 $ 208 $ ( 514 ) $ 561,914 Short-term restricted cash $ 300 $ — $ — $ 300 Long-term restricted cash $ 2,422 $ — $ — $ 2,422 As of December 31, 2023 (in thousands) Amortized Cost Gross unrealized gains Gross unrealized losses Fair Value Cash and cash equivalents $ 179,958 $ 13 $ ( 60 ) $ 179,911 Investments: Commercial paper 9,947 — — 9,947 Corporate debt securities 88,263 373 ( 57 ) 88,579 U.S. government & agency securities 353,029 478 ( 528 ) 352,979 Total investments 451,239 851 ( 585 ) 451,505 Total cash, cash equivalents and investments $ 631,197 $ 864 $ ( 645 ) $ 631,416 Short-term restricted cash $ 300 $ — $ — $ 300 Long-term restricted cash $ 2,422 $ — $ — $ 2,422 The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of March 31, 2024: (in thousands) Fair Value Due in one year or less $ 380,422 Due after one year through five years 109,840 Total $ 490,262 Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties. Investment income included in other income, net on the Condensed Consolidated Statement of Operations and Comprehensive Loss was $ 7.2 million for the three months ended March 31, 2024 and $ 6.8 million for the three months ended March 31, 2023. 12 Table of Contents NOTE 4. BALANCE SHEET COMPONENTS Inventory, net Our inventory, net, consisted of the following components: (in thousands) March 31, 2024 December 31, 2023 Purchased materials $ 24,632 $ 20,168 Work in process 26,298 23,436 Finished goods 16,413 13,072 Inventory, net $ 67,343 $ 56,676 Goodwill and Intangible Assets Goodwill We had goodwill of $ 462.3 million as of March 31, 2024 and December 31, 2023. Goodwill is reviewed for impairment at least annually during the second quarter, or more frequently if an event occurs indicating the potential for impairment. We performed our annual assessment for goodwill impairment in the second quarter of 2023, noting no impairment. Intangible Assets Intangible assets include acquired in-process research and development ("IPR&D") of $ 55.0 million as a result of the Apton acquisition in August 2023. The IPR&D will remain on our Consolidated Balance Sheet as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development activities. During the development period following the acquisition, IPR&D is not amortized, but instead is tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Upon completion of the development, we will amortize the asset over the life of the product or record an impairment charge if the asset is determined to be impaired. We performed our annual assessment of IPR&D in the third quarter of 2023 in connection with the completion of the IPR&D acquired through the acquisition of Omniome, noting no impairment. In addition to IPR&D, definite-lived intangible assets included the following: As of March 31, 2024 As of December 31, 2023 (in thousands, except years) Estimated Useful Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology 15 $ 411,179 $ ( 16,048 ) $ 395,131 $ 411,179 $ ( 9,195 ) $ 401,984 Customer relationships 2 360 ( 360 ) — 360 ( 360 ) — Total $ 411,539 $ ( 16,408 ) $ 395,131 $ 411,539 $ ( 9,555 ) $ 401,984 The estimated future amortization expense of intangible assets with definite lives is as follows (in thousands): Remainder of 2024 $ 20,559 2025 27,412 2026 27,412 2027 27,412 2028 27,412 2029 and thereafter 264,924 Total $ 395,131 13 Table of Contents Amortization of intangible assets is included within our cost of revenue if the costs and expenses related to the intangible assets are attributable to revenue generating activities. Amortization expense for intangible assets that are not directly related to sales generating activities are amortized to operating expenses. For developed technology intangible assets that are utilized in both revenue generating activities and in research and development activities, we allocate the amortization expense between cost of revenue and operating expenses. The definite-lived intangible assets are amortized using the straight-line method over their estimated useful lives. 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. Deferred Revenue As of March 31, 2024, we had a total of $ 23.4 million of deferred revenue, $ 17.3 million of which was recorded as deferred revenue, current, and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae Corporation ("Invitae") and deferred service contract revenues. 