What changed in this filing

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Item 1. Financial Statements

2025-08-07 compared with 2025-05-12 · 144 added, 144 removed, 637 unchanged (31% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value) March 31,

(In thousands, except par value) June 30,

2025 December 31,

35 unchanged sentences

Authorized 1,000,000 shares;

issued and outstanding 300,041 and 294,418 shares at March 31, 2025 and December 31, 2024, respectively

issued and outstanding 300,350 and 294,418 shares at June 30, 2025 and December 31, 2024, respectively

Additional paid-in capital 2,677,853 2,654,804

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share amounts) 2025 2024 2025 2024

6 unchanged sentences

Amortization of acquired intangible assets

183 2,628 4,528 3,971

Loss on purchase commitment

24 998 4,092 998

Total cost of revenue 25,082 30,075 63,606 57,603

Gross (loss) profit ( 1,371 ) 11,282

Gross profit 14,684 5,938 13,313 17,220

Operating Expense:

8 unchanged sentences

Other income, net 4,696 6,069 8,990 12,828

Loss before benefit from income taxes ( 426,377 ) ( 78,178 )

Income tax (benefit) provision

Loss before income taxes

( 41,895 ) ( 173,319 ) ( 468,272 ) ( 251,497 )

Income tax provision (benefit)

35 — ( 267 ) —

Net loss ( 41,930 ) ( 173,319 ) ( 468,005 ) ( 251,497 )

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

Common Stock Additional

5 unchanged sentences

Shares Amount

Balance at March 31, 2025 300,041 $ 300 $ 2,665,958 $ 381 $ ( 2,575,001 ) $ 91,638

Net loss — — — — ( 41,930 ) ( 41,930 )

Other comprehensive loss — — — ( 114 ) — ( 114 )

Issuance of common stock in conjunction with equity plans 309 — — — — —

Share-based compensation expense — — 11,895 — — 11,895

Balance at June 30, 2025 300,350 $ 300 $ 2,677,853 $ 267 $ ( 2,616,931 ) $ 61,489

Six Months Ended June 30, 2025

Common Stock Additional

Capital Accumulated

Comprehensive

Income Accumulated

Deficit Total

Stockholders'

(In thousands) Shares Amount

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

4 unchanged sentences

Share-based compensation expense — — 21,096 — — 21,096

Balance at March 31, 2025 300,041 $ 300 $ 2,665,958 $ 381 $ ( 2,575,001 ) $ 91,638

Three Months Ended March 31, 2024

Balance at June 30, 2025 300,350 $ 300 $ 2,677,853 $ 267 $ ( 2,616,931 ) $ 61,489

Three Months Ended June 30, 2024

Common Stock Additional

Capital Accumulated

Comprehensive Income (Loss)

Comprehensive

Deficit Total

2 unchanged sentences

Shares Amount

Balance at March 31, 2024 272,280 $ 272 $ 2,566,304 $ ( 306 ) $ ( 1,917,253 ) $ 649,017

Net loss — — — — ( 173,319 ) ( 173,319 )

Other comprehensive loss — — — ( 217 ) — ( 217 )

Issuance of common stock in conjunction with equity plans 211 — — — — —

Share-based compensation expense — — 17,219 — — 17,219

Balance at June 30, 2024 272,491 $ 272 $ 2,583,523 $ ( 523 ) $ ( 2,090,572 ) $ 492,700

Six Months Ended June 30, 2024

Common Stock Additional

Capital Accumulated

Comprehensive Income (Loss)

Deficit Total

Stockholders'

(In thousands) Shares Amount

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

3 unchanged sentences

Share-based compensation expense — — 36,744 — — 36,744

Balance at March 31, 2024 272,280 $ 272 $ 2,566,304 $ ( 306 ) $ ( 1,917,253 ) $ 649,017

Balance at June 30, 2024 272,491 $ 272 $ 2,583,523 $ ( 523 ) $ ( 2,090,572 ) $ 492,700

