What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-17 compared with 2024-02-28 · 467 added, 397 removed, 828 unchanged (51% of the section changed)

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Notes to Consolidated Financial Statements

Fiscal 2024 Form 10-K

Report of Independent Registered Public Accounting Firm

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2024, expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 17, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition - Identification of performance obligations and allocation of contract consideration

Fiscal 2024 Form 10-K

Revenue recognition - Identification and evaluation of performance obligations

Description of the Matter For the year ended December 31, 2024, the Company recognized revenue of $154.0 million, including $136.1 million of product revenue, which consists primarily of instrument sales and related consumables.

As described in Note 1 to the consolidated financial statements, the Company may enter into contracts with customers that includes a combination of promised products and services, resulting in arrangements containing multiple performance obligations.

The Company identifies a performance obligation for each promise to transfer to the customer, a product or service that is distinct.

The consideration is allocated between each performance obligation based on its individual standalone selling price, which is estimated by the Company, using historical sales data, as well as management judgment.

The Company enters into, or periodically modifies, revenue contracts with non-standard terms, requiring management to evaluate whether these non-standard terms represent a performance obligation.

For example, the Company may offer specified discounts on current products within an arrangement and on future purchase options, for which historical information may not be available.

As part of the Company's identification of performance obligations and the resulting determination of the allocation of contract consideration, the Company considers if these specified discounts represent a material right when compared to the estimated standalone selling price and, therefore, a performance obligation to be included in the allocation of the contract value.

Auditing management’s identification of the performance obligations and the resulting determination of the allocation of contract consideration in certain contracts involved a higher degree of judgment due to the subjective nature of identifying certain performance obligations and the related determination of standalone selling price when it is not based on historical information.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s internal controls addressing management’s identification of performance obligations and allocation of contract consideration, including standalone selling price determination.

Our audit procedures included, among others, reading executed contracts for a sample of arrangements and evaluating whether terms of the contracts (including specified discounts on current and future purchase options) resulted in additional performance obligations.

Additionally, we tested the completeness and accuracy of the information used in management’s allocation of contract consideration, including the data incorporated in underlying calculations to determine standalone selling price.

Business combination - Valuation of intangible asset

Description of the Matter As described in Note 2 to the consolidated financial statements, the Company completed its acquisition of Apton Biosystems, Inc.

The transaction was accounted for as a business combination, and the Company recorded an indefinite-lived intangible asset of $55.0 million.

Auditing the Company’s accounting for the acquisition was challenging because the determination of the fair value of the identified intangible asset, which consisted of in-process research and development (IPR&D), required management to make certain subjective estimates and assumptions.

The Company used an income approach to measure the intangible asset.

The valuation of the intangible asset is subject to higher estimation uncertainty due to management’s judgments in determining significant assumptions, which included certain components of the revenue projection and the discount rate.

A change in these significant assumptions could have a significant effect on the fair value of the intangible asset.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls addressing the identified audit risk.

For example, we tested controls over management’s review of the significant assumptions used to develop the fair value estimate of the intangible asset.

We also tested management’s controls to validate that data used in the fair value estimate was complete and accurate.

To test the estimated fair value of the intangible asset, we performed audit procedures that included, among others, evaluating the Company’s valuation model with the assistance of valuation specialists, performing sensitivity analyses to determine which assumptions had the greatest impact on the overall determination of value, and testing the completeness and accuracy of the underlying data used to develop the assumptions.

We also evaluated the assumptions by comparing them to market and economic trends, historical results of the Company’s business and other guideline companies within the same industry.

As described in Note 1 to the consolidated financial statements, the Company may enter into, or periodically modify, contracts with customers that include a combination of promised products and services, resulting in arrangements containing multiple performance obligations.

The Company identifies performance obligations for promises to transfer distinct products or services to a customer.

Contracts with customers may contain non-standard terms, requiring management to evaluate if there are additional performance obligations.

For example, certain customer contracts provide options to customers which can be exercised at a future date, such as the option to purchase products at discounted prices.

The Company assesses whether the specified discounts constitute material rights and, therefore, are performance obligations that are included in the allocation of the transaction price.

Auditing management’s identification and evaluation of certain performance obligations was challenging and involved a higher degree of judgment due to their non-standard nature.

Our audit procedures included, among others, reading executed contracts for a sample of arrangements and evaluating whether all performance obligations were appropriately identified and accounted for based on terms of the contracts (including specified discounts on current and future purchase options).

Fiscal 2024 Form 10-K

Impairment assessment of goodwill and indefinite-lived intangible assets

Description of the Matter As of December 31, 2024, the Company’s goodwill and indefinite-lived intangible assets balances were $317.8 million and $15.0 million, respectively.

As discussed in Note 1 to the consolidated financial statements, goodwill and indefinite-lived intangible assets are tested for impairment at least annually at the reporting unit level and asset level, respectively, or more frequently if indicators of impairment exist.

The Company is comprised of one reporting unit.

As described in Note 4 to the consolidated financial statements, the Company identified interim indicators of impairment in 2024, resulting in total impairment charges of $184.5 million for the year ended December 31, 2024.

Auditing the Company's interim impairment assessments was more complex due to the higher estimation uncertainty in determining the fair value of the reporting unit and the indefinite-lived intangible asset under the income approach.

Significant assumptions used in the income approach included revenue growth expectations and the selected discount rate.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining the fair value of the reporting unit and the indefinite-lived intangible asset.

This included controls over management’s review of the revenue growth rates and the discount rate.

Our audit procedures included, among others, evaluating the Company's valuation methodology and performing a sensitivity analysis of the assumptions to evaluate the change in the fair value resulting from changes in the assumptions to identify the assumptions that have the most significant impact on the fair value amount.

We evaluated the reasonableness of projected revenue growth used within the valuations against analyst expectations, industry and market data and other guideline companies within the same industry.

We also involved valuation specialists to assist in evaluating the Company’s selection of the discount rates.

In addition, we inspected the Company’s reconciliation of the fair value of the reporting unit to the market capitalization of the Company and assessed the results.

/s/ Ernst & Young LLP

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San Mateo, California

February 28, 2024

March 17, 2025

Fiscal 2024 Form 10-K

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

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Other liabilities, current 3,224 8,326

Contingent consideration liability, current — 172,094

Total current liabilities 66,299 95,029

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Additional paid-in capital 2,654,804 2,539,892

Accumulated other comprehensive income (loss) 219 ( 4,765 )

Accumulated other comprehensive income 422 219

Accumulated deficit ( 2,148,926 ) ( 1,839,075 )

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See accompanying notes to the consolidated financial statements.

Fiscal 2024 Form 10-K

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

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Sales, general and administrative 175,017 169,818 160,854

Impairment charges 184,500 — —

Merger-related expenses — 9,042 —

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Operating loss ( 474,313 ) ( 334,467 ) ( 307,196 )

Loss from Continuation Advances from Illumina — — ( 52,000 )

Loss on extinguishment of debt — ( 2,033 ) —

Gain on debt restructuring 154,407 — —

Interest expense ( 13,412 ) ( 14,343 ) ( 14,690 )

Other income, net 23,783 32,684 7,638

Loss before benefit from income taxes ( 318,159 ) ( 314,248 ) ( 274,872 )

Benefit from income taxes ( 11,424 ) — ( 93,649 )

Loss before income taxes ( 309,535 ) ( 318,159 ) ( 314,248 )

Income tax provision (benefit) 316 ( 11,424 ) —

Net loss ( 309,851 ) ( 306,735 ) ( 314,248 )

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See accompanying notes to the consolidated financial statements.

Fiscal 2024 Form 10-K

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

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Issuance of common stock in conjunction with equity plans 5,527 6 11,224 — — 11,230

Issuance of common stock in Private Placement, net of issuance costs 11,215 11 294,834 — — 294,845

Issuance of common stock in acquisition of Omniome 8,912 9 237,876 — — 237,885

Share-based compensation expense — — 78,613 — — 78,613

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Net loss — — — — ( 306,735 ) ( 306,735 )

Other comprehensive loss — — — ( 3,678 ) — ( 3,678 )

Issuance of common stock in conjunction with equity plans 5,527 6 11,224 — — 11,230

Share-based compensation expense — — 78,613 — — 78,613

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

Net loss — — — — ( 306,735 ) ( 306,735 )

Other comprehensive income — — — 4,984 — 4,984

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Balance at December 31, 2023 267,744 $ 268 $ 2,539,892 $ 219 $ ( 1,839,075 ) $ 701,304

Net loss — — — — ( 309,851 ) ( 309,851 )

Other comprehensive income — — — 203 — 203

Issuance of common stock in conjunction with equity plans 6,222 6 7,697 — — 7,703

Issuance of common stock in conjunction with convertible notes exchange 20,452 20 36,179 36,199

Share-based compensation expense — — 71,036 — — 71,036

Balance at December 31, 2024 294,418 $ 294 $ 2,654,804 $ 422 $ ( 2,148,926 ) $ 506,594

See accompanying notes to the consolidated financial statements.