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, 2023 for more information . The deferred revenue, non-current balance of $ 6.1 million primarily relates to deferred service contract revenues and is scheduled to be recognized in the next 6 years. Revenue recorded in the three months ended March 31, 2024 includes $ 3.2 million that was included in deferred revenue as of December 31, 2023. Product Warranties We generally provide a one-year warranty on instruments. In addition, we provide a limited warranty on consumables. At the time revenue is recognized, an accrual is established for estimated warranty costs based on historical experience as well as anticipated product performance. We periodically review the warranty reserve for adequacy and adjust the warranty accrual, if necessary, based on actual experience and estimated costs to be incurred. Warranties are recorded as part of accrued expenses on the Condensed Consolidated Balance Sheets and warranty expense is recorded as a component of cost of product revenue in the Condensed Consolidated Statements of Operations and Comprehensive Loss. There were no material changes in estimates for the periods presented below. Changes in the reserve for product warranties were as follows for the periods indicated: Three Months Ended March 31, (in thousands) 2024 2023 Balance at beginning of period $ 4,681 $ 1,651 Additions charged to cost of product revenue 1,600 604 Repairs and replacements ( 2,161 ) ( 631 ) Balance at end of period $ 4,120 $ 1,624 Term loans In connection with the acquisition of Omniome, we acquired $ 1.3 million in short-term debt and $ 3.0 million in long-term debt relating to a term loan facility that Omniome obtained in April 2020. Borrowings on the term loan facility were used to fund Omniome’s purchases of equipment, which serves as collateral. Each term loan has a term of 43 months and bears a fixed interest rate of approximately 17 % annually. The fee for the elective option to prepay all, but not less than all, of the borrowed amounts at any time after the 24 th month and before the 43 rd month after the commencement date, is 4 % of the outstanding loan balance. Payments are made in equal monthly installments including principal and interest. As of March 31, 2024, the carrying value of term loans outstanding was $ 0.2 million, recorded as part of other liabilities, current on the Condensed Consolidated Balance Sheet. Interest expense was not material for the three months ended March 31, 2024, and was included as part of interest expense in the Condensed Consolidated Statement of Operations and Comprehensive Loss. 14 Table of Contents The following table presents the future principal payments on the term loans (in thousands): Remainder of 2024 $ 152 Total $ 152 NOTE 5. CONVERTIBLE SENIOR NOTES 2030 Convertible Senior Notes In June 2023, we entered into a privately negotiated exchange agreement with a holder of our outstanding 1.50 % Convertible Senior Notes due 2028 (the “2028 Notes”), pursuant to which we issued $ 441.0 million in aggregate principal amount of our 1.375 % Convertible Senior Notes due 2030 (the “2030 Notes”) in exchange for $ 441.0 million principal amount of the 2028 Notes (the “Exchange Transaction”), pursuant to exemptions from registration under the Securities Act of 1933, as amended, and the rules and regulations thereunder. The 2030 Notes were issued on June 30, 2023. The 2030 Notes are governed by an indenture (the “2030 Indenture”) between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes bear interest at a rate of 1.375 % per annum. Interest on the 2030 Notes is payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 2023. The 2030 Notes will mature on December 15, 2030, subject to earlier conversion, redemption or repurchase. The 2030 Notes are convertible at the option of the holder at any time until the second scheduled trading day prior to the maturity date, including in connection with a redemption by the Company. The 2030 Notes are convertible into shares of our common stock based on an initial conversion rate of 46.5116 shares of common stock per $1,000 principal amount of the 2030 Notes (which is equal to an initial conversion price of $ 21.50 per share of common stock), in each case subject to customary anti-dilution and other adjustments as a result of certain extraordinary transactions. Upon conversion of the 2030 Notes, we may elect to settle such conversion obligation in shares of our common stock, cash or a combination of shares of our common stock and cash. On or after June 20, 2028, the 2030 Notes will be redeemable by the Company in the event that the closing sale price of our common stock has been at least 150 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide the redemption notice at a redemption price of 100 % of the principal amount of such 2030 Notes, plus accrued and unpaid interest up to, but excluding, the redemption date. Upon the occurrence of a Fundamental Change (as defined in the 2030 Indenture), the holders of the 2030 Notes may require that we repurchase all or part of the principal amount of the 2030 Notes at a purchase price equal to 100 % of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date, and all unpaid interest from the fundamental change repurchase date thereon, but excluding, the maturity date. The 2030 Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2030 Notes under the 2030 Indenture. The 2030 Indenture also includes customary covenants for convertible notes of this type. To the extent we elect, the sole remedy for an event of default relating to our failure to comply with certain of