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands) 2025 2024

27 unchanged sentences

Maturities of investments 195,448 351,623

Net cash provided by (used in) investing activities 45,234 ( 34,136 )

Net cash provided by investing activities 70,517 42,701

Cash flows from financing activities

2 unchanged sentences

Net cash provided by financing activities 1,959 6,401

Net increase (decrease) in cash, cash equivalents, and restricted cash 3,137 ( 103,265 )

Net decrease in cash, cash equivalents, and restricted cash ( 957 ) ( 80,843 )

Cash, cash equivalents, and restricted cash at beginning of period 57,592 182,633

12 unchanged sentences

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 and technology, which include our HiFi long-read sequencing technology, 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 products and technology, which include our HiFi long-read sequencing technology, address solutions across a broad set of applications including human germline sequencing, plant and animal sciences, infectious disease and microbiology, oncology, and other emerging applications.

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.

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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 March 31, 2025.

Actual results could differ materially from these estimates.

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

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

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

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

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

The cost used in the determination of gains and losses of securities sold is based on the specific identification method.

The cost of marketable securities is adjusted for the amortization of premiums and discounts to expected maturity.

Premium and discount amortization is recorded in other income (expense), net.

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.

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

Concentration and Other Risks

For the three months ended March 31, 2025 and 2024, no customer accounted for 10% or more of total revenue during the period.

As of March 31, 2025, 36 % of our accounts receivable were from domestic customers, compared to 36 % as of December 31, 2024.

As of March 31, 2025, one customer exceeded 10 % of our net accounts receivable, while no customer represented 10% or more of our net accounts receivable as of December 31, 2024.

Recent Accounting Pronouncements

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

Q1 Fiscal 2025 Form 10-Q

Significant Accounting Policies

There have been no changes to our significant accounting policies as disclosed in our 2024 Annual Report.

Q2 Fiscal 2025 Form 10-Q

FINANCIAL INSTRUMENTS

19 unchanged sentences

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

(In thousands)

9 unchanged sentences

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

For the three months ended March 31, 2025, 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.

During the six months ended June 30, 2025, 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

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(“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.

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.

3 unchanged sentences

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.

Q1 Fiscal 2025 Form 10-Q

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.

The key input used in the determination of the fair value included projected revenues of the high-throughput short-read products and services leveraging Apton's technology.

As of March 31, 2025, primarily due to management's decision to cease development of the high-throughput short-read system, and the resulting changes in the expected future revenues, among other factors, and as the milestone event must occur prior to the five-year anniversary of the closing date of the acquisition, the estimated fair value of the contingent consideration liability was $ 0 .

An acceleration in the timing of projected revenues or an increase in the projected revenues may result in an increase in the fair value of the liability.

A decrease in the discount rates, which include the risk-free rate and estimated subordinated credit spread for CCC credit rating, may result in an increase in the fair value of the liability.

Changes in the estimated fair value of the contingent consideration liability for the three months ended March 31, 2025 were as follows:

Primarily due to management's decision to cease development of the high-throughput short-read system, and the resulting changes in the expected future revenues, among other factors, and as the milestone event must occur prior to the five-year anniversary of the closing date of the acquisition, the estimated fair value of the contingent consideration liability was $ 0 .

An increase in the fair value of the liability may result from an acceleration in the timing of or increase in projected revenues and from a

Q2 Fiscal 2025 Form 10-Q

decrease in discount rates, including the risk-free rate and estimated subordinated credit spread for a CCC credit rating.

Changes in the estimated fair value of the contingent consideration liability during the six months ended June 30, 2025 were as follows:

(In thousands)

1 unchanged sentence

Change in estimated fair value ( 18,700 )

Ending balance as of March 31, 2025 $ —

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

Q1 Fiscal 2025 Form 10-Q

Ending balance as of June 30, 2025 $ —

Changes to the fair value are recorded as change in fair value of contingent consideration in the condensed consolidated statements of operations and comprehensive loss.