Fiscal 2024 Form 10-K

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

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

Loss (gain) from Continuation Advances — — 52,000

Depreciation 13,774 11,463 9,480

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Amortization of right-of-use assets 12,165 6,810 6,925

Share-based compensation 72,118 78,613 73,355

Share-based compensation expense 71,036 72,118 78,613

Impairment charges 184,500 — —

Merger-related compensation expense — 3,395 —

Loss on extinguishment of debt — 2,033 —

Amortization of premium and accretion of discount on marketable securities, net ( 12,840 ) ( 244 ) 4,011

Gain on debt restructuring ( 154,407 ) — —

Accretion of discount and amortization of premium on marketable securities, net ( 13,044 ) ( 12,840 ) ( 244 )

Change in the estimated fair value of contingent consideration ( 850 ) 15,060 2,377

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Maturities of investments 593,971 769,521 575,800

Net cash provided by (used in) in investing activities 4,604 116,083 ( 678,531 )

Net cash provided by investing activities 124,004 4,604 116,083

Cash flows from financing activities

Continuation Advances — — ( 52,000 )

Proceeds from issuance of Convertible Senior Notes, net of issuance costs — — 895,536

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

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Payment of contingent consideration — ( 86,411 ) —

Fiscal 2024 Form 10-K

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Payments made in conjunction with convertible notes exchange ( 50,200 ) — —

Notes payable principal payoff ( 490 ) ( 1,842 ) ( 1,608 )

Other — — ( 245 )

Net cash provided by financing activities 108,891 9,622 1,169,581

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 145,678 ) ( 137,506 ) 379,870

Net cash (used in) provided by financing activities ( 42,987 ) 108,891 9,622

Net decrease in cash, cash equivalents, and restricted cash ( 125,041 ) ( 145,678 ) ( 137,506 )

Cash, cash equivalents, and restricted cash at beginning of period 182,633 328,311 465,817

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Right-of-use asset and liability additions and modifications $ 18,253 $ — $ —

Issuance of common stock in conjunction with convertible notes exchange $ 36,199 $ — $ —

Issuance of common stock in acquisition of Apton and Omniome $ — $ 76,642 $ —

Issuance of common stock in connection with Apton liquidity event bonus plan $ — $ 2,111 $ —

Convertible Senior Notes exchange $ 441,000 $ — $ —

Convertible notes exchange $ — $ 441,000 $ —

Issuance of common stock following milestone achievement $ — $ 84,761 $ —

See accompanying notes to the consolidated financial statements.

Fiscal 2024 Form 10-K

PACIFIC BIOSCIENCES OF CALIFORNIA, INC.

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Business Overview

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 ® ) technology.

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

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 the most complete and accurate view of genomes, transcriptomes, and epigenomes.

Long-read sequencing was recognized by the journal Nature Methods as its “method of the year” for 2022 for its contributions to biological understanding and future potential.

Long-read sequencing has been applied to produce telomere-to-telomere genomes of humans, pangenome references, and has been recognized for its ability to provide more complete views of human variation .

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.

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All intercompany transactions and balances have been eliminated.

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

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, but not limited to, the valuation of inventory, the fair value of contingent consideration, the valuation of acquired intangible assets, the useful lives assigned to long-lived assets, the computation of provisions for income taxes, and the valuations related to our convertible senior notes.

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 December 31, 2023.

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 finite-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 December 31, 2024.

Actual results could differ materially from these estimates.

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We remeasure foreign subsidiaries monetary assets and liabilities to the U.S.

dollar and record net gains or losses from remeasurement in other income, net, in the consolidated statements of operations and comprehensive loss.

dollar and record net gains or losses from remeasurement in other income, net, on our consolidated statements of operations and comprehensive loss.

Fiscal 2024 Form 10-K

Cash, Cash Equivalents, Restricted Cash, and Investments

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Premium and discount amortization is recorded in other income, 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.

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Although we have historically not experienced significant credit losses, our exposure to credit losses may increase if our customers are adversely affected by changes in economic pressures or uncertainty associated with local or global economic recessions, or other customer-specific factors.

For the year ended December 31, 2023, no single customer accounted for 10% or greater of our total revenue.

For the years ended December 31, 2022 and 2021, one customer accounted for approximately 12 %, and 13 % of our total revenue, respectively.

For the years ended December 31, 2024, and 2023, no customer accounted for 10% or more of our total revenue.

For the year ended December 31, 2022, one customer exceeded 10 % of our total revenue.

As of December 31, 2024 and 2023, 36 % and 49 % of our accounts receivable were from domestic customers, respectively.

As of December 31, 2023, one customer represented approximately 10 % of our net accounts receivable.

As of December 31, 2022, one customer represented approximately 10 % of our net accounts receivable.

As of December 31, 2024, no customer represented 10% or more of our net accounts receivable.

As of December 31, 2023, one customer represented 10 % of our net accounts receivable.

We currently purchase several key parts and components used in the manufacture of our products from a limited number of suppliers.

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An extended interruption in the supply of parts and components currently obtained from our suppliers could adversely affect our business and consolidated financial statements.

Fiscal 2024 Form 10-K

Inventory, Net

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Operating Leases

We have various operating lease agreements for office, research and development, manufacturing and distribution facilities, including our headquarters location in Menlo Park, California.

As of December 31, 2024, these leases had remaining lease terms that expire between 2025 and 2027.

We record operating lease right-of-use assets and liabilities on our consolidated balance sheets for all leases with a term of more than 12 months.

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Costs that we incur to complete the business combination, such as legal and other professional fees, are expensed as they are incurred.

Fiscal 2024 Form 10-K

In connection with certain acquisitions, contingent consideration can be earned by the sellers upon completion of certain future performance milestones.

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These estimates require significant management judgment, including probabilities of achieving certain future milestones.

Changes in the fair value of the contingent consideration subsequent to the acquisition date are recognized in operating expense in our consolidated statements of operations and comprehensive loss.

Changes in the fair value of the contingent consideration subsequent to the acquisition date are recognized in operating expense on our consolidated statements of operations and comprehensive loss.

If the initial accounting for a business combination is incomplete by the end of a reporting period that falls within the measurement period, we report provisional amounts in our financial statements.

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We record these adjustments to the provisional amounts with a corresponding offset to goodwill.

Any adjustments identified after the measurement period are recorded in the consolidated statements of operations and comprehensive loss.

Goodwill, Intangible Assets, and Other Long-Lived Assets

Any adjustments identified after the measurement period are recorded on our consolidated statements of operations and comprehensive loss.

Goodwill and Intangible Assets with Indefinite Lives

Assets acquired, including intangible assets and capitalized in-process research and development (“IPR&D”), and liabilities assumed are measured at fair value as of the acquisition date.

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however, they are reviewed for impairment at least annually.

We perform annual impairment testing of goodwill in the second quarter of each year, or more frequently if indicators of potential impairment exist.

We generally perform annual impairment testing of IPR&D in the fourth quarter of each year, or more frequently if indicators of potential impairment exist.

We perform annual impairment testing of goodwill as of the first day of the second quarter, or more frequently if indicators of impairment exist.

We perform annual impairment testing of IPR&D as of the first day of the third quarter, or more frequently if indicators of impairment exist.

Events that would indicate impairment and trigger an interim impairment test include, but are not limited to, unexpected adverse business conditions, weak demand for a specific product line or business, economic factors, shifting focus to certain lines of business, unanticipated technological changes or competitive activities, loss of key personnel, changes in business strategy and acts by governments or courts.

We perform our goodwill impairment analysis at the reporting unit level.

We have one reporting unit, which aligns with our reporting structure and availability of discrete financial information.

During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair values of our reporting unit is less than the carrying amount, including goodwill.

During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than the carrying amount, including goodwill.

The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and our overall financial performance.

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We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative goodwill impairment test.

We generally perform our impairment test using a combination of an income and a market approach to determine the fair value of goodwill.

The income approach utilizes estimated discounted cash flows, while the market approach utilizes comparable company information.

During the IPR&D impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D is less than the carrying amount.

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We may elect to bypass the qualitative assessment in a period and proceed to perform the quantitative impairment test.

Fiscal 2024 Form 10-K

Intangible Assets and Other Finite-Lived Assets

Finite-lived intangibles assets include our acquired developed technology and customer relationships.

We capitalize finite-lived intangibles assets and generally amortize them on a straight-line basis over the estimated useful lives.

We regularly review the carrying amount and useful lives of our finite-lived assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

If indicators of impairment exist, an impairment test is performed to assess the recoverability of the affected assets by determining whether the carrying amount of such assets exceeds the undiscounted expected future cash flows.

If the affected assets are not recoverable, we estimate the fair value of the assets and record an impairment loss if the carrying value of the assets exceeds the fair value.

Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to the net book value, significant changes in the ability of a particular asset to generate positive cash flows for our strategic business objectives, and the pattern of utilization of a particular asset.

Intangible assets purchased as part of an acquisition are included in Intangible assets, net, on our consolidated balance sheets.

We regularly review intangible assets with finite lives and other finite-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

We assess the recoverability of assets based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset.

If the undiscounted future cash flows are less than the carrying amount, the asset is impaired.

In light of the changes in circumstances that led to the recoverability assessment, we also assess the remaining estimated useful life of the assets.

Factors that may indicate potential impairment include a significant decline in our stock price and market capitalization compared to net book value, significant changes in the ability of an asset to generate positive cash flows for our strategic business objectives, and the pattern of utilization of a particular asset.

In order to estimate the fair values of identifiable intangible assets with finite lives and other finite-lived assets, we estimate the present value of future cash flows from those assets.

The key assumptions that we use in our cash flow model are the amount and timing of estimated future cash flows to be generated by the asset over an extended period of time and a rate of return that considers the relative risk of achieving the cash flows, the time value of money, and other factors that a willing market participant would consider.

Management judgment is required to estimate the amount and timing of future cash flows and the relative risk of achieving those cash flows.

Revenue Recognition

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Revenues are recognized when control of the promised goods are transferred to our customers, or services are performed, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We may enter into contracts with customers that include a combination of promised products and services, resulting in arrangements containing multiple performance obligations.

Invoicing typically occurs upon shipment, or delivery in the case of an instrument, and payment is typically due within 30 days from invoice.

In instances where the right to payment or transfer of title is contingent upon customer acceptance of the product, revenue is deferred until the acceptance criteria has been met.

Revenue from instrument service contracts is recognized as the services are rendered, typically evenly over the contract term.

Revenue from development agreements generally includes upfront and milestone payments.