our reporting obligations shall, for the first 360 calendar days after the occurrence of such an event of default, consist exclusively of the right to receive additional interest on the 2030 Notes at a rate equal to (i) 0.25 % per annum of the principal amount of the 2030 Notes outstanding for each day during the first 180 calendar days of the 360 -day period after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived) and (ii) 0.50 % per annum of the principal amount of the 2030 Notes outstanding for each day from, and including, the 181 st calendar day to, and including, the 360 th calendar day after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived as provided for in the 2030 Indenture). On the 361 st day after such event of default (if the event of default relating to our failure to comply with its obligations is not cured or waived prior to such 361 st day), the 2030 Notes shall be subject to acceleration as provided for in the 2030 Indenture. 15 Table of Contents The 2030 Notes are accounted for in accordance with the authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. Under ASU 2020-06, the guidance requires that debt with an embedded conversion feature is accounted for in its entirety as a liability and no portion of the proceeds from the issuance of the convertible debt instrument is accounted for as attributable to the conversion feature unless the conversion feature is required to be accounted for separately as an embedded derivative or the conversion feature results in a substantial premium. The conversion feature of the 2030 Notes is not accounted for as an embedded derivative because it is considered to be indexed to our common stock, and the 2030 Notes were not issued at a substantial premium; therefore, the 2030 Notes are accounted for in their entirety as a liability. Because we may elect to settle any conversions entirely in shares, and because settlement in shares is the default settlement method, the liability is classified as non-current. The requirement to repurchase the 2030 Notes, including unpaid interest to the maturity date in the event of a Fundamental Change, is considered a put option for certain periods requiring bifurcation under ASC 815 – Derivatives and Hedging. However, given the low probability of such a Fundamental Change occurring during the applicable periods, the value of the embedded derivative is immaterial. The additional interest feature in the event of our failure to comply with certain reporting obligations is also considered an embedded derivative requiring bifurcation under ASC 815. However, due to the nature and terms of the reporting obligations, the value of the embedded derivative is immaterial. The Exchange Transaction was accounted for as an extinguishment driven by the change in fair value of the embedded conversion option. We recorded a loss on extinguishment of debt of approximately $ 2.0 million in connection with the Exchange Transaction during the year ended December 31, 2023, which represents the difference between the fair value and the principal amount of the 2030 Notes of the debt at the modification date, plus unamortized debt issuance costs of $ 1.5 million related to the respective portion of the 2028 Notes. We incurred issuance costs related to the 2030 Notes of approximately $ 7.3 million, which were recorded as debt issuance costs and are presented as a reduction to the 2030 Notes on our Consolidated Balance Sheets. The debt issuance costs are amortized to interest expense using the effective interest method over the term of the 2030 Notes, resulting in an effective interest rate of 1.6 %. We also paid accrued but unpaid interest of $ 2.5 million on the 2028 Notes in connection with the Exchange Transaction on June 30, 2023. We did not receive any cash proceeds from the Exchange Transaction. In exchange for issuing the 2030 Notes pursuant to the Exchange Transaction, we received and cancelled the exchanged 2028 Notes. Following the closing of the Exchange Transaction, $ 459.0 million in aggregate principal amount of 2028 Notes remained outstanding with terms unchanged. The net carrying amount of the liability for the 2030 Notes is included as convertible senior notes, net, non-current in the Condensed Consolidated Balance Sheets as follows: (in thousands) March 31, 2024 December 31, 2023 Principal amount $ 441,000 $ 441,000 Unamortized debt premium 507 524 Unamortized debt issuance costs ( 6,670 ) ( 6,907 ) Net carrying amount $ 434,837 $ 434,617 For the three months ended March 31, 2024 and 2023, interest expense for the 2030 Notes was as follows: Three Months Ended March 31, (in thousands) 2024 2023 Contractual interest expense $ 1,533 $ — Amortization of debt issuance costs 239 — Total interest expense $ 1,772 $ — As of March 31, 2024, the estimated fair value (Level 2) of the 2030 Notes was $ 343.6 million. The fair value of the 2030 Notes is estimated using a binomial lattice model that is primarily affected by the trading price of our common stock, market interest rates and volatility. 