Cash, Cash Equivalents, Restricted Cash, and Investments

The following tables summarize our cash, cash equivalents, restricted cash, and investments:

As of March 31, 2025

As of June 30, 2025

(In thousands)

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Long-term restricted cash $ 1,532 $ — $ — $ 1,532

The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of March 31, 2025:

Q2 Fiscal 2025 Form 10-Q

The following table summarizes the contractual maturities of our cash equivalents and available-for-sale investments, excluding money market funds, as of June 30, 2025:

(In thousands)

3 unchanged sentences

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

Investment income included in other income, net on the condensed consolidated statements of operations and comprehensive loss was $ 3.9 million for the three months ended March 31, 2025 and $ 7.2 million for the three months ended March 31, 2024.

Q1 Fiscal 2025 Form 10-Q

Investment income included in other income, net on the condensed consolidated statements of operations and comprehensive loss was $ 3.4 million and $ 7.3 million for the three and six months ended June 30, 2025, respectively, and $ 6.5 million and $ 13.8 million for the three and six months ended June 30, 2024, respectively.

BALANCE SHEET COMPONENTS

11 unchanged sentences

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 2024, as of the beginning of April 2024, noting no impairment.

We recognized a $ 93.2 million and $ 51.3 million impairment charge in the second and fourth quarter of 2024, respectively, as a result of quantitative interim impairment tests.

Based primarily on the decline in our stock price and overall market capitalization during the first quarter of 2025, driven in part by macroeconomic uncertainties, as well as our updated strategic plans and restructuring initiatives that prioritize accelerating adoption of HiFi sequencing and ceasing development of our high-throughput short-read platform, we concluded that changes to the timing and amount of expected future cash flows, 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, requiring an interim goodwill impairment assessment.

As a result of the quantitative interim impairment test performed as of March 31, 2025, we concluded that there was no impairment, as the estimated fair value of the entity-level reporting unit exceeded the carrying value.

To determine the fair value of the entity-level reporting unit as of March 31, 2025, we performed our impairment test using a combination of an income approach 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, industry data, and related risk factors.

The assessment is a level 3 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 a change in the fair value of the reporting unit of approximately $ 75 million.

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

Based on quantitative interim impairment tests performed in 2024, we recorded impairment charges of $ 93.2 million in the second quarter of 2024 and $ 51.3 million in the fourth quarter of 2024.

We conducted a quantitative interim impairment test as of March 31, 2025, based on a decline in stock price and market capitalization during the first quarter of 2025, macroeconomic uncertainties, and revised strategic plans emphasizing HiFi sequencing and discontinuing short-read platform development, and concluded there was no impairment.

We completed our annual goodwill impairment assessment on April 1, 2025 and noted no impairment.

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

2 unchanged sentences

In connection with the Apton acquisition in August 2023, we allocated $ 55.0 million of the purchase price to IPR&D.

This asset is considered indefinite-lived until the associated research and development activities are either completed or abandoned, and is tested for impairment annually and more

This asset is considered indefinite-lived until the associated research and development activities are either completed or abandoned, and it is tested for impairment annually and more

Q2 Fiscal 2025 Form 10-Q

3 unchanged sentences

Using a discounted cash flow model under the income approach, we determined the fair value was below carrying value and recorded a $ 15.0 million impairment charge.

The decline in the fair value of the IPR&D below its carrying amount as of March 31, 2025 resulted primarily from changes in the timing of expected future cash flows as compared to the fair value as of December 31, 2024, driven by the restructuring initiatives that prioritize accelerating adoption of HiFi sequencing and resulted in ceasing development of our high-throughput short-read sequencing platform.

The impairment charge is included on our consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025.

The impairment charge is included in our consolidated statements of operations and comprehensive loss for the six months ended June 30, 2025.

Significant estimates and assumptions used in the income approach include timing of future cash flows, revenue growth assumptions, a selected discount rate of 14.0 %, and a selected obsolescence factor of 11 years.