Revenue for these agreements is recognized when each distinct performance obligation is satisfied.

We may enter into, or periodically modify, contracts with customers that include a combination of promised products and services, resulting in arrangements containing multiple performance obligations.

We determine whether each product or service is distinct, in order to identify the performance obligations in the contract and allocate the contract transaction price among the distinct performance obligations.

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

Fiscal 2024 Form 10-K

The consideration for contracts with multiple performance obligations is allocated between separate performance obligations based on their individual standalone selling price.

We determine the best estimate of standalone selling price using average selling prices over a 12-month period combined with an assessment of current market conditions.

We determine the best estimate of standalone selling price using historical average selling prices combined with an assessment of current market conditions.

If the standalone selling price is not directly observable, we rely on estimates by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional specific factors, internal costs, profit objectives, pricing practices, and other observable inputs.

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Revenue is recorded net of discounts and sales taxes collected on behalf of governmental authorities.

We update the transaction price for expected consideration, subject to constraint.

Where we expect, at contract inception, the timing of payments to be consistent with the transfer of goods or services or the contract duration to be one year or less, we do not adjust the transaction price for the effects of a significant financing component

We periodically modify existing contracts with customers, which could change the scope or the price of the contract, or both.

When a contract modification occurs, we exercise judgment to determine if the modification should be accounted for as:

(i) a separate contract, (ii) the termination of the original contract and creation of a new contract, (iii) a cumulative catch-up adjustment to the original contract, or a combination thereof.

Further, contract modifications require the identification and evaluation of the performance obligations of the modified contract, allocation of revenue to the remaining performance obligations and determination of the period of recognition for each identified performance obligation.

Certain of our agreements provide options to customers which can be exercised at a future date, such as the option to purchase our product at discounted prices, among others.

In accounting for customer options, we determine whether an option is a material right and this requires us to exercise significant judgment.

If a contract provides the customer an option to acquire additional goods or services at a discount that exceeds the range of discounts that we typically give for that product or service for the same class of customer, or if the option provides the customer certain additional goods or services for free, the option may be considered a material right.

In accounting for customer options, we determine whether an option is a material right and this may require us to exercise judgment.

If the contract gives the customer the option to acquire additional goods or services at their normal standalone selling prices, we would likely determine that the option is not a material right and, therefore, account for it when the customer exercises the option.

If the standalone selling price of the option is not directly observable, an estimated standalone selling price is utilized which considers adjustments for discounts that the customer could receive without exercising the option and the likelihood that the option will be exercised.

We may also utilize the alternative approach to estimate the standalone selling price, available pursuant to the applicable accounting guidance, to the extent we conclude the applicable criteria for using the alternative approach has been met.

We update the transaction price for expected consideration, subject to constraint, each reporting period if our estimate of future goods to be ordered by customers change.

Additionally, we generally provide a one-year warranty on instruments.

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Service costs include the direct costs of components used in support, repair and maintenance of customer instruments as well as the cost of personnel, materials, shipping and support infrastructure necessary to support our installed customer base.

Fiscal 2024 Form 10-K

Research and Development

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We have the ability to hold and do not intend to sell the investments in unrealized loss positions before the recovery of their amortized cost bases.

We account for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax bases of our assets and liabilities and the amounts reported in the financial statements.

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Stockholders’ Equity for further information regarding share-based compensation.

Fiscal 2024 Form 10-K

Other Comprehensive Income (Loss)

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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 outstanding stock options, restricted stock units, and common stock issuable pursuant to our ESPP, using the treasury stock method.

Diluted net loss per share is computed by dividing diluted net loss by the weighted-average number of shares of common stock outstanding and potentially dilutive shares outstanding during the period.

We calculate the potential dilutive effect of outstanding stock options, restricted stock units, and common stock issuable pursuant to our ESPP, using the treasury stock method.

Potentially dilutive common shares issuable upon conversion of convertible senior notes are determined using the if-converted method.

Recent Accounting Pronouncements

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.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU improves segment disclosure requirements, primarily through enhanced disclosure requirements for significant segment expenses on an annual and interim basis.

The improved disclosure requirements apply to all public entities that are required to report segment information, including those with only one reportable segment.

The standard was effective for us beginning in fiscal year 2024 and interim periods within fiscal year 2025.

We adopted this ASU for our fiscal year ending December 31, 2024 and applied the amendments retrospectively to all prior periods presented in the consolidated financial statements.

There was no impact on the Company’s reportable segments identified.

Additional required disclosures have been included in Note 11.

Segment and Geographic Information .

Accounting Pronouncements Pending Adoption

In November 2024, the FASB issued ASU 2024-04, Debt—Debt With Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments .

This new standard clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion or extinguishment of convertible debt.

The standard will be effective for us beginning in the first quarter of fiscal year 2026, with early adoption permitted.

The new standard is expected to be applied prospectively, but retrospective application is permitted.

We are currently evaluating the impact of ASU 2024-04 on the consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

This new standard requires a company to provide disaggregated disclosures, within the notes to the financial statements, of specified categories of expenses that are included in line items on the face of the income statement.

The standard will be effective for us beginning in fiscal year 2027, and interim periods within fiscal year 2028, with early adoption permitted.

The new standard is expected to be applied prospectively, but retrospective application is permitted.

We are currently evaluating the impact of ASU 2024-03 on the consolidated financial statements and related disclosures.

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 impacts upon adoption.

This new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid.

The standard will be effective for us beginning in fiscal year 2025, with early adoption permitted.

The new standard is expected to be applied prospectively, but retrospective application is permitted.

We are currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures.

Fiscal 2024 Form 10-K

BUSINESS ACQUISITIONS

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(“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 shares 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.

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.

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 five-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 contingent consideration is accounted for as a liability at fair value, with changes during each reporting period recognized on 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):

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, 2023, 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 $ 97

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Total consideration transferred $ 94,008

The purchase price allocation is preliminary, primarily due to the pending finalization of review of various tax attributes.

We continue to collect information regarding certain estimates and assumptions, including potential liabilities and contingencies.

We will record adjustments to the fair value of the assets acquired, liabilities assumed and goodwill within the twelve months measurement period, if necessary.

During the year ended December 31, 2023, we recorded a measurement period adjustment of $ 1.6 million to decrease goodwill, and a corresponding $ 2.0 million increase in intangible assets and $ 0.4 million decrease in the deferred tax liability on the consolidated balance sheets, and a $ 0.7 million increase to our benefit from income taxes on the consolidated statements of operations and comprehensive loss.

The measurement period adjustment was due to new information that became available to us upon the completion of the valuation assessment of the in-process research and development and the tax provision.

We incurred costs related to the Apton acquisition of approximately $ 9.0 million during the year ended December 31, 2023, which are included in merger-related expenses on the consolidated statement of operations and comprehensive loss.

We have finalized the purchase price allocation for the Apton acquisition.

There were no material adjustments from those amounts disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

We incurred costs related to the Apton acquisition of approximately $ 9.0 million during the year ended December 31, 2023, which are included in merger-related expenses on our consolidated statement of operations and comprehensive loss.

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.

Fiscal 2024 Form 10-K

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").

We recognized goodwill of $ 52.3 million, which is primarily attributable to the synergies expected to occur from the integration of Apton and is not deductible for income tax purposes.

We allocated $ 55.0 million of the purchase price to acquired 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 projections and discount rate.

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 share-based compensation expense.

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

In connection with the acquisition the 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 that 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.

On September 20, 2023, we achieved the commercial milestone in connection with the acquisition of Omniome.

Financial Instruments for additional information on amounts paid and shares issued to former Omniome securityholders during the year ended December 31, 2023.

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

Total cash paid

Fair value of share consideration

Fair value of contingent consideration

Share-based compensation expense excluded from consideration transferred

Total consideration transferred $ 714,789

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 $ 15,338

Property and equipment, net

Operating lease right-of-use assets, net

In-process research and development 400,000

Goodwill 390,665

Other assets, non-current

Deferred income tax liability ( 91,814 )

Liabilities assumed ( 26,821 )

Total consideration transferred $ 714,789

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.

There were no measurement period adjustments recorded in the year ended December 31, 2022.

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 $ 12.0 million during the twelve months ended December 31, 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 twelve months ended December 31, 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 $ 12.0 million of PacBio acquisition-related costs, $ 18.9 million of share-based compensation expense related to acceleration of certain Omniome stock options not attributable to pre-combination service, and a $ 91.0 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:

Years Ended December 31,

(in thousands, except per share amounts)

Pro forma total revenue

$ 130,513 $ 78,893

Pro forma net (loss) income

$ ( 278,451 ) $ 17,510

Pro forma net (loss) income per share - basic and diluted

$ ( 1.27 ) $ 0.09

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

Revenues of $ 0 and a net loss of $ 15.6 million from the acquired Omniome business have been included in our Consolidated Statement of Operations and Comprehensive (Loss) Income for the twelve months ended December 31, 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 $ 987

Property and equipment, net

Intangible assets

Goodwill 19,309

Other assets, non-current

Deferred income tax liability ( 2,672 )

Liabilities assumed ( 118 )

Total consideration transferred $ 29,547

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 consists of developed technology and customer relationships.

INVITAE COLLABORATION

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 sequencing systems (instruments, consumables and service contracts).

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 was 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 s atisfied, which is when Invitae places purchase orders for certain sequencing platforms and the associated goods or services are delivered.

Any remaining unused credits will be recognized when they expire.

Invitae purchased certain instruments and consumables under the terms of the Amended and Restated Agreement, for which $ 10.5 million and $ 3.7 million of revenue was recognized as product revenue during the years ended December 31, 2023 and 2022, respectively, on the consolidated statements of operations and comprehensive loss.