16 Table of Contents 2028 Convertible Senior Notes On February 9, 2021, we entered into an investment agreement (the “Investment Agreement”) with SB Northstar LP (the “Purchaser”), a subsidiary of SoftBank Group Corp., relating to the issuance and sale to the Purchaser of $ 900.0 million in aggregate principal amount of the 2028 Notes. The 2028 Notes were issued on February 16, 2021. As discussed above, in June 2023 we completed an exchange of $ 441.0 million in aggregate principal amount of our 2028 Notes for $ 441.0 million aggregate principal amount of the 2030 Notes, leaving approximately $ 459.0 million in aggregate principal amount of 2028 Notes outstanding. The 2028 Notes are governed by an indenture (the “2028 Indenture”) between the Company and U.S. Bank National Association, as trustee. The 2028 Notes bear interest at a rate of 1.50 % per annum. Interest on the 2028 Notes is payable semi-annually in arrears on February 15 and August 15 and commenced on August 15, 2021. The 2028 Notes will mature on February 15, 2028, subject to earlier conversion, redemption or repurchase. The 2028 Notes are convertible at the option of the holder at any time until the second scheduled trading day prior to the maturity date, including in connection with a redemption by the Company. The 2028 Notes are convertible into shares of our common stock based on an initial conversion rate of 22.9885 shares of common stock per $1,000 principal amount of the 2028 Notes (which is equal to an initial conversion price of $ 43.50 per share of common stock), in each case subject to customary anti-dilution and other adjustments as a result of certain extraordinary transactions. Upon conversion of the 2028 Notes, we may elect to settle such conversion obligation in shares of our common stock, cash or a combination of shares of our common stock and cash. On or after February 20, 2026, the 2028 Notes will be redeemable by the Company in the event that the closing sale price of our common stock has been at least 150 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide the redemption notice at a redemption price of 100 % of the principal amount of such 2028 Notes, plus accrued and unpaid interest up to, but excluding, the redemption date. Upon the occurrence of a Fundamental Change (as defined in the 2028 Indenture), the holders of the 2028 Notes may require that we repurchase all or part of the principal amount of the 2028 Notes at a purchase price of par plus unpaid interest up to, but excluding, the maturity date. The 2028 Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2028 Notes under the 2028 Indenture. The 2028 Indenture also includes customary covenants for convertible notes of this type. To the extent we elect, the sole remedy for an event of default relating to our failure to comply with certain of our reporting obligations shall, for the first 360 calendar days after the occurrence of such an event of default, consist exclusively of the right to receive additional interest on the 2028 Notes at a rate equal to (i) 0.25 % per annum of the principal amount of the 2028 Notes outstanding for each day during the first 180 calendar days of the 360 -day period after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived) and (ii) 0.50 % per annum of the principal amount of the 2028 Notes outstanding for each day from, and including, the 181 st calendar day to, and including, the 360 th calendar day after the occurrence of such an event of default during which such event of default is continuing (or, if earlier, the date on which such event of default is cured or waived as provided for in the 2028 Indenture). On the 361 st day after such event of default (if the event of default relating to our failure to comply with its obligations is not cured or waived prior to such 361 st day), the 2028 Notes shall be subject to acceleration as provided for in the 2028 Indenture. The 2028 Notes are accounted for in accordance with the authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. Under ASU 2020-06, the guidance requires that debt with an embedded conversion feature is accounted for in its entirety as a liability and no portion of the proceeds from the issuance of the convertible debt instrument is accounted for as attributable to the conversion feature unless the conversion feature is required to be accounted for separately as an embedded derivative or the conversion feature results in a substantial premium. The conversion feature of the 2028 Notes is not accounted for as an embedded derivative because it is considered to be indexed to our common stock, and the 2028 Notes were not issued at a premium; therefore, the 2028 Notes are accounted for in their entirety as a liability. Because we may elect to settle any conversions entirely in shares, and because settlement in shares is the default settlement method, the liability is classified as non-current. 