3 unchanged sentences

A decrease of 200 basis points to the discount rate used in our analysis would have resulted in an increase in the estimated fair value of the IPR&D of approximately $ 3 million, and an increase of one year to the obsolescence factor used in our analysis would have resulted in an increase in the estimated fair value of the IPR&D of approximately $ 3 million.

Changes to IPR&D during the three months ended March 31, 2025 were as follows:

Changes to IPR&D during the six months ended June 30, 2025 were as follows:

(In thousands)

1 unchanged sentence

Impairment charge

Balance as of March 31, 2025

Balance as of June 30, 2025

Restructuring for additional information on costs incurred in connection with our current year restructuring activities.

In addition to IPR&D, we had the following acquired finite-lived intangible assets:

As of March 31, 2025 As of December 31, 2024

As of June 30, 2025 As of December 31, 2024

(In thousands, except years)

8 unchanged sentences

Total $ 421,539 $ ( 404,376 ) $ 17,163 $ 411,539 $ ( 36,967 ) $ 374,572

Q1 Fiscal 2025 Form 10-Q

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

3 unchanged sentences

Total $ 17,163

Q2 Fiscal 2025 Form 10-Q

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.

2 unchanged sentences

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

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

During the three months ended March 31, 2025, we revised the estimated useful life of the developed technology acquired in the 2021 Omniome, Inc.

2 unchanged sentences

As a result of the change in estimate, during the three months ended March 31, 2025, we recognized accelerated amortization of $ 359.3 million within amortization of acquired intangible assets in operating expenses, reflecting our revised estimate that the asset will no longer generate economic benefit beyond March 31, 2025.

This expense reduced basic and diluted net loss per share by $ 1.21 .

This expense had a negative impact on basic and diluted net loss per share of $ 1.20 for the six months ended June 30, 2025.

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

In the first quarter of 2025, as part of our interim goodwill impairment test, we also performed a recoverability test for the definite-lived asset group and noted no impairment.

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

1 unchanged sentence

Both the acquired technology and license are classified as intangible assets and are being amortized over an estimated useful life of three years .

As of March 31, 2025, $ 5.0 million of intangible assets acquired during the first quarter of 2025 remained unpaid, is included in accrued liabilities on the condensed consolidated balance sheets, and is expected to be paid in 2026.

In the first quarter of 2025, as part of our interim goodwill impairment test, we also performed a recoverability test for the definite-lived asset group noting no impairment.

As of June 30, 2025, $ 5.0 million of these intangible assets remained unpaid.

This amount is included in accrued liabilities on the condensed consolidated balance sheets and is expected to be paid in 2026.

Restructuring for additional information on costs incurred in connection with our current year restructuring activities.

Deferred Revenue

As of March 31, 2025, we had a total of $ 21.1 million of deferred revenue, $ 15.2 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 three months ended March 31, 2025 includes $ 4.6 million that was included in deferred revenue as of December 31, 2024.

Q1 Fiscal 2025 Form 10-Q

As of June 30, 2025, we had a total of $ 20.6 million of deferred revenue, $ 14.9 million of which was recorded as deferred revenue, current, and $ 5.7 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 four years .

Revenue recorded in the three and six months ended June 30, 2025 includes $ 4.8 million and $ 9.4 million, respectively, that was included in deferred revenue as of December 31, 2024.

Performance Obligations

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

As of March 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 58.7 million, of which approximately 70 % is expected to be converted to revenue over the next twelve months , approximately 23 % in the following twelve months , and the remainder thereafter.

As of June 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 56.6 million, of which approximately 72 % is expected to be converted to revenue over the next twelve months , approximately 22 % in the following twelve months , and the remainder thereafter.

Q2 Fiscal 2025 Form 10-Q

Product Warranties

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands)

2025 2024 2025 2024

Balance at beginning of period $ 2,859 $ 4,120 $ 3,100 $ 4,681

6 unchanged sentences

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.