As of December 31, 2023, $ 8.0 million of deferred revenue, current, and $ 2.9 million of deferred revenue, non-current, is recorded on the 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 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 recorded a

non-operating expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

Expected future cash flows utilize significant assumptions such as revenue projections and discount rate.

FINANCIAL INSTRUMENTS

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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.

Fiscal 2024 Form 10-K

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 December 31, 2023 and December 31, 2022, respectively:

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

December 31, 2024 December 31, 2023

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Total assets measured at fair value $ 57,592 $ 334,561 $ — $ 392,153 $ 72,894 $ 561,244 $ — $ 634,138

Contingent consideration - Omniome acquisition $ — $ — $ — $ — $ — $ — $ 172,094 $ 172,094

Contingent consideration - Apton acquisition $ — $ — $ 18,700 $ 18,700 $ — $ — $ 19,550 $ 19,550

Total liabilities measured at fair value $ — $ — $ 18,700 $ 18,700 $ — $ — $ 19,550 $ 19,550

For the year ended December 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.

Contingent Consideration - Apton

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.

We estimate the fair value of the contingent consideration liability based on the simulated revenue of the Company through the five-year anniversary of the closing date of the acquisition.

As of December 31, 2024, the key input used in the determination of the fair value included projected revenues of the Company relating to the high-throughput short-read products and services leveraging Apton's technology.

The assumptions used in our valuation are inherently subject to uncertainty.

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 7.8 % to 8.2 %.

risk-free rate and the estimated subordinated credit spread for CCC+ credit rating, which ranges from 9.4 % to 9.6 %.

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.

On September 20, 2023, we achieved the commercial milestone in connection with the acquisition of Omniome.

Consequently, former Omniome securityholders were entitled to receive as milestone consideration, among other things, an aggregate of approximately $ 100.9 million in cash and approximately 9.0 million shares of our common stock, representing $ 95.9 million divided by 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 was two days

immediately prior to the achievement of the milestone.

The $ 95.9 million represents the $ 100.0 million that was to be paid in shares of our common stock offset by $ 4.1 million attributable to stock options issued by PacBio in replacement of Omniome’s unvested options as part of the transaction, pursuant to the terms of the Omniome merger agreement.

Following the achievement of the commercial milestone, $ 101.3 million of the contingent consideration, which includes certain payroll taxes, was paid during the year ended December 31, 2023.

Additionally, 8,988,391 shares were issued at a value of $ 84.8 million to the former Omniome securityholders.

As a result of the achievement of the milestone, the contingent consideration liability incurred in connection with the acquisition of Omniome was no longer considered a Level 3 liability at December 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 for the year ended December 31, 2023, and our valuation techniques did not change compared to the prior year.

Changes in the estimated fair value of the contingent consideration liability for the year ended December 31, 2023 were as follows:

Fiscal 2024 Form 10-K

Changes in the estimated fair value of the contingent consideration liability related to the Apton acquisition for the year ended December 31, 2024 were as follows:

(in thousands) Level 3

Beginning balance as of December 31, 2023 $ 19,550

Additions 18,450

Change in estimated fair value ( 850 )

Achievement of milestone ( 186,054 )

Ending balance as of December 31, 2024 $ 18,700

Changes to the fair value are recorded as the Change in fair value of contingent consideration in the consolidated statement of operations and comprehensive loss.

For the year ended December 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.

Changes to the fair value are recorded as the change in fair value of contingent consideration on our consolidated statement of operations and comprehensive loss.

Contingent Consideration - Omniome

On September 20, 2023, we achieved the commercial milestone in connection with the 2021 acquisition of Omniome.

Following the achievement of the commercial milestone, $ 101.3 million of the contingent consideration, which includes certain payroll taxes, was paid during the year ended December 31, 2023.

Additionally, 8,988,391 shares were issued at a value of $ 84.8 million to the former Omniome securityholders.

Fiscal 2024 Form 10-K

Cash, Cash Equivalents, Restricted Cash, and Investments

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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 consolidated statement of operations and comprehensive loss was $ 32.8 million and $ 9.2 million for the years ended December 31, 2023 and 2022, respectively.

Fiscal 2024 Form 10-K

Investment income included in other income, net on our consolidated statements of operations and comprehensive loss was $ 24.9 million and $ 32.8 million for the years ended December 31, 2024 and 2023, respectively.

BALANCE SHEET COMPONENTS

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Finished goods 14,081 15,746

Inventory, gross 81,523 75,833

Inventory reserve ( 22,768 ) ( 19,157 )

Inventory, net $ 58,755 $ 56,676

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Property and equipment, net $ 30,505 $ 36,432

Construction in progress consists of capitalizable costs that have been incurred for the construction of long-lived assets and is primarily comprised of amounts that will be classified as lab equipment.

Construction in progress consists of capitalizable costs that have been incurred for the construction of finite-lived assets and is primarily comprised of amounts that will be classified as lab equipment.

Depreciation expense during the years ended December 31, 2024, 2023, and 2022 was $ 13.8 million, $ 11.5 million, and $ 9.5 million, respectively.

In connection with the interim impairment test of goodwill in the second and fourth quarter of 2024, we also performed a recoverability test for the definite-lived asset group, which includes property and equipment, noting no impairment.

Fiscal 2024 Form 10-K

Goodwill and Intangible Assets

As of December 31, 2023 and 2022, the goodwill balance was $ 462.3 million and $ 410.0 million, respectively.

Goodwill preliminarily increased by $ 52.3 million, due to the Apton acquisition, of which $ 11.3 million relates to a deferred income tax liability.

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.

Acquired Intangible Assets

Intangible assets include acquired IPR&D of $ 55.0 million as a result of the Apton acquisition in August 2023.

As of December 31, 2023, the research and development project had not been completed or abandoned and, therefore, the IPR&D intangible asset is not currently subject to amortization.

Goodwill is reviewed for impairment at least annually as of the first day of the second quarter, or more frequently if an event occurs indicating impairment.

We performed our annual assessment for goodwill impairment, noting no impairment.

Based primarily on the sustained decrease in our stock price during the second quarter and overall market capitalization as of the end of the second quarter of 2024 as well as other factors, we concluded that there was an indicator that it was more likely than not that the fair value of the reporting unit was less than its carrying amount that required an interim impairment test be performed on goodwill.

As a result of the interim impairment test performed as of June 30, 2024, we concluded that the carrying amount of the entity-level reporting unit exceeded fair value and recorded $ 93.2 million of goodwill impairment.

The impairment charge is included on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

The decline in the fair value of the reporting unit below its carrying value as of June 30, 2024 resulted primarily from the decline in our stock price and changes in the timing of expected future cash flows as compared to our initial long-term plan, due to continued impact of longer than expected median sales cycles resulting from various factors.

We performed our impairment test using a combination of an income and a market approach to determine the fair value of the reporting unit.

The income approach utilized estimated discounted cash flows, while the market approach utilized comparable company information.

Significant assumptions used in the income approach included revenue growth expectations and a selected discount rate of 12.0 %.

The discount rate was based on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors.

The assessment is a level 3 fair value measurement due to its reliance on certain unobservable inputs and significant management judgment.

The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value.

An increase of 100 basis points to the discount rate used in our assessment would have resulted in additional goodwill impairment of approximately $ 85 million.

The assessed fair value was deemed reasonable based on a market capitalization reconciliation and a supportable control premium.

As of the end of the fourth quarter of 2024, we concluded that the significant increase in the carrying value of the reporting unit resulting primarily from the debt restructuring during the quarter and changes in the timing and amount of expected future cash flows due to macroeconomic headwinds, among other factors, indicated that it was more likely than not that the fair value of the reporting unit was less than its carrying amount that required an interim impairment test be performed on goodwill.

As a result of the impairment test performed as of December 31, 2024, we concluded that the carrying amount of the entity-level reporting unit exceeded fair value and recorded $ 51.3 million of goodwill impairment.

The impairment charge is included on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

We performed our impairment test consistent with the approach used to determine the fair value of the reporting unit in the second quarter of 2024.

Significant assumptions used in the income approach included revenue growth expectations and a selected discount rate of 12.0 %.

The assessment is a Level 3 fair value measurement due to its reliance on certain unobservable inputs and significant management judgment.

The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value.

An increase of 100 basis points to the discount rate used in our assessment would have resulted in additional goodwill impairment of approximately $ 95 million.

The assessed fair value was deemed reasonable based on a market capitalization reconciliation.

As a result of the impairments, the carrying value of goodwill now approximates fair value.

Changes in our future operating results, cash flows, share price, market capitalization or discount rates, among others, used when conducting future goodwill impairment tests could affect the estimated implied fair value of goodwill and may result in additional impairment charges in the future.

Changes to goodwill during the year ended December 31, 2024 were as follows:

(in thousands)

Balance as of December 31, 2023

Impairment charges

Balance as of December 31, 2024

Fiscal 2024 Form 10-K

Intangible Assets

Intangible assets include developed technology, customer relationships, and acquired IPR&D.

As a result of the Apton acquisition in August 2023, we allocated $ 55.0 million of the purchase price to IPR&D.

As of December 31, 2024, the research and development project had not been completed or abandoned and, therefore, the IPR&D is not currently subject to amortization.

During the year ended December 31, 2023, acquired IPR&D of $ 400.0 million as a result of the Omniome acquisition in September 2021 was completed and became subject to amortization.

IPR&D is reviewed for impairment at least annually, or more frequently if an event occurs indicating the potential for impairment.

We performed our annual assessment for IPR&D impairment in the third quarter of 2023, noting no impairment.

In addition to IPR&D, we had the following acquired definite-lived intangible assets as of December 31, 2023 (in thousands, except years):

Based on the interim impairment test of goodwill in the second quarter of 2024 and our annual IPR&D impairment assessment in the third quarter of 2024, no impairment of IPR&D was identified.