17 Table of Contents The requirement to repurchase the 2028 Notes, including unpaid interest to the maturity date in the event of a Fundamental Change, is considered a put option for certain periods requiring bifurcation under ASC 815 – Derivatives and Hedging. However, given the low probability of such a Fundamental Change occurring during the applicable periods, the value of the embedded derivative is immaterial. The additional interest feature in the event of our failure to comply with certain reporting obligations is also considered an embedded derivative requiring bifurcation under ASC 815. 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 2028 Notes of approximately $ 4.5 million, which were recorded as debt issuance costs and are presented as a reduction to the 2028 Notes on our Consolidated Balance Sheets. The debt issuance costs are amortized to interest expense using the effective interest method over the term of the 2028 Notes, resulting in an effective interest rate of 1.6 %. The net carrying amount of the liability for the 2028 Notes is included as convertible senior notes, net, non-current in the Condensed Consolidated Balance Sheets as follows: (in thousands) March 31, 2024 December 31, 2023 Principal amount $ 459,000 $ 459,000 Unamortized debt issuance costs ( 1,292 ) ( 1,374 ) Net carrying amount $ 457,708 $ 457,626 For the three months ended March 31, 2024 and 2023, interest expense for the 2028 Notes was as follows: Three Months Ended March 31, (in thousands) 2024 2023 Contractual interest expense $ 1,721 $ 3,375 Amortization of debt issuance costs 81 156 Total interest expense $ 1,802 $ 3,531 As of March 31, 2024, the estimated fair value (Level 2) of the 2028 Notes was $ 381.7 million. The fair value of the 2028 Notes is estimated using a binomial lattice model that is primarily affected by the trading price of our common stock, market interest rates and volatility. NOTE 6. COMMITMENTS AND CONTINGENCIES The Company has entered into various operating lease agreements, primarily relating to our corporate offices. See Note 8 – Commitments and Contingencies , subsection titled “Leases”, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2023 for information regarding the Company’s maturity of lease liabilities under its lease agreements. Contingencies We may become involved in legal proceedings, claims and assessments from time to time in the ordinary course of business. We accrue liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. 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. 18 Table of Contents Indemnification Pursuant to Delaware law and agreements entered into with each of our directors and officers, we may have obligations, under certain circumstances, to hold harmless and indemnify each of our directors and officers against losses suffered or incurred by the indemnified party in connection with their service to us, and judgements, fines, settlements and expenses related to claims arising against such directors and officers to the fullest extent permitted under Delaware law, our bylaws and our certificate of incorporation. We also enter and have entered into indemnification agreements with our directors and officers that may require us to indemnify them against liabilities that arise by reason of their status or service as directors or officers, except as prohibited by applicable law. 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 March 31, 2024 and December 31, 2023. N OTE 7. STOCKHOLDERS’ EQUITY Equity Plans As of March 31, 2024, 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, 2024, we had 1.5 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan. Shares remaining and available for future issuance reflect shares that may become eligible to vest upon the achievement of maximum targets for certain equity awards. 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, 2023 for more information on the Company's equity plans . Stock Options The following table summarizes stock option activity for time-based awards: (Shares in thousands) Number of shares Weighted average exercise price Outstanding at December 31, 2023 13,011 $ 10.63 Granted 80 3.67 Exercised ( 515 ) 3.15 Canceled ( 239 ) 11.87 Expired ( 100 ) 7.05 Outstanding at March 31, 2024 12,237 $ 10.90 19 Table of Contents 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 is based on performance relative to specified revenue targets and continued employment through the vesting period. These PSU shares are issuable following the third year of the performance period. Maximum achievement of the revenue goal under the PSUs will result in up to 200 % of the target number of shares subject to the PSUs to become eligible to vest, while not meeting the minimum achievement of the revenue goal under the PSUs will result in no shares subject to the PSUs becoming eligible to vest. The following table summarizes the time-based RSUs and PSUs activity: Restricted Stock Units (RSU) Performance Stock Units (PSU) Weighted average grant date