The 2029 Notes, the Exchange Shares, and shares of common stock issuable upon conversion of the 2029 Notes were 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.

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.

4 unchanged sentences

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

Q1 Fiscal 2025 Form 10-Q

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.

1 unchanged sentence

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.

Q2 Fiscal 2025 Form 10-Q

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.

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

Q1 Fiscal 2025 Form 10-Q

The exchange qualified as a troubled debt restructuring under ASC 470-60 – Troubled Debt Restructurings by Debtors .

1 unchanged sentence

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 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 in 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.

Q2 Fiscal 2025 Form 10-Q

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.

2 unchanged sentences

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 March 31, 2025 is $ 213.5 million, of which $ 210.5 million is included as convertible senior notes, net, non-current, and $ 3.0 million is included as accrued expenses on our consolidated balance sheets.

Changes to the 2029 Notes during the three months ended March 31, 2025 were as follows:

The carrying amount of the liability for the 2029 Notes as of June 30, 2025 is $ 213.5 million, of which $ 210.5 million is included as convertible senior notes, net, non-current, and $ 3.0 million is included as accrued expenses on our consolidated balance sheets.

Changes to the 2029 Notes during the six months ended June 30, 2025 were as follows:

(In thousands)

1 unchanged sentence

Contractual interest expense ( 700 )

Carrying amount as of March 31, 2025 $ 213,500

As of March 31, 2025, the estimated fair value (Level 2) of the 2029 Notes was $ 154.0 million.

Carrying amount as of June 30, 2025

As of June 30, 2025, the estimated fair value (Level 2) of the 2029 Notes was $ 161.9 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.

2030 Convertible Senior Notes

In June 2023, we entered into a privately negotiated exchange agreement with a holder of our outstanding 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.

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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.

Q1 Fiscal 2025 Form 10-Q

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.

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.

Q2 Fiscal 2025 Form 10-Q

The 2030 Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the 2030 Notes under the 2030 Indenture.

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In exchange for issuing the 2030 Notes pursuant to the 2023 Exchange Transaction, we received and cancelled the exchanged 2028 Notes.

Q1 Fiscal 2025 Form 10-Q

Following the closing of the 2023 Exchange Transaction, $ 459.0 million in aggregate principal amount of 2028 Notes remained outstanding with terms unchanged.

Q2 Fiscal 2025 Form 10-Q

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

6 unchanged sentences

Interest expense for the 2030 Notes was as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands)

2025 2024 2025 2024

Contractual interest expense $ 1,516 $ 1,516 $ 3,032 $ 3,049

1 unchanged sentence

Total interest expense $ 1,756 $ 1,752 $ 3,511 $ 3,524

As of March 31, 2025, the estimated fair value (Level 2) of the 2030 Notes was $ 276.6 million.

As of June 30, 2025, the estimated fair value (Level 2) of the 2030 Notes was $ 291.3 million.

The fair value of the 2030 Notes is estimated using a binomial lattice model that is primarily affected by the trading price of our common stock, market interest rates and volatility.

9 unchanged sentences

Interest expense for the 2028 Notes was as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2025 2024 2025 2024

9 unchanged sentences

(In thousands)

Three Months Ended March 31, 2025 Cumulative amount incurred to date

Three Months Ended June 30, 2025 Cumulative amount incurred to date

Employee separation costs

$ 138 $ 4,787

Other costs 563 563

Total restructuring charges (1)

$ 701 $ 5,350

(1) $ 2.5 million was recorded in sales, general and administrative expense and $ 2.1 million in research and development expense.

(1) Cumulative charges incurred to date include $ 3.3 million in sales, general and administrative expense and $ 2.1 million in research and development expense.

Charges included employee separation costs comprised of approximately $ 2.5 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 $ 2.3 million of severance costs.

Charges included in other costs are primarily related to legal expenses incurred in connection with employee separation matters.

In connection with the restructuring and strategic shift, we incurred an additional $ 388.5 million in costs.