As of the end of the fourth quarter of 2024, we concluded that due to significant macroeconomic uncertainties and the related changes in the timing and amount of expected future cash flows, among other factors, it was more likely than not that the fair value of the IPR&D was less than its carrying amount that required an interim impairment test be performed on IPR&D.

We performed our impairment test by comparing the carrying value of the IPR&D to its estimated fair value, which was determined by the income approach, using a discounted cash flow model.

Significant estimates and assumptions used in the income approach, which represent a Level 3 fair value measurement, include revenue growth assumptions, a selected discount rate of 14.0 %, and a selected obsolescence factor of 13 years.

The discount rate was based primarily on the weighted average cost of capital, determined using market, peer company, industry data, and related risk factors.

Based on our analysis, the carrying value of the IPR&D exceeded its estimated fair value, and we recorded an impairment of $ 40.0 million in the fourth quarter of 2024.

The impairment charge is included on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

The assumptions used were inherently subject to uncertainty and small changes in these assumptions could have had a significant impact on the concluded value.

An increase of 100 basis points to the discount rate used in our analysis would have resulted in additional IPR&D impairment of approximately $ 5 million.

A decrease of one year to the obsolescence factor used in our analysis would have resulted in additional IPR&D impairment of approximately $ 5 million.

We also performed a recoverability test for the definite-lived asset group, which includes developed technology, noting no impairment.

As a result of the impairment, the carrying value of the IPR&D now approximates fair value.

Changes in macroeconomic conditions, industry-specific conditions and company-specific conditions may impact the estimates and assumptions used when conducting future IPR&D impairment tests.

These changes could affect the estimated fair value of the IPR&D and may result in additional impairment charges in the future.

Changes to IPR&D during the year ended December 31, 2024 were as follows:

(in thousands)

Balance as of December 31, 2023

Impairment charge

Balance as of December 31, 2024

In addition to IPR&D, we had the following acquired finite-lived intangible assets as of December 31, 2024:

(in thousands, except years) Estimated

(in years) Gross

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For the years ended December 31, 2024, 2023, and 2022, amortization expense of intangibles in operating expenses was $ 18.0 million, $ 6.3 million, and $ 0.2 million, respectively.

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.

Fiscal 2024 Form 10-K

Amortization of acquired 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.

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

The finite-lived intangible assets are amortized using the straight-line method over their estimated useful lives.

The estimated future amortization expense of acquisition-related intangible assets with finite lives is estimated as follows:

(in thousands)

2025 $ 27,412

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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.

Warranty expense is recorded as a component of cost of product revenue.

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 our consolidated balance sheets and warranty expense is recorded as a component of cost of product revenue on our consolidated statements of operations and comprehensive loss.

There were no material changes in estimates for the periods presented below.

Fiscal 2024 Form 10-K

Changes in the reserve for product warranties were as follows:

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Deferred Revenue

As of December 31, 2023, we had a total of $ 21.9 million of deferred revenue, $ 16.3 million of which was recorded as deferred revenue, current and primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae, as described in Note 3.

Invitae Collaboration , as well as deferred service contract revenues.

The deferred revenue, non-current balance of $ 5.6 million primarily relates to future performance obligations under the Amended and Restated Agreement with Invitae and deferred service contract revenues and is scheduled to be recognized in the next 5 years.

The deferred revenue, non-current balance includes $ 2.9 million that was reclassified from deferred revenue, current to deferred revenue, non-current following receipt of a non-cancellable order from Invitae during the year ended December 31, 2023 for partial utilization of the available credits, which is expected to be recognized in revenue after 12 months from December 31, 2023.

Revenue recorded in the year ended December 31, 2023 includes $ 18.9 million of previously deferred revenue that was included in deferred revenue, current as of December 31, 2022.

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 December 31, 2023, the carrying value of term loans outstanding was $ 0.5 million, recorded as part of other liabilities, current on the consolidated balance sheet.

The interest expense was $ 0.3 million for the year ended December 31, 2023, which was included as part of interest expense in the consolidated statements of operations and comprehensive loss.

As of December 31, 2023, the future principal payments remaining on term loans was the following:

(in thousands)

As of December 31, 2024, we had a total of $ 19.8 million of deferred revenue, $ 13.9 million of which was recorded as deferred revenue, current and $ 5.9 million of which was recorded as deferred revenue, non-current, which primarily relates to deferred service contract revenues and is scheduled to be recognized in the next five years .

Revenue recorded in the year ended December 31, 2024 includes $ 14.9 million that was included in deferred revenue, current as of December 31, 2023.

Performance Obligations

We regularly enter into contracts with multiple performance obligations.

These contracts are believed to be firm as of the balance sheet date.

However, we may allow customers to make product substitutions or certain modifications at our discretion.

The timing of shipments depends on several factors, including agreed upon shipping schedules, which may span multiple quarters.

Most performance obligations are generally satisfied within a year of the contract execution date.

As of December 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 58.6 million, of which approximately 62 % is expected to be converted to revenue in 2025, approximately 30 % in the following twelve months , and the remainder thereafter.

Other Liabilities, Current

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Other liabilities, current $ 3,224 $ 8,326

Fiscal 2024 Form 10-K

CONVERTIBLE SENIOR NOTES

2029 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.

On November 7, 2024, we entered into an exchange agreement with SB Northstar LP (“SBN”), a subsidiary of SoftBank Group Corp., pursuant to which we have agreed to exchange the remaining approximately $ 459.0 million in aggregate principal amount of 2028 Notes outstanding for (i) $ 200.0 million aggregate principal amount of 1.50 % Convertible Senior Notes due 2029 (the “2029 Notes”), (ii) 20,451,570 shares of common stock (the “Exchange Shares”) and (iii) $ 50.0 million of cash (the “2024 Exchange Transaction”).

The Exchange Shares were issued on November 21, 2024 (the “Closing Date”).

The 2029 Notes, the Exchange Shares, and shares of common stock issuable upon conversion of the 2029 Notes are subject to certain lock-up restrictions for a six-month period (the “Lock-Up Period”) beginning on the Closing Date of the 2024 Exchange Transaction;

the lock-up restrictions will terminate immediately prior to the consummation of any change in control of the Company.

Upon any conversion of the 2029 Notes, SBN will not be entitled to be issued a number of shares of the Company’s common stock which would cause SBN's beneficial ownership of common stock to exceed either 9.9 % of the total number of issued and outstanding shares of common stock or 9.9 % of the combined voting power of all of the securities of the Company, in each case, following such conversion.

The 2029 Notes are governed by an indenture (the “2029 Indenture”) between the Company and U.S.

Bank Trust Company, National Association, as trustee.

The 2029 Notes bear interest at a rate of 1.50 % per annum.

Interest on the 2029 Notes is payable semi-annually in arrears on February 15 and August 15 and commencing on February 15, 2025.

The 2029 Notes will mature on August 15, 2029, subject to earlier conversion, redemption or repurchase.

The 2029 Notes are convertible at the option of the holder at any time from the expiration of the Lock-Up Period until the second scheduled trading day prior to the maturity date, including in connection with a redemption by the Company.

The 2029 Notes are convertible into shares of our common stock based on an initial conversion rate of 204.5157 shares of common stock per $1,000 principal amount of the 2029 Notes (which is equal to an initial conversion price of approximately $ 4.89 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 2029 Notes, we may elect to settle such conversion obligation in cash, shares of our common stock, or a combination of cash and shares of our common stock.

On or after August 20, 2027, and prior to the 31st scheduled trading day immediately preceding the maturity date, the 2029 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 2029 Notes, plus accrued and unpaid interest up to, but excluding, the redemption date.

Upon the occurrence of a Fundamental Change (as defined in the 2029 Indenture), the holders of the 2029 Notes may require that we repurchase all or part of the principal amount of the 2029 Notes at a purchase price of par plus unpaid interest up to, but excluding, the maturity date.

The 2029 Notes are subject to certain debt and lien covenants as well as springing guarantees, in each case, the terms of which are set forth in a second letter agreement between the Company and SBN entered into in connection with the Indenture.

The 2029 Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2029 Notes under the 2029 Indenture.

The 2029 Indenture also includes customary covenants for convertible notes of this type.

Fiscal 2024 Form 10-K

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 2029 Notes at a rate equal to (i) 0.25 % per annum of the principal amount of the 2029 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 2029 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 2029 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 2029 Notes shall be subject to acceleration as provided for in the 2029 Indenture.

The 2029 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 2029 Notes is not accounted for as an embedded derivative because it is considered to be indexed to our common stock, and the 2029 Notes were not issued at a substantial premium;

therefore, the 2029 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 2029 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 qualified as a troubled debt restructuring under ASC 470-60 – Troubled Debt Restructurings by Debtors .

Since the undiscounted cash flows of the 2029 Notes were less than the carrying amount of the exchanged 2028 Notes, the carrying value of the 2029 Notes was determined based on the total undiscounted cash flows.

As a result, no interest expense will be recognized for the 2029 Notes.

The Company recorded a gain on debt restructuring of $ 154.4 million, which resulted in a decrease of basic net loss per share of $ 0.56 , during the year ended December 31, 2024 on our consolidated statements of operations and comprehensive loss.

The gain was calculated as the difference between the carrying amount of the old debt and the carrying amount of the new debt, adjusted for debt issuance costs.

We incurred issuance costs related to the 2029 Notes of approximately $ 3.1 million, including $ 0.2 million of lender fees, which were recorded as a reduction to the gain on debt restructuring on our consolidated statements of operations and comprehensive loss.

We also paid accrued but unpaid interest of $ 1.8 million on the 2028 Notes in connection with the 2024 Exchange Transaction.

We did not receive any cash proceeds from the 2024 Exchange Transaction.