fair value (Shares in thousands) RSU PSU Outstanding at December 31, 2023 11,308 541 $ 12.06 $ 9.43 Granted 12,194 — 5.15 — Vested ( 2,827 ) — 12.96 — Forfeited ( 587 ) — 9.92 — Outstanding at March 31, 2024 20,088 541 $ 7.80 $ 9.43 Employee Stock Purchase Plan (“ESPP”) Shares issued under our ESPP wer e 1,194,436 and 1,052,908 during the three months ended March 31, 2024 and 2023, respectively. In the first quarter of 2024, an additional 4.0 million shares were reserved under the ESPP. As of March 31, 2024, 15.0 million shares of our common stock remain available for issuance under our ESPP. Share-Based Compensation The following table summarizes share-based compensation expense: Three Months Ended March 31, (in thousands) 2024 2023 Cost of revenue $ 2,106 $ 1,948 Research and development 5,788 6,705 Sales, general and administrative 11,631 9,299 Total share-based compensation expense $ 19,525 $ 17,952 Determining Fair Value We estimate the fair value of stock options granted using the Black-Scholes valuation method and a single option award approach. When determining the current share prices underlying the stock options for calculating the grant-date fair value, we reference the observable market prices of our stock. 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 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 period. 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. • Expected Term - The expected term used in the Black-Scholes valuation method represents the period that the stock options are expected to be outstanding and is determined based on historical experience of similar awards, considering the contractual terms of the stock options and vesting schedules. • Expected Volatility - The expected volatility used in the Black-Scholes valuation method is derived from the implied volatility related to our share price over the expected term. 20 Table of Contents • Expected Dividend - We have never paid dividends on our shares and, accordingly, the dividend yield percentage is zero for all periods. • Risk-Free Interest Rate - The risk-free interest rate used in the Black-Scholes valuation method is the implied yield currently available on U.S. Treasury constant maturities issued with a term equivalent to the expected terms. 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, 2024 Expected term in years 4.9 Expected volatility 81 % Risk-free interest rate 4.32 % Dividend yield — Weighted average grant date fair value per share $ 2.45 The fair value of shares to be issued under the ESPP was estimated using the following assumptions: Three Months Ended March 31, 2024 2023 Expected term in years 0.5 — 2.0 0.5 — 2.0 Expected volatility 81 % 97 % Risk-free interest rate 4.54 % — 5.27 % 4.89 % — 5.20 % Dividend yield — — Weighted average grant date fair value per share $ 2.78 $ 5.00 NOTE 8. NET LOSS PER SHARE 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 equity awards using the treasury stock method. 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: Three Months Ended March 31, (in thousands, except per share amounts) 2024 2023 Numerator: Net loss $ ( 78,178 ) $ ( 88,015 ) Denominator: Basic Weighted average shares used in computing basic net loss per share 269,578 242,032 Basic net loss per share $ ( 0.29 ) $ ( 0.36 ) Diluted Weighted average shares used in computing diluted net loss per share 269,578 242,032 Diluted net loss per share $ ( 0.29 ) $ ( 0.36 ) 21 Table of Contents 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: Three Months Ended March 31, (in thousands) 2024 2023 Shares issuable upon conversion of convertible senior notes 31,063 20,690 Equity Awards 36,924 30,366 See Note 2. Business Acquisitions for detailed information on contingently issuable shares due upon achievement of a milestone. See Note 7 . Stockholders’ Equity for detailed information on equity awards. NOTE 9. REVENUE A summary of our revenue by geographic location is as follows: Three Months Ended March 31, (in thousands) 2024 2023 Americas $ 17,678 $ 19,071 Europe, Middle East and Africa 8,356 7,870 Asia-Pacific 12,776 11,959 Total $ 38,810 $ 38,900 A summary of our revenue by category is as follows: Three Months Ended March 31, (in thousands) 2024 2023 Instrument revenue $ 19,025 $ 20,700 Consumable revenue 15,984 13,954 Product revenue 35,009 34,654 Service and other revenue 3,801 4,246 Total revenue $ 38,810 $ 38,900 NOTE 10. SUBSEQUENT EVENTS On April 16, 2024, we announced plans to reduce operating costs. In connection with our expense reduction initiatives, we began implementing a reduction of our global workforce and will close our San Diego office. As a result of these actions, we expect to record a restructuring charge, comprised primarily of compensation and benefits afforded to terminated employees and lease-related costs. At this time, we are unable to make a determination of the estimated amount or range of amounts for charges to be incurred in connection with these actions. 22 Table of Contents