4 unchanged sentences

Employee Separation Costs

Expense recorded in Q1 2025

Other Costs Total

Expense recorded in YTD 2025

$ 4,787 $ 563 $ 5,350

Cash paid in Q1 2025

Cash paid during YTD 2025

( 4,463 ) — ( 4,463 )

Amount recorded in current liabilities

as of March 31, 2025

as of June 30, 2025

$ 324 $ 563 $ 887

5 unchanged sentences

(In thousands)

Three Months Ended March 31, 2025 Cumulative amount incurred to date

Three Months Ended June 30, 2025 Cumulative amount incurred to date

Employee separation costs $ — $ 10,008

2 unchanged sentences

$ ( 87 ) $ 26,110

(1) For the three months ended March 31, 2025, $ 1.0 million was recorded in sales, general and administrative expense.

(1) Cumulative charges incurred to date include $ 15.8 million in sales, general and administrative expense;

2 unchanged sentences

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 three months ended March 31, 2025 are primarily related to a lease termination fee and other costs related to our exit of the San Diego office.

Other costs in cumulative charges incurred to date 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.

9 unchanged sentences

Cash payments ( 1,058 ) ( 1,058 )

Amount recorded in current liabilities as of March 31, 2025

Amount recorded in current liabilities as of June 30, 2025

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

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 March 31, 2025 is $ 1.8 million, and is included in operating lease liabilities, current on the condensed consolidated balance sheets.

The ending balance of the San Diego office lease liability as of June 30, 2025 is $ 0 .

Q2 Fiscal 2025 Form 10-Q

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.

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.

Lease payments included in the measurement of the lease liability comprise the fixed rent per the term of the Lease.

All of our leases are operating leases.

Lease payments comprise the base rent per the term of the lease.

Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments, such as common area maintenance fees, recognized in the period those payments are incurred.

We often have options to renew lease terms for buildings.

In addition, certain lease arrangements may be terminated prior to their original expiration date at our discretion.

We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors.

The Company has entered into various operating lease agreements, primarily relating to our corporate offices.

On March 7, 2025, we amended our existing lease covering our corporate headquarters, as well as our research and development, manufacturing, and distribution facilities in Menlo Park, California.

The lease amendment extends the term to 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.

The lease amendment increased our operating lease right-of-use assets and operating lease liabilities by $ 29.6 million on our condensed consolidated balance sheets.

As of March 31, 2025, the maturities of our operating lease liabilities were as follows:

(in thousands)

Thereafter 59,897

Total undiscounted operating lease payments 100,480

imputed interest ( 47,583 )

Present value of operating lease liabilities $ 52,897

Balance Sheet Classification

Operating lease liabilities, current $ 2,417

Operating lease liabilities, non-current 50,480

Total operating lease liabilities $ 52,897

We use our incremental borrowing rate to determine the present value of lease payments, as the implicit rates in our leases are not readily determinable.

The weighted-average discount rate used to measure our operating lease liabilities was 10.1 %.

The weighted-average remaining lease term for our operating leases as of March 31, 2025 was 9.0 years.

Cash paid for amounts included in the present value of operating lease liabilities was $ 2.4 million and $ 3.0 million for the three months ended March 31, 2025 and 2024, respectively, and were included in operating cash flows.

Q1 Fiscal 2025 Form 10-Q

Operating Lease Costs

Operating lease costs were $ 2.0 million and $ 2.6 million for the three months ended March 31, 2025 and 2024, respectively.

See Note 6 – Commitments and Contingencies , subsection titled “Leases”, in Part I, Item 1 of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 for information regarding the Company’s maturity of lease liabilities under its lease agreements.

Contingencies

10 unchanged sentences

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

No additional liability associated with such indemnification obligations has been recorded as of March 31, 2025 and December 31, 2024.

No additional liability associated with such indemnification obligations has been recorded as of June 30, 2025 and December 31, 2024.