In exchange for issuing the 2029 Notes, Exchange Shares and paying $ 50.0 million of cash pursuant to the 2024 Exchange Transaction, we received and cancelled the exchanged 2028 Notes.

Following the closing of the 2024 Exchange Transaction, no amounts were outstanding on the 2028 Notes.

The carrying amount of the liability for the 2029 Notes as of December 31, 2024 is $ 214.2 million, of which $ 212.0 million is included as convertible senior notes, net, non-current, and $ 2.2 million is included as accrued expenses on our consolidated balance sheets.

As of December 31, 2024, the estimated fair value (Level 2) of the 2029 Notes was $ 175.0 million.

The fair value of the 2029 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.

Fiscal 2024 Form 10-K

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” and together with the 2029 Notes, the “Notes”) in exchange for $ 441.0 million principal amount of the 2028 Notes (the “2023 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.

5 unchanged sentences

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.

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 approximately $ 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 cash, shares of our common stock, or a combination of cash and shares of our common stock.

On or after June 20, 2028, and prior to the 31st scheduled trading day immediately preceding the maturity date, 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.

3 unchanged sentences

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.

Fiscal 2024 Form 10-K

The 2030 Notes are accounted for in accordance with the authoritative guidance for convertible debt instruments that may be settled in cash upon conversion.

1 unchanged sentence

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

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.

5 unchanged sentences

We recorded a loss on extinguishment of debt of approximately $ 2.0 million in connection with the 2023 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 and 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 %.

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 2023 Exchange Transaction on June 30, 2023.

2 unchanged sentences

Following the closing of the 2023 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 consolidated balance sheets as follows (in thousands):

The net carrying amount of the liability for the 2030 Notes is included as convertible senior notes, net, non-current on our consolidated balance sheets as follows:

(in thousands)

Principal amount $ 441,000 $ 441,000

10 unchanged sentences

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.

Fiscal 2024 Form 10-K

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.

On February 9, 2021, we entered into an investment agreement with SBN relating to the issuance and sale to SBN of $ 900.0 million in aggregate principal amount of the 2028 Notes.

The 2028 Notes were issued on February 16, 2021 and bore interest at a rate of 1.50 % per annum.

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.

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.

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 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 cost and are presented as a reduction to the 2028 Notes on our consolidated balance sheets and

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 consolidated balance sheets as follows (in thousands):

Also as discussed above, in November 2024 we completed an exchange of the remaining $ 459.0 million in aggregate principal amount of the 2028 Notes outstanding for (i) $ 200.0 million aggregate principal amount of the 2029 Notes, (ii) the Exchange Shares and (iii) $ 50.0 million of cash.

As of December 31, 2024 no amounts were outstanding on the 2028 Notes.

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 were 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 %.

In connection with the 2024 Exchange Transaction, the remaining unamortized debt issuance costs related to the 2028 Notes of $ 1.1 million were extinguished by offsetting the carrying amount of the convertible senior notes.

The net carrying amount of the liability for the 2028 Notes is included as convertible senior notes, net, non-current on our consolidated balance sheets as follows:

(in thousands) 2024 2023

Principal amount $ — $ 459,000

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Total interest expense $ 6,428 $ 10,605 $ 14,117

As of December 31, 2023, the estimated fair value (Level 2) of the 2028 Notes was $ 395.4 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.

Fiscal 2024 Form 10-K

RESTRUCTURING

During the year ended December 31, 2024, we implemented an expense reduction initiative that included workforce reductions, the closing of our San Diego office, and other actions to reduce annualized run-rate operating expenses.

A summary of the pre-tax restructuring charges are as follows:

(in thousands) Year Ended

December 31, 2024

Cumulative amount incurred to date

Employee separation costs $ 10,008 $ 10,008

Other costs 15,214 15,214

Total restructuring charges (1)

$ 25,222 $ 25,222

(1) For the year ended December 31, 2024, cumulative charges incurred to date include $ 14.9 million in sales, general and administrative expense;

$ 5.9 million in research and development expense;

and $ 4.4 million in cost of revenue.

Cumulative charges incurred to date include employee separation costs comprised of approximately $ 5.5 million related to salaries, wages and other employee benefits paid to terminated employees pursuant to the Worker Adjustment and Retraining Notification (WARN) Act and approximately $ 4.5 million of severance costs.

Other costs in the year ended December 31, 2024 are primarily related to accelerated amortization and depreciation of $ 8.1 million for the right-of-use asset, leasehold improvements, and furniture and fixtures relating to the abandonment of the San Diego office.

We also incurred cumulative charges to date for excess inventory of $ 3.6 million primarily relating to a decrease in internal demand resulting from the expense reduction initiatives which were recognized in cost of product revenues.

The accelerated amortization and depreciation, which was recognized in sales, general and administrative expense, was determined as a result of the Company's change in estimate pertaining to its remaining useful life of the San Diego office utilizing the estimated date on which it planned to abandon the San Diego office.

The lease liability pertaining to the San Diego office was also remeasured during the year ended December 31, 2024 resulting in a reduction in the operating lease liability balance of $ 4.4 million, which was offset against the right-of-use asset on our consolidated balance sheets.

We exited our San Diego office in September 2024.

A summary of the liabilities related to the restructuring is as follows:

(in thousands)

Employee Separation Costs

Other Costs Total

Expense recorded in YTD 2024 $ 10,008 $ 2,816 $ 12,824

Cash paid during YTD 2024 ( 10,008 ) ( 2,646 ) ( 12,654 )

Amount recorded in current liabilities as of December 31, 2024

$ — $ 170 $ 170

Estimated total restructuring costs to still be incurred $ — $ 946 $ 946

The table above excludes noncash activities and amounts incurred relating to the San Diego office lease liability.

The ending balance of the San Diego office lease liability as of December 31, 2024 is $ 2.6 million, and is included in operating lease liabilities, current on our consolidated balance sheets.

The other restructuring costs are expected to be incurred and paid by the end of 2025.

Fiscal 2024 Form 10-K

COMMITMENTS AND CONTINGENCIES

We record operating lease right-of-use assets and liabilities on our consolidated balance sheets for all leases with a term of more than 12 months.

In connection with the acquisition of Omniome, we acquired $ 18.1 million in right-of-use assets and liabilities on our consolidated balance sheets.

The operating lease right-of-use assets and liabilities are calculated as the present value of remaining minimum lease payments over the remaining lease term using our estimated secured incremental borrowing rates at the commencement date.

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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.

Fiscal 2024 Form 10-K

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;

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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.

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Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.

We recognized a loss on purchase commitment of $ 3.4 million for the year ended December 31, 2023, which was recorded as part of accrued expenses on the consolidated balance sheet and is included in the aforementioned purchase orders and contractual obligations amount.

The purchase commitment loss is based on an estimate of future excess inventory related to a supply agreement with a third-party vendor, for which we do not expect to have related sales.

We have a long-term supply agreement, which was amended in October 2022 (the “Supply Agreement”), for the purchase of certain products with a semiconductor manufacturer (“Supplier”).

The Supply Agreement provides for minimum purchase commitments through 2026 on our part in exchange for guaranteed capacity at Supplier.

We recognized a loss on purchase commitment of $ 1.0 million for the year ended December 31, 2024, which was recorded as part of accrued expenses on our consolidated balance sheet and is included in the aforementioned purchase orders and contractual obligations amount.

The purchase commitment loss is based on an estimate of future excess inventory related to supply agreements with third-party vendors, for which we do not expect to have related sales.

We have a long-term supply agreement, which was most recently amended in September 2024 (the “Supply Agreement”), for the purchase of certain products with a semiconductor manufacturer (“Supplier”).

The Supply Agreement provides for minimum purchase commitments through 2027 in exchange for guaranteed capacity at Supplier.

We are responsible for providing certain materials to allow our Supplier to perform its obligations under the contract.

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The Deposit is fully refundable to us, in accordance with the Supply Agreement, if we meet the minimum volume purchase commitment for the applicable year.

As of December 31, 2023, $ 3.0 million related to the Deposit was included in prepaid expenses and other current assets in the consolidated balance sheets and $ 12.0 million related to the Deposit was included in other long-term assets in the consolidated balance sheets, as we believe it is probable the minimum volume purchase commitment level will be achieved.

$ 3.0 million was refunded to us during the year ended December 31, 2024.

As of December 31, 2024, $ 4.0 million related to the Deposit was included in prepaid expenses and other current assets on our consolidated balance sheets and $ 8.0 million related to the Deposit was included in other long-term assets on our consolidated balance sheets, as we believe it is probable the minimum volume purchase commitment level will be achieved.

Fiscal 2024 Form 10-K

We are subject to income taxes both in the United States and certain foreign jurisdictions in which we operate, and we use estimates in determining our provisions for income taxes.

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operations were ($ 311.0 ) million, ($ 318.9 ) million, and ($ 315.7 ) million, respectively, and income/(loss) before taxes from foreign operations was $ 1.5 million, $ 0.7 million, and $ 1.8 million, respectively.

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes consists of the following (in thousands):

Income Tax Provision (Benefit)

Income tax provision (benefit) consists of the following:

Years ended December 31,

2023 2022 2021

(in thousands) 2024 2023 2022

Total current $ 521 $ — $ —

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Total deferred ( 205 ) ( 11,424 ) —

(Benefit) Provision for Income Taxes $ ( 11,424 ) $ — $ ( 93,649 )

Income tax provision (benefit) $ 316 $ ( 11,424 ) $ —

Income tax provision (benefit) related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21% to pretax loss as follows:

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Merger Expenses — ( 0.1 ) —

Goodwill impairment

Other ( 0.2 ) ( 0.2 ) ( 0.4 )

Total ( 0.1 ) % 3.6 % ( 0.1 ) %

Fiscal 2024 Form 10-K

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets for federal and state income taxes are as follows (in thousands):

Significant components of our deferred tax assets for federal and state income taxes are as follows:

(in thousands) 2024 2023

Deferred tax assets:

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In evaluating our ability to recover our deferred income tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations.

A deferred income tax benefit of $ 11.4 million for the year ended December 31, 2023, is related to the release of the valuation allowance for deferred tax assets due to the recognition of deferred tax liabilities in connection with the Apton acquisition.

We maintain a valuation allowance on the net deferred tax assets of our U.S.

entities as we have concluded that it is more likely than not that we will not realize our deferred tax assets.

Accordingly, this benefit from income taxes is reflected on our consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

For the year ended December 31, 2023, the Company's valuation allowance increased to $ 525.7 million, primarily because of an increase in our net operating losses, credits, and capitalized research and experimental expenses that were fully offset by a valuation allowance.

For the year ended December 31, 2024, the Company's valuation allowance increased to $ 558.8 million, primarily because of an increase in our credits and capitalized research & experimental expenses that were fully offset by a valuation allowance.

As of December 31, 2024, we had a net operating loss carryforward for federal income tax purposes of approximately $ 1,704.2 million, of which $ 783.2 million is subject to expiration beginning in 2025.

We had a total state net operating loss carryforward of approximately $ 1,171.8 million, which are subject to annual expirations.

We had a total state net operating loss carryforward of approximately $ 1,170.6 million, which is subject to annual expirations.

Utilization of some of the federal and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions.

The annual limitations may result in the expiration of net operating losses and credits before utilization.

We have federal credits of approximately $ 57.7 million, which will begin to expire in 2024 if not utilized and state research credits of approximately $ 49.8 million, which have no expiration date.

We have federal credits of approximately $ 64.4 million, a portion of which will begin to expire in 2025 if not utilized and state research credits of approximately $ 54.6 million, which have no expiration date.

These tax credits are subject to the same limitations discussed above.

Fiscal 2024 Form 10-K

As of December 31, 2024, our total unrecognized tax benefit was $ 17.7 million.

A reconciliation of the beginning and ending unrecognized tax benefit balance is as follows (in thousands):

Balance as of December 31, 2020 $ 5,954

Increase in balance related to tax positions taken in prior year 189

Increase in balance related to tax positions taken during current year 2,192

A reconciliation of the beginning and ending unrecognized tax benefit balance is as follows:

(in thousands)

Balance as of December 31, 2021 $ 8,335

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Balance as of December 31, 2023 14,554

Decrease in balance related to tax positions taken in prior year ( 6 )

Increase in balance related to tax positions taken during current year 3,128

Balance as of December 31, 2024 $ 17,676

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

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federal and state income tax purposes, the statute of limitations currently remains open for the years ending December 31, 2021 to present and December 31, 2020 to present, respectively.

In addition, all the net operating losses and research and development credit carryforwards that may be utilized in future years may be subject to examination.

In addition, all of the net operating losses and research and development credit carryforwards that may be utilized in future years may be subject to examination.

We are not currently under examination by income tax authorities in any jurisdiction.

STOCKHOLDERS' EQUITY

Preferred Stock

Common and Preferred Stock

Our Certificate of Incorporation, as amended and restated in October 2010 in connection with the closing of our initial public offering, authorizes us to issue 1,000,000,000 shares of $ 0.001 par value common stock and 50,000,000 shares of $ 0.001 par value preferred stock.

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Underwritten Public Equity Offerings

In August 2020, we entered into an underwriting agreement, relating to the public offering of 19,430,000 shares of our common stock, $ 0.001 par value per share, at a price to the public of $ 4.47 per share.

Under the terms of the underwriting agreement, we also granted the underwriters a 30 -day option to purchase up to an additional 2,914,500 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 August 2020.

In total, we sold 22.3 million shares of our common stock.

We paid a commission equal to 6 % 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 $ 93.9 million, excluding approximately $ 0.3 million of offering expenses.

In November 2020, we entered into an underwriting agreement, relating to the public offering of 6,096,112 shares of our common stock, $ 0.001 par value per share, at a price to the public of $ 14.25 per share.

Under the terms of the underwriting agreement, we also granted the underwriters a 30 -day option to purchase up to an additional 914,416 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 November 2020.

In total, we sold 7.0 million shares of our common stock.

We paid a commission equal to 6 % 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 $ 93.9 million, excluding approximately $ 0.3 million of offering expenses.

In total, for the year ended December 31, 2021, we issued 29.4 million shares of our common stock through our two underwritten public offerings with an average offering price of $ 6.40 .

The total net proceeds to us from the two offerings, after deducting the underwriting commission and offering expenses, were approximately $ 187.2 million.

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.

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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.

Private Placement of Common Stock

On July 19, 2021, in connection with the Omniome acquisition, we entered into a purchase agreement with certain qualified institutional buyers and institutional accredited investors, pursuant to which we agreed to sell an aggregate of 11,214,953 shares of common stock, at a price of $ 26.75 per share, for aggregate gross proceeds of approximately $ 300 million.

The transaction closed on September 20, 2021.

We registered the private placement shares for resale following the closing of the merger.

Fiscal 2024 Form 10-K

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 December 2, 2020, the Board of Directors (the “Board”) adopted the Inducement Plan and reserved 2,500,000 shares of our common stock for issuance 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, was 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.

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

The 2010 Employee Stock Purchase Plan (the “ESPP”) allows eligible employees to acquire common stock at a discounted price through payroll deductions during designated offering periods.

On May 25, 2022, stockholders approved an amendment to the 2020 Plan, and we reserved an additional 18.0 million shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan.

On June 18, 2024, stockholders approved an amendment to the 2020 Plan, and we reserved an additional 20.0 million shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan.

As of December 31, 2024, we had 28.4 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.

Stock Options

Time-based stock options

The following table summarizes time-based stock option activity for all of our equity compensation plans for the year ended December 31, 2023 (in thousands, except per share amounts):

of shares Weighted-average

exercise price

Outstanding at December 31, 2022 14,618 $ 10.60

Granted 419 $ 11.26

Exercised ( 1,119 ) $ 4.74

Canceled ( 910 ) $ 17.71

Outstanding at December 31, 2023 13,008 $ 10.63

Performance-based stock options

The following table summarizes performance-based stock option activity for all of our equity compensation plans for the year ended December 31, 2023 (in thousands, except per share amounts):

The following table summarizes stock option activity for time-based awards:

(shares in thousands)

of shares Weighted-average

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Canceled ( 2,153 ) $ 8.89

( 327 ) $ 5.81

Outstanding at December 31, 2024 10,509 $ 11.09

The performance condition was achieved during the year ended December 31, 2023.

The aggregate intrinsic value of the outstanding options presented in the tables above as of December 31, 2023, totaled $ 31.8 million, and had a weighted-average remaining contractual life of 5.9 years.

The aggregate intrinsic value of the outstanding options presented in the table above as of December 31, 2024, totaled $ 0.1 million, and had a weighted-average remaining contractual life of 5.4 years.

The aggregate intrinsic value of outstanding options represents the total pre-tax intrinsic value (i.e.

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The aggregate intrinsic value changes at each reporting date based on the fair market value of our common stock.

The vested and exercisable options as of December 31, 2023, totaled 10,039,742 shares, had an aggregate intrinsic value of $ 30.0 million, a weighted-average exercise price per share of $ 9.70 , and a weighted-average remaining contractual life of 5.2 years.

The vested and exercisable options as of December 31, 2024, totaled 9,429,082 shares, had an aggregate intrinsic value that was not significant, a weighted-average exercise price per share of $ 11.26 , and a weighted-average remaining contractual life of 5.1 years.

The vested and expected to vest options as of December 31, 2024, totaled 10,957,644 shares, had an aggregate intrinsic value of $ 0.1 million, a weighted-average exercise price per share of $ 11.13 , and a weighted-average remaining contractual life of 5.4 years.

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The weighted-average grant-date fair value of all options granted was $ 1.40 in 2024, $ 7.32 in 2023, and $ 5.93 in 2022, each determined by the Black-Scholes option valuation method.

Fiscal 2024 Form 10-K

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

Each Restricted Stock Unit (RSU) represents one equivalent share of our common stock to be issued after satisfying the applicable continued service-based vesting criteria over a specified period.

These RSUs are time-based and vest over four years at a rate of 25 % annually.

The RSUs do not entitle participants to the rights of holders of common stock, such as voting rights, until the shares are issued.

The fair value of these RSUs is

based on the closing price of our common stock on the date of grant.

We measure compensation expense for these RSUs at fair value on the date of grant and recognize the expense over the expected vesting period on a straight-line basis.

RSUs that are expected to vest are net of estimated future forfeitures.

We issue PSUs for which the number of shares issuable in the third year of the performance period is based on performance relative to specified revenue targets and continued employment through the vesting 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 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 for the year ended December 31, 2023 (shares in thousands):

We have awarded both Restricted Stock Units (RSUs) and Performance Stock Units (PSUs).

Each RSU represents the right to receive one share of our common stock upon meeting the required service-based vesting conditions.

RSUs typically vest over four years , with equal annual installments.

In 2023, PSUs were granted and are based on performance against predefined revenue targets and require continued employment throughout the vesting period.

These shares become issuable after the third year of the performance period.

Achieving the maximum revenue goal allows up to 200 % of the target PSU shares to become eligible for vesting, while failing to meet the minimum revenue goal results in no shares vesting.

The following table summarizes the time-based RSU and PSU activity:

Weighted-average grant date fair value

(shares in thousands)

Restricted Stock Units (RSUs) Performance Stock Units (PSUs) RSU PSU

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Outstanding at December 31, 2024 14,211 392 $ 7.41 $ 9.43

The total fair value of shares vested related to RSUs and PSUs during the years ended December 31, 2023, 2022, and 2021 was $ 39.3 million, $ 39.2 million, and $ 9.2 million, respectively.

The weighted-average grant-date fair value of all RSUs and PSUs granted was $ 9.65 in 2023, $ 10.15 in 2022, and $ 35.33 in 2021.

The total fair value of shares vested related to RSUs during the years ended December 31, 2024, 2023, and 2022 was $ 47.2 million, $ 39.3 million, and $ 39.2 million, respectively.

The weighted-average grant-date fair value of all RSUs granted was $ 5.02 in 2024, $ 9.65 in 2023, and $ 10.15 in 2022.

Employee Stock Purchase Plan

As of December 31, 2023, a total of 29.5 million shares of our common stock have been reserved for issuance under our 2010 Employee Stock Purchase Plan (the “ESPP”).

The ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods.

Each offering period will generally consist of four purchase periods, each purchase period being approximately six months .

The price at which the stock is purchased is equal to the lower of 85 % of the fair market value of the common stock at the beginning of an offering period or at the end of a purchase period.

If the stock price at the end of the purchase period is lower than the stock price at the beginning of the offering period, that offering period will be terminated and a new offering period will come into place.

As of December 31, 2024, a total of 33.5 million shares of our common stock have been reserved for issuance under the ESPP, which allows eligible employees to acquire common stock at a discounted price through payroll deductions during designated offering periods.

Each offering period typically consists of four purchase periods, each lasting approximately six months .

Shares are purchased at the lower of 85 % of the fair market value of the common stock at either the beginning of the offering period or the end of the purchase period.

If the stock price at the end of a purchase period is lower than at the start of the offering period, the existing offering period will be reset, and a new offering period will begin.

The ESPP provides for an annual increase to the shares available for issuance at the beginning of each fiscal year equal to the lesser of 2 % of the common shares then outstanding, 4,000,000 shares, or an amount determined by the ESPP’s administrator.

For the years ended December 31, 2024, 2023, and 2022, 1,906,529 shares, 1,735,058 shares, and 1,878,168 shares of common stock were purchased under the ESPP, respectivel y.

As of December 31, 2023, 12,197,447 sh ares of our common stock remain available for issuance under our ESPP.

As of December 31, 2024, 14.3 million sh ares of our common stock remain available for issuance under our ESPP.

Share-based Compensation

Total share-based compensation expense consists of the following (in thousands):

The following table summarizes share-based compensation expense:

Years Ended December 31,

(in thousands)

2024 2023 2022

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Sales, general and administrative 46,173 44,284 43,135

Merger-related expenses - stock-settled — — 6,349

Merger-related expenses - milestone — — 5,202

Share-based compensation 72,118 78,613 73,355

Merger-related expenses - cash-settled — — 7,373

Total share-based compensation expense $ 72,118 $ 78,613 $ 80,728

Total share-based compensation 71,036 72,118 78,613

As of December 31, 2024 and 2023, $ 0.6 million and $ 0.6 million of share-based compensation cost was capitalized in inventory, net, on our consolidated balance sheets, respectively.

The tax benefit of share-based compensation expense was immaterial for the years ended December 31, 2023, 2022, and 2021.

Fiscal 2024 Form 10-K

We estimate forfeitures related to our share-based compensation plans.

The estimated forfeiture rate is based on historical data, trends, and other relevant factors, such as employee turnover rates and expectations about future forfeitures.

The estimated forfeiture rate is reviewed periodically and adjusted as necessary to reflect changes in these factors.

The tax benefit of share-based compensation expense was immaterial for the years ended December 31, 2024, 2023, and 2022 due to a valuation allowance on the net deferred tax assets of our U.S.

entities, for which we have concluded that it is more likely than not that we will not realize our deferred tax assets.

Determining Fair Value

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The fair market value of RSU awards 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 Employee Stock Purchase Plan, or ESPP, we estimate the grant-date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model.

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, giving consideration to the contractual terms of the stock options and vesting schedules.

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

• 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.

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Stock Options

We estimated the fair value of employee stock options using the Black-Scholes option pricing model.

The fair value of employee stock options is amortized on a straight-line basis over the requisite service period of the awards.

When determining the current share prices underlying the stock options for calculating the grant-date fair value, we reference observable market prices of similar or identical instruments in active markets.

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Cash received from option exercises for the years ended December 31, 2024, 2023, and 2022 was $ 1.6 million, $ 6.5 million and $ 3.4 million, respectively.

We estimate the fair value of shares to be issued under the ESPP using the Black-Scholes option pricing model.

Fiscal 2024 Form 10-K

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

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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 consolidated statements of operations and comprehensive loss (in thousands, except per share amounts):

The following table presents the calculation of the basic and diluted net loss per share amounts presented on our consolidated statements of operations and comprehensive loss:

Years Ended December 31,

2023 2022 2021

Net loss $ ( 306,735 ) $ ( 314,248 ) $ ( 181,223 )

(in thousands, except per share amounts) 2024 2023 2022

Basic net loss $ ( 309,851 ) $ ( 306,735 ) $ ( 314,248 )

Interest charges applicable to convertible notes (2028 Notes) 6,428 — —

Gain on debt restructuring (2029 Notes) ( 154,407 ) — —

Diluted net loss $ ( 457,830 ) $ ( 306,735 ) $ ( 314,248 )

Weighted-average shares used in computing basic net loss per share 274,488 253,629 224,550

Basic net loss per share $ ( 1.13 ) $ ( 1.21 ) $ ( 1.40 )

Weighted-average shares used in computing basic net loss per share 274,488 253,629 224,550

Weighted average shares issuable upon conversion of convertible notes (2028 Notes) 9,395 — —

Weighted average shares issuable upon conversion of convertible notes (2029 Notes) 4,483 — —

Weighted-average shares used in computing diluted net loss per share 288,366 253,629 224,550

Diluted net loss per share $ ( 1.59 ) $ ( 1.21 ) $ ( 1.40 )

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):

Fiscal 2024 Form 10-K

Years Ended December 31,

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Equity awards 34,136 27,246 27,291

As described in Note 2.

Business Acquisitions , the contingently issuable shares would be due upon the achievement of a milestone.

Stockholders’ Equity for detailed information on RSUs with time-based vesting and RSUs with performance-based vesting.

Business Acquisitions , for detailed information on contingently issuable shares that would be due upon achievement of a milestone.

Stockholders’ Equity for detailed information on equity awards.

SEGMENT AND GEOGRAPHIC INFORMATION

We are organized as, and operate in, one reportable segment:

the development, manufacturing, and marketing of an integrated platform for genetic analysis.

Our chief operating decision-maker is our Chief Executive Officer.

The Chief Executive Officer reviews financial information presented on a consolidated basis for the purposes of evaluating financial performance and allocating resources, accompanied by information about revenue by geographic regions.

the development, manufacturing, and marketing of integrated platforms for genetic analysis.

Our chief operating decision-maker (CODM) is our Chief Executive Officer.

Our CODM reviews financial information presented on a consolidated basis for the purposes of evaluating financial performance and allocating resources.

On a regular basis, our CODM reviews:

• total revenues by category

• total expenses and expenses by function, including sales and marketing and general and administrative, which include depreciation and share-based compensation

• net loss per share

Our assets are primarily located in the United States of America and not allocated to any specific region, and we do not measure the performance of geographic regions based upon asset-based metrics.

Therefore, geographic information is presented only for revenue.

Fiscal 2024 Form 10-K

A summary of the segment profit or loss, including significant segment expenses is as follows:

Years Ended December 31,

(in thousands)

2024 2023 2022

Total revenue 154,014 200,521 128,304

Cost of revenue 116,732 147,741 79,269

Research and development 134,922 187,170 193,000

Sales and marketing 87,244 79,287 84,465

General and administrative 87,773 90,531 76,389

Impairment charges 184,500 — —

Merger-related expenses — 9,042 —

Change in fair value of contingent consideration ( 850 ) 15,060 2,377

Amortization of acquired intangible assets 18,006 6,157 —

Loss on extinguishment of debt — 2,033 —

Gain on debt restructuring ( 154,407 ) — —

Other income (expense), net 10,371 18,341 ( 7,052 )

Income tax provision (benefit) 316 ( 11,424 ) —

Consolidated net loss ( 309,851 ) ( 306,735 ) ( 314,248 )

A summary of our revenue by geographic location is as follows:

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(in thousands) 2024 2023 2022

Americas $ 105,410 $ 69,561 $ 64,521

$ 78,711 $ 105,410 $ 69,561

Europe, Middle East, and Africa 34,594 40,658 22,598

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Total $ 154,014 $ 200,521 $ 128,304

(1) Includes United States revenue of $ 75.3 million, $ 100.5 million, and $ 66.8 million for the years ended December 31, 2024, 2023, and 2022, respectively.

A summary of our revenue by category is as follows:

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Total revenue $ 154,014 $ 200,521 $ 128,304

Fiscal 2024 Form 10-K

SUBSEQUENT EVENTS

On March 7, 2025, we entered into an amendment to our existing lease for our corporate headquarters, research and development facilities, and manufacturing and distribution centers in Menlo Park, California.

The lease amendment extends the term from the prior expiration on October 31, 2027 to its new expiration on April 30, 2034.

We will pay approximately $ 97.7 million in base rent over the life of the amended lease, and receive base rent abatement of approximately $ 11.6 million for the period beginning on March 1, 2025 and ending on July 31, 2026.

We are also entitled to a tenant improvement allowance of $ 7.2 million.

On March 7, 2025, we entered into an agreement to acquire certain technology and related intellectual property from the Chinese University of Hong Kong for $ 9.7 million.

Fiscal 2024 Form 10-K

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data