EQUITY PLANS AND SHARE-BASED COMPENSATION

As of March 31, 2025, the Company had share-based compensation awards outstanding under the 2020 Equity Incentive Plan (the “2020 Plan”), the 2020 Inducement Equity Incentive Plan (the “Inducement Plan”), the 2021 adopted Omniome Equity Incentive Plan of Pacific Biosciences of California, Inc.

As of June 30, 2025, the Company had share-based compensation awards outstanding under the 2020 Equity Incentive Plan (the “2020 Plan”), the 2020 Inducement Equity Incentive Plan (the “Inducement Plan”), the 2021 adopted Omniome Equity Incentive Plan of Pacific Biosciences of California, Inc.

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

As of March 31, 2025, we had 11.3 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan.

On June 4, 2025, our stockholders approved an amendment to the 2020 Plan to reserve an additional 23 million shares of our common stock for issuance pursuant to equity awards granted under the 2020 Plan.

As of June 30, 2025, we had 13.5 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan.

Shares remaining and available for future issuance reflect shares that may become eligible to vest upon the achievement of maximum targets for certain equity awards.

Refer to Note 9 – Stockholders' Equity , in Part II, Item 8 of our 2024 Annual Report for more information on the Company's equity plans .

Q2 Fiscal 2025 Form 10-Q

Refer to Note 9 – Stockholders' Equity , in Part II, Item 8 of our 2024 Annual Report for more information on the Company's equity plans .

Stock Options

7 unchanged sentences

Expired ( 358 ) 6.52

Outstanding at March 31, 2025 16,548 $ 6.80

Outstanding at June 30, 2025 16,549 $ 6.57

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

10 unchanged sentences

Forfeited ( 2,939 ) — 4.01 —

Outstanding at March 31, 2025 21,407 392 $ 3.73 $ 9.43

Outstanding at June 30, 2025 18,907 392 $ 3.67 $ 9.43

Employee Stock Purchase Plan ("ESPP")

Shares issued under our ESPP wer e 1,752,417 and 1,194,436 durin g the three months ended March 31, 2025 and 2024, respectively.

Shares issued under our ESPP wer e 1,752,417 and 1,194,436 durin g the six months ended June 30, 2025 and 2024, respectively.

In the first quarter of 2025, an additional 4.0 million shares were reserved under the ESPP.

As of March 31, 2025, 16.5 million shares of our common stock remain avai lable for issuance under our ESPP.

As of June 30, 2025, 16.5 million shares of our common stock remain avai lable for issuance under our ESPP.

Share-based Compensation

The following table summarizes share-based compensation expense:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands)

2025 2024 2025 2024

Cost of revenue $ 925 $ 1,131 $ 2,090 $ 3,237

16 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

Expected term in years 4.9 4.9

1 unchanged sentence

Risk-free interest rate 3.89 % — 4.29 %

4.20 % — 4.32 %

Dividend yield — —

1 unchanged sentence

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

Three Months Ended March 31,

Six Months Ended June 30,

Expected term in years 0.5 — 2.0

9 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share amounts) 2025 2024 2025 2024

7 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2025 2024 2025 2024

1 unchanged sentence

Equity awards 44,643 33,370 44,643 33,370

Equity Plans and Sha re-Based Compensation for detailed information on equity awards.

Equity Plans and Share-Based Compensation for detailed information on equity awards.

SEGMENT AND GEOGRAPHIC INFORMATION

11 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2025 2024 2025 2024

8 unchanged sentences

Other income, net

Income tax provision

2,958 2,527 5,515 5,711

Income tax provision (benefit)

35 — ( 267 ) —

Consolidated net loss ( 41,930 ) ( 173,319 ) ( 468,005 ) ( 251,497 )

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2025 2024 2025 2024

2 unchanged sentences

Asia-Pacific 12,612 8,234 24,222 21,010

Total $ 37,153 $ 38,810

Total revenue $ 39,766 $ 36,013 $ 76,919 $ 74,823

A summary of our revenue by category is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2025 2024 2025 2024

6 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements